加载中...
共找到 24,777 条相关资讯
Operator: Welcome to the CME Group Fourth Quarter 2025 Earnings Call. At this time, I would like to inform all participants that your lines have been placed. I would now like to turn the call over to Adam Minick. Please go ahead. Adam Minick: Good morning, and I hope you are all doing well today. We released our earnings commentary earlier this morning, which provides extensive details on the fourth quarter and full year results for 2025. I will start with the safe harbor language, then I will turn it over to Terry. Statements made on this call and in the other reference documents on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statement. Detailed information about factors that may affect our performance can be found in the filings with the SEC, which are on our website. Lastly, in the earnings release, you will see a reconciliation between GAAP and non-GAAP measures following the financial statements. With that, I will turn the call over to Terry. Terrence Duffy: Thanks, Adam, and thank you all for joining us this morning. I will keep my opening remarks brief to highlight what was quite simply the most successful year in CME Group's history. Following that, Lynne will provide an overview of our financial results and our 2026 guidance. In addition to Lynne, we have other members of our management team present to answer questions after the prepared remarks. 2025 marked our fifth consecutive year of record volume with average daily volume increasing 6% to 28.1 million contracts. This growth was broad-based, including all-time records in our interest rate, energy, metals, agricultural, and crypto complexes. It was also a record year for our international business, which averaged 8.4 million contracts per day, up 8% from the previous record set in 2024. Global participants continue to choose the deep and liquid markets at CME Group to manage their risk. In addition to our record volume results, we continue to deliver unmatched capital efficiencies for our customers. In the most recent quarter, our customers' average daily margin savings reached $80 billion across all six asset classes, representing an increase of approximately $20 billion over the past year. The ability to offset margin across asset classes is not just a nice benefit; it is a necessity for our clients. Due to the diversity of our asset classes, this offering is a unique benefit for our market participants. In December, we received approval from the US Securities and Exchange Commission for CME Securities Clearing. We are on track to launch this new clearinghouse later this year in advance of the SEC's US treasury clearing mandate. This, combined with our work to extend CME fixed cross-margining to end-user clients early in 2026, will unlock even more capital efficiencies for the industry. Innovation continues to accelerate our growth, and in Q4, we expanded our retail footprint through the launch of event contracts on financial and commodity products, economic indicators, and sports. This initiative represents the next step in our multi-year strategy to expand our customer base by providing greater access to markets for the next generation of traders. While still early days, these products are delivering promising initial results and generated traction with a previously untapped customer segment. Over 68 million of these event contracts have traded in the six weeks since launch, including over 7 million markets-related contracts. Our retail-focused products also drove strong performance in 2025, with micro products up 59% in Q4 to a record 4.4 million contracts per day. The one-ounce gold contract that we launched last year has been successful, with Q4 volume of 66,000 per day. Next week, we will be launching a 100-ounce silver contract, which will help the retail community manage exposure or invest in that commodity at a time when the precious metals markets are very active. Finally, in 2025, it was a record-breaking year for CME cryptocurrency trading at CME Group. In the fourth quarter, average daily volume across the complex of 379,000 was up 92% and represented over $13 billion in notional value traded per day. This strength has continued into 2026, and next week, we will be expanding our cryptocurrency offering with the launch of Cardano, Chainlink, and Stellar Futures on February 9. We will begin offering 24/7 trading for our entire crypto suite next quarter to enable our customers to hedge exposure to the underlying cash markets for these products, which currently trade throughout the weekend. As markets continue to evolve, we will strategically evaluate whether other asset classes would also benefit from 24/7 trading. We have carried the momentum from a record-setting year into 2026 with new volume records in January. While the macro landscape grows increasingly complex, we remain focused on providing the premier risk management tools our clients need to navigate market shifts. With that, I will turn the call over to Lynne to review the financial results in more detail. Lynne Fitzpatrick: Thanks, Terry, and thank you all for joining us this morning. In addition to the volume records Terry discussed, we delivered our fourth consecutive year of record revenues and adjusted net income in 2025. Our revenue of $6.5 billion grew 6% compared to 2024 and included annual revenue records in five out of our six asset classes. Our market data revenue surpassed $800 million for the first time, up 13% from 2024. Adjusted annual expenses, excluding license fees, were approximately $1.625 billion, and our adjusted operating margin for the year was 69.4%, up 110 basis points from 2024. We delivered $4.1 billion in adjusted net income, resulting in 9% adjusted earnings per share growth for the year. During the fourth quarter, CME Group generated revenue of $1.65 billion, an 8% increase from Q4 2024. The average rate per contract for the quarter was $0.707, driving clearing and transaction fees of $1.3 billion, up 8% from last year. Market data reached a new record level, up 15% to $208 million. Adjusted expenses were $543 million for the quarter and $447 million excluding license fees. Our adjusted operating income was $1.1 billion, or a 67% operating margin for the quarter. CME Group had an adjusted effective tax rate of 23.7%. Adjusted net income and adjusted diluted earnings per share came in at $1 billion, or $2.77 per share, 10% higher than Q4 2024. Cash at the end of the quarter was approximately $4.6 billion, including $1.3 billion in remaining Austria proceeds. Our board has approved the use of these proceeds towards share repurchases over time. We repurchased $256 million in shares during the fourth quarter and an additional $276 million in shares thus far in 2026. CME Group paid dividends of $455 million in the fourth quarter and approximately $3.9 billion in 2025. As announced last year, the annual variable dividend declaration and payment dates have been aligned with our Q1 regular dividend and will be declared next week. Earlier this week, we published transaction fee changes, which will be effective April 1. Taken in aggregate with the market data fee change, which took effect January 1, and incentive program revisions, the fee adjustments would increase total revenue by approximately 1% to 1.5% on similar activity to 2025. We will be evaluating transaction fees on a regular basis going forward and may make changes as conditions warrant versus aggregating in December as in past years. For 2026 guidance, we expect total adjusted operating expenses, excluding license fees, to be approximately $1.695 billion. This includes our typical core expense growth, as well as reinvestment related to the new initiatives ramping up this year, including 24/7 crypto trading, securities clearing, and event contracts. We are dedicated to continuously evolving our product set and offering, a commitment that requires strategic investment for growth. Total capital expenditures are expected to be approximately $85 million, and the adjusted effective tax rate should come in between 23.5% and 24.5%. We are proud of the record-breaking results the firm has delivered this year, driving 6% revenue growth and 9% adjusted earnings growth on top of the record set in 2024. We are encouraged by the strong activity to date in 2026 and remain focused on helping our clients navigate this complex environment. We would now like to open up the call for your questions. Operator: Thank you. At this time, we will now begin the question and answer session. If you would like to ask a question, please first unmute your phone and then press star 1. At any time, if you wish to remove your question, you can press star 2 to remove yourself from the question queue. One moment, please, for our first question. The first question will come from Dan Fannon of Jefferies. Your line is open. Dan Fannon: Thanks. Good morning. I wanted to talk about just the current environment and activity, the health of your customer base in aggregate as well. Just given some of the volatility, you guys have raised margin requirements, I think, in the metals complex a few times. We have seen really large swings in the underlying. So hoping just to get a little bit more context around how you think the customer base is performing through these kind of elevated periods of volatility. Terrence Duffy: Yeah. That is Terry Duffy. Thank you for your question. And I think there are a couple of interesting examples of how the customer is looking at it. One can be a reflection of open positions, as we talk about constantly with the analysts, investors, and others. I think we are sitting around 125 million open positions today, but let's specifically talk about one product which you mentioned, which is silver. Now I will let Derek chime in. But when we change the margins on silver, some thought that the market would sell off. We went to a notional margin regime because of the activity related to silver and just on that particular product. That did not affect the customer base or the product at all because it went and made a new historic high, not went down the other way. So I would say the customer is healthy because of the market direction at which it went, which would tell you that some of the retail participants, which are traditionally long people, and others set new highs in lieu of the way the margins were going forward. So I would say, overall, the customer is very healthy throughout all the different asset classes, but I wanted to call out your example of silver. Do you want to add to that, Derek? Derek Sammann: Yeah. I think Terry made some good points there. I mean, the important part about the health of that market right now is we are seeing all our client segments grow. Yes, retail is growing, but our institutional base is growing double digits right now. I think, Dan, you also look at the quality of the market in terms of open interest. Open interest is steady to increasing. We are seeing volume increases across all regions as well as futures and options. So these are indicators of a risk-on environment. I think price up and price down, but we are seeing a healthy ecosystem. I think risk management is one of the reasons why customers choose an institutional customer specifically to do their business at CME Group. Dan Fannon: Great. Appreciate the comments. Operator: Thanks, Dan. The next question will come from Patrick Molley of Piper Sandler. Your line is open, sir. Patrick Molley: Yes, good morning. Thanks for taking the question. And congrats on the launch of the prediction market offering and the JV with FanDuel. I was hoping you could talk about what you have seen to date in terms of engagement and inbounds from market makers and institutions looking at the prediction market space, both in sports and non-sport contracts. As a second part to that, Terry, I would love to get your updated thoughts just on the legal and regulatory landscape around prediction markets and some of the comments that have come out of the CFTC recently kind of pledging to create clear rules of the road and defend their jurisdiction there. Terrence Duffy: Thanks, Patrick. I am going to ask Tim to touch a little bit on the market makers as it relates to the prediction markets in sports and the other things you referenced. I will touch on the legal and the regulatory. I just met with the new chairman of the CFTC, which I will update you on, but I will let Tim go first. Tim McCourt: Thanks, Terry, and thanks, Patrick, for the question. I think what has been interesting as we have launched the prediction markets at CME Group, we have not only seen new individual participants come to our market as we look to attract that next generation of traders and get more people to trade all products at CME Group across the traditional markets, futures-based event contracts, or sports, we are also seeing new institutional and market makers reach out to CME Group that are new to CME Group. So I think when we look at the innovation of the product design, we are pulling market participants from other parts of the ecosystem. They may be more traditionally sports-based, and they are also coming to our market to reach out how they could market make the event contracts at CME Group. How they can take advantage of the liquidity that is existing at CME Group. Early days here since we launched in December. We have been pleased with not only the market maker performance that we have seen on screen in providing liquidity to the marketplace, but the number of clients and new clients reaching out, asking how they can get involved. That is a great thing to see for a new market, but also great to see new participants being attracted to our long-standing benchmark products and market at CME Group as well. Terrence Duffy: So, Patrick, on the regulatory and legal side of this, first, I will touch on the legal side. The last thing I am going to have CME Group do is get tied up in a bunch of legal battles and court over sports. That is not traditionally our business. We are very focused on the market side of this. We have a great relationship with FanDuel. They are in the sports business. They are an online gaming company, as you know. So we thought it was a good marriage. We still believe it is a massively good marriage to distribute our product through FanDuel and touch a whole new customer base to trade our products, which I outlined in my opening remarks about the number of contracts that are being traded on markets, not sports. So I think that is a very healthy sign for that particular marketplace. So I really do not want to get involved in the legal battles in court between the states, the tribes, the casinos, and others about whether it is gaming or not. I think that is not our fight. So on the regulatory side, I will tell you that I believe that the CFTC looks at these contracts as swaps, as you know, and they are very much wanting to regulate that. I did meet with Chairman Selig. He felt very passionate about that. I will not say passionate; it is my word, not his. I would say that he is committed to overseeing this product. And I do believe he thinks that they are legal swaps under the CFTC's regulation. So that is what I can tell you today. But, again, let me emphasize this. We are not going to get bogged down in a bunch of litigation over whether this is sports gambling or swaps markets. Today, they are called swaps markets, which we participate in, and we will do so. If, in fact, there is some litigation that we do not like, we will not pursue that particular asset class and tie up our shareholders and others in court cases over this because I think there are enough people in that fight. But we will remain in the business as long as it is overseen by the Commodity Futures Trading Commission and they deem it to be a legal swap. Patrick Molley: Great. Thank you both. Operator: Thank you. The next question will come from Benjamin Budish of Barclays. Your line is open, sir. Benjamin Budish: Hi. Good morning, thank you for taking the question. I was wondering if you could address the pricing changes made. I think there was an announcement quite recently. I know market data pricing went into effect earlier in the year. Just curious if there are any other puts and takes by asset class. Obviously, your release, we saw that the rates asset class is not seeing any other changes, but just curious if there is any other context, anything else you could share around the thought process for this year. Thank you. Terrence Duffy: Yeah. Ben, thank you. I am going to ask Julie Winkler, chief commercial officer, to comment on the market data, not only the pricing but the business itself, which gives her an opportunity to talk about the exciting aspects. It is a really important component to CME, and then Lynne can address the other part of your question. Julie Winkler: Sure. Yeah. Thanks for your question, Benjamin. We did, on January 1, institute a 3.5% rack rate increase across most of our market data products. And, you know, this was really a continuation of our price-to-value adjustments, you know, in ensuring that our data business certainly remains resilient, and we have proven given the record, $800 million in annual revenue that was referenced earlier in our call. This marks the thirty-first consecutive quarter of growth for our data business. So Q4, we saw revenue up 15% to $208 million. And just to dig into that a little bit more, talking about the quality of that growth. So our nonrecurring revenue items like the audit and the cash payments were actually lower than the previous quarters, which really just demonstrates that our core subscription revenue is accelerating. And our growth drivers are really kind of balanced across three main pillars. We saw 50% of this revenue growth coming from new user expansion. And we have been successful in really monetizing both the retail growth that you heard us reference as well as institutional participation in our data products. The second pillar is really around 25% of our growth being driven by product innovation. So our ability to deliver new datasets, our new cloud-based delivery models, are really helping us to create more sticky recurring revenue. And lastly is that pricing integrity that I referenced earlier, the remaining 25% of our growth in revenue, where we are able to really capture the value of CME data, particularly given our strong benchmark products and liquid products. These really have become the golden source for futures and options and are a huge contributor to that record revenue that we saw this year. Lynne Fitzpatrick: Yes. So, Ben, when it comes to the transaction fee changes that we announced, the most impacted for those fee changes would be in the metals complex, particularly around precious metals and the micro complex as well. We also had some changes on the crude oil side. And finally, in the grains complex, I would say those are the three areas you will see the most meaningful impact. You did mention rates, though. One thing to keep in mind, those changes that you saw in that announcement were related to the rack rate fee schedule changes. We also are always looking at our incentive programs. We did make some changes in various programs, including some incentive programs related to the rates complex. We felt those were more appropriate than needing to change the fee schedule rates at this point. So overall, this increase is similar to what we have seen in the past years. One other last note, I did mention this in the opening remarks, but we are going to move away from consolidating these types of transaction fee changes in the December time frame. With the number of new initiatives we have launching and the like, we want to make sure that we are being thoughtful in when we are making these changes. So we may do them at different times during the year versus that consolidated change in the December time frame going forward. Benjamin Budish: Okay. Very helpful. Thank you both. Operator: Thank you. The next question will come from Craig Siegenthaler of Bank of America. Your line is open. Craig Siegenthaler: Thanks. Good morning, everyone. So we have a follow-up question to Ben's last question on your pricing strategy. We are all programmed to look for an announcement in Q4 and see the changes in Q1. But going forward, it looks like we are not going to get that same pattern from the CME. So curious what drove the change, and does this mean that increases will be smaller in the future? Because I thought the old method worked pretty well, and it provided transparency into CME's long-term revenue growth rate. Terrence Duffy: Yeah. Craig, it is Terry Duffy. Listen. We think that we need to do pricing changes as we continue to deliver value, and we do not necessarily need to do that in December every year. And so we make changes based on how we are running the business and how we think we can continue to grow that business and where the value is added. So that comes in different parts of the year. Some increases may be smaller. Some increases may be larger. Some may not be there at all. I think what you are hearing us say is we are running this business on a real-time basis. And we are going to continue to do what is in the best interest of our clients and our shareholders going forward to grow the business. So I do not think there is a pattern that we need to follow in order to facilitate pricing moves one way or another. Thank you. Operator: You are welcome. The next question will come from Brian Bedell of Deutsche Bank. Great. Thanks. Good morning, folks. Thanks for taking the question. Maybe just back to prediction markets. Can you talk about conversations that you are having with other distribution partners? I think you have got a total of about 130 retail partners all in. Maybe just characterize the interest from other potential partners to engage with prediction markets, other retail partners to engage with prediction markets on the CME platform? And then also, how you are thinking about future product rollout, the potential to really broaden the range of the types of contracts. I know you do not want to get into, obviously, political or culture, but more deeply into, say, financial and company-specific KPIs, something along the lines of fundamental investing, whether you are seeing any demand for that or there is any interest in launching those types of contracts? Terrence Duffy: Thanks, Brian. Touch on a couple of things. You did say something. I am going to turn it to Tim McCourt in a second, but you touched on political. We are not suggesting that we would not list political contracts. We are suggesting that we would not list certain political contracts, and I think there is a big difference there. When you have a presidential election or who is going to potentially win the house or the senate, those are large contracts that are very diverse in nature that multiple participants can take an opinion on versus maybe a small congressional race in a district or a state race or something like that. Those are ones we want to stay away from. But the larger ones, we are not suggesting that we would not take a look at them. I just want to make sure you understand that we are looking at some of the political contracts on the larger scale, not the smaller scale. On the culture ones, those are a little bit different depending on how you define what the culture of the prediction is. So I would have to see what is being referred to as. If it is around some of the award shows and things like that, entertainment, you know, some of those are a little I do not know if I want to get too much involved in those, but the political contracts on the larger scale are fine. There are some unique business contracts that we talk about PPI, CPI, things like that where we are already doing. Tim? Tim McCourt: Thanks, Terry. And Brian, thanks for the question. You know, we do have a few current distribution partners also live where Terry had mentioned The FanDuel Predict app is up and running. We also have DraftKings predictions that are connected. We have a handful of other distribution platforms also offering our event contracts across all the types of products that we have. The traditional futures-based markets, economic indicators, cryptocurrency, as well as the sports-based event contracts. We are working with our other 120 to 130 retail distribution partners to understand what it will take for them to be ready to offer this contract. We did turn these contracts on back in December, so we still are early days in working with those partners and making sure they have the technological capabilities to connect, offer, and the front end they need to offer these types of swap-based and futures-based event contracts to their participants. I would characterize that pipeline as robust, and we are actively engaged with continuing to onboard those participants. Just to further Terry's comments about the future product pipeline at CME Group, this is something that we approach in a similar way to all of our product development. We will continue to listen to the marketplace, our clients, our distribution partners, and our market makers and liquidity providers to figure out what does make sense in terms of rounding out the event contract offering. But it is important to us that this is more than just the trade of the day or what might be happening in the marketplace. We are really focused on getting these new users to our markets and into the known risk-based contracts of events as a way they could enter markets. We want to make sure they are also having access to things like event contracts on gold, event contracts on Nasdaq, S&P, economic indicators, as well as some of the stuff that we are seeing in the sports and cultural side of the offering. We will continue to work with them to make sure it makes sense. I think, Brian, about your question around some of the other financial aspects or KPIs, I think those are things that we are hearing from folks, but we have no commitment to look at those products at this time. We will continue to engage with them. But I think as Terry's comments also suggested, we do need to make sure and make sure everyone is aware that these meet the standards at CME and are also part of the CFTC regulatory framework. Those are the things that we look at to make sure that the contracts we do bring to market we have the comfort and confidence to make sure that the clients trade them. At the consistent experience of trading at CME Group that they have been accustomed to over the years. Terrence Duffy: So, Brian, let me just finish the prediction comment with one other thing that I said earlier. We are committed to listing these contracts that are deemed swaps. And if there are sports event-related swaps, we will list them. When I said that we do not want to get tied up in legal battles, it does not mean that we are going to run away. As long as the federal government calls these swaps, we will participate in them. That is our regulator. And if the states and others have issues with it, they should take it up with the federal government, not the entities that they approve for these contracts to be traded under DCMs. So that is what I meant about the legal battles. Brian Bedell: Yep. Yep. No. That is fantastic color. Thank you. Operator: Thank you. The next question will come from Bill Katz of TD Cowen. Your line is open. Bill Katz: Great. Thank you for taking the question. Maybe if I could sneak in two questions somewhat disparate, so I apologize in advance. But first, it is great to see you buy back some stock in the fourth quarter and early here into the New Year. How do we think about maybe the prospective approach to capital? And how much is related to the proceeds so forth as we should think about maybe the go-forward payout dynamic? And then within your market data and information services, it was nice to see the rise quarter on quarter. I would posit that is probably more of the activity levels. But could you speak to the durability of that given what seems to be a very frenetic change in the expectation around sort of subscription and data packages given AI disintermediation risk? Thank you. Terrence Duffy: Thanks, Bill. Yeah. We will talk about that in a second. The AI disintermediation risk is an interesting question. We will get to that in a second because I think that was your last one. So let's talk about the capital. I will let Lynne discuss that. And on the market data, was that tied to the AI part of your question? Is that a fair way to assess it? Bill Katz: Yes. Correct. Thank you. Lynne Fitzpatrick: Hi, Bill. This is Lynne. So your question on the buyback, we have discussed with our board, and we will be using the Austria proceeds towards repurchases. So you have seen us start along that path, and we will continue to be deploying that capital towards repurchases over time. And then, Julie, if you maybe want to address some of the market data questions. Julie Winkler: Yeah. I think the importance of, you know, certainly all of 2025 performance was really speaking to the recurring subscription revenue that this business generates. So the uptick in both retail participation and institutional demand for our clients serves as good momentum going into 2026. And that is something that we have seen with the historic growth of the business, you know, up thirty-one consecutive quarters. In terms of AI, we have been on top of that from the beginning. And I think a key part of thinking about data versus how our clients use data is this is a critical input for them as they backtest their trading strategies and deploy those within our marketplace to both provide, you know, proper hedging as well as liquidity into our market space. And so, you know, while AI is and the use of data is important there, you know, it does not change how that data is being used by our trading entities. We are very much talking with our customers about how they are using AI to enhance a lot of their trading algorithms. But they still need that core source data. And we do and have been adjusting our policies accordingly as the AI has continued to develop. Terrence Duffy: So, Bill, I assume your question was related to around some of our competitors as it relates to mortgage businesses and some of their surveillance businesses that could be potentially disruptive by artificial intelligence. We are not in that situation today, as Julie described. This is proprietary data that people need for risk management protocols and everything else that they do. So we are not in some of those other ancillary businesses that could be potentially disrupted by AI. I actually believe we are in a situation where AI could enhance our customer, enhance our business going forward, not disintermediate or disrupt it. Does that make sense? I think that is where your question was going, even though you did not ask it that way. Bill Katz: Well, I was trying to be a little bit more neutral on it, but thank you. Yes. Appreciate it. Terrence Duffy: Help you very much. Thank you. You know me. I kinda get to the point. Thank you so much. Operator: Thank you. The next question will come from Ashish Sabadra of RBC Capital Markets. Your line is open. Ashish Sabadra: Thanks for taking my question. I just wanted to ask a question on the progress on the Google Cloud migration and if you can quantify the expense in the fourth quarter and expected for 2026. Terrence Duffy: So why do not we talk for a second on the migration, which Sunil, and then we will talk real quick on the expenses with Lynne. So Sunil, give a quick update on the migration. Sunil Cutinho: Migration is going very well to plan. We will complete our non-ultra-low latency migration early this year. As far as our ultra-low latency markets are concerned, the purpose-built Chicago region by Google is coming up to plan. It is low latency technology in Google Cloud. It is very novel. So we will be making that available to clients for testing in 2027. I will pass it on to Lynne. Lynne Fitzpatrick: Yes. So in the fourth quarter, we had about $29 million in spending related to the cloud environment. The majority of that was in our tech line related to the consumption charges. So our total for the year was right around $100 million related to Google. It is getting harder and harder as we go forward to disaggregate the Google-related charges and our base charges because we have seen so many of the on-premises expenses start to roll off. So I would say going forward, that expense is built into our overall guidance. But it is becoming, I think, less meaningful to separate it out just because you have taken out a lot of those on-premises expenses. Sunil Cutinho: I will just start counting that in the overall expense growth, Ashish, that we guided to, the $1.695 billion. That is inclusive of all the tech-related spend, both Google and the remaining on-premises. Ashish Sabadra: Very helpful color. Thank you. Operator: Thank you. The next question will come from Michael Cyprus of Morgan Stanley. Your line is open. Michael Cyprus: Hey, good morning. Just curious how you see the role of tokenized collateral and potential benefits there. And more specifically, how do you think about some of the advantages or even disadvantages of stablecoin as collateral versus tokenized deposits versus, say, a tokenized money fund? I guess, would you accept all three? Would you treat any of them differently? Curious how you think about that, and if you could elaborate more broadly on the steps that you are taking this year to tokenize collateral. Terrence Duffy: Michael, thank you, and it is a great question. I do not know if we have enough time to answer all of it because it is pretty deep, but I will try to summarize it for you. As it relates to the tokenized cash, you know, we have an initiative that we are rolling out with Google that will be coming out this year on tokenized cash, and that will be with another depository bank that will help facilitate those transactions. On the tokens and what we would accept going forward, that all depends on who is issuing the token and giving it to us, and it would depend also based on the risk associated with that token. Would we haircut it to a point where it is even worth taking or not? And what is the entity that is issuing the token to give us the margin? So right now, we are looking at different forms of margin, but we are not going to put the enterprise at risk by taking something that we cannot get our arms around on a token. So if you were to give me a token from a systemically important financial institution, I would probably be more comfortable than maybe a third or fourth-tier bank trying to issue a token for margin. That is probably something I would not accept. So that is kinda how we are looking at what we would accept and how we distribute. So not only are we looking at tokenized cash, obviously, we are looking at different initiatives with our own coin that we could potentially put on a decentralized network for other of our industry participants to use. So there are multiple different ways that we are approaching this to create efficiencies for our clients going forward without introducing any additional risk to the system. Michael Cyprus: Great. Thank you. Terrence Duffy: Thanks, Michael. Operator: And we will take the last question from Ken Worthington of JPMorgan. Your line is open, sir. Ken Worthington: Hi. Thank you so much for squeezing me in. You mentioned that the CFTC approved cross-margining for client accounts. You would be launching shortly. What sort of cross-marketing programs are you launching, and what sort of adoptions do you anticipate? And along the same lines, you also got approval to launch treasury and repo clearing. How would you expect these two initiatives to impact collateral balances over time? Terrence Duffy: Great question, Ken. So I will ask Sunil to comment on the first part of it, maybe, Mike, you can touch on the second. Sunil Cutinho: So the CME FICC cross-margining program for clients is operationally ready. That program has been running since 2024. We have 18 firms participating. We generated record savings for those firms of about $1.5 billion. In terms of expanding to clients, while we are operationally ready, we are dependent on the approval from the SEC, which is expected sometime this year. In terms of, you know, generally, our portfolio margin savings, we are generating about $25 billion in the interest rate complex. That includes the $1.5 billion, which includes future swaps and cash products. Terrence Duffy: So, again, just to be clear, you were referring to our treasury clearing offering and what it could do to deliver value, what we have today with others. Is that just so I am clear so we can answer it correctly? Ken Worthington: Yeah. There was two parts to it. One is I thought you just got approval for client accounts from CFTC. I know you were waiting for that for a while. I thought that was just approved and that you will be sort of launching those programs sort of imminently. And then the second part was just on the treasury and repo side. Terrence Duffy: Yeah. That is the one that Sunil just referenced. We are still waiting for the SEC to approve. The CFTC has, the SEC has not yet. We are hoping that comes shortly. Ken Worthington: Got it. Okay. Okay. Awesome. Thank you. Terrence Duffy: And then the other part of your question was around the benefits of CME treasury clearing. Is that right? Ken Worthington: Yeah. Like, just on your collateral balances, you know, what are you kind of anticipating there? Lynne Fitzpatrick: Yeah. So it is a little hard to forecast at this point, Ken, but certainly with things like the mandates potentially coming for broader inclusion in need for clearing of some of these securities going forward. So some of the new types of clients that might need to clear going forward. That could be additive to that amount of collateral. But I think what is unique and what is important to remember is Sunil talked about these offsets we had within our complex, so the $25 billion a day. That is inclusive of all of our futures and options, the swaps that we are clearing here at CME as well as the offsets with FICC. When we have our treasury clearing offering added to that and potentially the ability to offer additional cross-margining, we are bringing more into that pool of capital and the efficiencies that can be created for clients by using these different pieces of the stool. So it is just further reinforcing the value proposition for clients and freeing up their capital for potentially other uses. So we think it is important that we are addressing all these different pieces. Terrence Duffy: The interesting part about all this, Ken, is our arrangement with FIC, which is critically important to the growth of this company. Especially when it comes to clearing and giving offsets. Going forward in the rates business to make sure that we are the dominant participant to bring your business to. That is uptick at FIC in recent months with new participants coming into it. So we were around a billion dollars, I believe, a day with just the FIC offsets. That is uptick several hundred million over the last, mark. 500 million or so in the last couple of months, and we see that continuing to grow. So the agreement we have with FIC is growing by the day. That is really the important part of this. Our treasury clearing offering is a nice to have. We will continue to roll it out in a methodical way. But the true value that we see right now and today is what DTCC and the FICC Clearing Organization. That is where the value is at, and that is what we are keeping our minds focused on. Ken Worthington: Okay. Great. Thank you. Terrence Duffy: Thank you. And at this time, I will turn the call over to Terry Duffy for closing remarks. Terrence Duffy: Thank you. And while 2025 was a landmark year for CME Group, our record performance in January provides a solid foundation as we move into 2026. We are delivering on our strategic roadmap, launching CME securities clearing, expanding our event contracts, and introducing 24/7 trading to meet the evolving needs of our clients. These investments reinforce our leadership as the world's premier risk management destination and will drive substantial growth for years to come. Once again, thank you for joining us on our call today. Operator: Thank you. This concludes today's conference call. You may all disconnect at this time.
Operator: Thank you for standing by. Welcome to Flex's Third Quarter Fiscal Year 2026 Earnings Conference Call. Presently, all participants are in a listen-only mode. After the speakers' remarks, there will be a question and answer session. As a reminder, this call is being recorded. I will now turn the call over to Mrs. Michelle Simmons. You may begin. Michelle Simmons: Thank you, Rob. Good morning and thank you for joining us today for Flex's third quarter fiscal 2026 earnings conference call. With me today is our Chief Executive Officer, Revathi Advaithi, and Chief Financial Officer, Kevin Krumm. We will give brief remarks followed by Q&A. Slides for today's call as well as a copy of the earnings press release are available on the Investor Relations section at flex.com. This call is being recorded and will be available for replay on our corporate website. Today's call contains forward-looking statements, which are based on current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. For a full discussion of these risks and uncertainties, please see the cautionary statements in our presentation, press release, and the Risk Factors section in our most recent filings with the SEC. Note, this information is subject to change and we undertake no obligation to update these forward-looking statements. Please note all growth metrics will be on a year-over-year basis unless stated otherwise. Additionally, all results will be on a non-GAAP basis unless we specifically state that it's a GAAP result. The full non-GAAP to GAAP reconciliations can be found in the appendix slides of today's presentation as well as the summary financials posted on the Investor Relations website. Now, I'd like to turn the call over to our CEO. Revathi? Revathi Advaithi: Thanks, Michelle. Good morning, and thank you for joining us today. As you know, this is an exciting time for Flex. There's a lot happening here. Our portfolio is continuing to evolve. I look forward to sharing with you where we are headed. But let's start with the quarter. So beginning on Slide four, we had another exceptional quarter delivering results above our guidance across all metrics. Revenue came in at $7.1 billion, up 8% versus last year, and adjusted operating margin was 6.5%. It was yet another quarter above 6%. We reported adjusted EPS of $0.87, up 13%, and that was another record for Flex. This performance reflects the strength of our differentiated business model. Let's start with data center first. As you all know, there's tremendous complexity in the data center deployment and the market needs an ecosystem of integrated products, capabilities, technologies, and services. Flex's holistic approach is resonating with customers, enabling them to build at the scale, speed, and quality demanded by the AI era, while drawing on Flex's more than five decades of experience navigating major technology shifts across industries. The growth we're seeing in data centers is being driven by rapidly expanding compute and AI workloads, and those demands are here to stay. As customers continue to scale, complexity increases. Every design choice has downstream implications across the ecosystem and requires a systems-level approach. This is where Flex is uniquely positioned to help. Our data center portfolio is built around three tightly connected capabilities: compute integration, cooling, and power. At the same time, scaling IT infrastructure adds additional layers of complexity. To scale effectively, power, cooling, and IT infrastructure must be designed to move together and adapt as technologies and workloads evolve. While many companies address individual elements of this ecosystem, very few can integrate all three in a cohesive and end-to-end way. This quarter, we reinforced that leadership through several milestones. We announced the development of modular data center systems with NVIDIA, reimagining deployment for speed and scale, as well as a partnership with LG to advance thermal management solutions designed for gigawatt-scale data centers. We also deployed our advanced rack-level vertically integrated liquid cooling at the Equinix co-innovation facility, demonstrating these capabilities in real-world environments. In addition, we introduced the new AI infrastructure platform, the first globally manufactured data center platform to integrate power, cooling, compute, and services into a modular design. This is capable of accelerating deployment timelines by up to 30%. These milestones demonstrate what sets Flex apart: our ability to understand the interdependencies and translate that insight into a comprehensive, differentiated offering that helps customers move faster, scale with confidence, and stay ahead in a rapidly evolving industry. While our data center business growth reflects where the industry is headed, that momentum extends across our diversified portfolio. Flex remains a trusted global manufacturing partner across a wide range of industries as we continue to move into higher value, more complex product categories. That also helps drive margin improvement. Beyond data centers, we continue to see robust momentum across our diversified end markets, each benefiting from long-term secular trends. In health solutions, demand for medical devices remains strong, and we saw an improvement in the medical equipment category. In core industrial, we're seeing demand in productivity-driven areas like warehouse automation and robotics, along with strength in select semiconductor-related capital equipment programs. Another area of strength not reflected in data centers is high-performance networking and satellite communication products, serving next-generation network and infrastructure platforms. So we are pleased to see that AI is driving momentum in the portfolio outside of what we include in data centers. Looking ahead, we believe in the strategic choices we have made to support both near and long-term success for Flex and our customers. We continue to expand and optimize our global footprint while investing in advanced technologies and capabilities that help customers manage complexities at scale across industries and geographies. The challenges our customers face are increasingly interconnected. Whether supporting highly regulated healthcare devices, large-scale data center deployment, next-generation mobility platforms, or cutting-edge consumer technologies, success today demands speed, flexibility, and resilience. Flex is well-positioned to adapt as markets evolve, technologies mature, and customer requirements continue to change. We see ourselves as a strategic enabler, helping leading brands navigate complexity, improve performance, and scale with confidence in a fast-moving world. Now I'll turn the call over to Kevin to walk through the details of our financials. Kevin Krumm: Thank you, Revathi, and good morning, everyone. I'll now review our third-quarter performance, which reflects disciplined execution and continued progress against our strategic priorities. I'll start with our key financials on Slide eight. Third-quarter revenue came in at $7.1 billion, up 8% year-over-year, driven by continued strong performance in data center and improving momentum in our Industrial and Health Solutions businesses. Adjusted gross profit totaled $690 million, and adjusted gross margin improved to 9.8%. Adjusted operating profit was $460 million, with adjusted operating margins at 6.5%, up 40 basis points year-over-year, a record for Flex. The margin improvement reflects disciplined cost management and our deliberate shift towards higher value products and services. Finally, adjusted earnings per share for the quarter increased 13% year-over-year to $0.87 per share, underscoring strength in our execution. Turning to our quarterly segment results on the next slide. Reliability revenue accelerated this quarter, totaling $3.2 billion, up 10% year-over-year. Power continues to drive strong growth alongside core industrial and health solutions. Adjusted operating income improved to $233 million, and adjusted operating margin was 7.2%, up 50 basis points year-over-year, driven by power and core industrial. Agility revenue totaled $3.8 billion, up 6% from the previous year. Data center-related end markets continue to drive strong growth but were partially offset by softness in our consumer-related end markets. Adjusted operating income was $239 million, and adjusted operating margin for the segment was 6.3%, unchanged from a strong quarter in Q3 last year. Moving to cash flow on slide 10. Cash flow in the quarter was $275 million, showing robust conversion driven by efficient working capital management. Inventory was up 5% sequentially and up 5% year-over-year. Inventory net of working capital advances was fifty-six days, flat from the prior year. Net CapEx totaled $145 million, or approximately 2% of revenue. And we repurchased around $200 million of stock in the quarter, which was approximately 3.3 million shares. Our capital allocation priorities remain unchanged. We are committed to maintaining our investment-grade balance sheet, funding strategic investments to support organic growth, and pursuing accretive M&A opportunities while returning capital to shareholders through opportunistic share repurchases. Turning to our full-year guidance on slide 11, for Reliability Solutions, we expect revenue to be up mid-single digits, driven by strong data center power demand and solid growth in core industrial and health solutions. For Agility Solutions, we expect revenue to be up mid-single digits, driven by continued strength in cloud, offset by softness in demand for consumer devices and lifestyle. Finishing with our guidance for the fourth quarter on Slide 13. We expect to exit the year with very good momentum. We anticipate Reliability Solutions revenue to be up low double digits to mid-teens, driven by continued strength in power and further growth in core industrial and health solutions. We expect Agility Solutions revenue to be up low to mid-single digits as cloud and networking growth is offset by softer demand for consumer devices and lifestyle. As we enter the last quarter of our fiscal year, we are pleased to see our team's hard work translate into meaningful progress against our strategy. Our disciplined execution and focus on portfolio management are reflected in our full-year results. For the fiscal year, we now expect the following: Revenue to be between $27.2 billion and $27.5 billion, which is $350 million higher at the midpoint versus our prior guide. Adjusted operating margin of approximately 6.3%, adjusted EPS between $3.21 and $3.27 per share, a midpoint increase of $0.11 per share, and finally, anticipate further strong cash generation and maintain our guidance of 80% plus free cash flow conversion for the year. Moving to our segment outlook for the year, for total Flex, we expect revenue to be between $6.75 billion and $7.05 billion, with adjusted operating income of $445 million to $475 million. We expect an adjusted tax rate of 21%, and finally, we anticipate adjusted EPS to be between $0.83 and $0.89 per share on approximately 375 million weighted average shares. As we close FY '26, we remain focused on disciplined execution, margin expansion driven by our product and services mix underscores the resiliency of our model and with our improving revenue momentum positions us for continued profitable growth in FY 2027. With that, I'll now turn the call over to the operator to begin Q&A. Operator: Thank you. We'll now begin the question and answer portion of today's call. A reminder, we ask that you please limit yourself to one question and one follow-up. Our first question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question. Ruplu Bhattacharya: Hi, thank you for taking my questions. Revathi, you're seeing strong growth in data center. Where do you see the bigger opportunity? Is it in power or in compute? And correspondingly, where are you focusing Flex's investments this year? I ask because as we look out over the next couple of years, there's a bunch of new AI programs that are scheduled to come online. Do you think Flex has the opportunity to benefit from one or more of those? And does Flex have the manufacturing capacity to handle these opportunities, or do you expect to need to retrofit any facility to handle more AI-related work? And I have a follow-up. Revathi Advaithi: Thanks, Ruplu. First, you know, we're really thrilled with the performance that we're showing across all the business segments that we have. Now with regard to data centers, we're still in line with a very strong year-over-year growth that we talked about earlier in the year, and we'll update that at the completion of the full year next quarter. This year, if you look at our investments, first thing is both power and compute are growing very, very strongly, whether it's embedded power or critical power or the compute side. For the year, if you look at it, our investments, I would say, have been in both parts of our businesses. Power has been more heavy this year in terms of investments for capacity, but we expect that because of the large AI infrastructure spend that you continue to see and new programs coming on board for compute, that we will be investing more in compute capacity in the next few years. But that is normal, Ruplu, as far as I'm concerned. Right? Some years, one segment will be a little higher investment than the other. As you add in capacity, you digest that capacity, and you move forward. So next year, I think we'll be adding probably more capacity in our embedded power business. Not as much in our critical power business because we'll be digesting the capacity we're adding this year. And then, you know, we'll have to continue to add capacity in compute because of AI programs coming into play, as you just mentioned. So, yeah, I think that's a continuous process. It's a good problem to have with the tremendous growth we're seeing. So we're pretty excited about the opportunity. Ruplu Bhattacharya: Okay. Thanks for the details there, Revathi. Can I ask a follow-up? You guided fiscal 2026 operating margins to 6.3%. I'm wondering conceptually, is there a ceiling on how high operating margin for Flex can go, given the business mix that you currently have? I mean, you've done a great job focusing the company on the longer life cycle, higher margin segments. Do you think it would be now strategic to maybe focus Flex more on AI and other higher growth opportunities? And maybe exit completely the lower margin consumer-related segments? Thanks for taking my questions. Appreciate it. Kevin Krumm: Hi, Ruplu. This is Kevin. I'll take the first stab at answering this question. I would say that we got this question last year at this time: Are our margins stable and sustainable? And I would say last year, we looked into this year, we answered it, yeah, we believe our margins are sustainable when you look across our underlying business units. And then we expect underlying business units to continue to drive margin improvement. Plus, there'll be mix impacts. So when you look at our margins this year, I think we've delivered against that. Our underlying businesses have improved from a margin standpoint, and we've seen positive mix impacts. As we go forward here, our answer isn't going to change when you look across our business units. We expect them to continue to deliver margin expansion year on year, and we expect there to be mix impacts in our business. So, that's how I would answer your question right now. As it relates to the overall portfolio, we're comfortable with where we are. I'll leave it at that. Revathi Advaithi: Yeah. Ruplu, I'd say the only thing I'd add is all of you know that we got to the 6% a year ahead of the long-term guide that we had given. And, you know, it is the continued focus on shifting our mix, which is exactly what you're talking about. And, you know, we make investments into the highest areas of return and the highest areas of growth. And that has driven the mix shift and improved our operating margin. Now with the growth in data centers continuing to be strong in the next few years, I think you'll see that mix shift. But we've also done a tremendous job on productivity, and I expect with AI implementation in our own facilities, that'll also continue to be strong for us. So more to come on Investor Day in May, in terms of long-term guide on margins, so stay tuned for that. Ruplu Bhattacharya: Okay. Thank you for all the details. Appreciate it. Operator: Our next question is from the line of Samik Chatterjee with JPMorgan. Please proceed with your questions. Samik Chatterjee: Yes. Hi, thank you for taking my questions. Maybe, Revathi, I appreciate your comments on the Power business. Doing robust growth right now. If you can help us differentiate a bit between Embedded Power and Critical Power, just in terms of what you're seeing from a competitive landscape perspective? Where do you see sort of more opportunity for share gains for Flex? Is it more on embedded and critical? And where do you see more opportunity to, like, gain large customers, large cloud customers that would make a more material impact on that growth or inflection growth? Sort of help us just differentiate between the two as much as you sort of have a high margin business across both of them. And I have a follow-up. Revathi Advaithi: Yeah. Samik, again, we'll talk more about this in our investor day. But at a high level, I would say both businesses, embedded power and critical power, are growing very, very strongly, right, through this year. So we feel good about that. Critical power is driven by, you know, it's all about, you know, how quickly can you manage your lead times, how quickly can you manage installations. Innovation does play a role, but it's all about kind of putting these large power pods in. Schedule management is a huge part of, you know, what people expect from that particular group of products, and we compete with the traditional electrical players that you all know about. I would say the embedded power is very different in the sense that it is going through a huge technology shift with what is happening in the 800-volt DC category, larger one-megawatt deployments in terms of rack power itself. So big technology shift that is happening there. We are at the forefront of that technology shift. There are only a very small group of competitors who play in that space, which is a significant advantage for us. And, you know, we're very excited about the changes that are happening in 800-volt DC and larger megawatt deployments that are happening across hyperscalers. So I would say that business is growing very well. We expect that to accelerate with these large power deployments and, you know, power-hungry data racks that are happening. So in both spaces, we're seeing strong growth, and, you know, the 35% guide this year is pretty strong. And if it continues at a pretty double-digit pace, I will be quite excited about the growth in these categories. But I would stay tuned for what comes out of Embedded Power just because of the technology shift that is happening and the very small set of competitors in that space. Samik Chatterjee: Got it. Got it. No. Very helpful. And for my follow-up, the full-year revenue guide expectation for Agility was sort of walked down a bit, and I'm assuming it's the consumer end market being soft that's sort of probably impacting it. But it's a bit more also a bit surprising on the flip side to see not more upside from the compute side to sort of offset that where you're clearly growing much faster in power, and that's driving the reliability acceleration. But as you didn't have as much upside on compute to offset that. I mean, anything going on specifically on that front? Because the cloud companies have obviously been pretty strong in their spending. So anything you can help us there. Thank you. Revathi Advaithi: No. Actually, I mean, we're very pleased with the Agility's kind of growth, and if you think about it, first is I'd say, data center growth remains on track for what we have said for the full-year guide. And we will update that when we finish the year. And so that remains on track, and we are comfortable with that. I think the additional upside that you are seeing in agility is driven by kind of what is happening in high-speed networking or network interface cards. And I'll just remind you that we don't include those end markets in our data center business. But these are data center-related infrastructure deployments that are happening, that is really driving very good growth for agility. The place that I see softness for agility is basically consumer-related end, which is lifestyle and consumer devices. So very pleased with the growth in data centers. And data center-supported infrastructure like networking or NIC cards that we don't report in our overall data center numbers. So, you know, I'd say really strong growth and agility just offset by consumer end markets. Samik Chatterjee: Okay. Great. Thank you. Thanks for taking my questions. Operator: The next questions are from the line of Mark Delaney with Goldman Sachs. Please proceed with your question. Mark Delaney: Yes, good morning. Thank you very much for taking the questions. First, I was hoping to better understand if Flex is already seeing material upside that it would attribute specifically to the Amazon warrant deal that you reached in calendar '25? And if not, when might that be additive to your business in a more meaningful way? Kevin Krumm: Hey, Mark. This is Kevin. I'll take the first part of your question. Short answer is the warrants are not incremental, nor were they expected to be materially incremental to FY 2026. So it's really that program as we move forward is where we'd expect to see that. Deployments are complex, and they scale over time. And so that's kind of how we expect the up and the additional revenue to come to us. Revathi Advaithi: Yeah. Mark, the only thing I'd add is that in our overall growth rate that we gave for the year, which is the 35% growth rate for data center, we were expecting, you know, pretty decent growth with our hyperscale customer, and it is playing out the way we imagined it to be. The only other thing I'd add is when we'll update you with kind of the customer consigned inventory mix shift, that does play into some of these growth rate numbers. But our growth with AWS is very strong, and it's going as expected. And we continue to expect to see that growth rate continue into the next few years. And then more to update that in our investor day. Mark Delaney: Very helpful. Thank you both. And my other question was on margins in the Reliability segment. You spoke a bit already around company-wide margins and the longer-term path you're on. You spoke a bit about mix, but reliability margins were quite strong over 7%. Want to better understand if there's anything episodic in reliability margin that might be more one-time in nature? Or is this just indicative of mix and some of the longer-term potential of that business segment? Thanks. Kevin Krumm: Hey Mark, this is Kevin. I'll answer that. Reliability margins in Q3 were strong. Really what you're seeing there is underlying mix impacts from continued growth in Power, year-on-year improvements in our core Industrial business, some of that's related to what Revathi was referencing earlier, which is strong performance in industrial and our non-data center-related end markets that still have exposure to some of the secular AI trends. But generally, what you're seeing in Q3 is power improvement, power mix, and strong underlying performance in core industrial. And as we move to Q4, we would expect those to continue. Mark Delaney: Thank you. Operator: The next question is from the line of Steven Fox with Fox Advisors. Please proceed with your question. Steven Fox: Hi. Just a follow-up on that last question. Kevin, I'm looking at incremental margins just from the last quarter that are like 20%. You dropped like $250 million more profits quarter over quarter on $250 million of sales. So can you just maybe dig into that a little bit more? It feels like we're glossing over some pretty powerful moves there. Like, how would you force rank those incremental margins? Thanks. Then I had a follow-up. Kevin Krumm: Steven, I'm going to have to ask a clarifying question. You're referring to Q3 margin performance noting the that we had? And sales were up $250 million plus and I'm just looking Q3 versus Q2. Profits were up like $50 million plus quarter over quarter. So that's like you're dropping 20% sequential margins incrementally. And I'm just not sure why it's that strong. Kevin Krumm: We had a strong quarter. A lot of that is related to the question we just had, which is underlying margin performance and reliability. Our power business continued to drive margin improvement in Q3, Steven. And then we also saw improvement sequentially in core industrial for some of the reasons I said. So I would just reiterate our strong margin performance in Q3 sequentially or year on year was related to continued mix impacts and growth in our power business and continued margin improvement in our core industrial business. Steven Fox: So not to pin you down, but should we take away that it's mainly power that drove sort of that outperformance? Kevin Krumm: No. I would say it was power, power mix, and core industrial, Steven. Steven Fox: Okay. That's helpful. And then, Revathi, I noticed this morning's Wall Street Journal, the headline is US manufacturing isn't is in retreat. I was curious if you could react to that headline and based on what you're seeing in The U.S. Thanks. Revathi Advaithi: Yes. Steven, I would say we are definitely not seeing that. You know, we are not only investing in our own capacity in U.S. manufacturing, but we continue to get a lot of inbound requests from customers on future projects, you know, that require US manufacturing. So we're not seeing that at all. You know, we're one of the world's largest manufacturers. We see a lot of activity in terms of what goes on in these multiple end markets. So I would say, you know, our biggest investments are still happening in North America, and the US is continuing to expand across many of our facilities. So I have to go read that article. I haven't read it yet and see what the macros are saying, but we're not seeing that being reflected, Steven, at all in our business. In fact, most of our investments are being driven by what's expected in the US and in Mexico. Steven Fox: Great. I appreciate that color and congrats on the great performance. Revathi Advaithi: Thanks, Steven. Operator: The last question is from the line of Jacob Moore with KeyBanc Capital Markets. Please proceed with your question. Jacob Moore: Hi, good morning. Thanks for taking our questions. This is Jacob on for Steve Barger. First for most is on automotive. I think we're all glad to hear that stabilization is the trend. If we could just dig into that a little bit, what trends does that assume between unit volume versus content? And how do you think that those trends inform your view of growth from here? Do you think the automotive maintains at these levels for a while? Revathi Advaithi: Well, Jacob, thank you for asking a question that is not data center related, but still all good. I'd say the comment on auto stabilizing was more, it's you recall what we have said in the last few quarters is that programs were at Flex were in flux, right? Because people were trying to decide what EV programs to put on hold, how to switch to some hybrid programs, or a combustion engine program. So there was a lot of confusion in terms of which platforms were going to grow for which customers. The stabilization comment is more in terms of clarity, which you can see from a lot of auto OEMs in terms of what programs are going on hold, which cars are being pulled off, and what platform investments are being made. And that helps us a lot in terms of being able to make forecasts and really understand where we see the end market growth. In terms of unit volume versus content itself, I would say in the US, well, as I know, kind of what the global car forecasts are right now. They haven't moved significantly. If anything, they have only dropped. So for us, any automotive growth actually comes from continuing to invest in future compute platforms. And because compute is needed in every vehicle, whether it is a combustion engine or hybrid or an EV, that is what drives our automotive growth for us is continuing to win in these software-defined compute platforms, which is agnostic of any platform. And that is super helpful for us. And so we like the first the stabilization and clarity of platforms, and it is definitely not unit volume. It is driven more by these compute platforms accelerating. Jacob Moore: Got it. Thanks. That's helpful. And then the second one from us is on the effect of skyrocketing memory prices. I think naturally, more price-sensitive markets like consumer are most vulnerable to that trend. Could you just talk through any dynamics that you're planning for as memory prices jump sharply? Are you seeing or anticipating any demand effects on consumer products or other high memory content platforms? Revathi Advaithi: Yeah. I would say the good news for us, Jacob, is that most of our customers outside of what we use in our own products in the power side are all procured by our customers directly from the memory suppliers. And so I'm sure, I mean, you hear this in the calls that the memory companies have. You know, they are selecting few end markets more than the others. So you are seeing a bigger distribution go to data centers and those types of end markets. That being said, we're not seeing a significant effect in terms of consumer end markets because those end markets are soft to begin with. So, you know, memory is not driving any kind of demand issue or supply issue in terms of consumer end markets. But I think, you know, you're hearing from memory companies that there is allocation of material that is happening, and, you know, we bake that into our forecast. Jacob Moore: Alright. Understood. And I appreciate you taking the questions. Revathi Advaithi: Thanks, Jacob. Operator: Thank you. I'll now turn the call back over to the CEO for any closing remarks. Revathi Advaithi: Thank you. So on behalf of our leadership team, I want to give a sincere thank you to all our customers for their trust and partnership, our shareholders for your continued support, and to all our employees across Flex. We're looking forward to speaking to all of you again when we report our fourth-quarter results. And most importantly, I'm hoping to see most of you in person at our Investor Day, which will be held on May 13 here in Austin. Thank you all. Operator: Thank you. This now concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good morning, and welcome to the Old Dominion Freight Line Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director, Investor Relations. Please go ahead. Jack Atkins: Thank you, Gary. Good morning, everyone, and welcome to the fourth quarter 2025 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through February 11, 2026, by dialing 50669658, access code 901145. A replay of the webcast may also be accessed for thirty days at the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. As a final note before we begin, we welcome your questions today. But ask that you limit yourself to just one question at a time before returning to the queue. At this time, for opening remarks, I'd like to turn the conference over to the company's President and Chief Executive Officer, Marty Freeman. Marty, please go ahead. Marty Freeman: Good morning, and welcome to our fourth quarter conference call. With me on the call today is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Old Dominion produced solid financial results during the fourth quarter that reflect our ongoing commitment to revenue quality and cost discipline. We once again delivered best-in-class service to our customers, and our yield continued to improve. Although our operating ratio increased to 76.7% for the quarter, we believe our profitability metrics will continue to lead our industry and they reflect our team's ability to operate efficiently despite the challenging environment. I want to thank our OD family of employees for their dedication to our customers and their unwavering commitment to executing our long-term strategic plan. Our team remains focused on controlling what we can control to ensure that we continue to deliver an unmatched value proposition for our customers. The foundation of this value proposition is our ability to deliver superior service at a fair price. Our customers know that they can expect the highest standard of service from Old Dominion every day, which positions them to drive value for their own customers. We are pleased to once again provide 99% on-time service in the fourth quarter and a cargo claims ratio of 0.1%. Our track record of consistently delivering superior service has helped us to win market share over the long term while also supporting our ongoing commitment to revenue quality. We maintain a disciplined approach to yield that is designed to offset our cost inflation over the long term while also allowing us to continue to make strategic investments in our capacity, our technology, and most importantly, our people. While these investments have increased our overhead cost in the short term, we believe they will support our ability to grow with customers in the years ahead. Our consistent investment in capital expenditures throughout this economic cycle has differentiated us from our competitors over time. This is also a fundamental component of our value proposition, which has been critical to our ability to win more market share over the last decade than any other LTL carrier. During the fourth quarter, our team continued to operate efficiently while also managing our discretionary spending. These efforts are reflected by how well we have controlled our variable operating costs over the last few years despite the decline in our overall network density and other inflationary headwinds. To put this in context, in 2022, when we generated a company record operating ratio of 70.6, our direct operating expenses were approximately 53% of revenue. In 2025, our direct operating costs as a percent of revenue were also 53% despite the loss of network density associated with the decrease in volumes. Our efforts to enhance productivity have been made possible by key technology investments as well as business process improvements, which we believe will allow us to improve our operating ratio and business levels ultimately improve again. As we begin 2026, we are cautiously optimistic that we will see some recovery in demand within the industry. With the combination of our industry-leading service standards and more network capacity than we've ever had, we are better positioned than any other carrier to capitalize on an improving economy. As a result, we are confident in our ability to win market share, generate profitable revenue growth, and increase shareholder value over the long term. Thank you very much for joining us this morning. And now Adam will discuss our fourth quarter in greater detail. Adam Satterfield: Thank you, Marty, and good morning. Old Dominion's revenue totaled $1,310,000,000 for 2025, which was a 5.7% decrease from the prior year. Our revenue results reflect a 10.7% decrease in LTL tons per day that was partially offset by a 5.6% increase in our LTL revenue per hundredweight. Excluding fuel surcharges, our LTL revenue per hundredweight increased 4.9% compared to 2024. On a sequential basis, our revenue per day for the fourth quarter decreased 4.1% when compared to the third quarter of 2025, with LTL tons per day decreasing 4.8% and LTL shipments per day decreasing 6.5%. For comparison, the ten-year average sequential change for these metrics includes a decrease of 0.3% in revenue per day, a decrease of 1.3% in LTL tons per day, and a decrease of 3.1% in LTL shipments per day. The monthly sequential changes in LTL tons per day during the fourth quarter were as follows: October decreased 5.3% as compared to September, November increased 2.6% as compared to October, and December decreased 4% as compared to November. The ten-year average change for these respective months is a decrease of 3% in October, an increase of 2.7% in November, and a decrease of 6.8% in December. For January, our revenue per day decreased 6.8% when compared to January 2025, due to a 9.6% decrease in our LTL tons per day that was partially offset by an increase in our LTL revenue per hundredweight. LTL revenue per hundredweight excluding fuel surcharges increased 3.9% in January. Our operating ratio increased 80 basis points to 76.7% for the fourth quarter of 2025. While we continue to operate efficiently and diligently managed our discretionary spending during the quarter, the decrease in our revenue had a deleveraging effect on many of our operating expenses. Our overhead costs tend to be more fixed in nature, increased 140 basis points as a percent of revenue due to this effect. The increase in our overhead cost also includes a 70 basis point increase in depreciation as a percent of revenue, which reflects the continued execution of our long-term capital investment plan that Marty just discussed. Our direct operating cost as a percent of revenue improved by 60 basis points as compared to 2024. This was primarily due to the net impact of adjustments we record in the fourth quarter each year that are related to third-party actuarial reviews of our injury and accident claims. The results of this annual review impact both the salary, wages, and benefits and the insurance and claims line items on our income statement. We were otherwise able to effectively manage our direct variable cost to be consistent with the prior year. Old Dominion's cash flow from operations totaled $310,200,000 for the fourth quarter and $1,400,000,000 for the year, respectively, while capital expenditures were $45,700,000 and $415,000,000 for the same periods. We utilized $124,900,000 and $730,300,000 of cash for our share repurchase program during the fourth quarter and the year respectively, while our cash dividends totaled $58,400,000 and $235,600,000 for the same periods. We were pleased that our Board of Directors approved a quarterly cash dividend of $0.29 per share for 2026, which represents a 3.6% increase compared to the quarterly cash dividend paid in the first quarter of 2025. Our effective tax rate for the fourth quarter of 2025 was 24.8% as compared to 21.5% in the fourth quarter of 2024. We currently expect our effective tax rate to be 25% for 2026. This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time. Operator: We will now begin the question and answer session. Before pressing the keys. Our first question today is from Jordan Alliger with Goldman Sachs. Please go ahead. Jordan Alliger: Yes. Hi. Good morning. I was wondering, might as well ask that, can you provide some sort of thoughts and perspective on both, any indication on demand and what you're seeing and hearing from customers and thoughts around possible better tone to volume as we move through the year. And then maybe it's all in conjunction with that, your thoughts on seasonality as we go from Q4 to Q1 from margins? Thanks. Adam Satterfield: Yes. I'll just start with the demand and let someone, I'm sure, will probably get at that OR question. But I think we've seen some positive signs that we've been really pleased with really over the last couple of months that have been developing. And then the release this week of the ISM was certainly very positive to see. And maybe as an indication of hopefully what things will be for the remainder of the year. Obviously, over time, we've seen that ISM it's a leading indicator and typically a couple of months after that inflects positive, we see volumes somewhat do the same. But just getting back to recent trends for what we've seen the thing I've been most pleased with is the increase in wafer shipment. And I think we've talked for multiple quarters now when trying to make the call on when is the demand environment going to finally turn. We've talked about looking at that weight per shipment, for example, as really the indicator within our business. So that really increased. We were down about fourteen fifty pounds in kind of September, October time frame. We saw that increase to fourteen eighty-nine pounds in November, which is above what our long-term seasonal increase would be for that month. And then we saw it increase further to fifteen twenty pounds in December. Again, that was about a 2% increase. Ten-year average is about a 1% increase from November to December in weight. So it pretty much performed in January. We're right at fourteen ninety-two pounds, so a little bit of a decrease, but that was right in line with seasonality. And I think somewhat impacted by a little disruption we had to our operations the last week of the month. We'd actually been trending higher than that as we progress through the month. So really good to see when looking at the tonnage per day, the weight per shipment, all those factors leading into the start of this new year. And hopefully, finally seeing the turn that we've been predicting for the last couple of years take shape. Jordan Alliger: Thank you. Operator: The next question is from Chris Wetherbee with Wells Fargo. Please go ahead. Chris Wetherbee: Yes. Hey, thanks. Good morning, guys. Maybe I'll just pick up on that and ask about the first quarter kind of sequential from an operating ratio perspective and maybe any thoughts you have on revenue per day for the first quarter as well? Adam Satterfield: Yes. Obviously, the revenue per day is going to lead right into it. And given the data that we just discussed for January, we're out a little bit behind seasonality. Again, on a revenue per day standpoint. I feel like we'll close that gap. We've seen good performance since early, but probably a little catch up in business this week where we had the weather disruptions last week. So, I think that will normalize. But hopefully, we can close the gap with seasonality as we progress through the remaining months of the quarter. Just from a big picture top line standpoint, I feel like our revenue for the full quarter will probably come in somewhere between $1,250,000,000 and $1,300,000,000. The low end of that range would be if we underperform seasonality at a rate similar to what we just did in the fourth quarter. And then the top end would be normal seasonality. And if you take normal seasonality from January through February to March, that would put us kind of right there in the middle. So, we'll see how that continues to take shape. And obviously, we give our mid-quarter updates that will allow for tracking. So with that said, the ten-year average change in the operating ratio was an increase of 100 to 150 basis points from the fourth quarter to the first. And I think we can get to the top end of that range. So I would say an increase of 150 basis points is probably the target and then maybe a plus-minus 20 basis points to continue to allow for some of that revenue uncertainty. Operator: The next question is from Scott Group with Wolfe Research. Please go ahead. Scott Group: Hey, thanks. Morning. So Adam, wanted to just you talked about the weight per shipment improving. Can you have a do you have a sense of of what's driving that? Is it are we starting to see some of the truckload stuff spill back? Is it just underlying industrial getting better? And then maybe just help us, I know that the yield trends decelerate a little bit into Q4 and maybe starting in Q1, is that just the weight getting better or is, you know, any thoughts on just, you know, how to think about yield trends as we're going from here? Thank you. Adam Satterfield: Yeah. The I think the weight is is probably coming from all the above. Looking at our contract customers, weight's up a little bit. Our smaller mom and pop customers which actually we saw a little bit more growth out of or better performance, I say growth in the fourth quarter. Weight per shipment was up as well. And so I think that exactly what you said as the truckload market is changing, we've talked a lot about the spillover effect and how that's impacted volumes. Over the last couple of years. I think we're probably in the early innings of some of that starting to normalize. I don't know that we're completely there yet, but just given how there's some supply rationalization there, It certainly feels like that is beginning to happen. And the weight certainly will put a little bit of pressure on our yield metrics. But our guidance for revenue per hundredweight for the fourth quarter was to be up 5% and that would have been normal seasonality. So we came in right at 4.9%. Normal seasonality for the first quarter would be about 4.5% increase on a year-over-year basis. I feel like we've probably got at least a 50 basis point headwind. It looks like right now with the change in weight per shipment. So that's actually a good thing. And January kind of came in right at about that 4% threshold. So that's about what I would expect. Unless we see further increases in the weight that may put pressure on that revenue per hundredweight metric. But the reality is that's what we're hoping to see. We want to continue to see that weight per shipment going up. Because the thing that's being missed when we talk about revenue per hundredweight is what's the revenue per shipment? And that will continue to go up as the weight increases. That's going to be ultimately what we're looking at for success. How are we managing our revenue per shipment? And our cost per shipment. And we've obviously, the last of years, the operating ratio has gone the other way because we've had more cost than revenue there. On a per shipment basis. So that weight continues to go up. That's going to help us continue to build density in our network. It's going to allow for us to have more true yield on a per shipment basis and hopefully allow us to turn the corner. And get right back to produce an improvement in our operating ratio and long-term profitable growth. Scott Group: Thank you, guys. Adam Satterfield: Thanks, Scott. Operator: The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Ravi Shanker: Great. Good morning, everyone. So maybe just a bit of a color here. I think you and your peers have spoken of some level of share shift away from LTL to TL in the down cycle, and you've expected that to come back when the market tightens up. I mean, now that TL rates have been pretty tight for a couple of months, are you starting to see that come back? And what do you think is the cadence of that coming back to the cycle? Thank you. Adam Satterfield: Yeah. I think that, you know, it's a a natural sort of change that happens. I think that when you look at that truckload environment and a lot of those carriers are barely breaking even or worse. We've seen some capacity rationalization, if you will, in that environment. And I think that's changed the pricing environment there. And so hopefully, we'll continue to see those trends change at a time where it feels like overall industrial demand ready to start showing some signs of improvement again. And again, we say we're cautiously optimistic about all this because we had improvement in the ISM last year at about the same time. And then we had the event in April that threw cold water on everything. So we're in a great spot to continue to handle any business that comes our way. We've got more capacity than we've ever had in their network. We've got capacity with our equipment and capacity with our people. So we can respond to the inflection as it happens. And I think that's what has differentiated us from our competitors in the past. The ability to be able to take on significant volume growth the early innings of the cycle. Is when we've gained the most market share in the past. That's certainly what we're going look to as this cycle eventually inflects back to the positive. Ravi Shanker: Understood. Thank you. Operator: The next question is from Ken Hoexter with Bank of America. Please go ahead. Ken Hoexter: Hey, great. Good morning. Adam, maybe just to follow on that or Marty, your thoughts on headcount down 6%. Shipments down almost 10%. So we're seeing a bit of a decoupling. Is there more opportunity as you think about the cost cycle? Or is that more being prepared, as you just mentioned, to capture that? And similar to cap seems like you're aging the fleet. Little bit as you reduced it from what down to $415,000,000 this year, down another to $265,000,000 next year. So now is there a cost impact on maintenance and the like? So maybe just it's a cost issue, but maybe you're talking about being more prepared for the upside. Thanks. Marty Freeman: Yes, we're definitely prepared for the up cycle. The average age of our fleet actually improved this past year. It's now down to an average of three point nine years for our tractor fleet. And that's about where we like it, somewhere around four years. We've been below that before, and we've let it age up a little bit. But really pleased with our operations team as they've continued to try to right size the fleet and make sure we've got all the equipment the places we need, but also managing through our cost inflation from a repairs and maintenance standpoint. When we went through go back to 2022, 2023, we had cost per mile inflation that was more in the 10% to 20% type of range for each of those years. And we've been sort of flattish, just some mild increases, if you will, over the last couple of years. And I think that's a reflection of the management team's efforts in that area and continuing to rightsize. But from an employee count standpoint, I think we continue to manage through. And at the local level, our managers are making sure they've got the right amount of people and got the ability to flex hours up to meet the increased demand from our customers. So we're in great shape there. We'd anticipated that we would see a little attrition through the fourth quarter. That's about what we saw happen. And so the overall head count drifted down a little bit throughout the fourth quarter. As we somewhat expected. So, I think that will likely be here. And when you look over the long term, the change in headcount, the change in shipments really kind of match with one another. But what we'd expect to see is when we get into the early phase of the recovery, the number of hours worked by employee will increase on a per employee basis. We'll be able to step those hours up to meet the increased volume needs as they come. And so you should eventually see the volume growth that's leading any growth in headcount before those two numbers kind of converge again. Ken Hoexter: Thanks, John. Operator: The next question is from Reed Tse with Stephens. Please go ahead. Reed Tse: Hey, guys. Thanks for taking my question. In the release, you pointed to pretty low CapEx number relative to what you expected year coming into 2025 and kind of what you've done historically. Can you talk about maybe what's driving that lower CapEx expense this year in those expectations behind, that guidance? Adam Satterfield: Yes. It's just a function really of how what the volume environment has been for the last couple, three years. And we've continued to run our CapEx plan and that too is something that I think has differentiated us over time. From our industry. In fact, we've spent about $2,000,000,000 in capital expenditures over the last three years. And the volume environment obviously has not been robust. But I think we're in a really good spot when you sort of go down the elements of spend from a service center standpoint, we've got some projects that are in flight and that's a lot of the spend. That we've got this year. But we've got a little over 35% capacity in our service center network. We're handling a little over 40,000 shipments per day right now. And our network is built to handle more like 55,000 or even more. We've done more in certain months back in 'twenty one and 'twenty two. So we've got a lot of flex there to be able to grow. And the same thing with the fleet, just like I mentioned earlier, we've continued to right size the fleet if you will, and take some of the older units out. But we've got some that continue to need to be replaced. And that's the majority of what's in the spend there in that category for this year. So it is lower than as a percent of revenue than our typical range being 10% to 15%, but that's really just a function of the consistent investment that we've made over the past three years and kind of where we stand now and just wanting the business to grow into the network that we've got built. And when that starts happening, you think about our fixed cost, and Marty alluded to this in his comments, our overhead cost, if you go back to that 2022 period, they're up four fifty five hundred basis points. And that's really the difference in that record operating ratio then versus what we just completed in 2025. But once we start getting leverage on all these assets that we put in place, that overhead cost as a percent of revenue can swing back very, very quickly. And the density will allow us to further improve our direct cost as a percent of revenue as well. So that's what gives us the confidence that when we start seeing growth coming back in our business that we can get our operating ratio going back to that 70 type of threshold and beyond. Reed Tse: Got it. Thank you, Adam. Operator: The next question is from Jason Seidl with TD Cowen. Please go ahead. Jason Seidl: Thank you, operator. Good morning, Marty, Adam and Jack. Want to go back on sort of your employee headcount numbers and as well as how should we think about driver pay and dock order pay as we move throughout the year if some of your cautious optimism comes true when we start seeing a rebound, do expect that number to go up a little bit as we move throughout the year? Marty Freeman: Well, Jason, we always give an increase to our employees. And when we operate at a 75 we're in the fortunate position to continue to reward our employees first. And from a stakeholder standpoint, we prioritize our employees, and we want to make sure they're rewarded continue to be motivated to take care of our customers. And when you give 99% on-time service and a cargo claims ratio that's below 0.1%, I think our employees have certainly delivered. So we continue to give healthy raises. We did so in the 42% of salaries and wages and 25%. And or at least in the fourth quarter. And but we expect that we'll have a little bit of headwind there on those benefit costs probably be somewhere in the 41% of salaries and wages in 2026. So And then the final piece is the four zero one match that we make. And I think that's what ties everything in together. And we give a discretionary match every year that's up to 10% of our company's net income. So we continue to put a lot of dollars into our employees' four zero one plans to help them and their families prepare for retirement. Jason Seidl: That's great color. Should we expect the next sort of raise to be next or this September? Or do you think it'll be sooner than that? Marty Freeman: No. September is usually the timing of our our raises. Jason Seidl: Okay. Fair enough. Appreciate the time. Operator: The next question is from Jonathan Chappell with Evercore ISI. Please go ahead. Jonathan Chappell: Thank you. Good morning. Adam, after two years of speaking to sub seasonality, it seems like a little bit more cautiously optimistic as you said and you laid out a first quarter where the middle of the range is February and March are in line with seasonality. A lot of your peers, even though they haven't reported yet, are talking, to a of, like, if we do x in volume this year or tonnage, that leads to y in OR. If you took that February, March midpoint of one q enrolled seasonality going forward, where would that put your tonnage on a year-over-year basis? And by association, where would that put your OR improvement for this year? Adam Satterfield: Yeah. You know, I I think we normally just take it one quarter at a time. And obviously, there's a lot of ifs and buts that have got to play out and could play out. In that scenario. But what they say, you have some butts and beer and nuts, you have a hell of a party. And so I'll I'll let all you guys, you know, sort of go through all those gymnastics. But just looking at more in the short run, because I don't want to undersell what the long term could be, We've produced some serious improvement in our operating ratio once we get into those stronger demand environments. When we see the script flipped, still remains to be seen. But the second quarter, we've kind of laid framework out for the first quarter. And the second quarter. Typically you see revenue grow sequentially about 7% and the average operating ratio improvement is sequentially 300 basis to three fifty basis points. So, that would if we see all of that, if we see the spring surge that typically would happen and lead to that 7% type of sequential increase. Then that would put the operating ratio pretty close to being flat on a year-over-year basis in the second quarter. And then we would just have to sort of take it from there. But But I still think we don't want anyone to really get out over their skis necessarily. At this point from an expectation standpoint. It remains to be seen if this really is going to lead into that spring surge that we would typically see. We certainly feel like the stars are coming into alignment, but we felt that way before and in particular about February and March. So that's why we continue to say we're cautiously optimistic about how things might develop for this year. But I think that's why you're seeing some of the pullback in capital expenditures and doing other things that we feel like we needed to do to continue to manage our costs. And we've controlled our variable costs, and I couldn't be more pleased than I am with our operations team. And if you think about the loss of network density, if you go back over the past couple of years, we've added about six service centers and there's a lot of cost comes with that, just overhead cost and network line haul cost, pickup delivery with the loss of density. So to be able to manage those costs, says a lot to our team. Says a lot to the continued investment in technology the tools that we give the team to help kind of manage those costs and also to the yield discipline. If you weren't disciplined with yields throughout, we wouldn't have been able to keep those costs consistent as well. So, a lot goes into it. And it's a total team effort from sales, operations, pricing cost and you name it. It all kind of feeds into how we've been able to continue to produce strong profitable growth over the long term that the last ten years despite this three-year freight recession, we've still got a ten-year average growth rate of about 15% in our net income. So this says a lot to what we've done, but we think about the future, we got a lot of room for growth ahead. And operating ratio improvement. So, I'm happy with what we've done, more excited about what can come. Jonathan Chappell: Great. Thanks, Adam. Operator: The next question is from Eric Morgan with Barclays. Please go ahead. Eric Morgan: Hey, good morning. Thanks for taking my question. I wanted to just follow-up on the pricing discussion. Sounds like weight per shipment is having a mix effect in the first quarter. Just curious how we should think about what the cadence might look like looking a little bit further out, especially if that if you do kinda hold that 1,500 pound level, I think that'd be a larger increase in 2Q and 3Q from last year. So just curious how we think about that impact, as well as maybe length of haul a little bit lower here. Should we just kind of naturally see that yield number trend a little bit lower from mix? Thanks. Adam Satterfield: Yes, I think so. I mean just looking at what normal seasonality would be we'd be in kind of that 4% to 4.5% type of range. And again, if we have even more of an increase in weight, it could be lower. When you look back at some of our stronger years, from an overall revenue standpoint, volume environment, those types of things, we've had revenue per hundredweight growth that's been more in the 3% range. And that was my point earlier with the comment that sometimes, I think we get so down in the weeds and thinking about revenue per underweight. Kind of missed the big picture of what's really the revenue trends doing. And what's our revenue per shipment versus cost per shipment. So, I'd love to see our weight per shipment go back up to 1,600 pounds, which is where we've been in stronger demand environments. And yes, that might put pressure on that revenue per hundredweight. That's going to do wonderful things for the overall top line revenue as well as what we would be able to do an operating ratio standpoint. So we'll continue to kind of manage through that. But certainly, we'd hope we see that weight per shipment and if we're talking about some revenue per hundredweight that might be a little bit lower than what was reported, last couple of years. That's probably a good thing in the sense of what's really going on with the demand environment. It's certainly no change with what our yield management philosophy fee is or how disciplined we continue to be as we manage cost and manage yields. Operator: The next question is from Rishi Harnane with Deutsche Bank. Please go ahead. Rishi Harnane: Okay. Thanks, guys. So Adam, you mentioned that last week you saw some disruption. Maybe just clarify what went into that. Was it just weather? And did that weigh on your costs? Should we expect higher costs this quarter or two in light of that weather? Is that embedded in your 150 basis points change in OR target? Also another clarification, curious if the government shutdown had any impact on 4Q or potential impact this quarter from that on you or the industry? This quarter. And then so those are that's a clarification. And then I guess just my real question beyond those clarifications is incremental margins. You said, you know, you have more excess capacity than you've ever had in your network. Know you said you're quite excited about what's to come. Should we think that your incremental returns on growth can be higher than we've ever seen? I believe you eclipsed 40% post-COVID, but that was accompanied by really strong revenue growth. So I'm not sure if that's a unique situation. Adam Satterfield: Yeah. I'll probably spend more time addressing the last real question. But yes, the snowstorm last week obviously was disruptive and that was baked into our revenue and margin guidance and really nothing material to speak from a government shutdown standpoint. But I think just thinking about incremental margins to me, one, we got to get back to revenue growth to produce them. But I like to think about that breakdown in our income statement structure, and we talk a lot about our direct variable cost. Those were 53% of revenue in 2025. So if you bring on $1 of business, you should be able to generate a 47% incremental margin if it just takes variable cost. From that standpoint and just get complete leverage on all your overhead. And typically, is what happened in the early innings of our recovery. We just see more of that variable cost. And getting that leverage there before you've got to get back into investing in new service center expansion and new equipment and those other assets. But as you add new service centers, that creates incremental costs. You've got a new service center manager and a team of employees at the facility and the office and salespeople and things like that. So it all kind of ties in together. But when I think about just where we stand now, 75% operating ratio, we've been at a 70.6. We've talked before about getting to a sub-seventy operating ratio. I think that sort of mid-40s makes sense in the an incremental margin standpoint makes sense in the early innings. But then let's just stay focused on getting back to achieving that sub-seventy operating ratio. And we certainly can get there. I referenced this earlier, but when you look back at some of our really strong years with revenue growth, we've had operating ratio improvement in the 300 or more basis point range in any given year. So that's what we'll be focused on. That will help drive that 75,000,000 back to the 70,000,000. And when we get to 70,000,000 when we beat that goal, that's when we'll establish the next one and probably give new incremental margin longer-term type of goals that we're looking at as well. Rishi Harnane: I like it. Thank you. Operator: The next question is from Tom Wadewitz with UBS. Please go ahead. Tom Wadewitz: Yes. Good morning. So Adam, I think there's you know, this ISM print was so large that such a big step up that and some of the commentary wasn't as bullish as the number and the orders going up a lot too. What what do you hear from customers? Do you hear that much kind of good news and enthusiasm about, you know, improvement in active activity or do how do you kinda look at what your what your customer feedback is and just kind of thinking maybe relative to such a big ISM number, which I know historically is, you know, is really good read for LTL? Adam Satterfield: Yeah. I think that, you know, obviously, we solicit feedback constantly from our customer base and our sales team. In the fourth quarter. We build a bottoms-up forecast and we marry that with a top-down forecast where we're looking at other macroeconomic indicators and things are starting to feel a little bit better even in the fourth quarter last year, I feel like we've had some really good customer conversations in the sense of what they were anticipating their volumes might look like, the amount of business that they would tender to us. And so forth that gave us a little sense of optimism. And I just continue to say that, that's one month of a print with the ISM. And that's why we want everyone to be cautious with it. We're still looking at at volumes that have been down on a year-over-year basis. And but we feel like things are getting better and we're still talking about revenue that would be down on a year-over-year basis in the first quarter. But one of the things about our business model is, I feel like when you think about our long-term strategy of giving superior service, allowing that service to support a fair price pricing targeting 100 to 150 basis points of yield above price or cost rather, That's allowed us to improve our cash from operations. There's a flywheel effect to our business model. And we've got to get that flywheel effect going again. So as we can get into the early innings, it's those first rotations are a little bit slower. We're just making sure everybody is thinking through all of those factors. And it's not just going to turn around on a dime starting tomorrow. Because that one economic data point came out. But if we are in the early stages of this, I think history repeats itself in this industry. And you certainly can see how we've outperformed the other carriers when we get into those early stages of recovery. And we're certainly in position. Our team is in position and ready to roll. So we're ready to put it on the trucks and see revenue growth coming again as and the operating ratio improvement will follow. Tom Wadewitz: So you are hearing positive input from customers but maybe not to the degree of the move up in the ISM number. Is that a fair understanding of what you said? Adam Satterfield: That's fair. Tom Wadewitz: Okay. Thank you. Operator: The next question is from Bruce Chan with Stifel. Please go ahead. Bruce Chan: Thanks operator and good morning guys. Adam, you talked about 35% spare capacity in the network. And I know, these past couple of years, we've been a little bit more focused on door and facility infrastructure. Just wondering if that number is similar for the fleet and linehaul network especially with some of the better planning tools that you have and, you know, maybe how we should think about additional fleet CapEx versus, you know, maybe flexing PT higher if, volumes do indeed accelerate? Adam Satterfield: Yes. We don't have that much excess capacity in the fleet, if you will. That would been heavy with our fleet, but probably not at that same type of level. We try to keep that a little bit tighter. You always want to have spare capacity, if you will, especially in the trailing equipment. You know, if you got that much excess power, it just hurts you. It's very punitive from a depreciation. Per unit standpoint. So but part of our CapEx this year we've got about 105,000,000 that's slated, I think, for equipment. And so that's something that we'll continue to look at replacing where we need to replace. We use a tractor for about ten years. So we've got some that are at that point of being replaced. And but continuing to right size the equipment pool as well and making sure that we've got equipment in all the right places where we're seeing growth to keep the line haul network in balance. And we continue to make adjustments to the line haul throughout the year. Team has done a phenomenal job of making sure that we're meeting service standards. We continue to tighten some of our transit times in certain lanes as well. Despite the limited density that the been in the network. So looking forward to get more freight back in the system will make some of that a lot easier, reduce our empty miles, allow us to start running more directs and bypassing some breaks and so forth. And that's what gives me comfort in knowing that those direct costs that we've talked about that are 53% of revenue in 2025 that we can really show some strong improvement in that number. Once we get density flowing again. Bruce Chan: Okay, great. Thank you. Operator: The next question is from Ari Rosa with Citigroup. Please go ahead. Ariel Rosa: Hey, good morning. So I was hoping you could address competitive dynamics in the industry. Just maybe speak to what your level of confidence is that this cycle will play out like past cycles? And specifically, I'm curious about just the role of Amazon. We've been hearing a lot about their growth ambition or them looking to expand in in the LTL space, and then, obviously, FedEx is planning the separation of its freight business. Just talk about how you feel your position. I know obviously service continues to be exceptional at OD, but just talk about how you think the cycle could play out this time around. Thanks. Adam Satterfield: Yes. Well, all the carriers that are there, top 10 carriers are 80% or so of the industry. And they're all the same other than yellow. That was there before. So we've been competing against these companies for years. And I feel like capacity within the industry continues to be tight and maybe more so than what the perception out there is. When you look at the total number of service centers, back in 2022 versus what was reported at the 2024. We've seen about a 6% decrease in the number of service centers in the industry. And when you look at shipments per day per service center, those two metrics at the '2 versus the '4 are about the same. So you take an environment that was tight back then and when you look at the growth numbers for other carriers, despite how strong the volume environment was in 'twenty one and 'twenty two, at least for the public carriers, I think the growth in tonnage in 'twenty one was about 4%. When we grew 16%. So most of the carriers run their networks a little closer to full utilization. And I think that's a structural difference that that we have. We own the majority of our service centers and about 95% of our doors overall. And so we're comfortable with continuing to invest through the cycle and having more of that late capacity out there to grow into. And that asset ownership gives us that ability to do so. So that's why we're confident that when we see the demand environment growing again that I think we'll be able to significantly outgrow the industry. And when we do so, we'll see stronger returns coming in. And despite the challenging environment that we've had for the last few years, we're still producing returns on invested capital of 25% to 30%. And when you look at GAAP numbers, true GAAP earnings we've got some competitors that have got net income margins in the low single digits. And so I think that will be the opportunity what we see in past cycles is that's when other carriers will increase rates more and take advantage of supply and demand imbalance. And but for us, we want to continue on with just more of a consistent strategy. And that's when we see that big density opportunity, if you will. And that's what what we're expecting when we finally see the turn in the cycle. Ariel Rosa: Very helpful. Thanks. Operator: The next question is from Jeff Kaufman with Vertical Research. Please go ahead. Jeffrey Kaufman: Thank you very much and congratulations. A lot of my questions have been answered at this point. So I want to go back to the equipment discussion you were having. Some of the truckers I've been talking to said, listen, we're having trouble quoting our freight liners or our internationals because of the section two two tariffs and people aren't certain what the rebates are gonna be. But we've got more fundamental pricing on our domestically produced trucks like our Pete's and Kenworth's. I was just kind of curious what you're seeing on the equipment side in terms of quoting activity from the OEs in the wake of some of the tariff changes? Adam Satterfield: Yes. I think that there are always challenges that we go through when we look at the cost of equipment and how we plan for equipment and so forth. And it seems like every engine change and new regulation it's done nothing but increase the cost of equipment. And for us, as I just mentioned, we typically will use a tractor for ten years. So when you think about the per unit price, ten years ago versus today, it's significantly different. That's a big driver of some of our cost inflation. When you think about those on a per unit basis. So, So that's part of why we when we look at the number of units we were going to buy this year, you take that all in consideration. But at the end of the day, you need the fleet that you need, and you've got to build the pricing of those units and every other element of cost that we deal with. Into our cost model. And let that drive the output of what we need. But I would say again, that's just one element of cost. If you go up and down our income statement, and you look and think about per unit inflation, we've been able to average cost per shipment inflation of about 3.5% to 4% over the last ten years. Each line item has had significant inflation and more so than that number. That's the importance of why we stay so focused on our cost and managing cost and managing efficiencies and discretionary spending. We're doing all these other things. We're driving operating efficiencies that really minimize the true inflationary impact that we're seeing from things like insurance costs. Group health and dental medical costs, the cost of equipment and so forth and so on. So our team has done a great job leveraging technology's business process improvements to be able to keep our cost inflation low. And then that, in turn, allows us that when we think about trying to target 4% to 5% type of increases that we've generated over the long term in our revenue per shipment, that's that positive 100 to 150 basis points delta that we want to be able to generate those two. But we can't take our eye off the ball when comes to managing costs. You've got to think about costs day in and day out in good times and bad. And I think that's what our team has done over the really over the course of our history, but over the past few years in particular. Jeffrey Kaufman: Thank you. Operator: The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Brian Ossenbeck: Good morning. Thanks for taking the question. Maybe just to quickly follow-up on the cost per shipment. Inflation you're expecting this year, is it still 3.5% to 4%? And you outlined some of the equipment and health care costs. Is that something you still think is reasonable to expect this year? Then maybe just to follow-up on the competition side. Private companies are obviously getting a bit bigger here as well in in the wake of Yellow going out of business. Wanted to see if you thought that had a any impact, on how the next cycle, upcycle, might play out for the industry. Thanks. Adam Satterfield: Yes. So the cost inflation, we're I think it's going to probably be a little bit heavier again this year. I'm thinking it's probably going to be more in the 5% to 5.5% range. And that's core inflation, not really thinking about what fuel might do. And right now, we're looking at fuel prices that have been lower on a year-over-year basis. So we'll see how that continues to play out. But I feel like we've as I mentioned earlier, we're looking at a little more inflation from an employee benefits standpoint. I think we're going to continue to see some pressures there. Within our group health and dental cost in particular. And then we've made some continued improvements to our paid time off policies and so forth that I referenced. So, anticipating some inflation there, continued inflationary increases. As just mentioned on the equipment on our insurance programs and other things. So if we can get some density coming back in the system, I think that is something that could turn that number into maybe seeing some improvement and working it back down. But if you just sort of stay in more of a neutral volume environment, if you will, I'm thinking that we're going to be more in that 5% to 5.5% range. And remind me again the second part was just the impact of Yellow being out. Brian Ossenbeck: Just how private companies seem to have taken up some of that extra capacity that has meaningful impact on how the industry might play out or the cycle might play. Adam Satterfield: Yes, think many of those service centers ended up with the private carriers. As it's been reported. But again, looking at overall capacity for the industry, number of service centers is the best thing we have. That looks to be down. Versus about 6%. And there may be some service centers that were swapped adding a few more doors, I think that's a good proxy for capacity that's been removed from the market. So again, if you had a capacity constrained industry, back in 'twenty one and 'twenty two, the number of shipments per day per service center are the same in 2024 with where we were back in that capacity constrained environment. I think we're going to see capacity constraints when we start coming back into a stronger demand environment. And that's what gives us the confidence that we'll be able to to win market share and outperform the other carriers from a volume standpoint in the early stages of that recovery. Brian Ossenbeck: All right. Thanks very much, Adam. Operator: The next question is from Stephanie Moore with Jefferies. Please go ahead. Stephanie Moore: Great. Good morning. Thank you. I wanted to maybe circle back to a prior question that was asked where you kind of talked through a a bottom bottoms up analysis of talking with customers and maybe some of the slightly more optimistic conversations you're hearing from them. Is there any any way you can parse out the end markets or there's any concentration of end markets where you're hearing some of that optimism from customers whether it's within industrial, is it large infrastructure kind of data center plays, is it within consumer, Any additional insight would be really appreciated. Thank you. Adam Satterfield: Well, you know, 55% to 60% of our revenue is industrial related, and I think that's similar for the industry. That's why I assume this is so highly correlated with the industry volume. So kind of hearing it across the board. I think that seeing some improvement there. We've had feedback that inventories have generally been lower. So we're thinking that we're going see some inventory replenishment. But I think it's sort of different factors for different customers. Our business is so diversified. We move everything, including the kitchen sink. So you've got, if housing starts improving, you'll see things like fall faucets and so forth that will have increased demand there. And obviously, all of the products that go into someone moving into a new home. But I think that'll be important to see some continued improvement there. If we continue to see on the industrial side. At the end of the day, what drives it all is a healthy consumer. And so consumer confidence and consumer strength and buying patterns will drive whether or not we see sustained improvement in the demand and volume environment. And so hopefully, when people start seeing if tax returns look better and they've got more discretionary income to go spend, And then inventory does need to be replenished. Those will all be good things that will create freight that will find its way on our trucks, we're looking forward to it. Stephanie Moore: Thank you so much. Operator: The next question is from Christopher Koon with Benchmark. Please go ahead. Christopher Koon: Hey, good morning. Thanks for taking the question at the end of the call. I really appreciate the time you guys given today. It's, you guys don't talk about it as much, but are there any AI initiatives that you are kinda undertaking and in the next 2026 and beyond that we should be focused on? Adam Satterfield: Yes. I would put it in the broader context of technology investments. And obviously, AI is kind of the buzzword of the moment. And we've got some investment there that's going into some of the tools. But I think from a bigger picture standpoint, you think about Old Dominion I think the investment that we've made in technology, it goes back decades. And we've got OD technology is one of our branded products. And so we've been at the forefront of tech investment, I think, for years and years, that will be no different going forward. But there's got to be investment going to end up with a return. We don't want to just say we're investing in, you know, machine learning and and and AI just to be able to say it, where's the proof in the pudding? And I think when you look at our cost performance in 2025, that's kind of the proof. And we wouldn't have been able to manage our line oil costs like we have if we've not continued to invest in and refine the tools that our teams are using. And it's the same thing on the dock. It's the same thing within our pickup delivery operations. We've got to continue to make investments in products that are going to have a return associated with them. You don't want to invest in something that going to cost you more on the technology that you would other what you're going to save potentially. And sometimes, could be the case. But I think that our focus will continue to be what I just said, investing where it's going to drive operating efficiencies. The other key part, though, will be continue to invest in something that drives a strategic advantage from a customer service standpoint. If we can continue to try to stay ahead of the game, have systems that drive sticky customer relationships. Those are kind of the two big key factors that we think about when we think about the dollars that are invested in tech initiatives year in and year out. Christopher Koon: Got it. Thanks. Appreciate it, Adam. Operator: This concludes our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks. Marty Freeman: Thank you all for your participation today. We appreciate your questions. And please feel free to give us a call later if you have anything further. Thanks and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Fourth Quarter and Full Year 2025 Conference Call. I'm Vicki, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Aritz Larrea, President and CEO. Please go ahead, sir. Aritz Uribiarte: Thank you very much. Good morning, everyone, and welcome to the fourth quarter and full year 2025 presentation for Loomis. My name is Aritz Larrea, and I'm the CEO of Loomis. And with me here today, I have our CFO, Johan Wilsby; and Jenny Bostrom, our Head of Sustainability and Investor Relations. I'll start by providing a quick summary of our fourth quarter as well as our full year performance, and we'll also talk about our accomplishments for the first year of this strategic period before taking questions. Let's start the presentation by turning to Slide 2. We delivered a solid and positive performance in the fourth quarter with revenues reaching SEK 7.7 billion despite a 10% negative impact from changes in exchange rates. Currency adjusted growth reached 7.5%, driven by 4% organic growth, solid despite the headwinds in our ATM business and a solid contribution from acquisitions. In the quarter, we saw very strong growth within the International and FXGS business lines due to an increased demand for the movement of precious metals, driven in part by geopolitical uncertainties. Our performance was driven not only by market conditions, but also by our expansion of the addressable market through the opening of new geographic lanes and our ability to capture global demand. We also continued to deliver strong growth within the Automated Solutions line of business during the quarter. The business mix, along with higher efficiency resulted in an increased operating margin of 13.2% versus 12.9% in prior year, with an operating income of above SEK 1 billion. This is the highest EBITA we have achieved for fourth quarter, and I'm pleased to see that the restructuring and efficiency initiatives we have taken, successfully growing the business without increasing headcount are supporting the margin expansion. We delivered another quarter of strong operating cash flow with a cash conversion of 99% for the year, and the free cash flow in the quarter was close to SEK 1.2 billion. This robust cash generation enables us to continue investing in the business while also delivering attractive returns to our shareholders. In the fourth quarter, we completed the acquisition of the precious metal storage facility in Toronto that was announced in the third quarter. This acquisition strengthens our local presence in Canada and expands our depository services and storage capacity within the International business line. During the year, we remained active in M&A while maintaining a disciplined approach to capital allocation. Despite continued investments in the business and the execution of our share repurchase program, our net debt-to-EBITDA ratio improved year-over-year. This discipline is also reflected in a return on capital employed of above 16% in the quarter. During the quarter, we repurchased about 540,000 shares for a value of SEK 200 million. In total, during 2025, we have repurchased close to 1.5 million shares for a value of SEK 600 million. The Board of Directors has proposed a record high ordinary dividend of SEK 15 per share to the Annual General Meeting. And in addition, the Board of Directors has proposed an extraordinary dividend of SEK 5 per share in an extraordinary dividend. This brings a total distribution to shareholders above SEK 1.3 billion. Let's now turn to our reporting segments, starting with Europe and Latin America. Our European and Latin American segment delivered a solid performance in the quarter with revenues reaching close to SEK 3.7 billion. We achieved an organic growth of 1.9%, which was strong considering the communicated decline in the ATM business line. The uncertain geopolitical climate has increased global demand for secure logistics and the management of physical assets such as precious metals, and our teams have successfully grown the business in this environment. It's impressive to see that the International business line grew over by 30% in the quarter compared to prior year. The operating margin increased by 40 basis points to 12.5%. And for the full year, we increased our operating margin by 0.7 percentage points to 11.8%, demonstrating that our focus on operational efficiency yields positive results. Let's move on to the next slide to talk about the U.S. The U.S. segment delivered another strong quarter. If we adjust for the currency impact, which was negative 13%, the U.S. achieved record high revenues and operating profit. Organic growth was 5.5%, and the acquisition of Burroughs contributed positively to the overall growth. The International and Automated Solutions lines of business had notably strong performance in the quarter. It's worth highlighting that it was the 16th consecutive quarter that the Automated Solutions business line has achieved double-digit organic growth. Our implemented operational efficiency measures continue to show results, allowing us to grow the business without adding employees. At the same time, we have secured a high service quality and maintained customer satisfaction. The integration of Burroughs into our U.S. operations and our Loomis culture is progressing as expected, and we are still early in the integration process. Burroughs is a strong strategic fit, and it allows us to provide a fully integrated ATM and Automated Solutions service offering to our customers. We are actually working on stabilizing the revenue and on improving our service quality. Once this is achieved, we will shift our efforts to improving operational efficiency and over time, focus on gaining market share. The volume growth, combined with improved efficiency contributed to the improvement of operating margin. The operating margin surpassed 17%, which is a new record for us. Let's turn to the next page and talk about SME/Pay. Revenues in the SME/Pay segment increased to SEK 71 million in the quarter. Nearly 40% of this revenue now comes from core and adjacent business lines, demonstrating that our strategic focus on SMEs is delivering both growth and margin. The reduction in the operating loss compared to the previous year is in line with the strategic priorities for the segment. Transaction volumes within the Loomis Pay business line increased 24% in the quarter compared to the previous year and reached SEK 2.3 billion. The migration to new POS platforms allows Loomis Pay to focus on larger SME customers in additional customer verticals. In this process, Loomis Pay has chosen to not migrate nonprofitable customers, which somewhat impacts settled transaction volumes going forward. Let's now move to the next slide, where I'll share a few updates on our sustainability progress. I'm pleased to share that we are progressing well towards our strategic sustainability targets. We have reduced our recordable work-related injury rate by 10% in 2025 compared to 2024. While this is in line with our target, we have never done and will continue our efforts to keep our employees safe. The Board has adopted a new group operational health and safety policy. This program will be rolled out during 2026, strengthening our group-wide focus on employee safety. Compared to 2024, we have reduced our Scope 1 and 2 emissions by 4%, if we exclude the emissions from the acquisitions of Burroughs and Kipfer-Logistik. Including these, we reduced emissions by about 2%. Continuing to grow the business while reducing emissions is, of course, challenging, but something we are committed to. And we, of course, aim to do so in a cost-efficient way that also supports our business. Efforts are already ongoing to include Burroughs in a carbon reduction plan by renewing their vehicle fleet. To put this in perspective to our CO2 targets, with the restated baseline for acquisitions, we have reduced our emissions by close to 26% compared to 2019, which is a step in the right direction to reaching 34% reduction by 2027. Now let's turn to the income statement slide, where I'll begin by noting that despite a significant negative impact from exchange rate fluctuations, we have achieved strong currency adjusted growth. This quarter includes costs classified as items affecting comparability, primarily related to the communicated impairment of goodwill as well as provisions for the ongoing legal case in Denmark. The impairment also had an impact on the effective tax rate since this was largely nontax deductible. For 2026, you can expect an effective tax rate of about 30%. Our financial net has declined compared to the previous year, following lower financial expenses driven by declining interest rates. I would also like to highlight that also our net debt-to-EBITDA ratio has declined year-over-year and is well below our ambition to be below 2x. Now let's move on to the next slide, where I'll summarize our 2025 performance in relation to our history. As we can see, we have a stable and resilient business model that continues to deliver. We ended 2025 with a record high operating margin of 12.7%. Despite the significant currency headwinds, we maintained the level of SEK 30 billion in 2025. Our currency adjusted growth was 6%, fully in line with our financial targets for the strategic period. If the exchange rates had been at the 2024 levels, our revenue would have been above SEK 32 billion for the year. 2025 was the beginning of a new strategic period for us. It has been a year characterized by macroeconomic uncertainties, a heightened emphasis on societal resilience and an increase in demand for security services amid a shifting and volatile global geopolitical landscape. In this environment, we made significant progress against our strategic priorities and delivered on our commitments, positioning the group well for the remainder of 2025-2027 period. Before opening up for Q&A, I want to remind you of what we have committed to last year at our Capital Markets Day and what we have achieved after the first year of the strategic period. Here, you see our 4 strategic priorities for '25 to '27, and I want to share my perspective on where we stand in relation to where we said we would be. Starting with growing in our established markets, a clear focus here is to accelerate growth within the SME customer segment. We are seeing healthy revenue momentum and solid margin contribution from SMEs across our key markets. We have also seen strong performance within International and Automated Solutions. However, as you know, we have been managing the impact of ATM business losses and are in the process of restructuring certain markets in Europe. Cash infrastructure is increasingly being called out as being an important piece in crisis preparedness and societal resilience, and we are a key part in keeping cash flows functioning in society. At the same time, we keep diversifying and our noncash-related services keep growing as well. In this environment, we have adapted and grown our addressable market within precious metals by opening new geographical lanes and expanded our storage capacity. While we have some more to do over the next couple of years, I'm confident about our journey. Moving to the second pillar. We have been very active in M&A during the year. Within core, we have acquired expertise and capacity within temperature-controlled logistics for pharmaceuticals as well as acquired a new storage facility in Toronto. Within adjacent, we have expanded into first and second-line maintenance of ATMs and Automated Solutions. And lastly, we have strengthened our digital offer on the POS side in Spain. We will continue to focus on generating both geographical presence but also diversifying our product and service portfolio through value-creating acquisitions. Our margin expansion is a clear demonstration of our progress within the third pillar, driving operational excellence and scalability. Our restructuring initiatives in Europe and Latin America are showing results, and we've been seeing clear margin improvements over recent quarters. In the U.S., the staffing planning measures and efficiency programs within CIT and CMS that were implemented since last year have consistently contributed to our profitability. And lastly, as I already touched upon earlier, we are advancing on our sustainability initiatives. We are dedicated to focus our efforts on where we have the most impact and where it also makes sense from a business perspective. We have submitted climate reduction targets to the science-based targets initiative for validation, taking a clear step towards focusing on reducing our Scope 3 emissions. This concludes my summary of the quarter and the year. Operator, we are now ready for questions. Operator: [Operator Instructions] We have a question from Simon Jonsson, ABG. Simon Jönsson: I hope you can hear me. A few questions from my side. First, on the International business, I think, obviously, it was one of the positive surprises on the report. Taking a step back, you have been clear before that comps will become tougher. And you also said before that some of these volumes should be viewed as temporary or short-term oriented. Of course, a lot has changed here in the recent months regarding the precious metals prices and so on. But my question is, where do you think we stand now from a broader perspective for your business? And do you think the long-term market dynamics have changed in any way? And I mean, what should we expect here in the coming quarters? Was there -- you said it before that we should view it as temporary, but I mean, was it even more temporary this quarter? Or yes, can you say anything about that? Aritz Uribiarte: Simon, thank you for your question. First of all, as you said, we need to understand that these businesses are cyclical in nature. But it is true that we have worked on growing our addressable market, as I said before, within the VIT. We have diversified our portfolio, expanding into the pharmaceutical. And we still have other areas like mining, let's say diamond and jewelry, low-value packages. When it comes to the trend, we were saying that we had difficult comps because we had a big increase last year in fourth quarter due to the U.S. tariffs. But the shipments, especially of silver have remained strong. And then both the prices of gold and silver have increased, and that benefits us. How do we see this trend is difficult to say, but we think it will remain very similar during the first quarter, first 2 quarters. And then I don't have a view on how it will end up the year. But we will keep increasing and try to grow the business organically. Simon Jönsson: Got it. And then moving on to other business areas. I mean, Automated Solutions also remains a very good growth driver, remain at good levels here. It looks like the growth is mainly coming from the U.S., but also from a broader perspective, can you maybe give us an update about the market for Automated Solutions mainly, I think, smart safes, for example, which you comment about on the CMD, for example. So maybe an update on what's going on in the market for -- in the U.S. specifically on smart safes. And do you think you're growing in line with the market? Or do you think you're taking market shares, or yes? Aritz Uribiarte: Here, it varies, as you said, when you look at the different regions. So I would say the first thing is we still have a strong pipeline in Automated Solutions in both regions. I would say that we have been growing -- gaining market share in both regions as well as in the U.S. and in Europe. In Europe, although we started the year a bit slower, I think the last -- the second half of the year has been really good when it comes to Automated Solutions. At the same time, we've taken advantage of the acquisition that we did with CIMA. CIMA is now our main supplier, not just in Europe, but also we're also exporting safes and recyclers and front office machines to the U.S. where we plan on growing. And that's what we said at the Capital Markets Day, Simon. I mean it's not only smart safes. We're talking about recyclers. We're talking about front office machines. We're talking about kiosks. So everywhere where we could add the cash component to the digital or the technology-driven solutions, we will be there. And as I said before, in the U.S., it's been 16 consecutive quarters growing at double-digit growth. As I said, we still have a strong pipeline, and that will remain strong in the following year. Simon Jönsson: All right. Do you think it makes sense to assume that you expect double-digit growth to continue then? Aritz Uribiarte: We will continue being strong, yes. Simon Jönsson: All right. But your view is that the underlying market is growing double digits? Aritz Uribiarte: Yes. Simon Jönsson: Yes. Moving on to maybe my last question here on capital allocation or a two-part question basically. You didn't announce any buybacks. I know sometimes you don't do it on every quarter, but I mean, it can be obvious reasons for it. But can you say anything on the buybacks and why you don't announce the program here? Or how should we view it? So yes, maybe start there. Aritz Uribiarte: Yes. To summarize, let me tell you that our capital allocation priorities remain exactly the same. Our aim is to use our capital in the best way to generate return and to maximize distribution to shareholders. That has not changed. So we will continue maximizing distribution to shareholders. That's what I would say. Simon Jönsson: Yes. All right. Do you think it's fair to say that you're also balancing the buybacks with -- now you have extra dividend. So should we keep that in mind that you are viewing it as a total pool of capital return? Aritz Uribiarte: Share buybacks are always in our mind, and we will continue doing share buybacks in the future. Simon Jönsson: Yes. All right. And then lastly on acquisitions. I think you made it clear that you will continue to look for value accretive acquisitions. But can you say anything about what is going on with the pipeline right now? Do you think it's -- is the pipeline building? Are you changing any sort of areas you're prioritizing? Have you made further shifts into how -- into what you look for, for example, do you look more into international areas to broaden that business? Or yes, where are you currently looking? And where do you think the M&A pipeline is more tilted towards? Aritz Uribiarte: So the M&A pipeline remains the same. It's a strong pipeline. We have not shifted. I mean when we presented our strategy at the Capital Markets Day, we did talk about not only investing in CIT, CMS, we were looking into the VIT and VMS areas as well, and we've proven to do that with the facility that we acquired in Toronto and the pharmaceutical business company as well. And we have those in our pipeline as well. So we haven't made a shift, the pipeline remains the same and our strategy remains the same as what we communicated. And it's both cash and noncash companies that we're looking into. And then as I always tell you, I mean, it all depends on meeting the seller expectations when it comes to price because obviously, we want these acquisitions to be accretive to us. But no major shift. And yes, we're focused on the International business as well. Simon Jönsson: All right. And in terms of price development, what have you seen here in recent quarters or in 2025 in general, what did you see in terms of shifts? Aritz Uribiarte: I think it's pretty stable. I mean I talked about in the past that before COVID, everybody had very high expectations. Then after COVID, those have come down. As I told you, we need to meet the seller and us regarding the price, and prices are more or less stable. That has not changed either. If you look into international, for example, obviously, with such a strong quarters in international business companies, the price is higher, obviously. But due to that it's cyclical, we need to do the right analysis. Operator: [Operator Instructions] Mr. Larrea, there are no more questions registered at this time. I would like to turn the conference back over to you for any closing remarks. Thank you. Aritz Uribiarte: Thank you very much all for listening in. And please reach out if you have any follow-up questions. Thank you. Bye-bye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Tom Foss-Jacobsen: Good morning, everyone, and welcome to the fourth quarter 2025 presentation for Borregaard. My name is Tom Erik Foss-Jacobsen. I'm the CEO of the company. And I'll be joined today by our CFO, Per Bjarne Lyngstad. Together we will take you through this agenda. I will start with the key highlights for the quarter and give an update on the market situation across our business segments. I'll then summarize the outlook for 2026 and finally present our dividend proposal for 2025 before handing over to Per Bjarne, and he will then take you through the financial performance in more detail. And before we begin, I'd also like to remind those of you that watch the webcast live that you are welcome to submit questions any time during the presentation, and we will address them at the end. Let's begin with the highlights for the quarter. EBITDA came in at NOK 405 million, slightly up from NOK 398 million in the same quarter 2024. BioSolutions delivered a solid quarter, supported by high biovanillin deliveries and continued growth in sales to agriculture, a trend we have now seen for the 2 last years. BioMaterials delivered good results, driven by higher specialty cellulose prices and increased sales volume. In Fine Chemicals, our Fine Chemical Intermediates delivered a strong performance. Bioethanol sales prices remained at the lower levels that we've been seeing throughout the year. Wood and energy costs were down in the quarter and partly offset the increases we saw in other costs. We also recorded impairments of, in total, NOK 245 million of the bio-based start-ups we are invested in. This is due to delays and increased capital needs. In the coming period, we will focus on our current positions in bio-based start-ups. We had a strong cash flow in the fourth quarter. Looking at the full year, we delivered another all-time high EBITDA, reaching NOK 1,878 million, just etching past last year's record of NOK 1,874 million. In BioSolutions, sales to agriculture were strong throughout the year, and we also saw higher sales of biovanillin products. In BioMaterials, sales prices increased and the product mix improved, supported by higher sales of high-purity cellulose. Fine Chemical Intermediates also delivered a strong result. And again, sales prices for advanced bioethanol declined significantly during the year, mainly due to a significant increase in market supply driven by favorable incentive schemes in Europe. Wood costs increased during the year and the increase in other costs exceeded general inflation. Net currency effects were positive. The cash flow was strong in 2025. Overall, we are pleased to present another all-time high EBITDA, driven by a strong momentum across our business segments. And this is despite the sharp decline we have seen in the advanced bioethanol sales prices and higher costs. Now let's turn to the fourth quarter in BioSolutions. This was a solid quarter with the average price in sales currency 6% above Q4 2024, driven by an improved product mix. We saw high deliveries of biovanillin and continued growth in sales to agriculture. The anti-dumping duties on vanillin from China continued to have a positive, though limited impact on our vanillin business. The average gross sales prices in NOK are impacted by a weaker U.S. dollar compared to Q4 2024. Sales volume was 3% lower than the same quarter last year, which was at the high end of our Q4 guidance and on level with what we see as a more normal fourth quarter volume. For the full year, BioSolutions delivered solid performance. Average price in sales currency increased 2% and sales volume increased 1% compared to 2024. Strong sales to agriculture continued across both specialty and industrial applications. We saw rising demand for multi-active ingredient solutions in crop protection and the reauthorization of Borregaard's lignin for use in EU, animal feed, helped us gain additional business. We also recorded higher demand for biovanillin and a positive but overall limited impact from the anti-dumping duties on the vanillin from China in both the U.S. and EU. The average gross sales prices in Norwegian kroner are impacted again by a weaker U.S. dollar compared to the previous year. Moving on to BioMaterials and the fourth quarter. This was a strong quarter with the average price in sales currency up 6%, primarily driven by price increases. The average gross sales prices in Norwegian kroner were impacted by a weaker dollar compared to Q4 previous year. Sales volume increased 5% compared to the same quarter 2024. As we informed last quarter, specialty cellulose exports from Norway and Brazil are subject to an ongoing U.S. anti-dumping investigation. A preliminary decision is delayed and now expected at the end of May 2026, with a final decision towards the end of 2026. And here, any duties may apply retroactively for up to 90 days. Looking at the full year for BioMaterials, the segment delivered a solid result with average sales prices up to -- up 9% and sales volume down 9% compared to 2024. The main drivers here were increased sales prices and an improved product mix, including increased sales of high-purity cellulose to regulated applications, food, pharma, personal care and also to bio-based plastics. The highly specialized share increased with 4% from 83% to 87%. The average gross sales prices in Norwegian kroner were also here impacted by the weaker U.S. dollar compared to previous year. Sales to the Construction segment declined as the European cellulose ether producers, typically our customers, were negatively impacted by increased imports from Chinese cellulose ether producers, and they are based on cotton linters as their raw material. The disruption we had in specialty cellulose production in Q3 2025 also affected the sales volume in the quarter. Now moving to Fine Chemicals Q4 and full year. We continue to see a significant decline in sales prices for the advanced bioethanol throughout the year. And this was due to the significant increase in market supply driven by the favorable incentive schemes in Europe. Prices have now returned to levels that we considered normal before these incentives were introduced. For Fine Chemical Intermediates, we saw higher sales prices and a strong product mix, both in the quarter and for the full year. Then I would like to share our outlook for 2026. In BioSolutions, we expect the sales volume to be approximately 340,000 tonnes with continued growth in the agriculture segment. First quarter sales volumes are expected to be around 80,000 tonnes. In BioMaterials, the full year sales volume is forecast to be in the range of 155,000 to 160,000 tonnes. Sales volume of highly specialized grades is expected to be slightly above the 2025 level. The average sales prices in sales currency is expected to be 3% to 4% lower in the first half of 2026 compared to the second half of 2025, and this is partly due to mix on customers and products. The European cellulose ether producers are expected to continue facing competition from the Chinese cellulose ether producers within the Construction segment. First quarter sales volume in BioMaterials is expected to be in the range of 37,000 to 39,000 tonnes. In Fine Chemicals, sales prices for bioethanol are expected to be largely in line with the levels we have seen in 2025. Sales volume for Fine Chemical intermediates is expected to increase compared to 2025. On the cost side, the wood costs in the first half of 2026 are expected to be around 15% lower than in the first half of 2025. We continue to monitor global uncertainty related to tariffs, war and geopolitical tensions, which may affect our markets and costs. The final outcome of the U.S. anti-dumping case may also affect several specialty cellulose markets. Before I conclude, I would like to present the dividend proposal for 2025. The Board of Directors has decided to adjust the dividend policy to a target range of 40% to 60% of the net profit compared to the previous range of 30% to 50%. We will continue to pay regular and progressive dividends, reflecting expected long-term earnings and cash flows. For 2025, the Board proposes a dividend of NOK 4.75 per share, an increase of NOK 0.5 or plus 12% compared to last year. This represents 55% of our net earnings before impairments, corresponding to a dividend yield of 2.4% based on the year-end share price. The total payment amounts to NOK 474 million. With that, I will hand over to our CFO, Per Bjarne Lyngstad, who will take you through the financial performance and key figures for the quarter and for the full year. Thank you. Per Bjarne Lyngstad: Thank you, Tom Erik, and good morning, everyone. Borregaard's operating revenues in the fourth quarter were 5% higher compared with the fourth quarter of 2024, mainly as a result of higher sales prices and sales volume in BioMaterials. EBITDA increased to NOK 405 million, NOK 7 million above the fourth quarter of 2024. BioMaterials had an improved result, while BioSolutions and Fine Chemicals had a lower result. Net currency effects were slightly positive by NOK 5 million compared with the fourth quarter of 2024. An 8% weaker U.S. dollar compared to the Norwegian kroner was offset by reduced hedging losses. The EBITDA margin ended at 22.1% in the fourth quarter, 0.7 percentage points below the corresponding quarter in 2024. In the quarter, as Tom Erik has mentioned, Borregaard has recorded NOK 245 million of impairments on investments in bio-based start-ups. Excluding the impairment, earnings per share ended at NOK 1.64 compared with NOK 1.30 in the fourth quarter of 2024. As I said, Borregaard has made impairments totaling NOK 245 million on its investments in bio-based start-ups. The impairments reflect recent development in these companies and is recorded under financial items in our profit and loss statement. The major part, NOK 225 million is an impairment of the investment in Alginor, where recent information indicated project delays and additional capital needs. The impairment is based on an impairment test in accordance with IFRS. After the impairment, the remaining book value of Alginor is NOK 250 million, about NOK 10 per share. In addition, a total impairment of NOK 20 million has been made on the investments in Kaffe Bueno and Lignovations. The Danish bioscience company, Kaffe Bueno faces delays in its project, and Borregaard has decided not to exercise its warrants to subscribe for additional shares, but we will participate in a minor convertible loan to the company. The Austrian technology start-up, Lignovations has also had delays and consequently faced lack of funding. On the 27th of January 2026, Borregaard received a notice of decision from the Financial Supervisory Authority of Norway following their regulatory financial reporting review of Borregaard's financial statements for 2024. Borregaard has been required to perform a new calculation of the value of Alginor at the end of 2024. If a correction is deemed necessary, figures for 2024 will be restated in Borregaard's annual report for 2025. Borregaard is currently in the process of preparing documentation for the valuation at year-end 2024 as requested by the Financial Supervisory Authority. Then turning to the full year for Borregaard. Operating revenues increased by 1% to NOK 7.7 billion. EBITDA had a marginal NOK 4 million improvement and ended at NOK 1.878 billion. Both BioSolutions and BioMaterials had an improved result, whereas Fine Chemicals had lower results compared with 2024. Strong sales to agriculture and higher sales of biovanillin in BioSolutions, increased sales prices and improved product mix for BioMaterials and positive net currency effects contributed strongly to the all-time high EBITDA in 2025. The result was negatively impacted by a significant reduction in bioethanol sales prices and cost increases exceeding the general inflation. The additional cost increases were mainly related to increased manning in Norway, mainly and also in the U.S. in addition to higher costs for certain chemicals and insurance and reduced government grants, among other things. EBITDA margin ended at 24.3%, close to the margin in 2024. Return on capital employed ended at 15.7%, below the 2024 level, but above our targeted level of minimum 15% pretax. Excluding the impairment, earnings per share were NOK 8.67 compared with NOK 8.24 in 2024. Operating revenues in BioSolutions were in line with the fourth quarter of 2024 and 4% above for the full year. EBITDA was NOK 245 million in the fourth quarter compared with NOK 251 million in the fourth quarter of 2024. High deliveries of biovanillin and sustained growth in sales to agriculture were more than offset by increased costs at the U.S. manufacturing sites in addition to general cost inflation. The net currency effect were insignificant in the quarter. For the full year, EBITDA reached an all-time high of NOK 1.209 billion, NOK 105 million higher than in 2024. Strong sales to agriculture also for the full year were the main driver of the improved result. This was partly offset by increased costs, the same explanations as for the quarter with the U.S. manufacturing sites and the general cost inflation. The net currency impact was positive compared with 2024. The fourth quarter EBITDA margin was 24.3%, 0.7 percentage points below the margin in the fourth quarter of 2024. For the full year, the EBITDA margin was strong and improved to 27.5%, 1.5 percentage points higher than in 2024. In BioMaterials, operating revenues in the fourth quarter were 11% above the fourth quarter of 2024 as a result of higher sales prices and sales volume. For the full year, higher sales prices were the main contributor to a 3% increase in operating revenues. EBITDA reached NOK 127 million in the fourth quarter, NOK 25 million above the same quarter in 2024. The improved result was due to higher sales prices and increased sales volume, together with the lower wood and energy costs in the quarter. This was partly offset by an increase in other costs, including certain chemicals, costs of the anti-dumping case in the U.S. and the general inflation. Net currency effects were positive in the quarter. For the full year, EBITDA ended at NOK 495 million, an improvement of NOK 61 million compared with 2024. For the full year, higher sales prices and improved product mix were the main reasons for the improved result, partly offset by lower sales volume and higher wood costs and the net currency effects were positive for the full year. The EBITDA margin ended at 18.7% in the fourth quarter, 2 percentage points above the same quarter in 2024. For the full year, the EBITDA margin was 18.4%, close to 2 percentage points also there above 2024. Improved product mix and sales prices for Fine Chemical Intermediates, partly offset by lower bioethanol sales prices were the main reasons for a 13% increase in operating revenues for Fine Chemicals in the fourth quarter. For the full year, operating revenues decreased by 16% due to lower sales prices for Borregaard's advanced bioethanol. EBITDA was NOK 33 million in the fourth quarter compared with NOK 45 million in the fourth quarter of 2024. Lower sales prices for bioethanol were partly offset by a strong result for Fine Chemical Intermediates. Fine Chemical Intermediates had a favorable product mix and increased sales prices in the quarter. Net currency effects were insignificant for Fine Chemicals in the quarter. For the full year, EBITDA ended at NOK 174 million, NOK 162 million lower than in the fourth quarter of 2024. The reduced result for the full year was due to lower sales prices for our advanced bioethanol. Fine Chemical Intermediates improved compared with 2024 due to improved product mix and increased sales prices. The net currency impact was positive for Fine Chemicals for the full year. The EBITDA margin was 21% in the fourth quarter, about 11 percentage points below the same quarter of 2024. The EBITDA margin for the full year was 26% compared with 42% in 2024. The net currency impact on EBITDA was positive by NOK 5 million compared with the corresponding quarter in 2024. Driven by a weaker dollar, the Norwegian kroner strengthened by 6% -- about 6% in the quarter using Borregaard's currency basket. Hedging losses were NOK 24 million in the fourth quarter compared with a loss of NOK 93 million in the fourth quarter of 2024. For the full year, the net currency impact on EBITDA was positive by about NOK 115 million. Hedging losses amounted to NOK 174 million compared with a loss of NOK 365 million in 2024. Using currency rates as of yesterday, the net currency impact for the full year 2026 is estimated to be positive by about NOK 55 million compared with 2025. The corresponding impact for the first quarter this year is estimated to be negative by about NOK 5 million compared with the first quarter of 2025. Borregaard had a strong cash flow from operating activities of NOK 419 million in the fourth quarter with a positive impact from a reduced net working capital. Also for the full year, the cash flow from operating activities was strong and close to NOK 1.4 billion an improvement of close to NOK 300 million compared with 2024. A more favorable development in net working capital was the main reason for the strong cash flow from operating activities. Investments were NOK 383 million in the fourth quarter. The largest expenditures in 2025 were related to environmental investments and debottlenecking at the Sarpsborg site, specialization projects within BioSolutions and participation in capital raises in Alginor. Net interest-bearing debt increased by NOK 18 million in the fourth quarter. For the full year, net interest-bearing debt was reduced by NOK 150 million to NOK 2.90 billion. At the end of 2025, Borregaard is well capitalized with an equity ratio of 61% and a leverage ratio of 1.11 compared with 1.2 at the end of 2024. Finally, I'll go through an updated investment forecast for 2026 and 2027. Borregaard has a financial objective to keep replacement investment at depreciation level, excluding depreciation from leasing. In 2025 to 2027, targeted CO2 and COD reductions and general cost increases explain replacement investments above target level. These environmental investments will also support specialization and value growth investments. The largest project is the debottlenecking at the Sarpsborg site, where we now expect a production output to increase gradually from the second quarter of 2027 instead of the second half of 2026. The delay is due to unforeseen challenges with buildings layout. However, the cost estimate for the project is unchanged at about NOK 800 million. The delay in the debottlenecking project is the main reason for lower-than-expected investments in 2025 and a slight increase in the forecast for 2027. Additional investments in bio-based start-ups are not included in this forecast. There are, of course, uncertainties in these estimates related to final decision, execution time, payment schedules, among others. And that concludes today's presentation. Tom Erik and I will now be ready to answer any questions, both from the audience present here in Oslo and from those who follow the webcast. Our Vice President, Finance, Veronica Skevik will moderate the webcast questions. Veronica Skevik: We have received some questions. The first one is related to U.S. legal costs. It comes from Mr. Niclas Gehin at DNB Carnegie. Could you give us a ballpark figure on how much you have spent on U.S. legal costs in Q4? And how much is the total sum that you expect to use? Per Bjarne Lyngstad: We have now passed in total NOK 10 million in costs for these investigations, most of it in the fourth quarter. We have answered a lot of questionnaires. So hopefully, that process is coming towards the end. It's still difficult to estimate how much more, but it will be somewhere, I think, between NOK 15 million and NOK 20 million as the end cost here as our best estimate as of today. Veronica Skevik: Next question is regarding the specialty cellulose competition from China. It comes from Mr. Magnus Rasmussen from SEB. Has the competition from China or on specialty cellulose intensified in recent months? Or is it on par with 2025? Tom Foss-Jacobsen: I would say that there has always been some imports from China, either cotton linters as a raw material, cotton linters pulp to blend in, but also exports of cellulose ethers in the low-end segments, typically construction because it's non-GMO origin and cannot be used for other applications. But I think we have gradually seen over the past 5 years that exports has been gradually increasing. But now over the last year, also with tariffs in U.S. and also with low construction activity in China, we see -- what we see in many other industries that the overcapacity in China is being exported. And now it can't be exported to U.S. without tariffs, even more is coming into Europe. So I think we definitely are seeing an increasing trend of imports of the cellulose ether products from China into Europe. Per Bjarne Lyngstad: But also remember that Borregaard's strategy has been to move more of our cellulose production going into ethers to food and pharma applications, and we have succeeded quite well with that over the last years also. So that's been our strategy. We've seen this coming, and we've changed our strategy. Tom Foss-Jacobsen: Yes. And it proves why this strategy is very sensible. Yes. Veronica Skevik: Thank you. Next question is related to developments in markets within BioSolutions. And it also comes from Mr. Magnus Rasmussen from SEB. You continue to refer to strong agriculture markets in BioSolutions and improvements in biovanillin, yet, except from Q1 EBITDA in 2025 has not been much stronger than 2024. What can you say about the developments in other markets than agriculture and biovanillin? Tom Foss-Jacobsen: Yes. I think, first, we have to bear in mind what has been said here on the cost side for Borregaard and for BioSolutions. We have seen increased -- significantly increased costs throughout the year. And specifically BioSolutions was mentioned both the wood cost, but also that we have cost in the U.S. and that they exceeded the general inflation, the other costs. But on the market side, agriculture is clearly one of the main driving segments for the growth. We have said before, this is roughly 1,000 customers, 200 products. So there's definitely a mix also within that portfolio. We have also seen weaknesses in certain markets. I would say, construction market should be no surprise that there are weaknesses in certain markets within construction and also oil throughout the year 2025 has been weaker. Veronica Skevik: Thank you. Next question is related to the price reduction in specialty cellulose and the mix effects. It comes from Mr. Elliott Jones at Danske Bank. With regards to BioMaterials, 3% to 4% price declines in the first half versus second half last year. Can you shed some more light on the mix effect? And if you only partly due to mix, what are the other reasons for the drop? Tom Foss-Jacobsen: Yes. First of all, it's important to notice that we are referring to that is partly explained by mix, which means mix of products and customers. And we sold about -- was it, 146,000 tonnes in 2025. We have in our outlook that we will sell 10,000 to 15,000 tonnes more. So that means also an additional volume with a mix with different pricing. And also the -- within the Construction segment to sell ethers, we have done some selective price adjustments. And we also have the 4,000 to 5,000 tonnes we need to sell to the market during the year from the production disruption we had in the last quarter. And I think these things together explains why the average sales price will be impacted in the range of 3% to 4%. Veronica Skevik: Thank you. Next question, and so far, the last I have here, also comes from Mr. Elliot Jones from Danske Bank related to costs. With regards to costs, excluding wood and energy that have exceeded inflation this year, 2025, can you provide some more rationale as to why this is? And how do you expect this to develop in 2026? Per Bjarne Lyngstad: Yes. I mentioned a few key factors there. Manning is one, we have increased our manning mainly in Norway, but also in the U.S. entities. So that gives an increase above inflation. We have had quite an increase in insurance premiums. That's also due to that we have chosen to improve our coverage on some of the insurance. And then we have given -- or we have gotten less grants from -- to our innovation activities in 2025, which normally is booked as a reduction in fixed costs. So these are some of the explanation. It's a lot of different things on the cost side, but we've seen. Also we have, in addition to manning at the U.S. manufacturing sites, the upgrade of the facility in Wisconsin and also an upgrade of the competence in the organization has led to additional costs there. Veronica Skevik: Thank you. There are no more questions on the web. So I'm not sure if there are any questions from the audience. Tom Foss-Jacobsen: That's concludes our presentation. Thank you very much. Per Bjarne Lyngstad: Thank you.
Goh Lilian: Good morning, everyone. Thank you for joining us today for Keppel REIT's Full Year 2025 Results Analyst Briefing. I'm Lilian from the Investor Relations team. Before we begin, let me introduce the management team on this session. We have Mr. Chua Hsien Yang, Chief Executive Officer; Mr. Sebastian Song, Chief Financial Officer; Ms. Teo Xuan Lin, Head of Investment; and Mr. Jason Chua, Director of Asset Management. We will start with the briefing with a presentation by the management team, followed by a question-and-answer session. I will now hand over the time to the CEO, Hsien Yang. Hsien Yang Chua: Thank you, Lilian. Good morning, everyone. Thank you so much for joining us today. We'll begin with an overall overview of 2025 and also our focus for 2026. In the fourth quarter of 2025, we completed 2 strategic acquisitions in December last year, namely a 75% interest in Top Ryde City, which is a regional mall in Sydney and an additional 1/3 interest in MBFC Tower 3 in Singapore. Top Ryde City is our first pure-play retail asset and diversification into retail, enhancing our income resilience, allowing us to benefit from the resilient suburban retail segment, which has strong growth potential supported by long-term consumption growth and population increase. MBFC Tower 3 was a right opportunity that allowed us to deepen our ownership in Singapore's core CBD. It is the best asset in the best location and is a property that we know well. Backed by the strong office market fundamentals in Singapore, we believe that it was the right move to increase our stake in MBFC Tower 3. As the acquisitions were completed late last year on 19th and 31st of December, we will see the full contribution from these properties starting from 2026. Operationally, we ended 2025 with a strong set of results, recording year-on-year increases in NPI and portfolio occupancy. I will elaborate further on the 2025 performance in the next few slides. For 2026, we will continue driving organic growth within the enlarged portfolio through both rental growth and proactive cost management. We've already begun to see the impact of lower interest rates on our borrowing costs in the second half of 2025. In 2026, we will continue to monitor the interest rate environment closely and to the extent possible, continue to bring down our borrowing costs. Here are some of our focus areas for the year ahead. Moving on to our full year 2025 key highlights on Slide 4. NPI rose 6.9% year-on-year, driven mainly by contributions from 255 George Street asset, which we acquired in 2024 and higher occupancy at 2 Blue Street. Share of results of associates and joint ventures increased 13.3% year-on-year, supported by the continued demand for Singapore prime office space and lower borrowing costs. DI from operations, assuming management fees were paid entirely in units would have increased 6.3% year-on-year. As at 31st of December last year, our leverage stood at 47.9% due to the transitory impact of the equity bridge loans or the EBR obtained to fund the MBFC Tower 3 acquisition. Had the proceeds from the pref offering been received on 31st of December and were used to fund the acquisition, our leverage would have been 40.4%. We have since completed the pref offering and the equity bridge loans were paid full -- are repaid in full on the 20th of January 2026. The weighted average cost of debt was 3.41% per annum. Total borrowings on fixed rate is 53% and excluding the impact of the equity bridge loan, it would be 62%. Our Singapore portfolio continues to be a key contributor to our overall performance, supported by positive rental reversions and lower interest rates. As at 31st of December, on a portfolio basis, our committed occupancy improved to 96.7%, and we achieved a robust rental reversion of 11.5% for the full year with the Singapore portfolio recording 10.7%. The portfolio's weighted average lease expiry remained long at 4.4 years, while the WALE of our top 10 tenants was 8.1 years, reinforcing our income visibility. Through proactive leasing efforts, we had over 1.7 million square feet of leases committed in 2025. I will let Sebastian take you through the key financial highlights. Sebastian Song: Thank you, Hsien Yang. For the second half of 2025, we see continued strong performance. Property income, NPI as well as share of results of associates and joint ventures have all increased due mainly to higher occupancy at 2 Blue Street and higher contributions from our Singapore assets. Also contributing to the strong performance was lower borrowing costs, largely due to tapering interest rates. Looking at our full year performance. Property income and NPI increased 4.9% and 6.9% year-on-year, respectively, mainly due to contributions from 255 George Street and higher occupancy at 2 Blue Street. Share of results of associates and joint ventures increased 13.3% year-on-year on the back of better performance from our Singapore assets and lower borrowing costs. Borrowing costs increased 2% year-on-year due mainly to higher loan principal in 2025 as compared to 2024. DI from operations decreased 1.1% year-on-year to $192.4 million, mainly due to the payment of 25% of management fees in cash. Assuming management fees were paid entirely in units, DI from operations would have increased 6.3% year-on-year. Moving to Slide 9. DPU for the full year 2025 is $0.0523. DPU for the first half of 2025 was $0.0272 and was paid on the 15th of September. An advanced distribution of $0.0163 was announced for the period 1st July to 16th of October, pursuant to the private placement launched in October. This was paid on the 25th of November. For the remainder of the second half of 2025, being the period from 17th October to 31 December 2025, a DPU of $0.0088 will be paid on the 25th of March 2026. DUI for the distribution period of 17 October to 31st December is attributable to both the units issued at 31 December 2025 as well as the new units issued on 19th January 2026 pursuant to the preferential offering launched in December 2025. The enlarged unit base attributable to both the private placement and preferential offering exercises. Coupled with the absence of contributions from these 2 acquisitions, which were completed in the later half of December, led to a lower DPU for the short-term distribution period of 17 October to 31st December. Full contributions from these acquisitions will be recorded from 2026. On Slide 10, the increase in deposited property, total assets, borrowings and total liabilities is due mainly to the acquisition of 75% interest in Top Ryde City Shopping Centre and the additional 1/3 interest in MBFC Tower 3. Adjusted net asset value per unit as at 31st December 2025 is $1.27. Slide 11 outlines our key capital management metrics. Weighted average cost of debt for the full year of 2025 was 3.41% per annum. Interest rates, particularly the SORA had eased substantially in 2025 from the peak in 2023 and 2024. In 2025, we had also achieved favorable savings on low margins during the cost of refinancing. Riding on this momentum, we will continue to seek optimal outcomes for our refinancing activities in 2026 and achieved cost of debt for 2026 to be between low 3% and 3.3%. Aggregate leverage was 47.9%. If proceeds from the preferential offering were received on the 31st of December and used to repay the equity bridge loans, aggregate leverage would have been 40.4%. Fixed rate borrowings and sustainability-focused funding account for 53% and 67% of our total debt portfolio, respectively. The proceeds from the preferential offering were used to repay the equity bridge loans on 31st December. Fixed rate borrowings would have been 62% and sustainability-focused funding would have been 79%, which is above our target of 75%. Interest coverage ratio remained at 2.6x. Moving on to Slide 12. We're in various stages for the refinancing of loans maturing in the first half of 2026, which represent approximately 27% of the total debt due in that year. The equity bridge loans of approximately $890 million were repaid in full with proceeds from the preferential offering on the 20th of January 2026. With that, I will now hand it on to Jason, who will walk you through our portfolio review. Jason Chua: Thank you, Sebastian. Slide 14 shows Keppel REIT's portfolio breakdown as at 31st of December 2025 by geographical locations. Singapore remains Keppel REIT's largest market at 79.8%, while Australia, South Korea and Japan are at 17.2%, 2.3% and 0.7%, respectively. Keppel REIT's portfolio committed occupancy improved to 96.7% quarter-on-quarter, driven primarily by new leases secured for Ocean Financial Centre, Keppel Bay Tower, 255 George Street, Pinnacle Office Park and 8 Exhibition Street. We are pleased to share that in January 2026, Keppel REIT committed a new lease at 8 Exhibition Street with a tenant from the banking, insurance and financial services sector. The new tenant will occupy 5 floors at the Grade A commercial building backfilling space vacated by another tenant. Slide 15 provides a breakdown of our performance by geography. Driven by higher rentals, the attributable NPI of our Singapore portfolio increased by 2.9%. Supported by contribution from 255 George Street and higher occupancy at 2 Blue Street, the attributable NPI for our Australian portfolio increased by 6%, partially offset by a stronger Singapore dollar. Attributable NPI for our North Asia portfolio decreased 3.2%, mainly due to the stronger Singapore dollar. Proceeding to Slide 16. The majority of the leases committed in 2025 were for our Singapore properties. New leasing demand and expansions were primarily driven by tenants from the banking, insurance and financial services and technology, media and telecommunications sectors. We continue to maintain a well-spread lease expiry profile as shown on Slide 17. The weighted average signing rent for our Singapore CBD office leases in 2025 was $12.91 per square foot per month. By comparison, the average rent for the leases expiring in 2026 stands at $12.14, which is below both our signing rent and CBRE's fourth quarter 2025 average core CBD Grade A office rent of $12.30 per square foot. We have commenced discussions with tenants whose leases are due to expire this year and leasing demand continues to be healthy. Slide 18 highlights our well-established and diversified tenant base, comprising reputable blue-chip corporations and government agencies that contribute to the stability of our portfolio. The next 3 slides provides a summary of our portfolio valuations as at 31st of December. On Slide 19, valuation for our Singapore portfolio increased 25.2% as compared to 2024. Excluding the additional 1/3 interest in MBFC Tower 3, our Singapore portfolio valuation would have seen a 5.5% increase. The increase in valuations is mainly due to higher committed end market rents. Slide 20 shows our Australia portfolio Australian dollar valuations, which increased by 19.3%. In Singapore dollar terms, the increase in valuation was slightly lower at 15.2% due to a stronger Singapore dollar. Excluding the acquisition of Top Ryde, the Australia portfolio valuation remains relatively stable. Moving on to Slide 21. In local currency terms, valuation for T Tower in Seoul increased 2.2% and KR Ginza II in Tokyo increased 5.6%. The increases were largely due to the higher committed rents achieved in 2025. Due to the stronger Singapore dollar, our valuations for North Asia decreased by 3.5% in Singapore dollar terms. On an overall portfolio basis, we see a strong increase of 22.3% in our valuations. Excluding both the acquisitions of Top Ryde and the additional interest in MBFC Tower 3, we would have seen a valuation increase of 3.4%. Moving on, we are pleased to share the enhancement works done at 8 Exhibition Street. The end-of-trip facility was upgraded to a larger bespoke facility to meet tenant needs for more premium amenities, was launched in October last year for tenant use. Some ESG activities conducted in the last quarter of 2025 include festive event held at Keppel Bay Tower that supported children from Care Corner Singapore as well as building facade light up at Ocean Financial Centre in support of World Diabetes Day. We are pleased to announce that MBFC Tower 3 achieved the BCA Green Mark Platinum Super Low Energy, or SLE, certification in December last year. This marks a major sustainability milestone for the development, and it is our third Singapore asset to be granted this certification after Keppel Bay Tower and Ocean Financial Centre. Sustainability is integral to how we create and preserve long-term value. We continue to maintain our positions on ESG benchmarks and indices. Furthermore, we are extending our carbon reduction commitment this year from the existing target of a 50% reduction in Scope 1 and 2 emissions by 2030 to a new target of achieving net zero for Scope 1 and 2 emissions by 2050. At the asset level, our portfolio continued to uphold strong green credentials. As mentioned, MBFC Tower 3 achieved the BCA Green Mark Platinum SLE certification. SLE buildings feature the best-in-class energy efficiency, the use of on-site and off-site renewable energy and other intelligent energy management strategies. As at end 2025, all properties were Green certified, except for Top Ryde City, which was acquired on 19th of December. This is consistent with our long-standing commitment to operational excellence and environmental stewardship. I will now hand the time to Xuan Lin, who will go through the market. Xuan Teo: Thank you, Jason. The next few slides highlight key trends across the markets where Keppel REIT operates. This slide shows the average rent for Singapore's core CBD Grade A office increasing by 0.8% quarter-on-quarter to $12.30 per square foot per month in the fourth quarter of 2025, while average occupancy increased to 95.5%. For the full year 2025, prime office rents increased by 2.9%, backed by resilient occupier demand and a tightening supply pipeline. In 2026, only one new office development is projected to be completed. Accordingly, across major property consultancies in Singapore, there is a clear consensus that CBD Grade A office rents will continue to rise, supported by the scarcity of supply, combined with sustained demand for quality office spaces. Latest projections by these consultancies indicate year-on-year CBD Grade A office rent growth of between 4% and 7% in 2026. In Australia, JLL reported that prime grade office occupancies increased for Sydney, Perth and Melbourne CBDs in the fourth quarter and declined marginally in Macquarie Park compared to the previous quarter. In North Sydney, there is a sharper occupancy decrease, primarily due to the recent completion of Victoria Cross Tower. Meanwhile, prime gross effective rent in Sydney CBD continued its upward trajectory, increasing from $1,067 per square meters per year in the third quarter to $1,084 per square meters per year in the fourth quarter, reflecting the resilient demand for quality office space. Looking at the Australia's retail market, we note that household spending, both discretionary and nondiscretionary had seen year-on-year increases from 2022 to 2024. Total household spending remained strong in November 2025, having a 6.3% increase year-on-year, continuing the strong rises in services and goods spending seen in the previous month. Data for December 2025 has not yet been released by the Australian Bureau of Statistics. In Seoul, market occupancy of CBD Grade A office was flat on a quarter-on-quarter basis. Notwithstanding the upward rent trajectory continues. JLL reported that the net effective rent for CBD Grade A office increased by about 1.4% quarter-on-quarter. In the Tokyo office market, JLL reported that Grade A office occupancy increased to 99.3%, while Grade B office occupancy increased to 98.5%. Net effective rents for Grade A offices increased 5.3% quarter-on-quarter and Grade B offices grew 3.7%, reflecting continued strong demand for office space in Tokyo. That concludes our presentation. Thank you. Goh Lilian: Thank you, Xuan Lin. [Operator Instructions] There's the first question from Terence, JPMorgan. M. Khi: Congrats on completing the acquisitions in December. I wanted to ask on what your priorities are for 2026. I understand that Marina One is reportedly in the market. Are you going to be looking at that, too? Hsien Yang Chua: Okay. So I think that the first slide that we presented, we really talked about our focus for 2026. As I also mentioned in the past month, our focus is really to drive the organic growth, especially for 2026, given the very low supply and high demand in the Singapore market. And our Australian assets, we also want to continue to push for the best results that we can actually get. And of course, the other priority that we mentioned in the slides was also to reduce the borrowing cost. I also assured investors that I think that we have already done a fair bit of acquisitions. So we are not rushing to do any equity fundraising anything anytime soon. The first half, we really want to dedicate towards asset management. And of course, if the time is right, if we do find this attractive offers for some of our assets, one or more of our assets, we could look at strategic divestments as and when we see the window open. In terms of Marina One, we understand that is coming to the market. That is coming to the market in maybe the next 1 or 2 months. It is a very large asset. It's expected to cost between $5 billion to $6 billion. And -- I mean, just as a rough gauge, the agent is saying that of course, they will also take our MBFC Tower 3 transaction, taking that into consideration in terms of where the market price would be. So it will be at a market cap rate estimated at plus/minus 3-plus percent. So of course, the rentals in this particular building are lower than MBFC. So the -- obviously, the price per square foot is expected to be a bit lower. It is something that the whole market will look at. So obviously, we will take a look. But if you ask me, is it possible for us to take down this whole asset given that it's around $6 billion, I think it's going to be quite challenging. M. Khi: Okay. That's great. And maybe if I could ask a little bit on the leasing since that's going to be the focus. I understand you said that you leased up 5 floors at 8 Exhibition. Can you share when the current tenant comes off and when does this replacement tenant kick in? And also on ANZ lease, I understand it is in the media that ANZ will be leaving OFC. Have you started to look at that lease? Hsien Yang Chua: Okay. So there is -- okay, I won't be able to name specific tenants in 8 Exhibition. There has been a few you can read out that there's been speculation of who the tenant is. The tenant is -- there's one particular tenant that we have been talking about they'll be exiting the building towards end of this year. So they take up between 8 to 9 floors. And then this lease that we have actually signed is actually for 5 floors. But what I will be able to sort of give a rough guide is that outgoing and incoming rental is actually quite a big difference. The reversion that we're getting from this new tenant is around -- is the rate incoming rate is more than double that of the outgoing. So this new tenant will be coming into the building sometime next year. So there will be a bit of a gap. There will be a bit of a gap close to a year, but the rental is double or more than double actually. M. Khi: Okay. Great. That sounds great. Maybe I'll join back. Hsien Yang Chua: Okay. Hold on. I haven't finished. I haven't finished on 8 Exhibition, and I will talk that you mentioned the other tenant in Singapore, I will address that. So there is -- so we have also signed heads of terms with another tenant which wasn't covered in the slide. There is 3 floors also in the 8 Exhibition Street. Similarly, the rentals that we are targeting for that is also more than double of the exiting tenant. And that one also will be -- but that one is -- the start date for that talent will probably be sometime in 2028, probably in the first half of 2028. Okay? So they're moving to Singapore. So I will not be able to confirm which tenant is leaving, but I think that for Singapore, any tenant that gives us space back in our CBD assets, whether it's OFC, MBFC, ORQ and MBFC, we really don't mind, especially if they are full floor tenants. I think we have shared in the last 2 quarters that we have a lot of demand for full floors, especially in OFC. So if there is a tenant who leaves, there will definitely be a lot more demand for -- to lease the space at much higher rates. I'm not sure whether that specifically addresses but yes... M. Khi: Sorry, just a clarification for the 2 tenants at Exhibition. So I understand you're saying end of '27 and probably first half '28. Is that inclusive of the tenant incentives already in terms of... Hsien Yang Chua: No, that is the start date. The tenant incentives for these 2 tenants is around between 35% to 38%. M. Khi: Okay. And the number that you quoted more than double is on a gross or net basis? Hsien Yang Chua: Gross. Goh Lilian: Thank you, Terence. Next, we have Dale. Dale Lai: Sorry, I think Rachel was first, but I'll just proceed to answer. Okay. Anyway, I just wanted to ask with regards to valuations in Australia in local currency terms. I noticed that the North Sydney asset valuations came off a bit. Are you able to share more on that? Hsien Yang Chua: So I think that our asset is doing well in North Sydney, but there is a general weakness in all the -- basically all the markets, except for the core CBD. So we have shared that the core CBD is very strong. Similarly, no increase in supply and a strong demand. So there's flight to quality trend that we're actually seeing in Sydney. So that's the reason why the -- because of the weakness, that's why the valuations for 2 Blue Street came down slightly. Dale Lai: Okay. Okay. Got it. Got it. Okay. And just wanted to follow up. I think previously, we were talking about interest rate savings that will drive earnings going forward. How is this coming along? And how should we be expecting your overall interest rates for this year? Hsien Yang Chua: So I think that we -- I think we have guided that we will see savings in interest costs, especially going into this year and also next year because -- but, of course, how the REITs actually hedge interest rates. So there are hedges that will need to come off. So that's why you have this [indiscernible] out effect. When the interest rates went up, very, very quickly. You saw that our K-REIT's interest rates remain relatively flat, went up quite slowly. And then we also keep much later than many of the other REITs. Similarly coming down, of course, it works that way. The other way also works against us. You will see it come down gradually. I'm not sure at this time whether we can give any guidance, but we will see interest rates coming off. As to that extent, I'm not sure [ Seb ] how much more color can you give. Sebastian Song: Yes, they also -- so previously, I think in last quarter, we guided that our outlook for 2026 for cost of debt will be in the low 3% to 3.3%. So I think that has not changed. But I think one of the main levers that we are tapping on is to ride on the momentum of our refinancing exercise. So in last year, we have already achieved considerable savings on the margin front. So we're riding on that into our refinancing activities this year. So we had also carried out some early refinancing for debt that were originally due in 2026 that was done in December last year. So we also achieved the same margin savings for those refinancing exercises, and we will continue to look to ride on that this year. Dale Lai: Okay. Okay. So just to clarify, this rate hike in -- by the RBA, it won't derail this low 3% target interest rates? Sebastian Song: Not for the time being. So yes, so that was unfortunate that they hiked the rate. But I think it was a matter of time really, whether it was yesterday or it was -- it is to be at the next meeting. But yes, so what -- that aspect we cannot control, but what we can control is really to one of the levers, which I highlighted earlier, and that is to drive margin savings. Goh Lilian: Thanks, Dave. Next Rachel. Apologies for that. Lih Rui Tan: No race. Forget and let Dale go first. A few questions from me. I think, firstly, the 2 Blue Street rental guarantee, is it coming off in April 2026? And do you expect your occupancy to trend up further before the rental guarantee comes off? Hsien Yang Chua: Okay. So yes, it does fall off in April. So this building, you can see the occupancy is around 92%, 93%. We are continuing to lease out the space. So when we -- so the building for now has actually performed better than underwriting for all the space that we have actually leased out. So actually, technically, we can potentially drop the rates a little bit for the remaining space, which is on the ground floor and the level below, and then we will still meet our underwriting numbers. So I think we are still holding out for higher rates. So there will be -- so if you look at the total because right now, it's whatever we are getting plus a top-up. So if we do not manage to lease out the space, there will be a slight drop in this particular building, but it's actually quite small. So I mentioned just now that there is some weakness in the North Sydney area. Our building is really one of the better performing ones. It's in fact, one of the best performing ones and this is a brand-new building. So if anything -- if anyone signs a lease, I think our building will be in the best position to actually secure our tenant, but it is a slower market that we are still trying to lease up this remaining space, which is why it's not so much about the rates, but it's really about the demand, and we are chasing this demand at the moment. So the ground floor space is fully fitted. So we are just waiting for the right tenant who like the space and then they can actually pick up this space. Lih Rui Tan: So better than underwriting, which means actually now at 92%, you are same as your underwriting 100% occupancy kind of income levels, is it? Hsien Yang Chua: Not -- almost there but not quite there, yes. Lih Rui Tan: Okay. Okay. And the competition is Victoria Cross Tower, right? Could you -- what's like comparative to your Blue Street rents, what's your asking rents versus their rents? And what's the pre-committed levels at the Victoria Cross Tower? Hsien Yang Chua: Victoria Cross, it's actually -- the vacancy is actually quite high. It's more than 20%. Yes. So it's actually quite high. Rental, the rental is around -- yes. A bit higher. I won't be able to specifically give you what they are asking for. Lih Rui Tan: And then can I just follow up on the 8 Exhibition Street, the 2 new leases. In terms of income contribution, when should we expect income contribution to come through? Hsien Yang Chua: So like I mentioned, 1 lease is kind of next year. The other lease is in the first half of 2028. Lih Rui Tan: So when they move in, then we will get the inter commission. There will be rent free period in this offer. Hsien Yang Chua: So that's part of the incentives. So each of them is a bit different, but then it will be amortized. So I think that -- so okay wait, I think just now, I also wanted to clarify the rental reversion. So we compared the rental reversion on a like-for-like. So the more than double rental reversion is comparing net to net and gross to gross. So it is -- so on a net basis, it is still more than double after incentives. So I think that this was something that Terence was asking just now, yes. Lih Rui Tan: Okay. So on a net basis, rental reversions is also more than double. Hsien Yang Chua: Correct. Lih Rui Tan: Okay. Okay. And the lease signed, the number of years that after lease that they signed? Hsien Yang Chua: The one that was just signed is a very long lease, it's very long. Yes. Lih Rui Tan: 10 years or I don't know, 7 years? Hsien Yang Chua: So yes, something like that. More than 7. I would not tell you how many years. More than 7, more than 8, okay? Lih Rui Tan: Okay. Then the OFC lease vacancy that's coming up. Roughly when is the least coming up? Hsien Yang Chua: Hold on there. October 2026, but they are talking to us. This tenant is talking to us potentially staying for another few moments. So we are still working on with them. It really depends on the new tenant that we can actually -- they actually want to come in. So we might not -- we might or might not give them an extension. Lih Rui Tan: Okay. That's good. Good to know. Okay. Then my next question is in terms of your divestment do you think that it is now a good time to sell Korea or Japan office. I know last year you said they have very strong reversions. You want to write on that, but then do you think Korea and Japan is good to sell? Hsien Yang Chua: So definitely, this year is a better time than last year. So -- but we are still seeing healthy rental reversions. I think that I've shared that we are looking at it very closely. So if we can get the correct price, will we sell it, yes, I think the answer is that we definitely would look at selling it. Goh Lilian: Thanks, Rachel. Next, we have Terence from UBS. Terence Lee: Can you please help us characterize the relationship with Hongkong Land going forward? I mean K-REIT used to be partners and now ostensibly competitors. I mean for now, they seem to want to grow their private equity AUM. So I'm just wondering, does it affect how you think about partnerships and potential stake sales. Like if you look in the past in K-REIT's history, OFC, there was a stake that was divested to Allianz? And in the current context, your valuations for Singapore office is indeed at a high. And maybe just a little bit of a follow-on to that is, do you also see future opportunity for acquisitions if and when they do decide on the private equity side to exit from their funds? Hsien Yang Chua: So our relationship with Hongkong Land is still good. We are still partners in ORQ and MBFC's Tower 1 and 2. So in fact, we just had an ExCo meeting last week. So things are as per normal. It is -- I think that say what you like, we have always been partners and also yet competitors at the same time. Last time was Hongkong Land, us, Suntec. Now it is still basically these 3 except for Tower 3, our JV partner there is DBS. So nothing has really changed. Everyone, every company has their own aspirations. Every company has own strategy. So it's our strategy is -- although you look at, I mean, between Keppel, you look at Capital Light, you look at Hongkong Land, Mapletree, all of us have similar strategies. Suntec also has a similar strategy. Does that mean that the working relationship is not good? I don't think so. I think that all of us are professionals. We work well with each other. We are still -- we're working closely with them. So obviously, they have the aspirations they want to grow their portfolio. Any asset manager want to grow their portfolio. But how do you grow it? Where do you actually grow that one, I think it is a question that you can actually ask them. But even for us, right, are we expecting to just sit and do nothing, obviously, I don't think that is something that we are doing. So when we compete, we will compete, but it doesn't mean that we cannot work well together. I'm not sure whether that is your specific -- whether that sort of addresses what you are asking. But things are still working well. We still have the partnership in terms of managing the assets, and we are still working together to produce the best results for the assets that we co-own together with them. Terence Lee: Got it. Got it. And on Marina One, the $5 billion to $6 billion ask is a big range. I think it's like a 17% delta. So let's say, if the closing price comes in towards the low end of that and let's say, you get a high 3% cap rate, how would you expect the valuers to factor this towards your valuations when the time comes? Hsien Yang Chua: So it is not -- okay. So I think it's our speculation, right? So Singapore premium office cap rates have always been around the 3.5% mark. I don't know how the valuers will value this. Do they value this as premium? Do they value this as more of a grade A. But even then, the difference usually between prime -- between premium and Grade A, we are talking about maybe 20 bps difference, so between 3.5% to 3.7%. So logically, I would expect the cap rates to be around kind of price -- this kind of range. If it ever goes to -- your example is, say, high 3s, if you ask me, the only reason for that is because of this ticket size being so big, that basically a lot of the buyers have actually been priced out because they are not able to come out such a big quantum. But logically, it should not be at this kind of cap rate. And of course, just now what I mentioned to you between $5 billion to $6 billion is what is given by the agents because you have to look at the underlying NPI, you need to look at the cap rates, you need to look at the in-place rentals before you can determine what the fair market price would be. But I think just on -- specifically on the question, how the valuers will look, there is a difference between, say, NBFC and Marina One. Marina One, it is in the vicinity. But if you walk, you will understand. If you walk -- just try to walk to Marina One, it is a street away. It is quite a fairly long walk. The difference between the ORQ and the Marina One or MBFC versus Marina One, they walk into the buildings, the feeling is different. You walk MBFC, it's really -- it's a different feeling versus Marina One, you look out, you're looking at a swimming pool, you're looking at the swimming pool of the residential there. And the whole feel and ambience of the place is actually quite different. So I think it's a bit early to tell how the property will actually transact. But all I can say is that it is a bit different in -- from a quality perspective between our building and their building. Terence Lee: Got it. And last one, quick one, just on ADS. Noticed that the valuation moved relatively little compared to -- I think Hsien Yang, you were alluding to the doubling of net rents. So just curious why it didn't have a more material positive influence on the valuations. Hsien Yang Chua: That hasn't factored in the new leases because the lease was only recently signed and the other HOA was also just recently signed. Goh Lilian: Thanks, Terence. Next, can we have Xuan? Xuan Tan: First question is on acquisitions. Do you rule it out entirely for 2026? If not, what are the factors that you will consider? And specifically, can you comment on Keppel South Central? Hsien Yang Chua: So sorry, do I -- the first question, again, do I... Xuan Tan: Do you rule out acquisitions? I understand it's not a priority, but do you rule it out for 2026? Hsien Yang Chua: Why would I want to rule out any acquisitions? Maybe that's maybe my question back to you. There's no need for me to rule out. All I say just now is that we are not actively looking at anything, especially for the first half. Second half, could we look at something? Of course, the answer is it's always possible, but are we going to do it? Without considering any divestments, the answer is probably not. I think if you want to buy something, as I have mentioned to a number of you, it's only logical for us to consider doing some divestments first before rushing to do more acquisitions. We are not rushing to do it, but there is no reason why it should come itself to stop work and not look at any investments. That's just not very, very logical from the way we look at things. So your question was -- the other one was on Keppel South Central, right? So I don't think there is any further update. What I mentioned to you is we have not commenced discussions with the sponsor for this asset. My understanding is that the occupancy is still not at a level that makes it interesting for us to start discussions with them at this point in time. So -- and of course, even if the occupancy level is at a level that's high enough for us to talk about, there's still a lot of things that we need to figure out. For example, what cap rate do you acquire that at, what's the price per square foot, what's the in-place rentals. There's a lot of things that we need to look at. But at this point in time, we haven't started even looking at it or considering even to talk to the sponsor about this asset. Xuan Tan: Okay. Got it. Second question is around rent reversion. If I compare the gap between expiring and signing, it's around mid-single-digit reversion. Is that fair based on your current leasing discussions? Hsien Yang Chua: So no. So I think that we have only just started the year, right? How are the rental rates going to go to this year, no one really knows. No one really knows. You are just comparing spot, but the market rentals can move quite quickly. So it is a bit too early to speculate where the rental reversions will be for this particular year. I think that like what I mentioned, we want as high a number as possible. So we will continue to work towards that. But what I can share is that there is continued demand in the market for especially quality and premium office space, and we are going to capitalize on that. Xuan Tan: If I recall one, 2 briefings ago, you were guiding for double-digit reversion for 2026. Does that still stand? Hsien Yang Chua: That is the aspiration of course. Goh Lilian: Thanks, Xuan. Next, we have Donald? Donald Chua: A couple of follow-up questions. Also back to acquisitions. How is the appetite for Australia retail right now, given that a lot of transactions in the market and demand is starting to really nicely picked up. And also to follow up on that is any color on your operational performance for Top Ryde in terms of leasing spreads and so on is the first question. Hsien Yang Chua: So I think that it's not just Australia. I think Singapore also has -- we have seen a number of transactions being recorded both in Singapore and Australia. So there is also a lot more people look at retail. It is -- everyone sees the strong tailwinds in retail and people are chasing these deals. In Singapore, we have seen Clementi Mall transacted at quite a good cap rate. And of course, recently, we have seen Anchorpoint and White Sands come to market. In Australia, there are also a number of transactions happening, including Westfield Marion in Adelaide. This is owned by Cascadia in Singapore. So there's a few transactions. Like I said earlier, we -- of course, there's no reason why we shouldn't look, but the acquisitions is really not the priority for us, especially in the first half. We will take some time to digest what we've actually done first, and then we will focus really on asset management. Second half really depends on where we see ourselves and also dependent on divestments that we might be looking to do more if we can recycle some capital. So that remains unchanged. So notwithstanding what transactions happened in the market, I think that, that is something that we have said we will do, and this is something that we will keep to at least for the time being.. Donald Chua: Capital allocation will be. Hsien Yang Chua: Sorry, yes, you mentioned capital allocation. Donald Chua: Yes. I think previously, post the Top Ryde acquisition, you were talking about more than not 20% or something like that. That still holds? Hsien Yang Chua: Yes. Yes. And I think that still holds. I don't think we are looking. But having said that, it's not like we want to go to 20%. It really depends. That is just like we just set ourselves like an upper limit, but we are happy to just own Top Ryde for now. And like I mentioned, we are not looking to just go out and continue buying. We do want to take this time to sort of reflect and also to focus on the management. And I think you were asking about Top Ryde, you will be able to see the contribution of this asset from first quarter onwards. We will not be able to share too much at this point in time. But I think based on the work that we have done so far together with our partners, definitely in line with underwriting, we are hoping to exceed our underwriting for this asset at least as expectation. And the demand continues to be very, very strong, especially for space in this particular retail mall. And then cap rate, maybe just a quick one, you didn't quite ask that, but I think we have -- we are starting to see a compression of cap rates, both in Singapore and Australia when it comes to retail assets. Donald Chua: Got it. On the debt side, right, for your guidance of low 3% to 3.3% WACD, feels a bit slow in terms of the decline. I mean my question is, what is -- any color on the currency breakdown on the expiring debt for 2026 and 2027? Is it more Aussie? Sebastian Song: '26 would be -- I would say -- okay, so we have a medium-term note, so that's in Sing. The remaining bank loans are split between Korean won and Aussie dollar. That's for 2026. Donald Chua: So it's 50-50? Sebastian Song: Yes. Donald Chua: Okay. So 50% SG and 50% Aus and Korea. Sebastian Song: Yes, that's right. I think maybe just one... Donald Chua: Would that the reasonable reason why the paper is a little bit slower and it could come in more in 2027? What's the breakdown in 2027? Sebastian Song: I think we need to get back to you separately on the breakdown for 2027. But yes, the reason why it is not going to taper as quickly as maybe expected is because we don't have that much Sing dollar debt. that is unhedged or floating. So -- and also the refinancing because it's only just that medium-term note that we have, which is currently about 3.72%. But whilst we think we could get a good rate when we refinance that closer to the end of the year, I don't think that will move the cost of debt significantly downwards, yes. Donald Chua: And your floating, you say, is mostly offshore currency, is it? Sebastian Song: My floating, yes. Donald Chua: And it's mostly also Aussie, I would presume. Sebastian Song: Aussie and won. Donald Chua: Okay. Sorry, I don't want to harp on this, but last question. On the 8 Exhibition, can I confirm that your income contribution for your first tenant that is going to lease up 5 floors will only coming in 2027. And then the remaining 3 floors is 2028? Sebastian Song: Correct. Donald Chua: Okay. And that will be the whole building. Hsien Yang Chua: No, no, this building has many, many floors. This is -- this -- we are only talking about 2 leases, yes. Donald Chua: And that will be somewhat around -- sorry, can you remind me how many percent of GRI? Hsien Yang Chua: So this whole building has 35 floors. It is a 35-storey building, yes. Donald Chua: So proportionate. Okay. That's all for me. Sebastian Song: Donald, just to get back to you with the breakdown of the loans for 2027. So for Sing dollar is about 60% of total debt due in 2027. Aussie is about 30% and the remainder is Japanese yen. Goh Lilian: Next, can we have Vijay? Vijay Natarajan: Just a couple of questions from me. Firstly, in terms of Singapore CBD office demand, can I get some color in terms of is this still driven by flight to quality? But with now the gap widening, do you see this flight to quality slowing down or even possibly reversing? Maybe also give some color in terms of new or expansion demand. Is this from new setup that is coming to Singapore? Hsien Yang Chua: So it is -- I won't say it's all flight to quality. It's really a good mix of we have quite a lot of expansion. In OFC, we are seeing a lot of expansion at the moment. Our priority is if our tenants want to expand, we will give them space. And for OFC, one of the -- I won't mention who are the tenants, but the only reason why this tenant is leaving is because we can't give them additional space. They actually ask us for -- they have 2 floors, they ask us for one additional floor. We are not able to give it to them. And that's why they are actually leaving our building going to another building. So that's the only reason. In fact, I just caught up with them. They're actually quite sad to leave, but they just needed one extra floor that we're not able to give. So OFC, like I mentioned, it's mostly expansion. The new tenants that we are talking to are not flight to quality. They are all -- okay, the majority of them are new tenants altogether, some flight -- you can say flight to quality, they are moving from other buildings. And across ORQ and MBFC is a good mix. It's expansion, it is new tenants, it could be flight to quality. But it's not like what you say majority flight to quality, not quite there, yes. Vijay Natarajan: Okay. Can you give some color on who took up the additional space in Keppel Bay Tower? I mean is this from an existing expansion? Or is this a new tenant in the same area? Hsien Yang Chua: So these are new tenants. Vijay Natarajan: Okay. Okay. My last question, would you consider share buyback as a strategy? Hsien Yang Chua: Yes. I think we did mention that we didn't -- we stopped our share buyback program because our gearing is at a slightly more elevated level. But now that our gearing has come off, if we do do some divestments, that is share buyback is definitely something that we are looking or considering. Vijay Natarajan: Okay. Only upon divestments? Hsien Yang Chua: Yes, not now, yes, definitely not now. Once we have done some divestments, as and when we do it, we're look into it, yes. Goh Lilian: Perhaps I think we're just in time for one last question from Derek. Jian Hua Chang: Just a follow-up on Hsien Yang's comment on Singapore retail as potentially attractive. Would that include your sponsors, i12 more. Hsien Yang Chua: Yes, we have -- we are not looking at it at this point in time. Yes. So I think that's all I can say. This asset, I think they have been doing repositioning and all that. I'm not sure of the latest, but that's not something that we have considered. Jian Hua Chang: Yes, that's why -- yes, hence, why I just want to check because they've been doing it for quite some time already, yes. And for Sebas, I think I just want to ask on the tax expense this time around $9 million. Is all that from withholding tax in Australia and that's cash,right? Sebastian Song: Yes. So part of it will be withholding tax. There is also a deferred tax component that we will provide for when there are valuation increases in Australia, Korea and Japan. So because there are capital gains tax regimes there, so we have to provide for some deferred tax or rather exit tax when there are valuation gains. Jian Hua Chang: And the $9 million is all cash, right? It hits the DI. Sebastian Song: No, no, no. The deferred tax component is noncash. So that will only be realized when there is an actual exit or divestment. So the remainder will be withholding tax that is actually paid in cash. Jian Hua Chang: How much of it is withholding? Sebastian Song: How much of it is withholding? Sorry, Derek, can I get back to you on this one? Jian Hua Chang: Yes. Goh Lilian: Thanks, Derek. I see that, Terence -- please go ahead. M. Khi: Sorry, just a quick question for me. I want to ask on how is the tax transparency for T3? And when should we expect that to come in? Hsien Yang Chua: We have started work on this one already. We are doing the documentation. So I think the last time we mentioned it should take around 6 months. So that's the estimated time frame at this point. M. Khi: Okay. That's good. And also for the new borrowings for MBFC Tower 3 and the acquisition side, what were the loan rates that you secured for the T3 acquisition? Hsien Yang Chua: So actually, when we bought Tower 3, there was already debt in place, which is locked in. Our own debt, we only took a very, very small loan. That one we borrowed at mid-double digits, plus/minus a bit. M. Khi: And the all-in cost? Hsien Yang Chua: Under 3%. Sebastian Song: Maybe just to get back to Derek, Morgan Stanley's question. So for the income tax for the year, that's $13.7 million. About $9 million was withholding tax being cash. Goh Lilian: Derek, you still have your hand raised. I believe you're okay, right? Thanks, Derek. Thank you, everyone. We've come to the end of the call today. Thanks for joining us. Hsien Yang Chua: Thank you. Sebastian Song: Thank you.
Agnieszka Dowzycka: Ladies and gentlemen, welcome to the presentation of preliminary results of Q4 2025 of Santander Bank Polska. I'm here with Michal Gajewski, CEO; Maciej Reluga, CFO; and Wojciech Skalski, Financial Controller. I'm in charge of Investor Relations at the bank. Throughout the presentation, you can send your questions using the link or you can send them directly to my e-mail address, agnieszka.dowzycka@santander.pl. Michal, over to you. Michal Gajewski: Ladies and gentlemen, welcome. Welcome to the Erste Group. We've just come through an intense period of communicating some of the most important milestones in our bank's history. We have finalized the sale of SCB to the Santander Group, which took place on the 23rd of December. We've changed our shareholder to Erste Group that happened on the 9th of January. And on the 22nd of January, our Extraordinary General Meeting approved the change of our name to Erste Bank Polska. The next step will be the KRS registration planned for the second quarter. And when that happens, we will begin with the rebranding process. For bank, 2026 marks a significant development opportunity. Erste Group's entry into the Polish market is a clear sign that the banking sector in Poland remains attractive to international investors. More broadly, it confirms that Poland is viewed as a country with solid economic fundamentals and very good growth prospects. This creates a supportive environment for long-term strategic investment, and that is exactly the nature of the transaction by Erste Group. For ourselves, for a bank, being part of a strong international banking group active across Central and Eastern Europe will allow to make better use of the cooperation potential within a region to share know-how and to tap into a wide base of business experience in the region. In particular, of course, in the corporate segment, new opportunities are opening up for us. A lot of our customers are starting their international expansion. They already have branches in Central and Eastern Europe. Regardless of the change in our main shareholders, we remain fully focused on our customers and continually improving the quality of our services to generate value for our shareholders. Coming back to the results. Today, we're presenting unaudited financial results for the 4 quarters of the year. And just like last quarter, we are referring only to continuing operations, meaning without SCB. Let me start with the key figures. Profit before tax from continuing operations, PLN 8.260 billion. Tax and regulatory charge for this period was almost PLN 3 billion. The group generated net profit of PLN 6.463 billion. In Q4 alone, that was PLN 1.571 billion. Slide 7, general operating data. Just to remind you, we serve over 6 million customers, 3.9 million digital customers, almost 5% more than a year ago. When it comes to the number of mobile customers, that is up by 8% year-on-year. At year-end, customer deposits stood at PLN 230 million. Our total assets were PLN 380 billion. Slide 8, key financial results. Continuing operations only. Net profit from continuing operations, PLN 6.463 billion. Net interest income reached PLN 12.703 billion, that's up 4% year-on-year. In the fourth quarter, it was nearly PLN 3.2 billion, broadly in line with the previous quarter. Fee income amounted to PLN 2.95 billion, an increase of 6% year-on-year. Q4 alone brought in PLN 752 million, 4% more than in the previous quarter. That was a record quarter for this item. Total income exceeded PLN 16 billion, up 4% year-on-year, with the fourth quarter delivering PLN 4 billion, that's higher than in the previous quarter. Our capital position remains strong around 20%. Return on equity, 23.6%, excellent liquidity. LCR at the end of December, 219%, good -- cost-to-income ratio, 30.3%. Now about the offer, new products and initiatives. Let me just give you the highlights. We introduced a new investment fund, Prestiz Dollar Debt Fund. We expanded local comfort insurance. We're running a pilot for international euro transfers using BLIK. For young customers, we launched a referral program, a dedicated communication platform and an education campaign under the slogan [Foreign Language]. For SME customers, we enable deposits via Euronet cash deposit machines. We launched new insurance products, [indiscernible]. We have strongly focused on digitalizing in this segment. We -- that includes remote document signing and digital prelimits. Throughout last year, we continued enhancing our customer experience, not only in the app, we rolled out our first Euro cash machines. Customers were very -- they were very much interested in that rollout. We also introduced the new Samsung Pay digital wallet. We are the leader when it comes to payment solutions. It remains our priority. We now have 3 million active cards in digital wallets, generating almost 43 million transactions per month. So that is very popular among our customers. Slide 13, starting from retail banking. We manage 4.8 million current accounts in PLN. When it comes to cash loans, we granted PLN 12.6 billion in cash loan, 10% more than last year. Q4 alone reached PLN 3.2 billion, a record year for cash loan sales, which we're, of course, very happy about. In mortgage, we're back on a growth path. Now new mortgage lending reached PLN 10.3 billion. For the full year, nearly 96% of new production was on a temporarily fixed rate. And the share of temporarily fixed rate loans in the total zloty mortgage portfolio rose to almost 60% at the end of December. Retail investment funds reached over PLN 30 billion, growing 28% year-on-year and 8% quarter-on-quarter. Our market share stands at 10.2%. SME segment, we granted PLN 1.3 billion in loans to SME customers. Digital lending is accelerating. The volume of fully digital SME loans increased by 87%. This, of course, impacts the cost of the process. Leasing, again, performed very strongly, PLN 4.5 billion in sales, up 8% year-on-year. In Q4 alone, that was PLN 1 billion in sales. Business and Corporate Banking credit volumes increased by 8%, FX income by 10%. Customer activity in digital channels continues to grow. Corporate and Investment Banking revenues from capital market services, up 40%. Trade finance revenues grew 23%. Institutional revenues of the brokerage office were 30% higher year-on-year. So very good performance of the CIB brings very good business to our bank. Now let's turn to the balance sheet, Slide 15. Gross loans, PLN 167 billion, 4% up year-on-year. On Slide 25, in the appendix, we show a continuation of the strong performance in new lending. As I mentioned earlier, very good cash loan performance, mortgage sales. We have more detail in the annex. Customer funds, Slide 16. Total customer funds as at the end of December, PLN 261 billion, an increase of 5%. Customer deposits, PLN 230 billion, up 7% year-on-year. In Q4, we saw a slight increase in balances, both in current accounts and in term deposits compared with the end of the previous quarter. Corporate deposits grew by 8%. Here, within this, we see term deposits increased by over 5%, while current deposits rose by 11%. Public sector deposits with an increase of 7%. I've already mentioned investment funds, very good performance, the value of almost PLN 31 billion. Slide #17, profit and loss. Net interest income, PLN 12.7 billion, 4% up year-on-year. Interest income grew by 3% year-on-year, while interest expense by 2%. Looking at quarterly results, you can see that across each quarter in 2025, this was at the same level despite fixed interest rate cuts. The net interest margin on continued operations was 4.64% in quarter 2 and declined by 24 basis points, both, of course, as a result of changes in market interest rates. Now let's talk about the net fee income. That's Slide #18. I've already mentioned that this was all-time high in quarter 4, 6% growth year-on-year. We saw really good growth in fees from asset management, insurance and brokerage activities. Quarter-on-quarter, we were very happy with the card fees, which grew by 15% quarter-on-quarter and brokerage fees, which grew by 21%. Slide #19, total income, PLN 16 billion here and grew by 4% year-on-year. Let me highlight that when it comes to income from other operations, that is noninterest income, non-fee income, that income grew nearly by 1/3. Slide #20, operating costs. Total costs at PLN 4.9 billion. And as you might remember, we had higher costs related to contributions to the banking guarantee fund. If we exclude the regulatory costs, the total overall grew by 7%, driven by inflation, salary costs across all performance-related bonuses as well as due to integration costs posted in quarter 4. If we strip off regulatory costs, administrative expenses grew by 5% year-on-year and 4% quarter-on-quarter. We can see that the administrative costs are close to the inflation growth. And of course, I can assure you that we do control this cost item. So our cost-to-income ratio, as I've already mentioned at the beginning, is slightly above 30%. Slide #21, loan loss provisions. And here, we also have a reason to boast a little bit. At the end of quarter 4, the net balance of provisions for expected credit losses on a consolidated basis was PLN 586 million, while the average cost of risk was -- 37 basis points, which is the historical lowest in our history. The low net balance of provisions and the decline in that balance was driven on the one hand from the good and stable quality of the loan portfolios. Also, that was also supported by good economic landscape that actually impacted the parameters we used to calculate provisions. The net balance of provisions declined also because we modified the criteria defining the material growth of risk. So we had to increase our charges last year by roughly PLN 130 million. The nonperforming loans account for 3.7% of our loan book, which is a good ratio, and this is specifically important when we are talking about dividend policy. In accordance with our process, we also reviewed our parameters and models we used to estimate expected credit losses. As a result, we wrote back PLN 27 million worth of provisions, and this confirms the good quality of our loan book. We haven't recorded any major one-off events in quarter 4 that could impact the net balance of our provisions. On the next slide, you can see that we sold nonperforming debt worth PLN 568 million, and which gave us the gross gain of PLN 112 million. Slide #22, summary of the banking tax and regulatory costs. As I said, these costs this year were nearly PLN 3 billion, in quarter 4, PLN 480 million. Slide #23, where we summarize our performance in quarter 4 and the year. Let me highlight that our stand-alone profit after tax, which is the basis for paying out the dividend was even higher than the one we report, that is -- we report EUR 6.4 billion and the stand-alone net profit that will be the basis for paying dividend was EUR 6.7 billion. In the table, we also show the costs related to legal risk, and that was EUR 1.6 billion this year, and that's 29% less than a year before. Our effective tax rate was 20.9%, and that was impacted by the regulatory cost and the cost of legal risk attached to FX mortgages as well as the recalculation of the deferred tax based on the new corporate income tax rate, and that was EUR 173.5 million. When it comes to our business performance, I'm happy with our results. We had record high net fee income as it reflects that our clients are very active that they use remote channels. We can see the growth in the number of mobile banking transactions and we increased the number of customers in the segments that are important for us, that is SME by 4% and Wealth Management segment by 18%. The net interest income in quarter 4 is close to what we saw last year despite fixed interest rate cuts. So this means that we prepared ourselves very well for this falling interest rate environment. And even though its impact was negative, it was much refrained. We have made our balance sheet strongly resilient to interest rate [indiscernible]. And that bodes well for 2026. So wrapping up, we closed a very important stage in our history of Santander Group, recording solid results. We are ahead of a new chapter. And I do believe that we will be even more effective when working with our new Austrian shareholder. And that's all from myself, and the floor is yours. Maciej Reluga: Good morning, Maciej Reluga here. We will try to group the questions asked during our CEO presentation. And please stand your questions. Let me start with the question related with Erste Group. Have you noticed any business areas that Erste focuses more than you used before? Yes. You know very well that we are a universal bank. We've been actually servicing all customer segments. And this gives us the advantage because if something does not work in one segment, then we can offset that by performance in another segment. Just like before, in our strategy, we want to stay and keep the nature of our bank as a universal bank. We have very good growth in the customer segments, which are most profitable. I mentioned SMEs and wealth customers. These are definitely the segments that we would like to grow further, leveraging the experience of Erste Group. Also in the corporate segment, large corporate segment, we notice the potential because investments have been accelerating. And there is also a big difference between debt financing -- private debt financing between us and the rest of Europe. And so in our opinion, this gives us a chance to grow further financing we extend. You know we've always been doing that in a profitable way. We know what is the cost of capital. We do not take part in the race just to grow the market shares without profitable growth. We've been tracking what our competitors do, and they write loans below the banking tax level, but we still are able to grow in a profitable way, building relationships with our clients. And they can see -- notice that these relationships give them value. So wealth customers, SME corporations, these are the areas that we will keep focusing on. But if you look at the mass segment, we focus on most profitable products that is funds in current accounts. And we also sell more and more insurance and cash. This refers to capital. The CET is nearly 20%. And what is the plan for using that? And the related question, what is the planned dividend payout in 2026? We need conditions to pay out 75% of profit in dividend. And as you know, this is the starting point. We have not taken a decision yet. You know our history. You know that in the recent years, we've always paid out dividend, a solid one. It's always been preceded by arrangements made with financial supervision. And this time, if we are to do anything, we have to talk to financial supervisor, but we meet the conditions for paying out 75% of the profit. Of course, we have quite a big capital surplus, more than PLN 9 billion. You might remember that in previous years, we were giving approval for paying part of the retained profits for the years when we met dividend requirements. So we will be talking to the banking supervisor, and we will be thinking how to use it best. And I mean the surplus. Okay. And there is one more question about the growth in balance sheet and the loans. The expected growth in loans in 2026, what is our opinion about it? How -- what do we think about the mix of growth? And what segments are we going to grow in? Are we particularly interested in any segments? And when it comes to corporate loans, are there any specific sectors? As I said, we've noticed a big potential for the growth in lending. We noticed there is a growing demand. We noticed the growth in investment. We also compared ourselves to the share of debt in corporate financing, business financing. All those indicators are good, which -- and they indicate a potential. Polish companies face the challenge, which is growing their productivity and effectiveness. Without automation, digitization of processes, which require capital outlays, this will not be possible to improve their effectiveness. So when talking to our clients, we can see they are more and more interested in investment loans. And we expect even bigger demand. This refers also to the SME market. We've done quite a lot there in recent years, not only talking about digitization, but also when it comes to excelling our models of financing, especially for micro and midsized companies. We have record low cost of risk. This is a difficult segment. You really have to get knowledge about that segment, and you have to be wise to finance that sector. We know how to do it. So our share in that market is growing. And this is something that our new shareholder appreciated. because they want to use our experience and models that we've developed. When it comes to personal individual clients, we had record high growth in cash loans, and we will continue to develop that product. It is very important to reduce unit costs, in this case, the cost of processes. Across the market, we can see there is a lot of competition price-wise. We are not going to be part of that raise. We are going to always mine the cost of capital and to stay profitable. So financing the transformation, and we've been good at that in recent quarters that is financing of the defense sector and also the initiative related to automation and digitization of processes and enterprises. We will also finance the expansion of our clients to the Eastern and Central Europe. We view it as a big chance, as a big potential because the vast majority of our clients have much more business there than in Western Europe, where Santander has its strong footprint. We have a strategic collaboration agreement with Santander. So there will be still support for the development of the business of our clients. Michal Gajewski: So now about deposits and our strategy to attract and maintain retail deposits, especially in savings accounts beyond special offers. And what do we think about deposit mix going into 2026? Let me answer this question. Our strategy is to provide good savings and investment offerings for our customers, not only in terms of deposits, even in the performance for 2025, you see the inflows to TFI, and that is likely to be continued. So we will have -- and we have a strategy ready here with the new shareholder. In terms of deposits, our strategy recently was to do 3 things simultaneously. They're quite difficult. That was to maintain customer satisfaction, the depositor satisfaction, maintain relatively low cost of deposits. And after 3 quarters, we had the best ratio in that respect on the market. And simultaneously, we wanted to maintain our market share. And we succeeded, as you can see in the figures today. You don't see -- we're not presenting here customer experience and satisfaction. We don't see the NPS. But the 3 elements that I've mentioned, we have delivered them. And we will continue. We'll put more pressure to boost current deposits. The market is growing fast, and we want to grow faster. The structure current versus term on our part compared to the market, it looks quite good, but I think we can improve it because current deposits are growing faster than term deposits, especially with lower interest rates. In terms of term deposits, again, you know that the better -- how we reprice term deposits in relationship to the scale of reference rate cuts or LIBOR, that ratio was very high at the beginning of the cycle, that was much above 100%. Now we're getting to the end of the cycle, and this ratio is going down. However, it is still close to 100%. So in 2026, the strategy that brought about the results you see today will be continued with focus on current deposits. And in relation to this, we have the question about net interest income and net interest margin and our outlook for 2026, our outlook for the rate sensitivity in 2026. So nothing to add to what we said before during the conference. The sensitivity is the same. 100 basis points of sensitivity is about PLN 250 million-ish. The balance sheet is growing. The sensitivity is relatively lower than it was in the year back. We've been working on our resilience. The share of temporarily fixed rate is almost 30 -- sorry, 60% at the end of December 2025. So it's not surprising that NII has been stable over the last quarters despite the interest rate cuts. In terms of rates, in 2026, we're expecting 2 cuts by 25 points, and we will continue with our strategy here. Now the cost side, we have quite a few questions here. Let's start with a more general one or the one-offs maybe, and then we'll give you a more general overview. Fourth quarter cost of integration, about PLN 70 million. What sort of integration costs can we expect in 2026? A few questions about the same thing really. So let's take this quickly from our financial controller. The last question is about specifying the cost of rebranding, as I understand, PLN 250 million is the impact on the results of the gross cost before tax, that's about PLN 300 million. How will that be distributed per quarter? What will happen in 2026, 2027? We are not presenting that on the slide. Well, our intention was to show you the impact on the result in gross terms. So PLN 250 million is the estimated cost of rebranding before tax. What will happen in time? Well, as we said, we are planning to rebranding in the second quarter and the cost of rebranding costs, the cost of physical rebranding, changing the logos, changing the colors, changing the names in various IT systems, they need to happen relatively fast. So this element of rebranding cost will be made in the second quarter, the bulk of it this year. Now promotion, media campaign that's already happening. This is the cost that will be distributed throughout the year. And some of it relatively small may still appear in early 2027. So that's about rebranding. Beyond rebranding, will there be any more costs related to the integration? Yes, of course. But because this is quite complex and because we're talking about elements that will require further procurement to continue to provide services in collaboration with Erste Group, some alignment when it comes to systems with the new group or alignment with local suppliers. We're not yet ready to give you a reliable figure and we'll be coming back with that when we present the results for the first quarter of this year. There is a question whether this PLN 250 million, that's the impact. I said that already. That's how I started to answer. Most of it will be made in 2026 when it comes to the brand promotion. When you leave the one-offs, what about the cost dynamics in 2026? We had a comment to that. Our distinctive feature, the strict cost discipline, nothing changes in this respect. First of all, our target is to maintain cost to income at this excellent level around 30%. The guidance for total cost, we can say today that we don't want to differentiate from the CPI expected in 2026. Now the cost of risk, our outlook here, are there any specific macro factors that you closely monitor for potential shifts in credit quality? Maciej Reluga: Let me take that one. There was a time a few quarters back when we were observing some variations when it comes to our customers' financial spending, whether they were importers or exporters. This was related to the strong PLN and the demand and the situation in Europe. We had stagnation without any serious rebound when it comes to volume or demand for export products. And this is when we closely monitor the situation, whether that was likely to persist. Well, I can say that the situation is stable. We're getting out of the trough. The PLN remains strong, but we're seeing some rebound in Europe, particularly in Germany. But in my opinion, this also shows that the adjustability of our customers' exporters are amazing. And we can safely say that this particular area does not require close monitoring. The situation here is stable. That's one answer. Now the first part of the question, cost of risk, 2026. You probably remember in our strategy, the cost of risk, we have guidance for 3 years. We did that in 2023. That's 3 years back. That was 70, 90 together with SCB. But as we're presenting in Slide 21, historically, SCB gives us about 10 or 15 points. So we need to subtract that in the first step, it was quite a wide bracket because it was for 3 years. Now we're talking about guidance for 1 year. And when it comes to the economic cycle, this year, it's actually being forecasted as quite a good one. 2025 in terms of cost of risk was unique, very low levels. So it would be difficult to give guidance with improvement. I would say that this will be stable if we had to give you some brackets that would be about 10 points up not more than 50. That's how I would put it. Next question, FX mortgage legal risks and the cost, our assessment of the remaining exposure related to FX mortgage legal risks. Well, the first thing, our provisions reflect the situation. In the balance sheet, you see slight minor portfolio, about PLN 0.5 billion. We're not giving any guidance here. This is the end of the story, positive results, the last ruling from the European Court of Justice, we see it as a positive sign. And here, we see on the asset and liability side, we see fewer lawsuits. The ruling from the 22nd of January, actually the court confirmed that may use set off in the same proceeding. They confirmed that we can raise a set of defense even in the same case when the borrower is challenging the validity of the loan agreement. So as I said, this is the end of the story. There will be other regulatory aspects that are likely to get more attention in the future. Let me -- well, let me just add, this does not mean that we won't be raising any provisions for Swiss franc loans. This is the end of the story, which means we're at the statistical tail of this. But this financial impact will be phasing out, but it's not quite the very end. Michal Gajewski: Well, there are a few detailed questions about ratios, NII and [indiscernible] at the end of 2025. I think this question results from the context of dividend. I can tell you that they were below the levels required for dividend payment. So there is a big buffer. NII before and [indiscernible] below close to 10%. And most likely in our annual report, we'll give you the more exact figures. Maciej Reluga: There is also a question of the long-term funding ratio requirement. Have we met it at the end of quarter 4? Well, this requirement formally was not in force. It is to come into force. But yes, we were below this threshold. And in the second half of the year, in quarter 4, we very effectively price our issues that we conducted in order to meet tier [indiscernible]. And that will help us. And there was a question on balance sheet hedged against the interest rate risk. I think we've already answered that. But just a question about the balance sheet. The nearly 58% of our loans are at the temporarily fixed rate. So we've already said that. Michal Gajewski: I think these have been all the questions that have been sent and asked. So thank you very much for this. We are starting the new year, the first month has passed. We are very optimistic when it comes to the future and the cooperation with the new shareholder. And I do believe that this is going to be another year of growth and really good performance. Thank you very much. Maciej Reluga: Thank you.
Conversation: Operator: Welcome to the PowerCell Group Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to the CEO, Richard Berkling; and CFO, Anders During. Please go ahead. Richard Berkling: Good morning, and thank you for joining us. 2025 was an important year for PowerCell, not because everything moved fast, but because the right things moved forward. We operated in a market where interest in hydrogen and fuel cell clearly increased, but the investment decision remained cautious and uneven, which affected the market. With that combination, market conditions requires discipline more than optimism and execution more than ambition, and that is what we saw in 2025 and what we will present here in this quarter 4 presentation. So against that backdrop, parts have continued our shift from technology development to more industrial execution. We delivered a record year when it comes to several aspects. We had improved margins materially. We generated positive EBITDA for the first time for a full year, and we strengthened our cash position, all this while operating at a slightly lower top level than we initially anticipated. So this is not where we want to end up, but it's also a very clear confirmation that our fundamentals are strengthening. It shows that we, as a company, can execute, control costs and deliver industrial performance in a very demanding environment. So as we enter into 2026, we're not managing towards a single market forecast. We are deliberately building a structure that can protect earnings at a lower activity scenario while still remaining ready to scale when the opportunity materialize. Marine is remaining to be our execution backbone where we see the most growth and more stable income. But power generation is now emerging as a second pillar, designed for scalable growth with a limited cash capital exposure. So we said that 2025 was about execution over ambition. We said it was readiness over prediction and more from promise to performance. And that's really summarizing the year. We have executed on more or less all strategic ambitions, but we are also setting the bar higher for the future. So key takeaways on 2025 and quarter 4. Our Q4 and cumulative 2025 results demonstrate a very solid execution on strategic priorities. Most notable, start of production deliveries to marine on time to customers, the product launch of the power generation platform that gives us an additional pillar for future growth. The first industrial order on the methanol power plant, which was a significant milestone. And I really like the fact that when we do product introductions, we see immediate market traction, which gives us a confirmation that we have rather good precision in the efforts in product development, investment into new features and then also market positioning to a very demanding market. And also for a company like PowerCell to find the breakeven point and deliver on it is extremely important. So it is encouraging that we can deliver organic growth in a volatile or flattish market to some extent. If we look at growth year-over-year, we take out the FX effect, it's actually 24% organic growth, which is strong. Once again, not necessarily to the level that we have as an ambition, but on the market conditions we see, we're quite happy with the development. We also delivered a very strong product offering in Marine introduced in 2024, which now was materialized into 0 production and customer deliveries, which we are now in commissioning and start of deployment. 2025 was about testing and proving that PowerCell can execute, deliver and remain financially disciplined also when the market is uneven. And to that we stood the test. And going back to a year ago, when we started -- when we reported Q4 2024 and gave the introduction to '25, we said that 25 is a slightly different year because it's more even over the quarters. We don't have the hockey stick revenue, which is then why we see that the quarter 4, compared to quarter 4 last year is a lower top line, but the full year is according to our expectation, and we're happy to see the progress. With that, I will hand over to Anders and a more detailed presentation on numbers. Anders During: I will not skip so many slides at once. I will start here with the fourth quarter and the numbers. Now Richard has been through basically the numbers and everything that's in essence. I'd just like to highlight 2 things, I think that's still important. When you see the numbers for last year, SEK 144 million, the majority of that number is from one order that we had in -- very late in the year. So as in this year, we have had several orders rather in the fourth quarter, building up the SEK 95 million. And then I think what we did after Q3 or when we presented Q3, we felt urge to give some guidance on the cash situation and the cash flow situation because we all realized that we have seen 3 quarters in a row where the path had been quite downward. And we wanted to make sure that you, the market and everyone around us understood that, yes, without living or giving forecasts, we would like to say that we are hopeful for the last quarter when it comes to cash flow. And now as you can see, the last quarter came in approximately -- which I say here, in line with expectations and then everyone would ask what were your expectations? Well, now you know this was what our expectations were, and we did our best to guide you without leaving a forecast. And that felt very pleasant to have that feeling for the company that one can say things and you see that, that's delivered. Moving on to the full year. Like Richard said, looking at the numbers straightforward, I mean, the growth is 15%. If you reduce that for FX effects in '24, which were positive and FX effects in '25 that were negative, you end up with 25% or 24% rather. The EBITDA level, I will get back to that on the next page. But just running through the numbers here, you see that we are basically doing better on all levels, and that includes the operating cash flow, of course, that ended up only minus SEK 10 million. And I think every one of you that listening to us and read our report after Q1, Q2 and Q3, we're a bit nervous about this, but we are happy to be where we are. And as you also noticed, we have added liquidity through this new credit facility on customer projects to our, let's say, asset bank when it comes to liquidity. So that feels good. Then just for the comparison because Richard said in his introduction that the underlying business is growing. And I think the stress when the underlying business is growing, that important to recognize how -- what the differences really are. If we eliminate the FX and the extraordinary items, and I think when it comes to extraordinary items, you that have followed us recognize that last -- in '24, in Q2, there was a huge ticket on SEK 30 million plus to the profit. And in this year, in Q3, we had a negative similar thing basically related to reorganizations. If you eliminate all those and the FX effect for the 2 years, the underlying growth, 24%, like Richard said, but it's important also to recognize that EBITDA change 24 to 25 on that same account is 79 million. And that is an effort that I think should be recognized. With that, Richard, I'll leave it back to you. Richard Berkling: Perfect. Thank you. So then we can also promote upcoming events, interim report quarter 1, which will be on April 23, and then the AGM here in Gothenburg on May 11, which we obviously want to invite as many people as possible. So if we then look at what we see over the year and what 2025 gave us, we see that we have proven resilience. Once again, EBITDA on the full year, the lower top level absorbed and we managed some headwinds. We are happy with the outcome. We are pleased to see that we have a resilient organization and a rather strong business model. But we're not yet at the ambition level that we want to be. And this is something that we're working quite hard on. And 2026 will be more of a normal year in PowerCell context where we most likely will have more of a hockey stick because you don't have the same even distribution over the quarters. This is also how it is to run a business in a technology shift. And reflecting a bit on this one, if you look at the market context, we try and visualize this with the navigation of a sailing yacht where you -- sometimes you have the headwind, you could have the tailwind, you have the current running with you. As we said, we are not operating in a one market scenario. We are really working hard to optimize what we have to work with. So what we see right now is supporting us is the awareness. We see regulation supporting the transition, especially in marine. And we also have a number of proof points from the use cases where we now have a rather strong deployed product portfolio, which are out in operation, giving us really, really solid proof points to more demanding customers. What is a headwind or ahead current is that we see a lot of capital discipline. We see risk averse money on the sideline. Also, of course, the macroeconomics and geopolitical landscape is not supporting areas where you are investing into new technology. But at the same time, we also see the cost and the drivers for especially marine, and this is something that we have been a bit surprised on the strength of this. Regardless of IMO postponing a decision 1 year to impose new emission regulation, EU has already moved ahead and EU have stricter policies than what the IMO proposed. So if you break this down, cost for fossil fuels for the marine industry will double between the year 2024 and 2030. And then it will be equally amount until 2035. So you have an exponential cost development. This is driving a change of behavior. This is driving transition. So when we signed the order with GAMMA [indiscernible] in quarter 3 or quarter 4, just in the break there for the bulk carrier, that was a breakthrough order because we see that they can deliver breakeven on the new technology rather early. So their ROI is well on this side of 2030. We see more of that going forward. So we have a strong support from regulation and also the early movers proving that this is really, really working. We also see the particle emissions is a growth driver because of the health effects, especially related to port and harbors and urban dense areas, where respiratory illnesses is causing massive cost to society. That is now the #1 driver compared to C2 that was the driver up until 2022 and 2023, in combination, of course, with energy resilience in society. So looking at the market going forward and what is resisting us is, of course, the risk-averse capital market. But what we have seen from 2021 until now is the -- what we call a market normalization phase. We have now seen a washout event where the more sustainable business solutions and business setups and strategic positions will survive. And we feel that we're quite well positioned in this market going forward. If we look at quarter 4 segment and what was in focus there, we can now see that the MS225, the marine systems are delivered completely to the customer and now are progressed into commissioning and deployment, which is quite encouraging. We also reported a SEK 43 million methanol-to-power order secured with a European shipyard, which is confirming the commercial traction beyond just pure hydrogen, which is important to us because that is doubling the availability of fuel, which is important to be able to scale up the new technology. In power generation, the PS190 and the portfolio for power generation gained traction following the market launch, which was quite encouraging. We have field validation agreement with the U.S.-based data center, which is, of course, really interesting to us because the data center industry is growing. It's a very demanding application. I will not stand here and say that our fuel cells and the #1 driver for energy for data centers, but we are in the energy mix, especially when it comes to clean power for backup power and peak shaving. So we look forward to experiencing this first installation and then come back and report on the progress. In aviation, we had a SEK 12 million follow-on order from a European Aerospace Research Institute on products and then an additional SEK 5 million on engineering services, which was encouraging. So if we then look at power generation and why we are so happy to be able to introduce this and why it's so important to us, it is that power generation is something that is creating a second pillar to us. It's the same core technology as we use in marine. We have a lot of synergies between ourselves and Bosch, both when it comes to core technology and volume. It is a highly competitive product portfolio. It is optimized in its performance and price for power generation, and it has a very interesting package when it comes to size, performance and functionality, especially in combination with the software platform, which is the integration platform that is really, really important in order to optimize the asset of a fuel cell. So with that core component and the software platform that we are promoting to the market, we give a package that is easier to install and you can better optimize over the life cycle, extending durability, extending lifetime and also optimizing our fuel efficiency. So we have a very, very strong product package to the power generation market. And the contribution to PowerCell is, of course, that it gives us another growth potential. It is an extension of our core business without the capital spend of start of production and market introduction when it comes to the industrialization phase. So really important proof point of our asset-light business model. Marine and Power Generation, it doubles the growth potential for us. And it's really, really valuable for us to be able to protect our EBITDA and protect the bottom line if the market is sideways or slow, but it gives us a really strong opportunity to capture growth when and if it happens. It also gives us an opportunity to continue to protect the breakeven margin on around SEK 400 million that we have proven this year. So expanding without adding too much of additional cost or fixed cost is, of course, important in the market conditions that we are operating in. Briefly touching on the underlying market and what we see in different segments. Marine is continuing to be the strongest segment for us. We have the most clear business cases. We have the first customers that can clearly define their breakeven point. And we also see now an infrastructure that is supporting more growth with availability of hydrogen in port and harbors. 2025 was actually a year where you saw more final investment decisions regarding hydrogen production than we've ever seen before. So marine is continuing to be the backbone of PowerCell short term. Power generation, the addition of the product portfolio that we launched is really important. And hopefully, we can have the same development and traction as we did when we introduced the marine portfolio, and that is a focus area for 2026. Off-road is continuing to be a segment that we're following and not necessarily actively developing. A bit slow. You see some traction in rail and locomotive, but other areas, we have customers operating with our products, but we don't really see the traction that we do in marine and power generation. Aviation is a segment that is, as we have said before, it's not our volume segment, but it is the segment that is qualifying new technology and pushing the boundaries on safety, robustness and quality. We have seen ZeroAvia communicating that they are scaling down some of their cost portfolio. What they have protected is the development and certification of the fuel cell driveline, which is, of course, where we are operating. We are continuing to supporting them, and we are looking forward to completing the certification. But it is sometimes difficult for heavy capitalized companies in that energy transition to continue full speed ahead. So seeing them completing a new funding round was good. It was fortunate that they have decided to protect the part of the business that is focused on what PowerCell is doing. So if we look at 2026 and how we continue to build the company, we have a very clear strategic focus. We need to continue to leverage the platform, the systems and the product that we have in production today. We need to continue to focus on growing. We need to grow the top line. Right now, we are at a position where we have a really strong leverage on growth, being able to protect breakeven at a low level, also means that when you see a strong growth going forward, the leverage is going to be quite interesting for us. The industrial partnerships are important to us. We need to continue to build business and market and volume through the larger OEMs that we're operating with. And then fiscal discipline is going to be in focus also for 2026. It's going to continue for PowerCell. And I'm happy to say that we have proven that resilience in 2025. So 2026, we are focusing on staying the course. It's going to focus on real demand and the practical applications. We are going to continue with the step-by-step progress. Positive EBITDA is something that we're going to focus on and trying to protect really, really hard for 2026. We are proud to say that we have an operational model that is remaining lean and cost discipline. You need to bear in mind that starting production as we did in 2025 comes at the cost, not necessarily always a financial cost, but there's also a cost and challenge to the organization. And to see that we managed to start production, deliver on time to customer and come out protecting the bottom line is something that I'm extremely proud of, and that is a new phase for PowerCell. So I'm really happy to see that we are progressing. The focus for 2026 is, of course, that we need to be very strong industrially. We need to have credibility as we are moving to customers that are really demanding. We need to broaden our commercial footprint. Power generation is one aspect of that. And then, of course, a focused sales effort into areas where you see traction, India, Middle East and Europe, of course. Summarizing PowerCell, we are built for volatility, but we're also built to capture the opportunity that we see there. And if I'm reflecting on the Q4 2025 compared to the Q4 that was my first report 5 years ago. So this is actually the 20th report that I'm doing. What we can see is that the value creation, and this is where running a company and reporting numbers, numbers tells a story. Numbers can also share the history and the progress of the company. In 5 years, the Q4 report in 2020, which was summarized in the full year, the development from that point until now is a completely different company, progressing product portfolios that are optimized and industrialized for specific segments, building a completely new company where you have industrialized processes, you have output of demanding industrial components that are put into operation in OEM applications. But more importantly, is the internal value creation because the revenue in 2020 consisted of some throughput revenues that was really not value creating in PowerCell. So growth is from that point until now, 720% when it comes to the value-generating abilities of PowerCell, where we go out and sell something, where we have designed something, where we are producing and delivering something. And those 720% really tells a story. And to be able to do that and leverage growth and deliver a positive EBITDA for full year, it is, of course, something that we're quite happy with. And then we say that we have not reached our full potential. We have more ambitions going forward. But if that ambition is completely fulfilled in '26 or '27, that is also up to the market conditions to decide. And this is why we build a company that is able to protect bottom line if the market is soft, but also to act on the opportunity going forward. So with that, we open up for questions on 2025 and Q4 report. Operator: [Operator Instructions] Richard Berkling: So one question that is coming in is why haven't we uncovered the full power generation lineup? Will HTS be part of that lineup? So good question. The market introduction we did with power generation indicated 2 products that are available immediately or 2 system products and then 1 complete delivery. We have a road map to introduce more solutions, most likely with the higher power rating and also with some new functionality. So continuing to build that portfolio and expanding to be able to provide value to more customers is also part of the market introduction. We also want to see where we get traction. So we are not overinvesting too soon. So we are going to continue to build more products and more offerings into the product portfolio to be able to continue to see where we see traction and where we see real customer value. HTS will most likely be part of the lineup going forward. But as we have indicated, the development cycle is that the HTS will be commercialized and industrialized sometime around 2028. So it will be part of the lineup, but not in the short term. So one question from Stefan is he missed the reason for decrease of sales in the last quarter. How are we going to strengthen the sales channel? And he's also asking and commenting that he's not seen and heard a commission situation. A good question. As we said, 2025 was a different year compared to what is a normal year for PowerCell. And I would say for the whole industry when you're working in the energy transition. Quite often, you have a hockey stick development over those years because they are quite often budget driven, quite notably in China, where you saw a very low activity in the second half of 2025 because that was at the end of their 5-year plan. In October, they communicated that hydrogen and fuel cells will be a very important part of the new 5-year plan, which is now then in place and is going to accelerate sales and volume in China. So it is the nature and the conditions of the sales distribution. So in 2025, we had more of the large orders, as Anders commented, we had 2 really big orders that were evenly spread throughout the quarters. This year, we still have medium-term and large orders, but they are more centralized throughout the segment. So volatility will continue to be part of the segments. And in quarter 4 this year, the volume was lower than quarter 4 last year. But for the full year, it was a rather solid growth. So it is about the distribution between quarters. And this is also one reason why we're not making forecast because it is difficult to predict exactly how the distribution will be throughout the different quarters, especially when you're still a very small growing company. That means that specific orders can have a big impact, whether or not they are fulfilled and delivered before a quarter or after a quarter. So we're continuing to see volatility, but we feel very solid in the performance and that we have a good growth strategy. And then the sales, we have an extremely strong product offering. In Marine, after the introduction of the Marine System platform, we have an estimated 80% to 85% market share. After introducing the power generation lineup, we immediately signed a number of orders. No big volume orders yet, but we are hoping to have the same precision in that introduction. And that is because we are we are quite determined and focused on making sure that we capture end user value and not just selling products. But still, the proof is in what we deliver going forward, but it's a really good question. So one question from Carnegie. Given the current uncertainty around customer investment timing, the marine project execution and the ramp-up of power generation with Bosch, what are the key factors that would determine whether or not 2026 lands on the high versus the low end of the outcome range? A very good question. A number of aspects to answer that question. And the question was well articulated because Marine segment is quite often projects with a longer cycle. When we deliver something, it goes into a vessel that is being built and the build period is between 2 and 3 years. Quite often, we deliver our hardware much earlier than the final commissioning. So we have a shorter time to market than the actual vessel built, but it is a slower process. What we saw in 2024 and what we continue to see is that we have a rather short time between order and delivery also in Marine, much shorter than in the past. We also now see with the new emission trading into effect in Europe, we also see a market opening up for retrofit, which could accelerate the order to delivery in Marine. But that is also why power generation is complementing our portfolio in a nice way because power generation has a much shorter order to delivery cycle. Quite often, we can deliver something and it can be up and running within 2, 3 months. You don't need to wait for a vessel to be built, commissioned and put into operation. So that is complementing it. So I would say that what would determine whether or not 2026 lands on the high versus the lower end of the outcome range is the distribution between marine projects, marine orders, power generation and, of course, IP, royalty and engineering services because all of those are also very short turnover business. So product mix is going to determine the outcome. We are quite confident in the long-term development and the long-term ramp-up, but the short term is definitely decided by the product mix. And this is where we are going to be clear when we get the orders on when the revenue is occurring and how it's distributed. But a very good question from Carnegie. From Ari, we have an update related to Bosch and opportunities and threats. I would say that our collaboration with Bosch is a very solid foundation for PowerCell. The fact that we have a collaboration with one of the really strong industrial partners in any industry is something that gives a solid backbone to PowerCell. I have been in industries like this for 25 years. I can honestly say that without PowerCell, without Bosch, PowerCell would not be in the situation we are right now. They have matured our offering with at least one industrial cycle. So that is really, really valuable. And then the opportunity, China is going to be an important market for hydrogen and fuel cells. China is the #1 market when it comes to investment into infrastructure into investment and availability of hydrogen, and they have a clear strategy on how hydrogen is going to be part of the energy mix in society. Having Bosch as our sales channel in China is valuable. So working with them and supporting them in leveraging that opportunity is going to be really, really important. Threats, I don't see any immediate threat. I view Bosch as a very strong owner and industrial partner. So one question from [indiscernible] is, are the Norwegians very fully invoiced and paid now? I would say no to that. And we have some deliveries and commissioning left to do. And in that, we also have payment milestones. So revenues and liquidity is going to also affect 2026 in a positive way. What would you say that this year is overall better in general compared to last year? Question from Fredrik. A good question. I would say that the fact that we managed to achieve what we did in all aspects of running a company is what is overall better. I mean, first, the underlying growth. Adjusted for FX, 24% with the FX fully affecting us plus 15%. It is a growth year, not on the levels that I want to be because I want to grow faster. But at the same time, doing that organically on a slower market, it is still a good year. But doing that, delivering positive EBITDA for the full year and also doing a full industrialization and start of production is a complexity that is not easy. It's been a tough year here at Ruskvadersgatan. The employees have really, really pulled through. Some areas of the company or the company as a whole has sometimes done more than you can ask for because it takes a lot of commitment to be able to start production. And anyone who's been in an industrial company knows the pain of labor to do that. So being able to pull through and still protect EBITDA, have a strong operational cash flow in the end of the year, delivering on what we said, I think, is what makes this year overall better. But we always want to do more. So hopefully, we can come back and show even more progress. But it's been a year where we've proven organizational and commercial resilience. And that is something I am quite happy with, and that gives me comfort going forward because it's continuing to be a difficult market out there. Hopefully, we can see some progress in the macro effects. But unfortunately, that is not under my responsibility. Anders, do you see any questions that you want to know? Anders During: Well, I think there are some items that I've seen some questions popping up around. That is changing in assets in the cash flow analysis that is predominantly related to the payers of the license fee from Bosch that turns into long-term assets. And I also noticed that some of you have comment on the fact that in our notes where we do the segmentation reporting, royalties and IP gets a bit confused. In Q4, we had a classification of the royalties/IP revenues going into the service line because in the agreement with Bosch, we changed -- which slightly changed the terms and condition on that arrangement, which made it classified as IP for the most in Q4 rather than royalties. And that is the confusion. Otherwise, to clarify it, the amount of money that we received on IP and royalties in Q4 is approximately equal to what we received last year in '24 for that same items. But we will make sure to take this confusion on our segmentation reporting away that will change that going forward. So that's more clear directly. Richard Berkling: So let me see if we have any more questions. I think we have covered them all. So if we then close -- here we had one -- let's see if we have one more. So from Carnegie, if market development remains slow, what cost or prioritization levers can you pull to continue being EBITDA positive without compromising long-term competitiveness? This is a very good question. I should probably have noted that one, but in the positive sense, there is one thing I'm really proud of and also grateful for the support that we had from the Board. It is a balance point of not reaching EBITDA positive by being anorectic by really scaling down. The fact that we have continued to invest in new products that we're introducing to the market as well as core technologies that will be the revenue engine from 2030 and onwards, I would say that balance point is really, really important. With that said, I was commenting going back to 2020 and reporting on my quarter 4 2020, which was my first report from the previous year when I was not here. We have more or less the same cost structure as we did then. But now we are producing industrial components. So we have made a rather interesting transition in the company. We have more levers to pull. We made a restructuring of the management team last year, which is going to have a positive effect on 2026 when it comes to cost structure. We have cost levers to pull. Now with production, if we see a slower development, we can ramp down the shifts that we have in production. We are going to protect sales and business development because that is what is really the important thing right now. We have levers to pull also when it comes to investment, which we can push or postpone. So we have a number of levers to pull. But the balance point, so the question is really well articulated. This is the #1, I think, obligation I have is to protect PowerCell and balancing between the short-term performance and protecting EBITDA, still being able to catch the potential growth that is out there, depending on how it materializes between product mixes. And continuing to have strong competitiveness going forward because the energy transition and any technology shift, it is a marathon. We are now starting to see some tailwind when it comes to awareness, regulatory support and also infrastructure and availability of critical components like the hydrogen. But it is a marathon. So thank you for asking that question. And I should probably have mentioned the balance point and how I am happy with the support we get from the Board in doing this. But this is something we need to come back to going forward over the year because defending this balance point is what we do in the management team. So with that, we have a company now that is built to endure, adapt and win as this transition unfolds. What we do is not easy. Business development in technology requires a pioneering mindset, but also clarity to see things for what it is in the short term. We see a rather clear path going forward. And the simple golden rule for us as a growth strategy is to grow number of installations in the market as well as grow the value creation per installation. When we do that, we capture the volume that is out there, we drive more penetration in the market, and we will also see growth that is sustainable and that we can leverage. So we are looking forward to 2026 that is going to be important to us, where we hope to prove our competitiveness as an industrial partner to our customers and also to continue to deliver growth that we can leverage and protect both bottom line while still being able to capture the potential that is out there. So thank you very much. Thank you for joining us. And as always, you are more than welcome to visit us in Gothenburg.
Unknown Executive: Good morning, everyone. Welcome to 2025 Results Conference Call. First, let me introduce our management. CEO, Khun Pratthana; CFO, Khun Tee; Chief Enterprise Business, Khun Phupa; and Chief Retail Business, Khun Prapat. Khun Nattiya and myself also joined this call and will be briefing you to the results and running this session. At this moment, please allow our CEO to give an opening remark. Pratthana Leelapanang: Good morning, everyone. I would like to take this opportunity, firstly, to address the very most recent incidents of the misuse of AIS corporate Internet from one of our corporate customers. You may already seen our formal disclosures, but I would like to really emphasize that we take this matter very seriously. We view this matter as a reminder of our responsibilities as a national digital infrastructure provider. While this is one of the isolated incidents, we are using it to really strengthen our internal processes and technologies to enhance the capabilities of detecting, preventing and monitoring, in order to make sure that we protect our stakeholders properly. Governance, integrity and trust remain at the core of our business that we run. Safeguarding our reputations, trust from the investor, as well as public are our priorities, and we will continue to invest in that what I'd like to address as the first part. Secondly I'd like to say that we do expect that the market will be pleased on the capital return we deliver, or rather surprised and pleased the capital return we deliver. I would like to reiterate that AIS is not about maximizing our short-term cash return. We are building sustainable digital infrastructure business with scale and financial strength. Our capital reallocations, I'd like to put it, reflecting our confidence in long-term business growth with a strong cash flow and balance sheet. We will continue to invest in leadership, grow responsibly and return capital only if it strengthens long-term shareholder value. So that's the second piece I really like to address here. Lastly, I'd like to address our business direction going forward. This year forward is about laying foundations of AIS's next road chapter. Beyond the connectivities, we are expanding our capability in network intelligence, advanced IT, and very important digital backbone of data centers, cloud and AI. With all of these foundation components, we truly believe it will support AIS to capture new opportunities across consumer, businesses, and expanded digital ecosystem. So that's in brief what I'd like to start with. Thank you. Unknown Executive: Thank you very much. Now let me begin with a short brief and going directly into Q&A. At this time, you may also reserve to ask the question through the chat box. Please type your name and corporate name. So firstly, we delivered this year with a strong and resilient performance, supported by growing customer demand and solid content proposition to upsell our existing base, amid the modest economic recovery. In mobile, growth momentum remained strong, driven by rising data usage. In the latest quarter, the data consumption exceeded 34 gigabyte per subscriber. This is up 16% year-on-year. The 5G adoption continued to be a key driver, reaching 17.9 million subscribers or 38% of our subscriber base, growing nearly 50% year-on-year. The broadband service continued to grow steadily with subscribers exceeding 5.2 million and ARPU at THB 530, both were up more than 4% year-on-year. Take note that the net add was softer in this latest quarter due to temporary resource allocation to support the flood relief efforts in the Southern Thailand. The Enterprise business delivered double-digit growth, supported by strong connectivity demand. Our data center business through GSA is progressing as planned. The 01 is already commercialized, and 02 and 03 are expected to be ready by 2027, bringing total capacity close to 200 megawatts. The retail sales grew 15% year-on-year, driven shop renovation, stock training and better channel and product mix. Our virtual bank initiative is also progressing well with commercialization targeted within this year. With the above, we exceeded the upper end of our guidance for both core service revenue and EBITDA, driven by strong operating performance and efficiency. The net profit was THB 47.9 billion up 37% year-on-year. The normalized profit was THB 46 billion, excluding FX impacts and onetime tax item related to tax loss carryforward utilization. This is up 32% year-on-year. Our performance remained strong with good momentum from 2024. The Board approved an ordinary dividend of THB 15.30 per share, representing a 95% full year payout ratio. In addition, the Board also approved a onetime special dividend of THB 19 per share, paid from retained earnings to unlock shareholder values. The ordinary dividend remains our priority, aligned with the earnings growth. The rationale for unlocking the special shareholder value is based on 3 key considerations. First, we have strong visibility on growth and cash flow generation across our businesses, even after accounting for necessary investments to sustain leadership and build long-term digital foundations. Secondly, we remain committed to maintain prudent leverage and an investment-grade credit profile while preserving financial flexibility for future opportunities. Third, this visibility allows us to optimize the balance sheet and return excess capital to shareholders without compromising financial discipline. Importantly, our dividend policy remains unchanged with a minimum payout of 70% of NPAT. And again, the ordinary dividend continues to be our priority. Let us put this into the context. Operating cash flow is approximately around THB 100 billion, with expectations to grow alongside the business. The annual investments are around THB 50 billion, covering CapEx, current and future spectrum and JV investments. This would result in the free cash flow approximately THB 50 billion to THB 60 billion after investment. With improved cash flow visibility and strong leverage profile, we see an opportunity to unlock shareholder value through balance sheet optimization while preserving our investment grade rating. This optimization is executed in a favorable interest rate environment to support our investment requirements while the special dividend is funded from operating cash flow, which remains a dynamic over time. We expect the leverage to gradually decline with improved performance while maintaining room for financial flexibility. Turning briefly into sustainability. We received an MSCI ESG rating AA. This places us the ESG leader category. AIS is the only Thai telecommunication company to achieve this MSCI rating. In addition, we also received a AAA ESG rating from the Stock Exchange of Thailand, the highest level, reflecting clearer development plans, strengthened supply chain practice, enhanced stakeholder engagement, and this is in alignment with strong corporate governance standards. Looking ahead in 2026, we guide core service revenue growth of around 3% to 5%. The EBITDA growth of around 2% to 4%, and the CapEx investment excluding spectrum of THB 30 billion to THB 35 billion. The growth will continue to be driven by connectivity demand across consumer data usage and enterprise digital connectivity. The higher expense and CapEx are deliberate investment to build foundations for midterm and long-term growth. The CapEx increment reflects a new investment phase. This is aligned with the anticipated growth in data consumption and long-term network quality leadership with year-on-year increase primarily reflecting higher mobile network investment. Beside network modernization, we also emphasize on IT enhancement for customer stickiness while this would lay a strong foundation for future revenue growth. The allocation within the CapEx is approximately 55% to 60% mobile, around 20% broadband, 10% enterprise and 15% for IT and others. Before we move to Q&A, I would like to remind you our upcoming event for which invitations have been -- already been sent. If you have not yet registered and would like to attend, please kindly confirm your participation by today. The online session will be arranged for overseas participants and the access link will be sent following the confirmation. With that, we are happy to take your questions. Unknown Executive: Please be reminded that you may reserve to ask the question through the chat box with your name and corporate name. And also please limit your questions to 3 per round to allow others to also participate. We have the first one from Khun Pisut from Kasikorn. Pisut Ngamvijitvong: Congrats on your record breaking results and dividend. Pisut from Kasikorn Securities. I have 3 questions for this round. The first one is about the core revenue growth guidance, which basically comes down from 7% last year that you achieved to 3% to 5% this year. Just want to know that, I mean, the key reasons why the growth is coming down, that's coming from the competition, it's going to be more intense or the economy, which is quite subdued, which 1 is going to be weaker in your perspective? And also from the 1-month operation that's passed -- just passed, what do you see about the revenue momentum from the previous quarter? My second question is about your EBITDA growth guidance. Why the growth also came down from 9% last year to 2% to 4% this year, and why the magnitude of the growth target of 2% to 4% go below the core revenue growth of 3% to 5%. I understand that you mentioned about the initial loss from the new venture that you may have booked in the share of profit, probably from virtual bank data center. But if you're stripping out share of profit from your associates, is it possible for your 2026 EBITDA to grow faster than your core revenue growth, and also from the operating leverage effect? My last question is about your tax loss carryforward. In the note, you have remaining tax loss carryforward of about THB 15 billion, which could save tax about THB 3 billion spreading over 2 to 3 years. If I am correct, could you please confirm about this couple of numbers? And what's your plan to utilize most of it? Nattiya Poapongsakorn: Let me take the question on guidance. I think overall, if you look at our total guidance from revenue to EBITDA and CapEx, we're trying to say to the market that we're actually looking for new growth areas. In the past few years, a lot of our growth has been built in with more rationalization of the competition within the market. Going forward, we need to build a lot of new foundations for new growth areas. However, going into 2026, especially now at the beginning of the year with the Bank of Thailand and many houses announces the GDP forecast, we've also seen that consumer sentiment and the potential spending and the underlying economic growth of Thailand may seem to be on the low side, likelihood somewhere lower than 2%. So I think that's the main concern we may have and reflected on the 3% to 5% in terms of the revenue growth. Rather than the issue around competition, I think for the past year and also in the fourth quarter, we have not yet seen anything that put us in a concerned mode in terms of the competition. Fourth quarter may not be the best quarter to reflect in terms of the growth partly also because in terms of fixed broadband, as you see, the net add has been a bit slow because we were mobilizing our effort to address the southern flood for quite a long period of time. But we expect some of that growth to be able to resume within this year. On the EBITDA guidance, as I mentioned, because we now want to establish new growth initiatives, whether it's in the IT system, you see that we are now having more diversified business portfolio going into building a stronger retail distribution channel across online, offline. A lot of that will require that we advance or modernize many parts of our internal IT system. Plus another thing that we have started last year was on the entertainment business, which covers the sports and entertainment content. So this year, we are also looking forward to be selective in some of the key strategic contents that we want to continue building our brand, perception and customer engagement. So with all of that, we do see that some of the building foundation will incur costs within 2026, and that's why the EBITDA guidance is landed slightly lower than the revenue growth. Another point would also be that in the past 3 years, we did integrate 3BB with AIS operation. So you see some of the early cost savings from the integration effort, which would be mostly done for 3 years period. Last question on the tax loss remaining amount. I don't think we can say how we plan. But yes, as we disclosed in the notes to financial statement, those are -- there are the schedule of the tax loss to be expired within each year. So I think our intention is continue to build the broadband business as a single operation entity and making profit. So with the entity making profit, we'll be able to utilize the tax loss. Unknown Executive: Now we move to Khun Wasu from Maybank, please. Wasu Mattanapotchanart: So 3 questions from me. The first question is about the projection of net debt to EBITDA on Page 28. My question is regarding this chart of the declining net debt-to-EBITDA is that have you factored in any more special dividend in that projection? And what is your assumption of payout ratio in that chart? So that's the first question. The second question is about the forward-looking of the net debt to EBITDA. Let's assume that AIS pay special dividend every year, and the net debt to EBITDA stays in the range of 2 to 2.5x, will AIS be able to keep the credit rating with S&P? So that's the second question. And my third and final question is regarding Page #6 of the slide. It is mentioned that CapEx budget will be 15% of the total revenue in the medium term. My questions are, how long is the medium term? And will the CapEx budget go up or down after the medium term? Nattiya Poapongsakorn: Thank you for the question. On net debt to EBITDA forecast that in corporate how we see the business growth and upcoming investment we need to make across different businesses, including the spectrum. On special dividend, we would like to emphasize again that this is a one-time nonrecurring capital return. We execute this because at this point in time we see a low interest rate environment. And we see that we have accumulated a fair amount of retained earnings to be able to return this capital to the shareholder. And this leads to the retained earnings number -- post this distribution of dividend, you will also see that the retained earnings remaining would be fairly minimal. So it comes back to the point that this special dividend is really a onetime that we restructure or optimize our balance sheet to be at a more efficient level. On the credit rating, as you see, because we have looked into that. So I don't think we have any concern around the credit rating. The last question on the CapEx level, which is 15% of revenue in medium term. I think when we talk about medium term, basically, we look across the technology. Right now, we would say that we're approximately may be in the mid-cycle of the 5G. So I think we have a pretty solid idea of how much in terms of 5G capacity is needed in each year, given the forecast of the traffic growth from consumer point of view, embedding in with the AI. If there are more AI use case for the new 60 technology upcoming, you see that normally in those new cycle there may be a period of time where the CapEx as a percent of revenue may increase. And then afterwards, I think it should -- for us it should come down to more of a normalized level. Wasu Mattanapotchanart: So how long is the medium term? How many years? Nattiya Poapongsakorn: I think for us 3 years outward is a fair outlook we see -- even that we haven't seen the 60 technology becoming materialized in the next 2 years. Unknown Executive: Now we could have Khun Thitithep from KKPS. Thitithep Nophaket: I have 3 questions. Number one, do you think that you have to adjust the long-term strategy given the big change in the shareholder of your competitor, True? Number two, is it fair, both you and True suggest that the payout ratio has become more aggressive than a year ago. Do you think it's fair to say that it's a suggestion that the mobile phone business in Thailand is reaching a situation of becoming a mature stage. And that's why there is no need to be aggressive in reinvestment in the mobile phone business? Number three, your payout ratio, including special dividend, it's rather aggressive like you said you don't have any [ return ] left after the payment. But then you did say that you are in the process of laying the foundation for new growth. Do you have to reserve some cash in order to invest in the new growth areas? Pratthana Leelapanang: Let me address the strategy piece. We are very firm on the strategy we are taking especially the expansions of the digital infrastructures from mobile, 5G, to broadband and to the enterprise of which it expanded into data centers, cloud and AI. And on top of that, it would be digital ecosystem around the distributions as well as digital finance. Regardless of what True about to be, I think these foundations are key to serve customers across multiple segments, as mentioned, on consumer side, on the enterprise side and other related party. We remain firm on that piece. On the competition, we do expect that competition will continue on, having multiple prong of strategy anyway. So I'd like to address that we stand firm our strategy. Add on to that, related to the maturity of the markets, if we look real hard on how consumers behave and use the product and service. On mobile side, we still continue to see the growth in consumption. Thailand has roughly about 30-plus percent 5G penetrations. We have not reached 50% yet. In many countries ahead like China, it went on to 60%, 70%. And about to come on new service and applications as we've seen from AI related, they're going to be introducing more data on the uplink. So on the consumption side, I don't think we are near saturation on consumption. In our plan that we described earlier, we have factored in our midterm forecasts of how the consumption would grow on mobile, broadband and enterprise as part of our medium-term plan. Unknown Executive: I think a lot of questions about the payout ratio and special dividend. I think as Khun Nattiya mentioned, when we look at the -- I think expect that investment in the future and also the growth prospect of our business. I think we have sufficient investment that we -- or cash reserve that we have within the company to invest in the growth and also provide, I think, extra return to the shareholders. I recall that also many quarters or even many years now, I think most of the analysts asked about payout ratio, whether it can be more than 100%. So when we does -- when we do that, then the question is also a little bit concerned on whether we have enough cash reserve to invest. And I just want to point out that we do feel confident in the industry right now, the dynamics, the growth industry, we do feel mobile, broadband, enterprise and also the new businesses that we are expanding into can provide sufficient growth for the future. And with the -- I think the current leverage status, we do feel that we are not taking on [ more risks ], we basically optimize capital structure that we have to be able to provide, I think, optimal return to the shareholders and also to provide growth for the business as well. We have deleveraged quickly since the time that we took over 3BB, that based on a lot of synergies that we create, the industry repair and also the growth in the business that we expanded into. So all those things gave us the opportunity today that we can do the thing that we think it's the most optimal to the shareholders. Unknown Executive: Next we can have Ranjan from JPMorgan please. Ranjan Sharma: Congratulations on the results. A couple of questions from my side. Firstly, on your guidance for EBITDA, if you can help us understand the major investments that you are planning on the OpEx side, which results in EBITDA growing slower than revenues. And I can completely appreciate that you're taking a longer-term horizon for our business rather as it should be. So if you can also walk us through the revenue opportunities that you can unlock with the investments that you're planning in this financial year. The second question is, there are related party transactions with GSA02 as disclosed in your release. I think the financing arrangements or details have not been disclosed, especially for GSA02, if you can share more details around it. Nattiya Poapongsakorn: On the EBITDA guidance, I think basically, the IT is one of the big part that we would see OpEx costs coming into 2026. That's one of the big part. And then the second part would be on the content entertainment related business. That's the main second part. There could be a fair bit of some of the incremental in utility and maintenance stores are more likely in line with the growth of the network that we have been seeing. So those are the major ones that we would see. Ranjan Sharma: So if I can just follow up. So the impact on revenues or the revenue opportunities that these investments can unlock in the next 3 to 5 years, if you can comment on that as well. Unknown Executive: Let me put this way. Sorry, my voice a bit hard to understand today. Basically, if you look at last year performance, we did deliver higher growth on EBITDA than revenue. And I think probably going to be the same for the year before as well. But we can't keep that trend as we embark into a lot of new things. I think in the end, we want to make sure that we do spend on the things we need to spend to make sure that we modernize our system, both on the network side and also on the IT side because the business model has changed a bit. Actually, going forward, we also want to do a lot more things with our customers because to me, the real asset that we have is the vast base of customers, both on mobile, broadband and enterprise side. So to go to do new services, we need to modernize a lot of our infrastructure. So that's one part. What else we can sell, the channel that we're going to sell to them, the way you're going to sell to them, the personalization that we talk about all along and even the AI at the back end, right? So all these require investment, both in the network and in the IT system, plus in the capability of the people as well. All this, including the apps and everything we have to be modernized. So I think we are going through that journey. That's why you see a bit of an elevated forecast on CapEx for the next few years. We can't give you a pinpoint portion to go which one is which, but -- and those are directions we want to go. Whether it can unlock? Which revenue can unlock -- I think there will be a lot one mobile, we can optimize the package for each of the users. We can also lay on more detailed services. Same thing with broadband and enterprise, right? So all those, I think, hopefully, we can keep growing the ARPU. Then the question, why we forecast lower revenue growth this year versus last year? I think a lot of that is coming from the headwind on macroeconomics in a situation. If the country can grow at a higher GDP, we are happy to push the growth of the company as well. So I think that's more or less the first question you asked. We do hope that the -- I think, investor community understand that we want to spend a bit this year or next year to make sure that we have a stronger foundation to embark on the next growth phase of the company, right? I think for GSA, normally, it's -- I think, project finance. So it takes a bit of time to be able to get the funding from the bank. So we need to pass certain stage to be able to get the funding from the bank. So a lot of time we did a bit of the own funding first and then we get the loan back from the bank and then we use that money to reinvest in the next project. Nattiya Poapongsakorn: This upcoming Friday, when we have the Analyst Meeting, I think the presentation from the management will lay out more clearly about the strategy and the growth that you asked. Unknown Executive: Now we have Piyush from HSBC. Piyush Choudhary: Congratulations for a set of results and special dividend. A few questions. Firstly, you mentioned about CapEx being higher, right, around THB 30 billion to THB 35 billion this year. In addition to this, can you talk about capital allocation and other growth initiatives? Like how much of capital will be going in virtual bank, data center in 2026, '27 and if you can, in 28? Just want to get the 3-year kind of capital commitment to the growth areas? And secondly, if you can talk about the outlook for the mobile and broadband ARPU for 2026, any initiatives being taken by you or your competitor to uplift ARPU? How is the consumer sentiment at the moment? Unknown Executive: Yes. On the new investment through the JVs that we have set up, in the end, I think we estimate it to be about THB 8 billion to THB 10 billion over the next 2 years because a lot of those are in the JV format. So we don't hold 100% of the whole company. As for virtual bank, I think you know the detail from the regulation that the first year around THB 5 billion paid up. And if we want to exit DR5 and as we have THB 10 billion paid up. So that will be -- if you need to forecast something, then that's the number for you to look at. For GSA and other JVs that we have on the cloud as well, that mostly was subject to the project that we can secure. I think so far, we have disclosed up to GSA03. Anything you can maybe forecast the growth of the JV of the data center business and then work backwards for any capital commitment that we need to make. But in the end, it is proportionate to the shareholding level that we have. Pratthana Leelapanang: For overall customer needs, which is get translated into our services, we continue to see and we forecast that the consumption will grow higher for both sides, mobile and broadband. For mobile, as mentioned, there are still huge amount under 4G moving forward to 5Gs that would help consume more and also uplift the ARPUs. For broadband, we see 2 important expansions. The first one is the expansion to home whereby they have not had our broadband before. At this point, the broadband penetration is roughly about 50-plus percent towards the occupied household. So there are room to expand on broadband in terms of customer. And second prong is in terms of consumption and services. We also see more demand in consuming broadband at home as well as extra services, inclusive of content and digital services, which cuts across back to mobile as well. So as those 2, we do expect ARPU to continue on increasing. The overall economic situation may taper off a bit of sentiment, that's why we also be mindful about how we offer the product and service for customers, what's the price point we are going after. So I think that's the big picture. Piyush Choudhary: Just to clarify on that THB 8 billion to THB 10 billion over 3 years, that is AIS contribution, right, into the JVs over 3 years? Unknown Executive: Yes, that's our position. Unknown Executive: Now we have Khun Kijapat from Bualuang. Kijapat Wongmetta: Congratulation on strong performance and solid results. I have a few questions. First is about the special dividend. From my calculation, I think it's over THB 50 billion for this special dividend. So I calculated that the equity part may drop like half. And can I imply that how it will go double? And at the same time, for the gearing ratio, could it also like go to 3x? And will it affect our credit rating? Do we have any debt covenant on DE ratio. This is the first question. Nattiya Poapongsakorn: Yes, in terms of special dividends, it's over THB 50 billion. The equity definitely will drop and therefore the IE will substantially increase. However, I think your gearing number might be on the high side because as we presented earlier on our chart, we do not expect the gearing -- in this definition is net debt to EBITDA, whereby net debt already include the lease liability and the spectrum payable should not exceed to 0.5x net debt to EBITDA. Kijapat Wongmetta: So we don't have it on DE, right? Nattiya Poapongsakorn: No, none of our debt has covenant. Kijapat Wongmetta: Okay. For the second question, I would like to ask about the -- in the medium term. Do we have, like, comfort range of gearing or equity level that would trigger another special dividend? Nattiya Poapongsakorn: I think the questions around target gearing has been asked by many investors in the past. Our capital allocation framework doesn't fix on any target gearing. In terms of financial resiliencies, one key point is that we are committed to being an investment-grade credit profile. That's number one. Number two, we want to ensure that the leverage aligns prudently with the risk appetite we aim on the business growth. That also implies that we need to ensure that we have sufficient financial flexibility to exercise any future initiatives that we aim for, not just in the existing business that we are running, but also in new opportunities that we aim to grow. So rather than fixing on any particular target gearing, we actually look at where we want to grow the level of risk appetite and the prudent level of the balance sheet we aim at any given point in time. Kijapat Wongmetta: For the last question, I would like to ask about the recent change in major shareholders in our key competitors. Do you think about -- does it -- will have any potential implication for the mobile and broadband industry? Pratthana Leelapanang: We believe that we're always in the situation that in the market we all compete even before changing in major shareholder of competitors, every day we see mobile, broadband and even enterprise, we both compete in the arenas of providing service for customers. My belief is the focus of competition may shift a bit as they address in the public. And I think you pick it up as well. But once again, coming back to AIS, our goal remains unchanged, that we are expanding our digital infrastructures and building the foundations that we have said in the morning and there are some reinforcement along the way that we are investing in technology and building blocks to support that. Unknown Executive: We have Khun Pisut coming back for a second round. Pisut Ngamvijitvong: I have 2 follow-up questions. The first one is about data center. As also mentioned that AIS and the partners, we will have 200-megawatt data center capacity under 3 phases of GSA. But when I read your financial statements, a lot of restructurings inside. So just want to update about your economic stake on this venture on this business, I mean, data center, is it still 25% at the bottom line? And if this 200 megawatts being fully utilized, I mean, how much the amount of share profit we will be able to generate? The ballpark figures is [ 5-megawatts ] per year. And also, what is your capacity target in the next 3 to 5 years from 200-megawatt to at what certain level? My second question is about the 6G technology. As you may see some global leading operators increasingly investing into the low earth orbit broadband satellite business. My question is, have you been ever exploring into this new technology at this point? And also, will this be real thing or just a nice to have technology for telco to deploy at this stage in your view? Nattiya Poapongsakorn: Okay. So under the JV where we invest for the data centers that have already been 3 phases. The first 2 phase is a JV among 3 shareholders. AIS has 25% share in the first 2 phase. On the Phase 3, it is a shareholding between 2 shareholders, where AIS has shareholding of 30%. You asked about the contribution, I think, because this is the early stage. So in the next 3 years' time, it might not be a big move to the bottom line yet unless we have more because at least the Phase II, Phase III, it only begin in 2027. So it will be fairly small to the bottom line in terms of share profit. Pratthana Leelapanang: For the future of emerging technologies, [ LEO ] is a very important one. The low orbit satellite is the latest technology on a satellite whereby it can cover globally with multiple thousands of satellites cover all over the place around the globe. It will definitely support and complement other communications, especially on the outdoor and outdoor very far away as well as in the sea. So we see as the very much complement technology, even though in Thailand right now, there has no right to provide a service yet. And some have started to provide a service like NT. We look at it very carefully amongst many of the collaboration model. At this point, we may not be able to release any information, but we look at it very carefully. The second piece is 6G. 6G standardization may come out in 2030, putting extra important functionalities like sensing network and collaboration with mobile and satellites. So those pieces are upcoming, but not very fast. It will be the second way from now, maybe 2031 onwards. We also look at it very closely as well. Overall, for now, we understand that consumers, enterprise and businesses and others require to use Internet bandwidth whereby it can be served with the current technology of fiber and mobile 5G. We see upcoming uptick in consumption generating in the very near future from AI and a lot of interactivity of things to things that would require more bandwidth and a variety of connectivities. As an overall, we consider all possibility of technology we can adopt. Unknown Executive: We have Khun Nuttapop from TNS. Nuttapop Prasitsuksant: Two questions from me. On data center, I believe GSA is more external service. You didn't touch much about what you might need to build on your own to serve your enterprise business, if I may call. Is that already included in your guidance? Or do you prefer to go asset light for the enterprise service that you may rent someone else, including GSA? The second question on IT CapEx. It feels one-off to me when we talk IT CapEx. Is it going to be like that? Or it will be recurring for a few years? And may I ask whether it will be more the revenue unlocking factor, or I should see it as the long-term cost-saving machine? And you touch on retail channels with this IT investment. Can we dream of like open platform of the retail business or it has better efficiency of your product sales? Lastly, I would like to say, may need to please with your capital management plan nicely done and congratulations. Pratthana Leelapanang: Maybe I address as the big pictures for infrastructures. As I mentioned, one of the very strong building blocks, new one coming in as the digital infrastructure is data center, cloud and AI. The data centers that we have built in GSA01, 02 and upcoming 03 are by and large, serving a very big computer system. That computer system will definitely serve in both cloud and AI in combined. That will be also be part of serving inside that we need to expand the system. So the answer is, yes, both inside, internal that we are expanding the system as well as for external customer. When it comes to external customers is both hyperscalers as well as the local enterprise. So I think that's the big picture of data center infrastructure. It is very important infrastructure for the modern AI era that must have locally. I haven't addressed the important piece so-called a sovereign cloud and sovereign AI, of which it will play a very important role as the backbone of the AI era that we are going after. In IT, as mentioned earlier, is the very important piece when it comes to IT, intelligence and AI. Software infrastructure as well as intelligent, which provide both as the customer experience, the personalization engines will help us uplift revenue. On the other side, it also provide automation and intelligent to serve to uplift the operation efficiencies. So both are very important. When I talk about operational efficiency, it cuts across network planning, optimizations, customer operation as well as internal operations. So the IT CapEx may be mixed with the OpEx that as a core engine for us to bring in intelligence from now on. Lastly, when it comes to retail, IT-related sometimes we call it omnichannel, is the distribution platform, whereby we would serve customer in many ways that they like, reaching them at the right point, right time with the most convenient. You can also imagine that with the ecosystem that we have been working with, the platform of the distribution will also open -- it has been open some for our partner to be on board jointly with AIS distribution platform. The answer is yes. Unknown Executive: We have Khun Arthur from Citi, please. Arthur Pineda: Two questions, please. Firstly, with regard to the THB 8 billion to THB 10 billion contribution that you were putting in into the JVs over the next few years, is this on top of the CapEx target that you've stated and the 15% long-term capital sales trends that you do it earlier? Or is that built into these targets? I'm just trying to better understand the free cash flow trends for the company. Nattiya Poapongsakorn: It's on top of the CapEx. Arthur Pineda: That's on top? Nattiya Poapongsakorn: Yes. JV is not guided in the CapEx. CapEx is purely from operational core businesses guiding. Arthur Pineda: Understood. And the second question I had is with regard to capital management. So you opted for a one-time bumper dividend instead of a staggered release of capital over several years, which I think would have allowed you to better match higher yield while your investments are in GSA, digital bank, are gestating. Why the urgency for an upfront dividend payment instead of an extended payment cycle wherein you could keep yields higher for longer? Unknown Executive: I think in the end, you have always asked us whether we need the cash to do investment or we're going to release it back to shareholders. I think we have waived the option of giving one-time versus over a period. And then in the end, with the current situation, current environment, we do feel that giving a one-time could potentially maximize the shareholders' return. I can't give you much more than that. In the end, we will look at this, and we feel it's the optimal time to do so. Unknown Executive: Yes. And last person, we have Khun Wasu from Maybank, again. Wasu Mattanapotchanart: And I have one follow-up question for Khun Nattiya. So I think you mentioned that there are 3 key items for the OpEx increases that would impact EBITDA growth in 2026. The first one is IT OpEx, the second one is content and entertainment, and the third one is utilities. My question is about the first item, the IT OpEx. Could you please elaborate what is it for, the increase in IT OpEx for the 2026? Nattiya Poapongsakorn: I think what both CEO and CFO mentioned earlier about the overall business strategy and how we want to serve our customers, that's all embed into both the IT CapEx and OpEx, which embed into the guidance of 2026. So I don't think we would be able to break down into the system. But basically, it incorporates both customer-facing engines as well as some of the back end data-related, data analytics engine that can help serve the hyperpersonalization, how we build the omnichannel to ensure that customer walked into whether online or offline, we'll be able to seamlessly -- we will be able to seamlessly deliver a seamless customer experience across different channels, how we upsell and cross-sell to customers, as well as some of the back end for operational efficiency. Unknown Executive: Thank you for today's question. And please be reminded that you can still register for our Investor Day upcoming Friday, 6th February, at Pearl Bangkok Building. The main session will be from 1:00 p.m. to 3:30 p.m. in the afternoon half. So thank you all for participating and see you again in the Analyst Meeting or our Investor Day. Thank you.
Operator: We'll now begin the LY Corporation Fiscal '25 Third Quarter Financial Results Briefing. Thank you very much for joining us today. In this briefing, we will use the financial results briefing presentation materials available on the LY Corporation website. Today's briefing is attended by the following members of LY Corporation: Representative Director, President and CEO, Takeshi Idezawa; Senior Executive Officer and CFO, Ryosuke Sakaue; Senior Executive Officer, Media and Search Domain, Domain Lead, Hiroshi Kataoka; Senior Executive Officer, Commerce Domain, Domain Lead, Makoto Hide; Senior Executive Officer, Corporate Business Domain, Domain Lead, Yuki Ikehata. First, Sakaue will provide an overview of the fiscal '25 third quarter financial results. After that, we will have a question-and-answer session. The entire briefing is scheduled to last about 1 hour. This briefing is being live streamed. If you experience any audio or video issues during viewing, please use the link displayed at the bottom of the screen and move to another server. Now let us begin. Ryosuke Sakaue: This is Sakaue from LY Corporation. Thank you very much for taking time to join our fiscal '25 third quarter financial results briefing today. I will give you the overview of our third quarter financial results. So this is the overview. At our subsidiary, there was a system outage due to a ransomware attack. So to show the underlying business performance in an easy-to-understand manner, we will present figures, excluding ASKUL for both the previous and current fiscal years. First, excluding ASKUL, third quarter performance showed steady business growth. And as you can see, we had double-digit year-on-year increases in both revenue and profit. I will present following the agenda. First, the consolidated financial results. So third quarter results. Consolidated revenue declined 0.7% year-on-year. But as I said, excluding ASKUL, it was 15.7% year-on-year increase. Adjusted EBITDA was down 2.3% year-on-year, but excluding ASKUL, it was up 11.2% year-on-year. So this is the third quarter. So for the fiscal '25, we show our outlook, and we show also the outlook for next fiscal year. For fiscal '25, reflecting the impact of ASKUL's system outage, revenue is projected at about JPY 2 trillion. Adjusted EBITDA is expected to be around JPY 500 billion even after factoring the system outage impact. Revenue growth in Strategic segment and company-wide cost reductions are supporting the overall performance. The Media segment has been on an improving trend since bottoming out in the first quarter. Adjusted EPS is also expected to land within the initial guidance range. For fiscal '26, we aim to achieve for adjusted EBITDA, 10% to 15% increase compared with the fiscal '25 outlook of approximately JPY 500 billion, driven by business growth and cost reductions. So on a consolidated LY basis, we're targeting JPY 550 billion to JPY 575 billion. So as I explained, the underlying business has remained solid. Next. So, EBITDA year-on-year analysis in the middle, this shows excluding ASKUL last and this fiscal year. Revenue increased driven by expansion in the Commerce and Strategic businesses. Although SG&A increased due to PayPay consolidated and Commerce, they were absorbed by revenue growth. We had 11.2% increased profit. So this is ad-related revenue. Commerce, advertising grew 20.1%, supported by the expansion of transaction value and company-wide ad revenue grew 3%. Next, about the e-commerce transaction value. Reuse, due to growth of Yahoo! Flea Market and consolidation of BEENOS achieved double-digit growth. For shopping. So in Q2, there was a spike in hometown tax payments. So there was a shift from Q3 to Q2. And last year, there was a high level of tax payment in Q3. So reflecting that, it was a 2% year-on-year growth. Even including ASKUL, consolidated e-commerce transaction value was up 2.5% year-on-year. Next, performance by segment. For Media, revenue achieved a slight positive growth year-on-year. Adjusted EBITDA declined 2.8% year-on-year, but the growth rate bottomed out in the first quarter and has continued to improve. Margins increased due to changes in the revenue mix. Next. So this is the Media revenue and EBITDA year-on-year comparison. Revenue saw search advertising declined 9.5% year-on-year. Account ads rose 13.8% and display ads also posted positive growth. Total advertising revenue grew 0.4%. Adjusted EBITDA was down 2.8% year-on-year as decreases in costs such as outsourcing expenses were offset by increases in sales promotion and Gen AI-related expenses. As we have shared in the previous earnings results, this is a mid- to long-term business development plan leveraging on OA, OA: LINE Official Account. The first point is capitalizing on OA's expanding customer base. And then we will build up services and layer structure from MINI Apps to SaaS to be offered from the first half of FY '26. So from #1 to #3, I will give you the progress to date. So regarding the account advertisement, both Pay-As-You-Go Billing Accounts and Plan Revenue accounts increased. On the back of that, on the right-hand side, you can see that the sales grew by 13.8%. So this is regarding the second point, the MINI Apps. The number of MINI Apps grew by 57.8% year-on-year. And the MAUs, it continue to grow at a high rate of 63.8% Y-o-Y. The promotions, growth in development partners and improved convenience of MINI Apps led to increase in usage. So this is the third point regarding SaaS. For SaaS, we are starting with the SMB sector and the beauty category. For solutions targeting restaurants, we are acquiring Toreta to build a reservation capability, which was a missing piece for us. And this was recently announced. This acquisition, it covers the functionality required for store operations, i.e., the reservation functions. Toreta services, as you can see on the right-hand side, have a proven track record. And it's a reservation log or strong in table management, and it is used mainly by casual restaurants. In the future, together with official accounts and reservations log, they will be linked to provide a one-stop solution from customer attraction to customer management and CRM. Through these efforts, we aim to enhance the ARPU. Next page, please. This is regarding the Commerce business. Consolidated revenue and profits were down. Excluding ASKUL, impact of new consolidation and strong reuse business contributed. And as presented on Slide 4, excluding ASKUL, revenue grew by 31% year-over-year and adjusted EBITDA grew by 15.5%. So this is again the Commerce business. On the left-hand side and the right-hand side, both excludes the numbers from ASKUL. For revenue for LINE Yahoo! Commerce, it increased by 64.4% Y-o-Y due to the consolidation of LINE MAN and BEENOS. A higher promotion expenses for Yahoo! JAPAN Shopping and Yahoo! JAPAN Flea Market was absorbed by revenue growth, as you can see on the left-hand side. So the impact of the consolidation is JPY 1.1 billion as shown on the right-hand side. But excluding that, the EBITDA grew by 11.9% Y-o-Y, and we were able to achieve organic growth. This is a Strategic Business. Revenue rose sharply by 30% year-on-year. We are achieving high growth. Adjusted EBITDA also expanded significantly. Steady growth continues with more margin expansion to 22.2%. Next, this is the year-on-year comparison for the Strategic Business. PayPay consolidated revenue growth by 24%, and it is driving the segment growth. In Other Fintech subsegment, LINE Bank Taiwan, which was consolidated in the current fiscal year contributed. Higher SG&A expenses was offset by revenue growth, and we achieved growth in adjusted EBITDA. This is focusing on the PayPay consolidated business. In addition to continued growth in QR code payments, interest income increased at banks on the back of loan book growth, leading to growth in both Payments and Financial Services. As a result, both consolidated GMV and revenue grew at a high rate of more than 20% year-on-year. Consolidated EBITDA grew 59.1% year-on-year to over JPY 30 billion for the quarter. So, this will be my last slide. And that concludes my presentation on the Q3 earnings results. To wrap up, in Q3, despite the impact on earnings stemming from ASKUL system outage, the fundamentals were solid with double-digit growth in both revenue and profit. Our focus areas such as Official Accounts and MINI Apps are also growing steadily, and we aim to maintain this growth trend and increase profit by 10% to 15% next fiscal year for FY '26. Thank you very much for your attention. Operator: Now we would like to move on to the Q&A session. [Operator Instructions] So now without further ado, we'd like to begin the Q&A session. The first question, please. From Goldman Sachs Securities, Munakata-san. Minami Munakata: Munakata from Goldman Sachs Securities. So, I'd like to ask two questions. Should I state the two questions together? Ryosuke Sakaue: Yes, please. Minami Munakata: So, with the Media business, so it seems to be bottoming. But ad demand, how has it trended past 3 months? Was it in line with expectations? In what areas was it not? And also SG&A, what's the ratio of the AI in SG&A? So that's the first question. Second question, maybe getting ahead to ourselves, but next fiscal year -- this fiscal year, ad business was in a tough situation, but you did renewable LINE apps and you introduced AI agents. So I think you are quite aggressive on those fronts. So next fiscal year, 10% to 15% adjusted EBITDA increase is what you're expecting. But -- so things -- measures you've taken this year, how is that going to contribute next year? What is going to drive the growth next fiscal year? Ryosuke Sakaue: Let me respond to the first question, and Ikehata will follow up. So, for the search ads improved quite a bit compared with Q2. So search ad product has been improved. We have improved it. And so the negative number has shrunk somewhat. Display ads, Q2, there was a special demand from hometown tax. And so it was just the same as Q1, but display ads is strong. It's moving into the higher revenue direction. For account ads, it seems that globally, account ads using points not so active, not so vibrant. So Y-o-Y, a little less than Q1, Q2. But account ads using points, not so profitable, not high margin. So in terms of profit impact to the segment, not so big impact. And for SG&A, AI for Media segment, it's about JPY 1 billion plus alpha. Ikehata, please. Yuki Ikehata: This is Ikehata. So throughout the fiscal year, ad business, so you asked, was it in line with expectations? So let me give you our impressions. So Sakaue has explained, and so I may be repeating some parts, but the three major things about the account business. And well, there's account and display and the search ads. So for account ads was in line with expectations. So for next fiscal year, as was mentioned in the presentation, we are taking various measures for next fiscal year. So we are prepared for expansion, and we're able to maintain growth rate. For display ads, this fiscal year, it was negative, but now it's becoming flat. And then single-digit growth is what we would like to realize. We've been saying that for some time. And looking back in terms of numbers, so from flat to single-digit growth, we are able to show for display ads. And so the ad platform construction that we've been working on and data sharing to increase ad performance, we are starting to see results. And so, we've finally been able to come flat and entering the single-digit growth. So it's based on our plan, it's going. So next fiscal year, is it going to dramatically increase the growth rate? Maybe not. So let's be conservative. We will aim for flat or higher. That's what we will aim for. And one thing that may be out of line with expectations and something that we have to take measures is search ads. So in terms of numbers, you can see and Sakaue also mentioned -- commented about this as well. So for next fiscal year, certainly, the existing search ads and the new shopping search ads and AI initiatives, those new challenges going to be pursued to improve the search ad business itself. That's how we look at this. So that's my supplemental explanation. Ryosuke Sakaue: So for the next question about our image for next fiscal year, for Media, so I think we have become leaner, and we are improving productivity and raising margin. And so next fiscal year, we would like to solidly make profit increases. That's one thing. For Commerce, so this fiscal year, we have taken various measures for Flea Market and Others. So reuse part, I showed you the number, including BEENOS. And the reuse part is getting on a growth trajectory. So next fiscal year in terms of profit, we are expecting it to boom. So Media Commerce, JPY 10 billion each profit increases is what we'd like to achieve. For ASKUL, some uncertainties. So, we would like to get plus alpha with a rebound. And for Strategic segment, it's still growing around PayPay. So about JPY 20 billion increase in profit we'd like to achieve, mainly around PayPay. And Others, well, JPY 15 billion reduction in fixed cost is what we explained last time. And so that's outside of the three segments and JPY 15 billion reduction in fixed costs. So if you add that, that would be JPY 50 billion plus. And then ASKUL, we're going to provide strong support if sales recovers. Well, if it can contribute more to profit, I think we can create strong numbers. Minami Munakata: For the first one about the Media business, if I may follow up a bit, SG&A increased, so the ratio of AI, not so big was the impression I got. But the AI search usage rate, any changes in such numbers in the third quarter? Ryosuke Sakaue: Comparing Q2 and Q3 in search, the ratio of AI ads hasn't changed so much, 10-plus -- a little less than 20%, 10-plus percentage, we're controlling at that level. Operator: Next question is from Maeda-san from SMBC Nikko. Eiji Maeda: I have two questions. The first question is regarding the AI search that you just explained. So you said that you're managing that in 10-plus percent range. But going forward, by using the AI search, would you try to improve the impact of the ad, so that it can eventually lead to revenue per ad. Google has been quite successful in that space. So to grow your search ad business, would AI be a driver for that growth? And do you have any good feeling for that right now? So are you managing that at 10%? Or do you just manage to have it used at 10% or so? So if you could just give us some nuance to that. And also for next fiscal year on Page 13, you talked about the rollout of OA and MINI Apps. So, you talked about the market outlook. But for your revenue and profit, what are going to be the impact on your numbers? And also the timeline and addressable market and the scale, can you elaborate on those points as well for those strategies? Ryosuke Sakaue: Yes. So I will respond to both of the questions. So Kataoka-san and Ikehata-san will follow up. For AI search, as a major direction, the AI search proportion will be increasing in the search result. So we are now doing some tests and trying to incorporate the ad for the AI results as well. So, on top of the genuine search advertisement, we will have the AI portion, which will be an uplift on the revenue. And Kataoka-san, please? Hiroshi Kataoka: Yes, I will follow up. So, first on the search ad, we have the existing search ad, shopping search ad. And what we're testing right now is the AI ad. So, we have the mix of the three, so that we can improve the decline we're seeing with the search ad business. So right now, AI results account for roughly 10-plus percent, and we are now planning to add new initiatives. So within the ad search, the AI results -- AI usage will be increasing. And we are now testing the AI ads so that we can monetize on that opportunity. So we will be growing the AI ads. And on top of that, with the existing search ad business, the shopping ad business, we are now rolling out measures to improve. So all-in-all, we aim for growth. So we are intentionally managing that to just 10%, I mean the AI ad. And this is because we're still pushing up the functions for AI ads to be as competitive as the other ads. So as we push up the functionalities, we will be able to raise the proportion from 10-plus percent. And on your second question, as we have shared in the previous earnings results for FY '28, we are now trying to double the revenue from the current JPY 140 billion to JPY 280 billion. And in terms of the mix, in the first layer, which is the official account, we are expecting 10% to 15% stable growth. And then what's short to the doubling of the revenue, maybe JPY 100 billion, that would be covered by the second layer, the MINI App and also the third layer SaaS business. And in terms of the margin, for the first layer for the official account, the margin will be the highest. And then SaaS and for the MINI App, we have to think about the mix between the ad and the payment. But if the payment is larger, then the margin may not be that high. So, Ikehata-san, do you have any follow-up? Yuki Ikehata: Yes, this is Ikehata. Thank you for the question. So maybe let me put this into the context of the timeline. For FY '28 that target remains unchanged. And for next fiscal year, for FY '26 and also beyond '27, '28, first, looking at FY '26. For the existing official account, the first layer on this diagram, we aim to achieve further growth. And that is going to drive the revenue growth. And on top of that, simultaneously from this fiscal year to next fiscal year, we are going to be working on the monetization of the second layer MINI App and also doing the marketing for SaaS. So for monetizing FY '27, FY '28 will be the timing for incremental revenue for the MINI App and the SaaS business. At the same time, for Toreta coordination is something that we have in the plan. So then the SaaS product launch may be happening earlier than expected. So for the FY '27, '28 timeline and the impact on profit, as we get more clarity, we will be sharing our outlook. But at this point, this is the timeline that we are expecting for the monetization opportunities. Operator: Next, from Okasan Securities, Okumura-san. Yusuke Okumura: This is Okumura from Okasan. Two questions. First, clarification of the previous question. Next fiscal year, JPY 10 billion profit growth for Media is what you're aiming for. And MINI Apps and SaaS as of Q3, you don't have revenue yet. So in increasing JPY 10 billion profit, MINI Apps and SaaS, what's the contribution expectation for next fiscal year? Should we not expect much in the next fiscal year? Second question, several years ago, there was a security incident and talking about the response to that. So end of next month, those measures are to be completed. Is that the understanding correct? And from April onwards, any restrictions to be removed? So PayPay implemented in LINE app or the kind of more collaboration within the group, is that going to be strengthened? Are you going to enter that phase? So what are the measures you have in mind with the ending of the measures against the incident? Ryosuke Sakaue: So I'd like to respond to both questions. So Media numbers for next fiscal year. So as Ikehata mentioned, in Q3, we had no revenue. And for next fiscal year, MINI Apps and SaaS, so will be single-digit billion. So JPY 1 billion to JPY 1.5 billion. It's very small, and it should be tens of billions in '27, '28. So we're preparing to achieve those numbers in terms of sales for '27, '28. So it will be mainly around official account and we're going to increase margin to achieve profit growth. As for the security incident, so end of March, we are planning to end the measures. So going forward after that, PayPay and LINE, Yahoo!, ID Link, some parts that have not been completed, those areas we would like to work on and prepare for those measures. That's all. Operator: Nagao-san from BofA Securities. Yoshitaka Nagao: This is Nagao from BofA. I have one question. At the outset, you talked about the next year's outlook and aiming for 10% to 15% growth. So thank you for sharing that. So that would mean the profit growth will be JPY 50 billion to JPY 75 billion profit growth. And I would like to confirm, as for Media plus JPY 10 billion, Commerce with the existing business, plus JPY 10 billion. And for the remaining, how do you aim to grow by 10% to 15%? You have the cost reduction and also recovery of ASKUL. Did you say that together will be JPY 30 billion? Can you clarify those numbers once again, please? Ryosuke Sakaue: Yes. As I'll be repeating my answer. So Media, Commerce were JPY 10 billion plus each. Commerce does not include ASKUL. Strategic businesses, plus JPY 20 billion is my image. And Media, Commerce and Strategic segment, outside of that cost reduction, it will be roughly JPY 15 billion cost savings across the organization. Yoshitaka Nagao: So, sorry for repeating my question. But -- and these numbers does not incorporate ASKUL's performance recovery? Ryosuke Sakaue: That is correct. Yoshitaka Nagao: I see. That's clear. Operator: From Nomura Securities, Harahata-san. Ryohei Harahata: Harahata from Nomura. Two questions. So Media business, the business environment change next fiscal year on ChatGPT. That's going to be a trial and Gemini also. So that may expand to Japan. So how do you see the change in the competitive environment? And second, there was a reporting in Nikkei in January. So the system foundation integration between Yahoo! and LINE. So Nikkei said several tens of billions yens of savings with the integration. So when are you going to see the impact of the cost reductions based on that? Thank you. Ryosuke Sakaue: To answer your first question, the Media competitive environment change may be including ads, so Kataoka will answer that one. Hiroshi Kataoka: This is Kataoka. Let me respond. So GPT and Gemini, number of users are increasing in the market. So there is the user need. And so there's going to be further usage. In addition to that, we are also doing testing. So with the increased number of users, there will be ad space and the testing has started to add ads to those spaces. So ad market, we think will grow gradually. That's our expectation. So there will be more users and ads will grow for them. But from existing search ads, is it going to simply switch from there to that? Well, the market itself is growing now. So the overall pie is growing. And so in terms of the weight, there's going to be this search ad. So in terms of how we understand the market, Well, there's going to be various solutions. So we consider that a positive thing. That's all. Ryosuke Sakaue: The second question. Next fiscal year, I talked about the three segments. And outside of that, there will be JPY 15 billion cost reduction. And one part of that is the LINE and Yahoo! technology foundation integration, lowering the infrastructure cost. So that is included in that JPY 15 billion. So that's going to bring about the impact over several years. So next fiscal year, yes, we would like to achieve impact so that there will be several tens of billion as of yen total. So I don't have the numbers at hand about what's the specific number for next fiscal year, but that's my response. Operator: [Operator Instructions] Next from Jefferies Securities, Sato-san, please. Hiroko Sato: This is Sato from Jefferies. Can you hear me? Ryosuke Sakaue: Yes, we can. Hiroko Sato: I have one question. In Q3, vis-a-vis the internal plan, how did you do? For Media for the internal target, was your result in line with the internal target? How about e-commerce, excluding ASKUL? And also for Strategic businesses, I think you outperformed the original plan or maybe in line with your internal projections. Also briefly, compared to the internal target, how did you do with the Q3 results? Ryosuke Sakaue: Yes. For Commerce, it was pretty much on par with the plan. For Media, it's difficult to say which point. But about a year ago, from that base point, compared to the internal original target, we were slightly short, but that was offset by strategic segment and others. Hiroko Sato: So if that's the case for Q3, compared to the internal target, Media was slightly weaker than your projection. Is that correct? Ryosuke Sakaue: Yes, just very slightly. Operator: From Daiwa Securities, Kumazawa-san, please. Shingo Kumazawa: For the EC service, so foreigners, maybe Chinese people may not be able to come to Japan. And EQ and hotel reservation, what's the expectation for January, March quarter and onwards? What's your current outlook? Ryosuke Sakaue: Hide will respond. Makoto Hide: This is Hide. EQ and Yahoo! Travel, so the current users are mostly domestic users. So Chinese people not come to Japan, leading to lower reservation, that's not going to happen because it's our main user base is Japanese users. Where there will be impact is inventory of hotels. So until recently, there were many inbound customers and so there was competition, strong demand. And so unit price have gone up. But in some areas, the unit price is coming down. So there is some impact there. Overall, not such a big impact. But in some areas like Toreta in Okinawa, we see a slight decline in unit price of hotels. Operator: [Operator Instructions] It seems that there are no further questions. So we will complete the Q&A session. So lastly, we would like to have Mr. Sakaue give a closing remark. Ryosuke Sakaue: Yes. So I have explained the presentation. So I will hand over to Idezawa-san for the closing remarks. Takeshi Idezawa: Yes, this is Idezawa, and thank you very much for your time today. As we reported, we had the ASKUL impact. But setting that aside, the businesses fundamentally have been making steady progress. For next fiscal year, we are aiming for 10% to 15% growth, and we are now putting together the plan for next fiscal year. And important thing is going to grow with the product. So we are now working on AI agent and also working on all the other services. So focusing on that and also with the ad business we will try to revive that for -- to achieve growth. So we would like to achieve multifaceted growth, and we hope to continue to enjoy your general support. Thank you very much for participating today. Operator: So with that, we would like to complete LY Corporation's Q3 earnings results for FY '25. Thank you very much for joining us today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Hanna-Maria Heikkinen: Hi all, and welcome to this news conference for Wartsila Q4 '25 results. My name is Hanna-Maria Heikkinen, and I'm in charge of Investor Relations. Today, our CEO, Hakan Agnevall, will start with the group highlights. He will continue with the business performance. And after that, our CFO, Arjen Berends, will continue with key financials. After that, we will discuss the dividend proposal and also the outlook. After the presentation, there is a good opportunity to ask questions. Time to start, Hakan. Håkan Agnevall: Thank you, Hanna-Maria, and before you leave, congratulations. You were voted to the most popular investor relations professional in Finland. Hanna-Maria Heikkinen: Thank you, Hakan. And thank you, first of all, to Hakan, Arjen and all of the Wartsila management, but also all of the analysts and investors who have been engaging in our dialogue and providing very inspiring questions. Thank you. Håkan Agnevall: Yes. Thank you. Thank you. So Q4 and 2025, I think this has been a great year and we are on a great journey, I would say. If I sum it up in one word, great. But you also need to look a little bit beyond, and I will come back to that. So if we start with Q4, all-time high operating profit and cash flow. And look at the order intake, and if we focus on Energy and Marine, it's developing quite positively. So Marine order intake increased by 8% while the organic growth, which when we exclude FX impact and impact of acquisition, was actually 11%, double digit. On the Energy side, the Energy order intake increased by 4% while the organic was 13%. So also there, double digit. Now total order intake, and this is where it gets a little bit complex, the total order intake for the group was down 11% to EUR 2.2 billion due to two drivers. Basically a strong comparison period on Energy Storage. Energy Storage had decent order intake in Q4 2025, but it was very strong in the year before. In general, we continue to have a challenge on order intake in Energy Storage. And then the second driver for the down 11% is the divestment in Portfolio Business, which is actually we are in a good trajectory divesting the business units. But as we take them out, it has an impact, of course, on our overall order intake for the group. But key message is, Marine and Energy, double-digit organic growth. Now we also continue to have a strong order book, around EUR 8.2 billion, and that is after the elimination of about EUR 900 million related to the divestments. Net sales increased by 8% to about EUR 2 billion. And then we continue the journey of improving our operating profit. So comparable operating results increased by 23% to EUR 256 million, and that is 12.8% of net sales. Operating results increased by 10% to EUR 251 million, and that is 12.5% of net sales. And then on services, a lot of attention on services. The 12-month rolling book-to-bill continues to be above 1. On the Energy side, it was 1.1, and on the Marine side, it's 1.01. And cash flow, and Arjen will talk more about that, strong cash flow from operating activities of EUR 652 million. So strong Q4. And if we look at the full year, we have all-time highs in four key metrics: so in order intake, in net sales, in operating results and in cash flow. So a very strong year. Now I will talk through these numbers, and I will do it rather quickly. Because of these effects on portfolio and storage, we actually made an additional slide this time where we drill a little bit deeper. But if we start with the group level's order intake, you could clearly see it's down 11%, EUR 2.2 billion. Net sales is still up with 8% to EUR 2 billion. Book-to-bill also on group level, 1.11, clearly above 1. Comparable operating results, up 23% to 12.8%. Operating result, up 10% to 12.5% of net sales. Then looking at the full year before we move on. Order intake, rather flat on group level. Net sales, up 7% to EUR 6.9 billion. Book-to-bill for the full year, 1.17. Comparable operating results, up 20% to EUR 829 million, which is 12% of net sales. And finally, the operating result, up 16% to EUR 833 million at 12.1% net sales. And that's a milestone, the 12.1%. You remember our old financial targets for the whole group, we achieved them, and now we move on. Now this is a little bit breaking down into details because this is the underlying message. So let's look first -- this is our full year numbers. Let's look at Marine and Energy combined and then Energy Storage. So here, you see a little bit different picture. So order intake was actually up on full year 17% to EUR 6.9 billion. Even if you look at organic growth, it's even higher, it's 20%. If we look at service and equipment, it's flat on service, but we do have an FX effect here of about 4%. Equipment is up 43% to EUR 3.3 billion. Order book, up 18% to EUR 6.7 billion. Net sales, up 12% to EUR 5.5 billion. And organically, it's even up 15%. You look at the services. Services is actually up 6%. It's up 10% if you look organically. Equipment, up 22% and book-to-bill moving to 1.24. And comparable operating results, up 21% to EUR 758 million, and that is 13.7% of net sales. We are on a good path, solid path to reach our targets of 14% for Marine and Energy combined. Now that's all good, developing really well. We do have and continue to have a challenge on storage. I mean, you can clearly see it here. Order intake has been a real challenge during 2025. So order intake is down 60% to EUR 455 million. If you look at the order book, it's also down 36% to EUR 719 million. Net sales, down 13% to EUR 694 million. And book-to-bill, clearly below 1 at 0.66. And comparable operating results also deteriorated to EUR 24 million, 3.4% of net sales. So still within the 3% to 5% EBIT span that we've been talking about. The team is doing a good work in executing projects and delivering and doing that in a profitable way. But of course, order intake is a major challenge. Now looking at our two industries, some comments on the general industry development, starting with Marine. I mean the sentiment for our key segments remain on a good level. Of course, overall contracting in 2025, decreased from the extraordinary activity levels we saw in 2024. So the number of vessels ordered in the review period decreased to 2,000 about from 2,400. Now one driving factor, the regulatory uncertainty, but also high newbuild prices and softer market conditions affected negatively the newbuild investment in some segments. Ordering has been rather uneven across vessel segments. But the appetite in our core segments -- in Wartsila's core segments, cruise, containerships and LNG bunkering vessels has been rather good, and contracting in our key segments are expected by Clarksons and by ourselves to remain clearly above the 10-year average level. Shipyard order books are at the highest level since 2009 and shipbuilding capacity expansion is primarily in China. In January to December, 366 orders for new alternative fuel capable ships were reported. That's about 37% of the total, so to say, which is down from 50% in the comparison period. And that is mainly mix driven because during the last time, there has been a bigger share of tankers and conventional bulk carriers, so to say. But the key thing here, when we see the graphs here, is still the same message. If you look on the overall demand, it is still below -- the forecast from Clarksons is still above, sorry, the 10-year average. Focusing on Wartsila core segments, it's clearly above the 10-year average. Energy market. Increased demand drives the energy transition and investments in the energy transition and it continues. The transition continues to move forward. Two key things stood out in energy-related macroeconomic development in 2025. One was load growth and the other was tariff-related uncertainty. The investment environment for energy technologies has improved along with global macroeconomic conditions. In engine power plants, the market demand for equipment and services has been strong. Demand for baseload engine power plants is expected to remain stable with further growth opportunities in data centers. The driver for engine balancing power plants continue to develop favorably. In the battery energy storage, the demand is closely linked to the increasing share of intermittent renewables in the energy system, which continues to progress strongly. The U.S. market is still facing regulatory headwinds, though several drivers remain solid with data centers also for storage as a potential new opportunity going forward. And after significant growth driven by solar up to the mid-20s (sic) [ mid-2020s ] renewable capacity addition are expecting to decrease slightly in 2026. Growth prospects towards the end of the decade, though, remain solid. So there is still definitely a positive trend. So going through the numbers, looking at the graphs, and now we are back to group level. So organic order intake decreased by 4%. Order intake decreased by 11%. But as we talked about, Marine order intake increased by 8%. Energy order intake increased by 4%. Energy Storage, though, order intake decreased by 40%. If we look at equipment overall, equipment order intake decreased by 15%, primarily driven by storage, and service order intake decreased by 5%. We have a strong order book, and rolling book-to-bill continues above 1, I think now for the 19th quarter -- consecutive quarter. But as we talked about, the order book decreased due to the elimination of about EUR 900 million related to divestments in Portfolio Business. Now this is a new slide that we have added, and our intention is to keep this as a standard slide in our reporting going forward. And we are really trying to describe how our order book will translate into sales going forward. So because the existing order book will generate sales that is distributed further into the future. So here you can see the distribution in time of the deliveries of the existing order backlogs for 2024, 2025 and 2026. And you clearly see how it is stretching out. We have also given the numbers and the size of the order backlog to help the analysis. And you can say there are two driving factors here that you really need to look very careful on. First of all, we are selling capacity further and further out in time. And that is, of course, a function of a hot market, so to say. And the other major driving factor, as you know, in Energy, we are very much about equipment deliveries and much less on EPC deliveries these days. And there are two different revenue recognition models. I mean, basically, the EEQ, you could say the major revenue recognition, it's rather lumpy because it's actually when you deliver the engines. And that is different from the EPC way because the EPC way, you could say you gradually continuously over the project recognize sales. So these two factors really affect how we think about translating the timing, how we translate the order backlog into sales. Very important going forward. Organic net sales increased by 16%. Net sales increased by 8%. Marine net sales increased by 10%, and Energy net sales increased by 29%. Energy Storage, though, net sales decreased by 20%. Overall, equipment net sales increased by 15% and service net sales remained stable. Profitability continued to improve. Net sales, we talked about, that increased by 8%. Comparable operating result increased by 23%, and the comparable operating margin 12-month rolling to 12% from previous 10.8%. Now technology and partnership highlights. There's a lot of exciting things happening. As you know, Wartsila, it's all about innovation and technology and services. And there, we are really making progress. First of all, data center orders. We continue to break into the U.S. and global also data center market. We talked about it, that off-grid data centers really growing in its market, so to say. And the power need is, in many installation is right in our sweet spot. So this is the example from end of last year, where we got an order of 507 megawatt power plant supplying data center in the U.S. We continue to grow. And we will deliver 27 engines to provide continuous primary power for a new data center in construction in the U.S. The on-site power facility will operate with this 24 (sic) [ 27 ] Wartsila 50SG engines with a power of 507 megawatts. They will run on natural gas that can later be converted to run on sustainable fuels in the future. And the order was booked in our order intake in Q4 2025. The equipment will be delivered in 2027. Then moving to Marine. We had our second order for an ammonia engine on the Marine side and to a Norwegian customer, Skarv Shipping cargo vessel. So we will provide our advanced Wartsila 25 Ammonia solution to power a new cargo vessel for Skarv. And this vessel will be built at the Huanghai shipyard in China, and it will be the first newbuild to benefit from the solution. And this order was also booked in our order intake in the fourth quarter of 2025. You have also seen the other press release that we have made this morning, and it's about setting us up for continued growth, further investments in our capacity. So we will expand our production capacity in Vaasa in Finland. We will expand the technical capacity with 35% to meet the global increase in demand in Energy and Marine. We will invest about EUR 140 million to further expand our production capacity with 35% in our STH technology center and also in the associated global supply chain. The vast majority of the investment is in STH. This expansion will increase our industrial capacity and strengthen the capacity of the associated global supply chain. And the new capacity will be installed within the STH expansion that we announced in April 2025, and it's expected to be commissioned in the first quarter of 2028. So a major step for STH in Vaasa. I think overall now, the last few years, we have invested about EUR 400 million in Vaasa facility. But it's not only about Vaasa. We also continue to invest in our service business in a very concrete way in our global spare part distribution center in Kampen in the Netherlands. And that investment is also to continue to support the growth. So we will expand our main spare parts distribution center in Kampen by 40% and consolidate nearby leased storage facility into Kampen. And this is a smaller investment but a very important one. We will invest about EUR 14 million in expanding the facility, and we expect to have it commissioned by 2027. Then expanding capacity is a lot about the supply chain, as we all know. And I really wanted to highlight this partnership agreement that we have signed with one of our key suppliers, Siempelkamp foundry. We have formed a strategic partnership to secure the supply chain to support our continued growth. And we strengthened the supply chain by this strategic partnership with Siempelkamp in the supply, and they are a supplier to us of large cast components for our engines. And as a result, we can, in our turn, support the growing demand from our customers and the markets in sustainable technologies for the marine and energy sectors. We are also continuing our work on streamlining Wartsila, becoming a more focused and profitable company. So we have made progress in our Portfolio Business divestments. This is nothing new. But we wanted to sum up some of the metrics here to help you with the analysis of Wartsila. So as you remember, we divested ANCS, Automation, Navigation and Control Systems to Solix. The divestment was completed in the 1st of July last year. Now the annual revenue of this business was EUR 127 million in 2025 and close to EUR 230 million in 2024. And ANCS has also clearly been the most profitable unit of our Portfolio Business, representing about 80% of the operating results during the first half of 2025. So that was ANCS. Then we had MES, the divestment of Marine Electrical Systems to Vinci Energies that was completed on 31st of October last year. Here, the annual revenue of the business was about EUR 92 million in 2025 and EUR 100 million in 2024. And the group order book has now been adjusted with, in this case, EUR 620 million. So it's one big part of the EUR 900 million that I was talking about before. And finally, the divestment of Gas Solutions to Mutares is expected to be completed. We have signed and we expect to complete the transaction in the second quarter this year. The annual revenue of the business was EUR 394 million in 2025, about EUR 300 million in 2024. And after these divestments, we have one business unit left, and that is Water & Waste. And that is a business unit with an annual sales of about EUR 50 million. And of course, our ambition is to move ahead and also sign and close during this year. Work is ongoing. Now looking a little bit on our businesses, how have they developed. So on the Marine side, growing order intake and net sales as well as improving our comparable operating results. So order intake, up 8%. We talked about that. Net sales, up 10%. And if we look at the development, continuous improvement of the profitability, on the positive side, we have higher service and equipment volumes providing better operating leverage. We also have improved newbuild margins in what we have delivered, positively contributing. And on the investment side or the cost side, we do run increased R&D investing into our future. Service continues with a book-to-bill above 1. We see 9% CAGR on the net sales. And you see the different disciplines here. And then you notice, if you see agreements, it looks like it's going down. It's the blue line there. That is more periodization. Because agreements there, it's a little bit like project business, and you can have -- it could be a bit lumpy based on periodization. And you also see the retrofit business. That is really below 1 now but also there, it's project business, and we have a positive outlook going forward. So we will continue to grow in Marine service. Going over to Energy. So growing order intake as well as significantly improved net sales and comparable operating results. Order intake, up 4%. You might think that was not so impressive growth. But I look at the newbuild side there and look at the orders we announced here just in the beginning of the year, where the other week, we announced an additional 550 megawatts plus. It's about periodization of order intake of big orders, so to say. There is a strong underlying demand, and we will come back to that when we give the demand guidance. Net sales, up 29%. Here, if we look at the development of the comparable operating results, continue to improve our profitability. Also here, the higher equipment volumes provides better operating leverage. We have a better service margin mix. I can also say that we are building the margins in our order backlog, but that will be delivered later, so to say. On the same side as Marine, we continued to increase in R&D. Also on the Energy side, we continue with service book-to-bill above 1. We have had 4% CAGR. Here, you see, if we look to the right, on the Energy side, on the blue dotted line, we had a good service agreement order intake at the very last week. So periodization, here, we were a little bit lucky but the overall trend is positive. Similar to Marine, you see retrofit here. Periodization, we see underlying growth going forward. Storage. So in storage, on the positive note, we had a revived order intake development after three slow quarters. However, it was clearly below the exceptionally high comparison period in the fourth quarter of 2024. And this is why you see the order intake is down with 40%. Now we do have a challenge overall through the 2025 on order intake. Let's be very frank about that. Net sales was down as a consequence of that with 20%. If we look on profitability, which has decreased, on the positive side, as I talked about, very solid execution of the projects, I mean, in the backlog by a strong team. But the lower volumes, and also R&D, we continue to invest in R&D, is affecting the profitability negatively. Here's the bridge Q4 Q-on-Q, so to say, and how the different businesses are developing. So from the group, we go from 11.3% to 12.8% comparable operating results. Marine is up from 11.8% to 13%. Energy is also up from 15.1% to 16%. And Storage, down then from 6.9% to 4.3%. Portfolio is actually executing well, improving 3.7% to 7.4%. And overall, the comparable operating results increased by 23%. Now Arjen, over to you. Arjen Berends: Thank you, Hakan. Very happy to talk about other key financials as they look all very, very good. Very happy with that. If we start with operating cash flow, EUR 652 million for the quarter and EUR 1.6 billion for the full year. Both on the quarter as well as the full year, it's an all-time high, as Hakan also mentioned earlier. The previous all-time high is actually also on the slide. It's EUR 1.2 billion in 2024. Great support from the profitability to the cash flow. Let's say, you can see it on the EBITDA line, which is clearly getting higher. And that, of course, over time, will convert into operating cash as well as, let's say, the working capital. Working capital, in fact, is actually at an all-time low as well. Big element in the working capital is, of course, the advances. It's about EUR 1.3 billion and a little bit more. If you exclude the advances from the working capital, still I would say it's a very good working capital level. It's about EUR 80 million positive compared to, let's say, 2 years ago at the start of, let's say, 2024, it was EUR 600 million. So working capital excluding advances being EUR 600 million at that time, now about EUR 80 million. So it's not just the advances that help us, but it's also all the good work that we are doing in other areas of working capital. Clear highlight on this slide is this, the ROCE, clearly going up. Okay, it's close to double, I would say, from previous year. And of course, that is really driven by also good profitability development and, in particular, also a very good working capital development. Solvency, I'm also very happy with. Let's say, I think it's a couple of years ago that we had a number above 40%. Now we have 40.5%, up from 37.4% last year. And earnings per share, also here, an all-time high at EUR 1.06. So I can only say that I'm super happy with these numbers. If we look at the trend, and let's say all trends go in the right direction. Cash flow, clearly, let's say, the orange trend is up and the working capital trend is down. Also good to remark here that, let's say, the 5-year average working capital to net sales line, the dotted line on the right side graph, is now for the first time in a negative number, minus 0.6. Just for reference, at the end of Q2, I think we had 2.4, if I remember right. So really, let's say, going well on a long-term basis as well. If we then move to dividend, the Board will propose to the AGM -- or has proposed to the AGM basically a base dividend of EUR 0.54 to be paid in two installments and then an extraordinary dividend of EUR 0.52, altogether making up 400% of EPS at EUR 1.06. Final slide from my side. Solid progress towards the financial targets. If we start at the Marine and Energy combined graph in the top left corner, first of all, very good growth, organically 15%. Newbuild was 25% and service was 9%. So really in both areas, really good growth. Also the orange line, 13.8% on the operating margin, really improving significantly, I would say, in Q4 on a rolling 12-month basis. Q3 was 13.2%. And 1 year ago, at the end of 2024, we had 12.8%. So it's 1 full percent up year-on-year -- percent point, I mean. On Energy Storage, as Hakan also explained already, we have been suffering from, let's say, low order intake that translates then, of course, also in lower sales, and that has a consequence to, let's say, absolute profitability as well. Still having said that, let's say, the performance was on a acceptable level, 3.3%, which is within the range of the financial targets for Energy Storage, 3% to 5% operating margin. Gearing, it further goes down. I don't need to comment too much about it. And I think the dividend distribution, I just mentioned. With these words, back to you, Hakan, on the outlook. Håkan Agnevall: Yes. So let's look then on the guidance. So on the Marine side, we expect the demand environment in the coming 12 months to be similar to that of the comparison period. But please note that the last 12 months have been very, very strong. So we continue to -- the demand continue on a very good level, driven by our core segments. On the Energy side, we expect the demand environment for the next 12 months to be better than the comparison period and driven by -- not only by data centers, but by balancing power, other baseload. So better demand environment. On Energy Storage, we expect the demand environment in next 12 months to be better also, of course, coming from a very low level. But particular in the Energy Storage, we note that the current geopolitical uncertainty particularly impacts this business and may affect the growth. Then we make the general comment that we underline that the current high external uncertainties make forward-looking statements challenging. Due to high geopolitical uncertainty, the changing landscape of global trade and the lack of clarity related to tariffs, there are risks of postponement in investment decisions and of global economic activity slowing down. Okay. That was the presentation. Hanna-Maria Heikkinen: Thank you, Hakan, and thank you, Arjen. Now we will continue with the Q&A. [Operator Instructions] Handing over to the operator, please. Håkan Agnevall: It's a very silent operator today. Hanna-Maria Heikkinen: Yes, it looks like so. Maybe it was crystal clear already. Maybe while waiting, do you, Hakan, want to elaborate what was kind of what do you consider as key achievements last year? Håkan Agnevall: No, I think we talked about it. All-time high in a number of dimensions. But not only the financials. We have, for the first time in Wartsila, we were recognized by Forbes as being in the top 1,000 employers in the world actually based on surveys that are made of our employees. So it also shows that we are on a very positive development when it comes to the culture of Wartsila and engagement of our people. I mean, we continuously have extremely high score, very high in our engagement surveys, which I find very, very positive. And I think, of course, now we are in a positive role, that helps. But I think also we know a couple of years back, it was tougher. I think the whole narrative on decarb and the focus on innovation and technology and services is really resonating with our people. So very good development. Hanna-Maria Heikkinen: Thank you. So once again, handing over to the operator. Operator: [Operator Instructions] The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: But I wanted to start on getting a little bit more color on the 35% capacity increase. I guess, a couple of items related to that. But how much of that is already things that you have, let's say, on 1Q '28 you will open up? How much of that is already covered by things that you have on the backlog? And then would we have sort of any margin impact before 1Q '28 because you're hiring people? And how should we think about sort of like any financial implications before you open? But starting with that, and then I'll ask a follow-up. Håkan Agnevall: So I think now what we can say, well, we are starting to open up our backlog. I'm referring to the slide that we presented here. So it's a new standard slide going forward. But I don't think it has reached 2028 yet. So I think it's a little bit early to open up there. I mean, I can say that... Arjen Berends: Of course, we have orders for '28 already. Håkan Agnevall: We have orders for '28. And for certain parts of our offering, I mean, engine types, as you know, we have different engine types, if you want to order a new engine of that particular type, the delivery time is definitely in 2028. Then we have other engine types where we can deliver at the end of this year. So it's a mixed situation. I think that is as precise as we will go. On the cost side, I think that, that will not affect our profitability in a major way going forward, so to say. Daniela Costa: Got it. And then just as a follow-up. Can you talk a little bit about like how prices per megawatt have evolved '25 versus '24 and the general trend you're seeing given the demand has been so strong, particularly both for engines and turbines and everyone in this supply chain? So to have an idea of how the mix is also maybe improving going forward. Håkan Agnevall: No. As I briefly mentioned before, I think the margins in our order backlog are going up. I mean, it is, of course, a very vibrant demand side. And so that leads to some pricing realization. But I don't want to go into the details. But it's developing. The margins are... Arjen Berends: Positive. Operator: The next question comes from Akash Gupta from JPMorgan. Akash Gupta: My question is on your announcement on increasing capacity by 35%. So again, I mean, when we look at the other power equipment makers, the decision is not surprising. But I think what is different is on other guys, we have a lot of visibility from firm orders, backlog and some slot reservations. While at Wartsila, based on what you have reported, we don't yet see that. So I wanted to ask, like what has changed in the last few months that led to this announcement of 35% increase in capacity? Is this more bottleneck on these 50SG engines that has been commonly used by data centers based on your order announcement or anything that is in pipeline? But any clarity that you can provide behind this capacity expansion, that would be great. Håkan Agnevall: So I mean, first of all, please note that we communicate around our technical capacity. And right now, and you see that in our Q&A document, which we also posted, 2025, we have been operating around 75% of our technical capacity. So 75% of technical capacity. Now the expansion is to expand the technical capacity with 35%. So then you understand we are coming from one level and going to another level over a few years. So that's one important element to look into. Now why do we do this? I mean, you could also say already in April last year, we took one step. We announced a EUR 50 million and where we started to expand, and now we continue. And the drivers, they are several. On the Energy side, yes, data center is clearly a driver and it's certainly there. We have several opportunities in various stages of maturity. You also saw we started the year in a very strong way. But it's not only about data centers. On the balancing power, the narrative is playing out still in the U.S., still in some other countries as well. And then on the, you could say, the traditional base load, we have strong demand in Southeast Asia, in Latin America. So it's a strong underlying demand situation overall in Energy. And on the Marine side, we continue to operate, as we talked about, even though we guide similar, this is on a very high level for us and in a good level. And we continue to see strength in cruise. We continue to see strength in offshore, in special vessels, to a certain extent, the containers as well. So it's more than data centers. And the expansion, just also to clarify, it's not only for W50. W50 is the standard energy engine. So you're right from that perspective. But this expansion is not for W50 only clearly. Arjen Berends: The engine is very flexible. So you can swap slots quite easily. Håkan Agnevall: Thank you for clarifying. The engine is very flexible, you run different engine models... Arjen Berends: Correct. Yes. Akash Gupta: And this 75% of technical capacity, that is on total engines, I mean, including Marine and Energy both together? Or is it just only Energy? Håkan Agnevall: Total, both Marine and Energy. Operator: The next question comes from Uma Samlin from Bank of America. Uma Samlin: I just have one on the service opportunities for your data center orders. So far, it seems like most of the orders you booked are more on the OE side. And how should we think about the service opportunities there? I presume that a lot of the data center developers are not keen to do service themselves. How should we think about that, like the timing of those opportunities and the pricing power you have there? Håkan Agnevall: So I think there will be a strong service business, first of all, because these plants will operate 24/7 with high requirements and uptime reliability. And that is a strong base for a good service business. Within the data center customers, some want to go to full O&M where we do the operation and maintenance. Some want to do a little bit more themselves. There is not one solution fits all. We will adapt. But if you sum it all up, it's very strong potential for service business there. And that has not started to accumulate in order intake yet. Arjen Berends: So baseload opportunities -- baseload is good. The more running hours, the more service. Uma Samlin: So when can we expect to see that coming into your orders then? Håkan Agnevall: In the coming -- I mean, as we said, I'd say a little bit similar like on the newbuild side, that we are in negotiation with customers and service agreements. These negotiations are in various stages of maturity and they will -- certainly, some of this will materialize this year. Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: Could I ask about the Marine service business? The order intake growth rate slowed a bit from obviously very impressive levels historically. What's your outlook there? What's driving the slowdown? And perhaps what would be potential impact from the reopening of the Red Sea on the service opportunity that you have? Håkan Agnevall: So if you look, I mean -- and you're right, Vlad, that if you look Q-on-Q we are down. And I think there are a couple of drivers. One is that in Q4 2024, we had a big order from Royal. And so that creates this effect. Then there is also some periodization. I mentioned that earlier on the agreement side, things moving from one quarter to the other. Similar also on the retrofit side, a bit of periodization from one quarter to the other. There is also a little bit of FX. Clearly, it's mainly U.S. dollar exposure. So those are combined. But our underlying message, and I'm reiterating it, we are above 1. And we have a positive outlook on the growth of the service business also in Marine. Vladimir Sergievskiy: Super. Very helpful. And anything you can comment on potential impact of Red Sea reopening? Is it meaningful for your business? Is it not at all? Håkan Agnevall: So I mean, what will happen and what I hear now, that there are some of the major liners, they are kind of testing. Of course, everybody is very much focused on the safety side. I mean, it's pretty obvious that right now, people have been running longer hauls south of Africa. And if you go back to the Red Sea, that will reduce the route that you travel. However, yes, first of all, that has not been -- I mean, the whole Red Sea has not been a major driver for our service growth. I would say there has been some addition but it's not a major driver. And there are some other elements because some people are also saying that the operators, they will go slower to try to compensate. So they will try to keep some of the fleet. I mean, they will not just scrap out vessels. So let's see how the -- I think the dynamic is a little bit hard to predict what will happen. It will have some impact on our service business but not a major impact. Arjen Berends: Not majorly. And then also good to remind you that the majority of the vessels that sail through the Suez canal is two-stroke main engine. And that's the main engine running. We have, of course, a lot of auxiliary engines on merchant fleet. But typically, let's say, they don't run less or more typically on a journey. Håkan Agnevall: And there is not a lot of cruise vessels going through Suez. Arjen Berends: No, no, definitely not now. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: Congrats on the results. If we could go back to Slide 5 where we talk about where you're indexed into contracting trends. It looks like you're addressing about 25% of the overall market just kind of correlating the two graphs, one on top, one on bottom. On that kind of better indexation over the next 3 years, is it fair to assume that there's production slots on these vessel classes already, i.e., within the contracting numbers, the mix is skewing to your favor over the next 3 years? Or am I reading too much into this? Arjen Berends: Okay. If I understand your question right, let's say, is on these upper lines on the '26, '27, '28, do we have already contracts to be part of that? I would say the answer is yes. Because, let's say, our order books, as you could also see from the other slide, are getting longer and longer also in Marine. So clearly, let's say, we have orders for '27, '28. So they are part of those lines. John-B Kim: Sorry, Arjen, my question is actually more on the production slots in the yards because yard capacity is still an issue... Arjen Berends: But then can you repeat the question because then I misunderstood it most likely. John-B Kim: Sure. So within those orders or that pipeline, do you have visibility on production slots? Are the yard constraints still valid? Or are these already planned in the yards for the next 3 years? Håkan Agnevall: I would say it's a mix. It depends what type of vessel you're ordering. I mean, if you take on cruise, for instance, I think the slots are pulling out longer and longer in time. Whereas on certain bulkers or tankers, there are shorter lead times. But to Arjen's point, when we talk about Wartsila supporting or delivering to the shipyards, if you look at '26, '27, we clearly have in our order backlog deliveries for yard slots in '26, '27 and '28 as well. Operator: The next question comes from Sven Weier from UBS. Sven Weier: The first one is just following up on the announced capacity expansion. There, I was just wondering, I mean, if you say we raised capacity, technical capacity by 35%, should we assume that this is also raising the revenue potential by at least 35%, given where the prices per megawatt are heading? And I was also wondering why is the expansion only completed in Q1 2028. Because I think it's probably a bit more of a brownfield. Why is this taking like 2 years? That's the first one. Håkan Agnevall: Yes. So of course, over time, if you expand a certain capacity, it will translate to revenues, so from that perspective. But then, and I know you know this, Sven, but there is also we have our production schedule, which is factory related. And then we have our project schedule, which relates to when we deliver to customers and the projects. And sometimes there is not a perfect correlation year-by-year. But I mean, the fundamentals, you're right. I mean, as we expand capacity, revenues will go up as well. Then, of course, with a twist, which is positive maybe from a revenue perspective. If we have EPC, then it's engine plus. Now I mean, we are not changing our strategy. Our focus is still having a majority of EEQ and less EPC. But we will still have EPC. So that will, of course, then you get leverage on the engine capacity that you have. Sorry, your second question? Arjen Berends: It was on the capacity. Why only in early '28? Håkan Agnevall: Yes, that's what I'm asking my team as well. Let's go faster. But on a serious note, I think there is lead time for equipment that we need in our -- for instance, in our testing facilities. These are big power equipment, they have certain lead time. The concrete needs to dry before you pit certain things in. And also it's also -- it's very -- since we are now we are really -- the team is doing a great job in trying to do a lot of things and squeeze it in, but there is a limit what you can do in one space, so to say. But believe me, we have really tried to accelerate still. Arjen Berends: And to add, let's say, the supply chain needs to follow, right? So I think it's... Håkan Agnevall: Very good point. I think the supply chain, as we all know, is critical. But however, I would say, I mean the partnership that we announced with Siempelkamp, and we wanted to make that point to show to the... Arjen Berends: It's one example of. Håkan Agnevall: That we are working very actively with our supply chain. That's just one example. We have a very good dialogue with our core suppliers, and we have long-term relationship. So it's a major work. We should not diminish the importance. But we are -- step by step, we are in a good role here to be able to go live in beginning of 2028. Arjen Berends: If you have a nice factory with capacity, but you miss some parts, then you can still not make engines. So we need to make sure that the supply chain can follow. Sven Weier: That makes sense. Just maybe on the Energy margin itself. I mean, obviously, impressive outcome here. But when you look at GEV and Siemens Energy, they've obviously given new long-term margin outlook for the divisions that obviously looked quite nice. I was just wondering, I mean, are you planning kind of a Capital Markets Day for this year where you also intend to give us revised new longer-term margin targets, at least for the Energy business? Håkan Agnevall: I think this is a very relevant question. We fully understand it. We will have to come back and answer it. I don't have the answer today. But clearly, we understand the logic for the question. Operator: The next question comes from Max Yates from Morgan Stanley. Max Yates: Just sorry to come back on this capacity expansion. You talked about the fact that this was in addition to the announcement that you announced kind of last year. So I guess if we just look at kind of the base in terms of what you're delivering today, it looks like kind of 1.2 gigawatts in terms of deliveries when I back it out of your revenues. Just thinking about what is the total technical capacity increase when we include this latest round, but also what went before? And I guess I'm trying to tie it back to this year in terms of sort of megawatts, it looks like your orders are roughly around EUR 2.3 billion. Is that the kind of end technical capacity that we should be thinking for in terms of what you can deliver when we look out to 2028? Håkan Agnevall: I understand the -- here, we will not be so explicit. I mean, for instance, we will not give out the megawatts. I know some of our competition is doing that. We are very happy because we make a lot of analysis of those data. We don't want to give out those data. So that's why we are talking about where we are moving in relationship to our technical capacity. So as I said, 2025 full year, 0.75% of technical. And then beginning of 2028, once we have commissioned this, we will have a technical capacity that is 1.35%, so to say. So you see where we are going from and where we are going. Arjen Berends: It's about 80% up then from the operating level. Håkan Agnevall: Correct. Max Yates: Okay. But we shouldn't assume that you had a given capacity, you increased it last year, and then this 35% comes on top, 35% of the total, all in. Håkan Agnevall: That I can be very clear. I mean the April announcement, EUR 50 million, you could say that is also coming online in connection with this additional EUR 140 million. So it's not on top. You could say we are going from 0.75%, 2025 to 1.35% in beginning of 2028. And that is including all the investments that we have announced. Max Yates: Okay. And sorry, maybe one quick clarification. When we look at your data, when we look at your orders this quarter in Energy in new equipment, you did 520 megawatts. I mean, it looks like it was almost entirely that data center order that you booked. And yet the value per megawatt on the orders is only about EUR 0.7 million per megawatt. So I guess I'm just trying to square the fact that kind of we're talking about pricing on these data center orders being very good. We're seeing huge numbers in terms of dollars per kilowatt coming out of the gas turbine guys. Yet when I very simply look at your Q4 number, which I know is mostly the data centers, I don't see that kind of uplift. So maybe if you can help us understand. It doesn't look like you're getting a huge price uplift to these data center customers based on what you booked this quarter. Håkan Agnevall: Well, I can say like we stated, we have definitely improving our order backlog and we are on a good journey there. I would rather say it shows that we are very competitive. Max Yates: What does that mean? Sorry. That means you're pricing aggressively versus the other... Håkan Agnevall: No, that we can improve our profitability and be very competitive with the gas turbine competition. Arjen Berends: And also with other engine manufacturers. Håkan Agnevall: And just for clarity, I mean, I understand your analysis, but I should also say it so we are fully clear, there was more than data center orders. But the data center was a major chunk of the order intake. So from that perspective, you're right. Operator: The next question comes from Panu Laitinmaki from Danske Bank. Panu Laitinmaki: I actually wanted to ask about the same topic. So it seems that in Q4, majority of the energy equipment orders were the single data center order. Just a bit surprised, like why didn't you get more of the other orders? Was it just timing? Or was it tariff-related delays? Or did you increase pricing so much that there were delays? Or what caused this? Håkan Agnevall: So first, I mean, this is a project. I mean, Energy is a project business. Power plants, whether they go for data centers or balancing power, you negotiate. And sometimes, you don't close the deal in the end of December or the 20th of December. You close it in the 15th of January instead. And that's why I underline, look at how we started the year with 550 megawatts. One is clearly the biggest one there is for a utility, that the demand is driven by data center. The smaller one, I would say, it's one of our traditional, you can say, it's balancing borderline baseload. I think that's the answer to your question. It's about periodization. Panu Laitinmaki: So if I can ask about a follow-up, what does your pipeline in Energy equipment orders look like? So if you would directionally comment, like if things go as you plan in first half or full year this year, will it be like half of orders coming from data centers, half balancing? Or any comments how does it look like? Håkan Agnevall: No, we don't go into those details. The only thing I can point to is the guidance. It's going to be better. Arjen Berends: It looks good. Otherwise, we would not extend capacity either. Håkan Agnevall: Yes. And I think there are some really -- look at how we expand capacity, look at how we communicate. We increased the guidance. We give an extra dividend. We are on the road. Hanna-Maria Heikkinen: We are running out of time. We still have one additional slide. It's regarding our data center theme call, which is taking place next week. So it's an excellent opportunity to continue the discussion, what are Wartsila's opportunities in growing data center market. Besides Hakan and Arjen, I'm very happy that also Anders Lindberg, President of our Energy business, will join the call. So hopefully, you can also be there. And our Q1 report will be published on April 28. Thank you. Håkan Agnevall: Thank you for today, and a warm welcome to our data center call. Looking forward to that. Arjen Berends: Thank you.
Operator: Welcome and thank you for joining the Cencora, Inc. Fiscal 2026 First Quarter Results Call. My name is Lucy, and I will be coordinating your call today. During the presentation, you can register a question by It is now my pleasure to hand over to your host, Bennett Murphy, Senior Vice President of Investor Relations and Enterprise Productivity to begin. Please go ahead. Bennett Murphy: Good morning, good afternoon. Thank you all for joining us for this conference call to discuss Cencora's fiscal 2026 first quarter results. I am Bennett Murphy, Senior Vice President, Investor Relations and Enterprise Productivity. Joining me today are Bob Mauch, President and CEO, and James Cleary, Executive Vice President and CFO. On today's call, we will be discussing non-GAAP financial measures. Reconciliations of these measures to GAAP are provided in today's press release, which is available on our website at investors.cencora.com. We have also posted a slide presentation to accompany today's press release on our investor website. During this conference call, we will discuss forward-looking statements about our business financial expectations on an adjusted non-GAAP basis, including, but not limited to, EPS, operating income, and income taxes. Forward-looking statements are based on management's current expectations and are subject to uncertainty and change. For a discussion of key risks and assumptions, we refer to today's press release and our SEC filings, including our most recent 10-Ks. Cencora assumes no obligation to update any forward-looking statements, and this call cannot be rebroadcast without the permission of the company. You will have an opportunity to ask questions after today's remarks by management. We expect you to limit your questions to one per participant in order for us to get to as many as possible within the hour. With that, I will turn the call over to Bob. Robert Mauch: Thank you, Bennett. Hi, everyone, and thank you for joining Cencora's fiscal 2026 first quarter earnings call. I'll begin by thanking our team members who drive our strong performance while advancing our purpose. This morning, we were pleased to announce that we've completed our acquisition of the majority of the remaining equity interest in OneOncology. And I welcome CEO, Dr. Jeff Patton, and the entire OneOncology team to Cencora. Your commitment to and expertise in supporting community oncology practices is a cornerstone of the Cencora strategy. In 2026, we delivered adjusted operating income growth of 12% and adjusted diluted EPS growth of 9%, driven by our market-leading capabilities. To reflect our performance and the contribution from our recently completed acquisition of OneOncology, we are raising our fiscal 2026 guidance to reflect year-over-year adjusted operating income growth of 11.5% to 13.5%. Our results were driven by continued strength in our US healthcare solutions business, as we executed our pharmaceutical-centric strategy and worked to advance commercial solutions. Our dedication to understanding customer needs and delivering tailored services creates long-standing strategic relationships fueling our growth. We are furthering the customer experience and our operational excellence leveraging technology and advanced analytics. Our solutions differentiate us in the market and allow us to capitalize on strong specialty pharmaceutical utilization trends. We have three growth priorities core to our strategy. First, strengthening our leadership in specialty. Second, leading with market leaders. And lastly, enhancing patient access to pharmaceuticals. On today's call, I'll focus on how our MSO expansion is advancing each growth priority. I'll begin with how our MSO footprint strengthens our leadership in specialty. Our investments in pharmaceutical-centric MSOs represent a natural extension of our long-standing leadership in specialty pharmaceuticals, complementing our existing specialty distribution and GPO services. Our MSOs provide practices with critical back-office and administrative support while strengthening our relationship with pharmaceutical companies. We expect to drive significant value for physicians across OneOncology and Retina Consultants of America by creating an MSO platform that leverages the capabilities of these market leaders. We'll unlock new opportunities and enhance our solutions for both providers and biopharma by leveraging our platform strength and scale in areas like clinical research, revenue cycle management, and data-driven clinical insights to support physicians and advance care. Focusing on our growth priority of leading with market leaders, our MSOs demonstrate the value of our commitment to support healthcare leaders at the forefront of innovation. While much focus today will be appropriately on completing the acquisition of OneOncology, in January, we celebrated the one-year anniversary of RCA joining Cencora. Over the past year, we've been very pleased with the addition of RCA, both in terms of their performance and leadership in driving pharmaceutical innovation. RCA has clearly differentiated itself with its clinical trial and research capabilities, contributing to more than one-third of all retina clinical trial research conducted in the United States across our MSO platform. And we see significant potential in extending this offering. In addition to expanding research capabilities, RCA physicians continue to enhance the patient care journey by adopting advanced technologies in their practices that have a meaningful impact on patient experience. Since completing the acquisition, we've supported the deployment of hundreds of advanced imaging devices across RCA practices, enabling more precise noninvasive assessment of patients' clinical conditions. And finally, our MSO expansion is supporting our growth priority of enhancing patient access to pharmaceuticals. As specialty pharmaceutical innovation continues to accelerate, physicians are navigating more advanced treatment options while facing increased operational complexity. Our MSOs help address these challenges by providing a robust portfolio of services that support physicians in delivering the most modern, high-quality care. Both RCA and OneOncology physicians are active contributors at leading retina and oncology conferences, presenting research across a wide range of disease states. Recently, OneOncology partner practices presented dozens of abstracts covering emerging treatments, including cellular therapies, subcutaneous bispecific antibodies, and CAR T. These activities highlight the important role OneOncology physicians play in advancing cancer care and expanding access to complex treatments for patients in local communities. Another recent example of our MSO physician's leadership advancing clinical practice is RCA's research chair, Dr. Charles Wyckoff, and team performing the world's first procedure of a new FDA-approved cell-based gene therapy for MacTel type two, a degenerative retina disease that previously had limited treatment options. We've also seen the real-world impact of this leadership in the retina biosimilar market. RCA physicians were highly involved in supporting research for a key biosimilar product, and due to their clinical familiarity and confidence, were leaders in its early adoption, helping to drive patient access to this high-quality, lower-cost treatment. Across both platforms, OneOncology and RCA physicians are leading in the adoption of advanced and individualized treatment approaches, expanding access to clinical trials, and ensuring patients have access to the most cutting-edge treatments in an accessible setting. In closing, Cencora delivered a strong start to our fiscal 2026, continuing to execute at a high level. We are advancing our strategy and strengthening our position as a leading healthcare company. Guided by our purpose, growth priorities, and strategic drivers, we are well-positioned to drive sustainable value creation for our stakeholders over the long term. Before handing it over to Jim for a detailed review of our quarterly results and updated guidance, I want to once again thank the Cencora team. Their expertise, commitment, and dedication to our purpose power our strong performance. With that, I'll now hand the call over to Jim for an in-depth review of our performance and updated expectations for the year. Jim? James Cleary: Thanks, Bob. Good morning and good afternoon, everyone. Before turning to a review of our fiscal 2026 first quarter financial results and updated guidance expectations, I want to take a moment to echo Bob in expressing my excitement on our announcement that we have completed our acquisition of OneOncology. OneOncology and its partner practices are leaders in community oncology, having built a differentiated MSO platform that has delivered exceptional growth since its founding and has been a key contributor to Cencora's leadership in specialty. As innovation and biosimilars continue to advance, our partnerships with pharmaceutical-centric MSOs will allow us to better support physicians, patients, and manufacturers, enhancing our specialty offering. We are confident our investments in MSOs will unlock new value creation opportunities and support our long-term growth as evidenced by our recently increased long-term guidance. Moving now to our consolidated first quarter results. And as a reminder, unless otherwise stated, my remarks today will focus on our adjusted non-GAAP financial results. For further discussion of our GAAP results, please refer to our earnings press release and presentation. Starting with adjusted diluted earnings per share, we completed the quarter with adjusted diluted EPS of $4.08, an increase of 9% driven by performance in our US healthcare solutions segment. Consolidated revenue was $85.9 billion, up 5.5% due to solid growth in both reportable segments and in other. The drivers of which I will detail when I speak to our segment level results. In the quarter, we continued to see strong sales growth in the US for GLP-1 products, which increased by $1 billion or 11% over the prior year quarter. Turning to gross profit, consolidated gross profit was $3 billion, up 18% primarily due to growth in the US healthcare solutions segment. Consolidated gross profit margin was 3.48%, an increase of 37 basis points driven by the January 2025 acquisition of Retina Consultants of America. Moving to operating expenses, in the quarter, consolidated operating expenses were $1.9 billion, up approximately 22%, driven primarily by the RCA acquisition and to support our revenue growth. Consolidated operating income was $1.1 billion, an increase of 12% compared to the prior year quarter due to strong execution by our teams and continued growth in our US healthcare solutions segment. Moving now to our net interest expense and effective tax rate for the first quarter. Net interest expense was $72 million, an increase of $44 million versus the prior year quarter primarily due to debt raised to finance a portion of the RCA acquisition. Our effective income tax rate was 19% compared to 20% in the prior year quarter. And as we look at the balance of fiscal year 2026, we now expect our full-year effective tax rate to be approximately 20%. Finally, diluted share count was 195.3 million shares, a 0.1% increase compared to the prior year first quarter. As a reminder, due to the OneOncology acquisition, we have paused share repurchases as we prioritize debt pay down and anticipate our full-year diluted share count to be approximately 105.5 million shares. Regarding our cash balance and adjusted free cash flow, we ended December with $1.8 billion of cash and had negative adjusted free cash flow in the quarter of $2.4 billion as a result of seasonal working capital needs. This compares to negative adjusted free cash flow of $2.8 billion in 2025. We continue to expect full-year adjusted free cash flow to be approximately $3 billion as the working capital dynamics unwind in the balance of our fiscal year 2026 as they did in fiscal year 2025. This completes the review of our consolidated results. Now I'll turn to our segment results for the first quarter. Beginning with the US healthcare solutions segment, US healthcare solutions revenue was $76.2 billion, up 5% as we continue to see good volumes and revenue growth across our customer segments, including growth in GLP-1s, and in specialty sales to health systems and physicians. As a reminder, this quarter, we faced a more challenging revenue comparison due to a large grocery customer we off-boarded in 2025 and the 2025 loss of an oncology customer as a result of it being acquired. US Healthcare Solutions segment operating income increased 21% to $831 million, primarily driven by the RCA acquisition and continued specialty growth in health systems and physician practices, more than offsetting the headwind from the oncology customer loss. Our teams continue executing at a high level across the segment, contributing to our strong performance. In the quarter, we saw particularly good volumes and trends in our health systems business where we continue to see benefits from our focus on strategic partnerships leveraging our expertise in specialty. At RCA, we saw better than expected volume, excellent trends in research, and new physicians joining the platform. Turning now to our international healthcare solutions segment. In the quarter, international healthcare solutions revenue was $7.6 billion, up approximately 10% on an as-reported basis and 6% on a constant currency basis driven primarily by our European distribution business but also reflecting revenue growth at each of the businesses within the segment. International Healthcare Solutions operating income was $142 million, down 14% on an as-reported basis and down 17% on a constant currency basis. The decline was driven by lower operating income in our European distribution business largely due to the timing of manufacturer price adjustments in a developing market country, partially offset by operating income growth in our global specialty logistics business. In the quarter, we continued to see encouraging trends for our Global Specialty logistics services with volumes growing again this quarter. Our teams have been prioritizing operational excellence and targeted business development which are positioning us for success as the market begins to rebound. Moving to other, revenue in other was $2.1 billion, up 6% primarily due to growth at MWI Animal Health and ProPharma, and offset in part by a revenue decline in our legacy US hub consulting services. Operating income was $91 million, down 6% primarily due to a decline in operating income in our US hub consulting services business resulting from the fiscal 2025 loss of manufacturer program, partially offset by operating income growth at MWI Animal Health. The teams continue to execute well across companion and production animal markets. That completes a review of our segment level results. I will now discuss our updated fiscal 2026 guidance expectations. As a reminder, we do not provide forward-looking guidance for certain metrics on a GAAP basis, so the following information is provided on an adjusted non-GAAP basis except with respect to revenue. Beginning with adjusted diluted earnings per share, when we announced the acquisition of OneOncology, we indicated that we had expected to be towards the lower half of our EPS range due to pausing of share repurchases. Today, we are pleased to now be reaffirming our full guidance range of $17.45 to $17.75 to reflect our strong execution, the continued performance of our US healthcare solutions segment, and the expected contribution from OneOncology. Moving now to revenue. We expect consolidated revenue growth to be in the range of 7% to 9%, up from the previous expectations of 5% to 7%, reflecting increased growth across both reportable segments and in other. In 7% to 9% revenue growth, which includes the OneOncology MSO revenue and continued solid utilization trends across the segment. In the International Healthcare Solutions segment, we now expect revenue growth to be in the range of 7% to 9% on an as-reported basis to reflect the weakening of the US dollar against many currencies. On a constant currency basis, our International Healthcare Solutions segment revenue growth remains unchanged at 6% to 8% growth. For other, we now expect revenue growth to be in the range of 1% to 5%, reflecting updated expectations for ProPharma and positive volume trends we have seen at MWI, which represents a significant majority of revenue in other. Moving to operating income, we expect consolidated operating income growth to be in the range of 11.5% to 13.5%, up from the previous guidance of 8% to 10%. This is primarily driven by our increased growth expectations for the US healthcare solutions segment, where we now expect operating income growth to be in the range of 14% to 16% due to our acquisition of OneOncology and the continued strong execution and performance of the segment. As a reminder, we expect OneOncology to be neutral, net of financing costs, to adjusted diluted EPS in its first twelve months. There is no change in our full-year operating income expectations for the International Healthcare Solutions segment, as the largest driver of the year-over-year weakness for the first quarter was timing-related within the European distribution business, which we expect to pick up in the balance of fiscal 2026. As it relates to our operating income expectations for other, we now expect to see operating income flat to the prior year revised reportable segment results. This is due to the full impairment of depreciable assets of the US consulting business as of December 31, 2025, thereby eliminating the need for future depreciation expense. While this consulting business is small in the context of the Cencora enterprise, we are pleased that we are making progress on focusing our portfolio. Before moving to our updated interest expense expectations, I wanted to spend a moment providing details on non-income contributions we expect from the OneOncology acquisition. Due to the nature of non-wholly owned investments held by OneOncology, we expect to have the following two additional benefits to Cencora's net income. First, we expect to record approximately $30 million of income on our other income and loss line for the full year fiscal 2026, primarily relating to a joint venture in which OneOncology's UUG subsidiary holds a noncontrolling stake. Second, we expect to have a noncontrolling loss add back to net income also related to UUG that will largely offset the noncontrolling income we eliminate from ProPharma, resulting in our noncontrolling interest line being relatively small in fiscal 2026. While these items are helpful callouts as you incorporate OneOncology into your models for Cencora, we do not anticipate them being regular points of discussion. The OneOncology platform is well-positioned, high-performing, and will be a meaningful contributor to Cencora's operating income both in 2026 and in our long-term plans. Moving now to interest expense. We expect interest expense to be in the range of $480 million to $500 million, up from our previous range of $315 million to $335 million, primarily due to additional borrowings required to fund our acquisition of OneOncology. As a reminder, our second quarter is typically our highest interest expense quarter due to the seasonal working capital needs. And with the OneOncology financing, we would expect second quarter net interest expense to be about double our first quarter interest expense. That concludes our updated full-year guidance assumptions. In closing, Cencora delivered a strong start to fiscal 2026. As our purpose-driven team members executed to support our partners and patients. Our strategy, centered on our growth priorities and strategic drivers, is powering our performance, informing our capital deployment, and will allow us to drive long-term value creation for all our stakeholders. Now I'll turn the call over to the operator to open the line for questions. Operator? Operator: Thank you. When preparing to ask your question, please ensure your device is unmuted locally. The first question comes from Glen Santangelo from Barclays. Your line is now open. Please go ahead. Glen Santangelo: Yes. Thanks for taking my question. Hey, Bob and Jim, I'm just going to talk about operating income growth for a second for the balance of the year. I think with so many moving parts like around, you know, RCA, the retina deal, and Florida Cancer, and now adding OneOncology. I think what the market's kinda confused a little bit about is the deceleration, Jim, that we saw in that in the US segment from the September to the December. And so I'm kind of curious if you can give us a little bit more color there. And within your full-year guidance, should we just assume continued deceleration throughout the year due to the more difficult comps? And I don't know if there's any other headwinds or tailwinds to that operating income line that you think are worth calling out as we think about the balance of the year? Thanks. James Cleary: Sure. Glenn, thanks a lot for asking that question. And then, you know, I'll start out with the December. And during that it's December, as you know, in the US, we had adjusted operating income growth of 21%. And I'll start out talking about our long-term guidance. As you know, our long-term guidance for adjusted operating income growth in the US is 7% to 10%. And we've increased that twice in the last few months. And the reason I bring that up is if you look at the first quarter, and look at that 21% operating income growth in the US, if you back out RCA, and RCA had a very good quarter, but if you back out RCA, our performance in the US was still towards the higher end of our long-term guidance range, and that's even with the headwind from the customer that we lost. And so if you back out that headwind, we were meaningfully above our long-term guidance range in the first quarter, and the US. And really, those positive results are due to things like utilization trends. We've talked about for some time, really strong performance in Specialty in the quarter. We had particularly good performance with health systems, but also with physician practices and really good sales to both OneOncology and RCA and then just broad performance across the US segment. And so as a result of that and as a result of the contribution, of course, from OneOncology, we're increasing our guidance for the full year from in the US from 9% to 11% adjusted operating income growth to 14% to 16%. And so if we look at the balance of the year guide that you asked about, and if we exclude RCA and exclude OneOncology, we're still solidly within that long-term guidance range of 7% to 10%. And that's in spite of the headwind that we have from the loss of the oncology customer that was acquired by a competitor. And, that, you know, very good performance is, you know, is driven by the same factors, including utilization trends, strength in specialty sales, and broad-based performance. And so if you look at our performance now, I think we are performing really well. It may not be the same level of outperformance that we've had in some of the recent past. Of course, the comps that we're hitting are very strong comps. But I will say that we, you know, feel very good about our long-term guidance and very good about even when you x out things like RCA and OneOncology, we're performing, you know, solidly within that long-term guidance range that we've increased a couple of times in the last few months. So thanks a lot for the question, Glenn. Operator: Thank you. The next question comes from Elizabeth Anderson of Evercore ISI. Your line is now open. Please go ahead. Elizabeth Anderson: Hi, guys. Good morning, and thanks for the Appreciate all the details. I was wondering if you could go into a little bit more detail on some of the MSO platform AOI accelerators such as, you know, you've owned RCA for about a year. You obviously have just rolled up OneOncology in terms of closing that. Where is it like shorter-term opportunities in terms of helping to drive AOI growth? And what sort of like a longer-term driver as we think about that platform, going forward. Thank you. Robert Mauch: Hi, Elizabeth. Thank you for the question. You know, I'll just I'll take a step back and just kinda explain a bit kind of what why the MSOs fit so well within the Cencora strategy, and I'll get right to your specific question. But the MSO strategy is a natural extension of the relationship that we have with specialty providers as well as specialty biopharma. It's, in addition to the strong businesses that we have in specialty distribution and GPO. So the acquisition of RCA was a good important first step. And as we saw the performance of that business, it became clear to us that we should, if we could, accelerate the acquisition of OneOncology, which we're extremely happy that we were able to accomplish. So what that gives us now, which gets to your question, is now we have two platform MSOs who are market leaders with significant capabilities within each MSO. And then the answer to your question is as we look across those MSOs, we have opportunities to leverage those capabilities, which we which we've talked about and we, you know, we restated in the prepared remarks today. But the clinical trial excellence that exists within RCA is something that we believe we can quickly leverage across the entire platform. Revenue cycle management is a very strong capability, which within the MSOs that can become even stronger. That's a value driver. And then things, you know, around future products and future technologies. That these excellent physicians have leadership in, that's where you get to a little bit of the medium and the longer term. We're confident that there will be new capabilities and new services that will be built over time. That most importantly, will be there to support the physicians and you know, to restate again, the purpose of the MSO is to support the physicians and the physician practice. That allows them more time to focus on their patients, on clinical excellence. And driving. So as we build those capabilities, we have a scale and the footprint now to deploy them in a significant way. So we have short-term opportunities, which we talked about, but we're also excited about medium and long-term opportunities that we'll talk more about once they become more apparent. Operator: The next question is from Lisa Gill of JPMorgan. Your line is now open. Please go ahead. Lisa Gill: Thanks very much. Bob, I have one question for you and then just a follow-up for Jim. Bob, on your side, I appreciate everything you're talking about from an MSO perspective and the physician relationship. But one of the comments that stood out to me today is the benefits of strategic partnerships with health systems. Can you talk a little bit more about the opportunities that you see there? You know, what's in the numbers today and what the future opportunity is? And then Jim, can you just help us to understand the cadence of earnings? I just want to sure I know you don't give quarterly guidance, but anything to call out as we think about the next several quarters? Robert Mauch: Hi, Lisa. Thank you for the question. You know, we certainly are focused, the MSOs today, but your question is spot on. With our strategy and the way that we think about our specialty business because certainly, the physician community physician side of care is critically important for patients and for Cencora, but we also see significant growth in our relationship with health systems who are also focused on that specialty growth. And we've been, you know, focused there over a number of years. We feel really comfortable with the customer portfolio that we have. And we expect to continue to see growth there. And you know, as I mentioned in my prepared remarks, you know, we spend a lot of time understanding those customers, these health systems customers, understanding their strategy, how they want to grow, and then we bring the capabilities of Cencora to help them do that. And so that's worked out well to this point. We expect it will continue, but your question really is indicative of the way that we think about the specialty pharmaceutical growth and that we want to be a leader in the sites of care where all of our customers are, and we're doing so certainly in the physician space, the health systems, but then others as well. We want to make sure that we're the right partner for those providers. Thanks for the question. James Cleary: Lisa, thanks a lot for the follow-up question. I'll just call out two things. The first is, of course, the oncology customer that was acquired by a competitor. That will be a headwind like it was, the last two quarters. That'll be a headwind in the second and third fiscal quarter, and then we'll no longer have that headwind in the fourth quarter, which will enhance our operating income growth rate in the fourth quarter. Then the only other thing I'll call out which I said in my prepared remarks, and we kind of gave a lot of detail here to help with the modeling is due to the debt that we're taking on to fund the OneOncology acquisition, we're indicating that our interest expense in the second quarter will be approximately 2x our interest expense in the first quarter. Thanks a lot for that follow-up question. Robert Mauch: Thank you. Operator: Next question comes from Michael Cherny of Leerink Partners. Your line is now open. Please go ahead. Michael Cherny: Good morning. Thanks for taking the question. Maybe can talk about the market construct a little bit. Obviously, the first range of IRA price negotiations hit the market. Start of this year. Can you just give a sense, as you prepared for calendar '26 any changes or discussions, relative to the supplier side terms of how you go to market and any changes in terms of the contracting relative to any of the list price changes that were absorbed? James Cleary: Yeah. Let me make a couple of comments there. Thank you for that question. We have a very strong strategic global sourcing team and we were well prepared. And when there were the in list price, as we've said before, we have terms in our contracts which indicate that we'll get into discussions with manufacturers. And we were very successful in those discussions with manufacturers because of the value we provide the supply chain. So we were very successful in maintaining our economics and our gross profit dollars. And so we were, you know, pleased with the way that that turned out. And we had talked about, you know, for some time, the insulin example and how we had protected our gross profit dollars, and this was just another example at the end of this year of us, because of the value we provide in the supply chain, able to come out of those discussions with maintaining good economics and gross profit dollars. And then the only other one thing I'll comment on is just in general, what we saw at the end of the year in terms of, you know, brands and any price increases and those sorts of things was very much in line with our expectations. Thank you very much for the questions. Operator: Thank you. The next question is from Erin Wright of Morgan Stanley. Your line is now open. Please go ahead. Erin Wright: Great. Thanks. So I'll switch to international. It does seem to be more of a timing dynamic. Can you describe that a little bit more? Is there a specific geography that this was attributable to in terms of in the quarter? And I guess, give a little bit more detail on what that headwind was or quantify it for us? Then what gives you confidence in that ramp? What are you seeing in, like, bulk courier, for instance, and other areas as well? Thanks. James Cleary: Yeah. Thank you. Appreciate the question, Erin. And so, I think the key thing is that in the international segment, we're maintaining our operating income guidance of adjusted operating income growth of 5% to 8% for the fiscal year. And what we saw during the first quarter in the International segment was a challenging quarter due to a timing difference for manufacturer price adjustments in a developing market country. And that price adjustment on last year happened at the beginning of the fiscal first quarter and this year, it happened at the very end of the fiscal first quarter. And so that'll really just be a timing difference that we'll see year over year. And as a result of that, there's no change in our guidance for the fiscal year, and we expect it to pick up in the balance of the fiscal year. But then I think in the international segment, the thing we were really pleased to see during the quarter is operating income growth in our global specialty logistics business. And what we've seen the last two quarters is really volume growth in that business. And so we're executing well as a team there, and we're really pleased by the positive signals that we've seen of volume growth there. And of course, that translated in the most recent quarter to operating growth. So those are the things that enable us to maintain our guidance of 5% to 8% in international for the fiscal year. Thank you, Erin. Operator: Thank you. The next question comes from Steven Baxter of Wells Fargo. Your line is now open. Please go ahead. Steven Baxter: Hi, thanks. I was hoping to spend a minute on the revised US EBIT guidance. It looks like that came up about $160 million or $170 million. I was hoping you could perhaps break that into perhaps the contribution from OneOncology, whether we should think about any kind of transitory costs or kind of ramping going on with that to kind of consider. And then in terms of organic guidance provision, is there any organic guidance provision in the segment allowed to point to there? Thank you. James Cleary: Yeah. Thanks a lot for the question. And, of course, in the US, we increased our guidance from 9% to 11%, as you know, to 14% to 16% and that was driven by the OneOncology acquisition and also by continued performance in our US healthcare solutions segment for all the reasons that we've been talking about. And as I said before, if you back out RCA and you back out OneOncology, in the first quarter, we're towards the higher end of our long-term guidance range of 7% to 10%. And in the last March, if you back out RCA and OneOncology again, we're within that long-term guidance range. And both those things are in spite of the loss of the oncology customer that was acquired. Now one other thing that I want to raise, and this is why we got into a little bit of detail in my prepared remarks, is there are some OneOncology benefits that happen below the operating income line and part of those benefits are in the other income line, and part of those benefits are in the noncontrolling interest line. And now these were covered, but just to quickly go through them, we expect approximately $30 million of benefit in our other income and loss line for the full year fiscal 2026, and that's primarily related to earnings from a joint venture in which UUG holds a noncontrolling stake. And then second, we expect to have a noncontrolling loss add back to net income also related to UUG and just to size it, this add back will largely offset the noncontrolling income we eliminate from ProPharma. That results in our noncontrolling interest line being relatively small in fiscal 2026. And that's a lot of detail there, but we just really wanted to make the point that there's the operating income benefit from OneOncology, and then there's also some income below the operating income line. Steven Baxter: Thank you. Operator: The next question comes from Eric Percher of Nephron Research. Your line is now open. Please go ahead. Eric Percher: Thank you. Jim, I might ask you for a little bit more detail on top of that detailed description. When you look at 9% to 11% to 14% to 16%, it looks like this quarter's performance would add a point recognizing there's a range here. But can you remind us maybe how the OneOnco acquisition contribution flows in at the segment level versus what you gave us at total company being neutral? And how much of that is attributed February 2 to the end of the fiscal year? James Cleary: Yeah. Thanks for asking that follow-up question. And so that increase in guidance from 9% to 11% to 14% to 16% in the US is largely driven by OneOncology, and it's also as a result of the continued strong performance in the US. And, you know, what you'll see is in the other income line, for the first four months of the fiscal year, we have our, you know, our 35% of the net after-tax earnings from OneOncology and that's after interest after tax. So it's a relatively small number. And then, of course, that moves up to operating income for the last eight months. And so it's really just kinda eight months there that drives the increase from 9% to 11% to 14% to 16%. And, you know, just one other thing that I'll add is that it does ramp. And so we'll see the OneOncology contribution ramp as the year goes on, which is due to, you know, both organic growth and inorganic growth, some inorganic growth that we'll see there. But we do see a nice ramp over the course of the fiscal year that'll, of course, continue to ramp in future years. Thanks a lot, Eric. Eric Percher: Thank you. Operator: The next question is from Allen Lutz of Bank of America. Your line is now open. Please go ahead. Allen Lutz: Good morning, and thanks for taking the questions. One for Jim. You mentioned if you back out RCA and OneOncology, you're toward the high end of the long-term EBIT guidance in the quarter. And then over the last three quarters, you're within that range. How should we think about what's embedded in that core business for the rest of fiscal '26 if we exclude RCA and OneOncology? Should we just assume it's basically within that? And then what gets you within US Healthcare Solutions on the EBIT side? What gets you to the low end and the high end of that range? Thanks. James Cleary: Yeah. And, you know, really, it's the things we've been talking about for quite some time. And so it's solid utilization trends. It's on strength and sales of specialty to both health systems and physician practices. And we've seen really strong performance there in health systems. Given our strength in specialty in oncology, that's really helped us with health systems. And then broad-based performance throughout our US business. And so it's really, you know, just kinda all those sorts of things, and it's a range, because, of course, it's very strong performance, and it's just kinda what's that level of strong performance within the range. And then, of course, you know, our business has been good for, you know, for so long. That, that, we have, we have strong comps that we're comparing against. But, also, you know, we have a lot of confidence in our guidance because of our success and because of those underlying trends that we've been talking about for quite some time. Thanks a lot for the question. Allen Lutz: Thank you. Operator: Next question is from Charles Rhyee of TD Cowen. Your line is now open. Please go ahead. Charles Rhyee: Yes. Thanks for taking the question. Jim, maybe just to go back to the below the line items related to OneOncology. I guess, if I remember correctly, when you announced the deal, you know, you guys did say that you wouldn't be consolidating 100% of that, and I assume that this is that portion that is not being consolidated and will continue to be below the line. You call it out this time, but is it right to think that this $30 million amount is an ongoing kind of an NCI piece that we should be modeling? And then I guess then, you know, how much of that so I guess, really, how much of total OneOncology are you owning in going to the future? Is this, like, is this, like, a 10% piece that will remain kinda staying outside? Or is it less? And then and then if I could just add a follow-up on share repurchase. I understand you're pausing in the short term, but when I look at your total leverage, it's still pretty low. And that would seem like you would have the ability to both pay down debt and buy shares. I'd love to understand maybe you're thinking why you necessarily have to pause if there's any kind of covenants or anything like that. Thanks. James Cleary: Okay. Great. There was a lot there in that question. And what I'll say is that the two below the line items that I specifically related to OneOncology's UUG subsidiaries, and that they will continue to, you know, be there over time and will continue to have those benefits that below the line below the operating income line contributions as a result of that. The second part of the question had to do with our ownership stake in OneOncology. And we increased our ownership stake when we made the announcement today from 35% to 92%, and we're really pleased to say that the practices and management will own the remaining 8%. And so I think that was the second part of the question. And then the third part of the question was share repo. And as we've said, you know, we're pausing share repo and focusing on deleveraging. But I will add that our, you know, long-term capital deployment priorities remain the same, which are, of course, investing in the business, strategic acquisitions that you've seen, share repurchases that you've seen over time, and then having a nice growing dividend, which we grew at 9% this year. So a lot for the question. Charles Rhyee: Thank you. Operator: The next question is from George Hill of Deutsche Bank. Your line is now open. Please go ahead. George Hill: Good morning, guys, and thanks for taking the question. And I'm gonna ask another one on MSL accounting. So first, I guess my question is, could you unpack a little bit of the revenue guidance change in the US business? It's about $5.7 billion. And I'm interested in you if you can provide some color on the OneOncology contribution, the growth in the core, and kind of how to think about any of the puts and takes in WAC price reductions, whether or not that played a point at all. I recognize that you guys have offset at the earnings line of inch I'm I'm surprised there's kinda no impact on the revenue line at all. And maybe growth of GLP-1. Then my quick follow-up would be know that we were all looking at the OneOncology acquisition as a multiple of EBITDA. Is that EBITDA number the right proxy to use for AOI as we model OneOncology? And, like, are there are there any significant puts and takes between the AOI line and the EBITDA line for OneOncology? Thank you. James Cleary: Yeah. So there was a couple of things there in that question. The first was on revenue and revenue guidance. And, you know, OneOncology does not have a large impact on our revenue guidance and the growth there. And, of course, the MSO business model is a lower revenue business model, but a really nice operating margin business model. And that's similar to what you've seen from RCA. It really impacts our operating income margin. And then the other thing I'll say there is, you know, we don't count the revenue twice that we, you know, of course, we sell to MSO, but, yep, but only count the revenue once, of course, and I'm sure you're aware of that. And then the other things I'll say is that as we, you know, look at our revenue growth this year, of course, we have a grocery customer that we off-boarded, and we also have the oncology customer that was acquired by a competitor. So that impacts our revenue growth this year. And then also the we fully anticipated the changes in list prices when we put together our revenue guidance for this year. And so we're, you know, pleased with the increase in guidance because it just shows, you know, the underlying strength of our business when we have the increase in revenue guidance. And then you, you know, you asked a question about kind of any differences between EBITDA and operating income other than the components. There is no meaningful difference there that I would, you know, call out other than, of course, the depreciation and amortization. Thank you for the questions. George Hill: Thank you. Operator: The next question is from Steven Valiquette of Mizuho. Your line is now open. Please go ahead. Steven Valiquette: Yes. Great. Thanks. Good morning. I guess within the international business, your revenue growth is pretty strong. Any color just on the drug pricing trends in Europe? Really on the back of all the MFN drug-related policies from the US might be impacting pricing in Europe or the UK? Any impact from that one way or the other? Or is it just kind of business as usual in Europe aside from your one call out? In the, that developing country? Thanks. Robert Mauch: Hi, Steve. Thanks for the question. I'm gonna take this so we can give Jim a break, he can take a sip of water here. No, we haven't seen any real changes in the markets from MFN. So, you know, as Jim said earlier and you just restated, we did have the timing issue in one market. Overall, the international business is performing, you know, within our expectations, and we expect to, you know, meet our fiscal 2026 commitments there. But no changes based on MFN. We're also seeing, Steve, you know, which may be a sub-bullet of your question kinda within we talked about the World Courier business improvement, but, you know, I do want to state how strong our growth is in our global 3PL platform. So, again, part of our specialty strategy and within that specialty strategy in Europe, those products are delivered, you know, through 3PL and not necessarily through wholesale. And we have a pan-European market-leading service there. Also includes, obviously, the United States and all of North America. So which is performing very well. But full circle, no real changes in pricing that we're seeing in that market. Thanks for the question. Steven Valiquette: Thank you. Operator: The next question comes from Kevin Caliendo of UBS. Your line is now open. Please go ahead. Kevin Caliendo: Hi, thanks for taking my question. I want to change it up a little bit. There was a relatively credible story about a private equity firm potentially being interested in buying MWI. I want you to you're not gonna comment on the story, but just broadly speaking, can you talk about how you think about asset divestitures in the context of long-term growth rate or impact to long-term growth rates, impact near term to earnings? Like, does that would you contemplate dilution? Or anything like that if strategically it made sense for you long term? And also maybe just speak to what's happening in that marketplace right now. In MWI's positioning, you called it out. It had a good quarter. I'm just wondering strategically how it fits long term for you guys. Robert Mauch: Yeah. Thank you for the question. As you said, we're certainly not gonna comment on any rumors, but I will, you know, reiterate, you know, what we said very specifically last quarter and really have been working on over the past year or so. And that is our strategy is being, you know, refocused and one of our strategic drivers is to make sure that we're prioritizing growth-oriented investments. And so we went through a process of assessing all of our businesses to make sure that they are very well aligned with our strategy and our future strategy going forward. And made the determination that we would put certain businesses in the other category. And at that time, we said we would be looking at strategic alternatives for those businesses in other. The purpose of that is really to create that focus, management focus and strategic focus, and then we believe, you know, growth rate benefit from doing that. But I'll hand it over to Jim and talk about some of the potential, you know, short-term impacts if any divestitures were to occur. James Cleary: Yeah. So let me comment on a couple of things that you said. First of all, MWI continues to perform very well within its market. In this most recent quarter, it had 7% revenue growth. And performed well in both the companion and production animal markets. So we're pleased that it continues to perform well. With regard to one aspect of your question is, any potential dilution from a divestiture. You know, from some divestitures, there could be potential dilution. But as Bob was saying, you know, we think it's the right thing to do for the long term. And one of Bob's real strategic priorities is to prioritize growth-oriented investments, as he was saying. And that's why we're investing in businesses like MSOs that bring competitive advantage to the balance of the enterprise. And so while there might be dilution in the short term, we think it will, you know, it could enhance growth and enhance returns over the long term. Thanks for the questions. Kevin Caliendo: Thank you. Operator: The next question is from Daniel Grosslight of Citi. Your line is now open. Please go ahead. Daniel Grosslight: Hi, thanks for taking the question. It sounds like RCA is performing better than initial expectation which has been the case for the past couple of quarters here now. I think when you initially announced that deal, you were thinking around $0.50 of accretion from RCA in the first full year. There was that kind of accounting change, and so I'm accounting for that. Now that we've passed that, one-year mark, I was wondering if you could provide an update on how much accretion you saw from RCA in the first year or maybe quantify that app performance for us? And then maybe provide a little bit more detail on the sources of that outperformance. Thanks. James Cleary: Sure. Yeah. We've continued to see, you know, very strong performance at RCA. And we've seen, you know, good performance organically, and we've seen good tuck-in acquisition opportunities. So we've been just, you know, really pleased by the performance of the team there. And we've, you know, it exceeded the expectations that we had and the clinical trial part of the business, but really performed well throughout the business. So we're very pleased with the acquisition. And seeing the growth continue to ramp over the balance of the year. And then, hey. Just one follow-up I want to make on the OneOncology. Some of the below the operating income line items that I was referring to, I just want to make it clear that, you know, those are accounting nuanced items related to one of the OneOncology subsidiaries related to the UUG subsidiaries. And this will be a part of the model going forward. It's not one so we'll continue to have that benefit from OneOncology below the operating income line, but we don't anticipate that we'll be talking much about it, you know, this year or in the future years because, you know, we fully expect, given the strength of the very strong performance we've seen in the business in the past and what we expect that there'll be very good operating income growth. Thank you for the RCA question also. Operator: Thank you. That concludes today's Q&A session. I'd like to hand back to Bob for closing remarks. Robert Mauch: Thank you very much. In all seriousness, do want to thank Jim for carrying the heavy load today, and thank you all for your questions and interest today. I'm proud of how Cencora continues to execute to drive value for all our stakeholders. Investing internally in our infrastructure and externally to extend our solutions for customers. We're well-positioned to drive long-term growth and are pleased to have raised our long-term guidance this year. Demonstrating our confidence and our ability to continue to execute and create shareholder value. Thank you all very much. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.
Operator: A warm welcome, and thank you for joining Cloetta's Q4 Interim Report Presentation. I'm Laura Lindholm, the Director of Communications and Investor Relations. We extend a special welcome to the more than 5,000 new shareholders that joined our journey last year. And of course, hope that many of you are listening in today. Our CEO, Katarina; and CFO, Frans, will as per usual, first go through our results, after which we will move to the Q&A. Where you either have the possibility to dial in ask questions live or alternatively post your question through the chat. The chat has already opened up for your questions. Over to you, Katarina. Katarina Tell: Thank you, Laura. I am really proud to share our fourth quarter and full year results with you today. And I'm so pleased that 2025 turned out to be a successful year. We closed it with an exceptionally strong profit in the quarter, and we are now taking another step closer to delivering on all our long-term financial targets. But first, over to the agenda. Today, it looks as following. I will start with Cloetta in brief, then I recap our strategic framework and our updated financial targets. After that, I'll move to our quarterly highlights. Our CFO, Frans, will then walk you through our quarterly and full year financials. And then as always, we wrap up with a Q&A. For any new listeners on the call, let me start to tell you a bit about Cloetta. As Laura already shared, during last year, we welcomed more than 5,000 new shareholders. So this slide might be a good recap, especially for you. Cloetta was founded in 1862. And today, we are the leading confectionery company in Northern Europe. We strongly believe in the power of true joy and our everyday purpose is to spread joy through our iconic brands. We have grown a lot since the early days, and we now have operations in 12 countries. In 2025, we hit SEK 8.5 billion in sales, and our operating margin was 12.1% to be compared with 10.6% in 2024. As I already mentioned last quarter, we have established a strong profitability uplift, which we will talk more about today. Over half our sales come from our 10 biggest brands, and we call them our Superbrands. Despite the current geopolitical uncertainty, including a tariff situation, our company remains largely unaffected. This resilience is due to several key factors: firstly, we operate in a noncyclical market with stable consumer demand, which provides a solid foundation even in uncertain times; second, our strong and trusted brands gives us the ability to adjust prices when needed without losing consumer loyalty; thirdly, our broad product portfolio allows us to offer a range of alternatives, helping us adapt quickly to shift in consumer behavior; and finally, we have, despite the current geopolitical uncertainties, still many attractive growth opportunities like the expansion of our Superbrands, our step-up in innovation and growing beyond our core markets. These strengths gives us the confidence to continue delivering solid performance and building long-term value for our investors, our customers and consumers and the people at Cloetta. I will now briefly walk you through how we bring our vision to life through our strategic framework and then in relation to this, also our updated financial targets. To learn more, please see the recording of our Investor Day 2025, which is available on our website. So let me start to talk about our vision at Cloetta because it really captures what we're all about. Our vision is to be the winning confectionery company inspiring a more joyful world. And it's not just something we say. For us, this is a real promise to do great work to keep innovating and most of all, to bring joy to people every day. This vision is what guides us, is what keeps us learning, improving and leading the way in our industry. We have created a clear strategic framework to guide us forward. And right at the center is, of course, our vision, to be the winning confectionery company inspiring a more joyful world. Our strategy is about some clear choices, choices that will help us scale, grow and make the biggest impact where it truly matters. We have 5 core markets. It's Sweden, Denmark, Norway, Finland and the Netherlands. And today, around 80% of our total sales come from these markets. Frans will talk more about our geographic mix a bit later. Our first strategic priority is to focus on our 10 Superbrands within these core markets. These are the brands with the strongest potential. By leaning into our expansion strategy, we can open new opportunities, grow faster and build real scale. I will also share one example today of how we are working with one of these brands in our core markets. We are not stopping there. We're also looking beyond our core markets. We have identified 3 high potential markets that sits outside our core. That's the U.K., Germany and North America. Today, I will share an update of our progress in North America, but also a short update of our global agreement with IKEA. Our third priority is to elevate our marketing and acceleration in innovation. The market keeps changing, and we need to stay ahead, not just following trends, but also help to shape them. In our strategic framework, we are now also opening up to explore M&A, but only if it fits our strategy and when it makes good business sense. That said, any M&A would serve as an accelerator. It's not something we rely on to reach our financial targets. And to make all of this work, we need, of course, the right enablers in place. This means having a focused, efficient operating model and a structure that actually supports our strategy and goals. In Q2 last year, we announced changes to our organizational setup, including some role reductions and updates to our group management team. Those changes are now in place, and we have aligned our structure with our strategy so we can move faster and strengthen our path to profitable growth. People and culture are, of course, at the heart of everything. Without them, the rest is just the black box. Our culture is the foundation of how we work, and we're committing to building an organization that is strong, capable and filled with joy in what we do. So let me share an example of how we expand with our Superbrands into new markets. And this time, I will use Kexchoklad as an example. In Sweden, Kexchoklad isn't just a popular chocolate. It's actually the best-selling product in the entire food and beverage industry. Everyone in Sweden knows the yellow-checkered pattern. Many of us also connect Kexchoklad with skiing and an active lifestyle. Kexchoklad is part of Swedish everyday life. We have been selling Kexchoklad in Denmark, too, but only through a few retailers with limited distribution and often discounted. It has not reflected the strength of the brand. So last year, we decided to change that. We took the marketing materials that worked so well in Sweden, translated it and brought the same strong story to Danish consumers, and it worked. Demand grew and so did the sales. Now Finland is starting the same journey. We just launched Kexchoklad there, and the response has been very good. At launch, we reached 90% weighted distribution, and we also hit our market share target during the first week. It's early days, but momentum is strong, and it shows what's possible when we bring our Superbrands to new markets with the right focus and investment with a good return. Then let me move to 2 examples connected to our strategy of growing beyond our core markets. The first one is IKEA. In 2025, we signed a global agreement with IKEA. And today, the now broader assortment has been made available in 14 countries in Europe. This means that some of our most iconic Superbrands are now also available at IKEA stores. And we're not stopping there. We plan to roll out these products in even more markets during 2026 and 2027. The details of the agreement with IKEA and Cloetta are, of course, confidential, but we will continue to share updates whenever the agreement allows us to. Now let us look at another example, how we're growing beyond our core markets. It's about our progress in North America. Today, we have a small but growing business there. We are continuing to build on what we started while at the same time, preparing for the next stage of expansion and putting the right long-term infrastructure in place. We have set a 3-year plan because for us, it's more important to have a solid, well thought-out business plan than to rush. We want to make sure that every investment really counts. Building a brand and expanding on a new continent is exciting and is really full of opportunities, but it has to be done in a controlled and pragmatic way. And we are already taking important step. We have signed a contract with a local commercial leader who will further drive our go-to-market strategy and build the local organization. We also finalized the packaging and recipes for our key branded packaging products. These are now needed for any larger fast-moving consumer goods company to be able to operate in the U.S. This was an important step to meet the different food regulation in North America, and it positions us well for the rollout in 2026 and 2027. For Pick & Mix, we run a pilot project to gain deeper consumer insights, which now guides us our long-term rollout. And as a part of building our Pick & Mix brand and awareness, we also opened a CandyKing store at Bleecker Street on Manhattan, and I will tell you more about that on the next slide. So we are moving on to the update on our newly opened CandyKing store on (sic) [ in ] Manhattan. This store is an important step for us. It helps us build the brand, increase awareness of our leading concept and introduce local consumers and retailers to the Nordic tradition of pick and mix. The store is an excellent way to showcase what we can do and have done in more than 4,000 retailer stores in Europe. The store opened 2 months ago, and the response has so far been fantastic. Both consumers and the press have welcomed us warmly and the store has been profitable from day 1. Yes. Now over to the long-term financial targets. So in March 2025, we updated our long-term financial targets to match our strategic priorities and our vision. With a clearer plan in place, we raised our long-term organic growth target from 1% to 2% to 3% to 4%. As inflation now is stabilizing, it's obviously difficult to justify price increases driven by inflation. This means that further growth primarily needs to come from higher volumes, exactly what our strategy is designed to deliver. Our long-term adjusted EBIT target stayed at 14%, and our goal is now to also reach at least 12% by 2027. As many of you saw in the report, we're already above 12% in 2025. As Frans will explain later, Q4 got an extra boost, and we will wait to celebrate 12% EBIT when it's fully repeatable. Historically, our net debt target has been around 2.5. Since we are -- have been consistently reached that over the years, we now set a new target below 1.5. Of course, if a strong M&A opportunity appears, we may go above that temporarily, but only if it clearly supports our strategy and with a clear deleverage plan in place. And finally, we have also updated our dividend policy. Instead of paying out 40% to 60% of profit after tax, we are now aiming for payout about above 50%. Frans will talk more about this year's dividend proposal later on, but I'm, of course, happy that also our shareholders are able to be part of our successful journey. And now a short quarterly update. As previously mentioned, we had a successful year that ended with a strong quarter, and I'd like to highlight some key takeaway. As a start, I would like to emphasize that I'm really, really pleased that we've shown growth in both business segments this quarter. And more importantly, this growth is coming from stable and increasing volumes. As mentioned earlier, with inflation stabilizing, volume growth becomes even more important for us going forward. We are the leading confectionery company in Northern Europe. And this quarter, we continue to see strong performance in the Nordics and in North America. In the rest of Europe, sales were stable compared to the previous quarter. This quarter was also exceptionally profitable. That was driven by our long-term margin-enhancing activities, our savings related to the change in our operating structure and the fact that we received a partial compensation for the supplier quality incident we had early 2024. With the strong results we deliver in 2025, the Board will also propose increasing the dividend to SEK 1.40 per share. So in short, as we close 2025, we can clearly see that we're getting closer to delivering on all our financial targets. Growth is important. And by strengthening our profitability, we're also giving ourselves the room to invest more so we can drive stronger growth ahead. Now it's finally time for the financials, and I hand over to Frans, who I know is more eager than usual to walk you through both our fourth quarter and our annual financials. Frans Rydén: Thank you, Katarina. Yes. Let me take you through both the full year and Q4 in a bit more detail and 4 best ever results when it comes to profit, cash leverage and subject to shareholder approval, also dividend and with important steps towards the long-term net sales growth target. And let me start with the sales. So in the quarter, we again delivered stable, profitable organic sales growth of 1.1%, bringing the full year organic growth to 1.9%. Now Q4 may then at first seem like a slowdown versus year-to-date. So I want to highlight what I think is our 3 really interesting things on how our new more focused strategy is gradually starting to take effect. Firstly, the last major round of pricing took place in Q3 2024. So Q4 2025 is the first full quarter without the benefit of strong pricing versus the comparator. So instead, while in Q3, I mentioned that volumes were down about 1%, I can now share that Q4 volumes are stable to growing. So from a perspective of satisfying the consumer demand, we're actually moving in the right direction. Secondly, while for the full year, we have been able to continue to rely on our broad portfolio to ensure organic growth, so where the decline in the Packed segment was more than offset by growth in Pick & Mix. Now in Q4, as Katarina mentioned, both segments are growing again, and that is really important. Thirdly, as in quarter 3, in quarter 4, we continue to see strong growth in the Nordic region as well as in North America, but partially offset by the rest of Europe. Although in Q4, also the rest of Europe has stabilized a bit. So that helps us grow stronger in Q4 than what we did in Q3; and again, despite the absence of the pricing benefit that I mentioned. You can actually see this for yourself in the report. So in Q4, the Nordic market adds up to 70% of our total sales. That's up 2% versus 2024. And a 2% bigger slice of the pie when the pie has grown 1.1% organically, that means arithmetically, that the Nordics has grown about 4% in the quarter, and that's well within our long-term target, while the other markets have declined and despite that, the strong North America. We're, of course, not content with 1.9% in the full year. But what I just shared indicates that combined with the new organization structure in place as of October 1 to support the new more focused strategy, we are in a good position to progress towards our long-term target of 3% to 4% organic growth. There is also a fourth interesting thing I want to mention on the topic of resilience, and that is about the currency effect on our reported net sales. So down 2% on the full year, 3-some-percent in quarter 4; and based on that, it would be easy to erroneously include Cloetta in the current focus on the negative effect of the strong Swedish krona on Swedish companies. So for obvious reasons, if you are a Swedish company incurring costs in Swedish krona in Sweden to make products that you then export and sell in euro, you have a challenge today. But Cloetta, we -- of course, we largely sell our products where we make them. So products made in Sweden are mostly sold in Sweden and products made in euro-denominated countries are mostly sold in those countries. So the real effect of the strength in Swedish krona is limited for us. And the lower reported sales, that's primarily a translation effect. Then moving on to the normal page I have showing the segments over and under. Actually, I think I've covered what's on this slide pretty well when I said, number one, Q4 growth is without the benefit of pricing. Volumes are actually up. Number two, both segments are growing, and Packed is now back to being over 70% of our sales. And three, the Nordics is doing really well with the rest of Europe a bit more stable. And on the pricing, you can see the impact on the sales in 2023 and 2024 is pretty clear in the graph. But we're, of course, incredibly proud that consumers appreciate and love our brands and products have continued to visit our customers to buy them to the same extent as they used to despite the higher price that they find in the stores; and actually for Q4, buy even more. Now I also want to call out here that Easter in 2026 is now going to happen a little bit earlier than it did in 2025. So we expect that around SEK 30 million to SEK 40 million in sales will shift from Q2 into Q1 as a result of the Easter phasing, and that's largely Pick & Mix in Sweden. So our sales will be up, but also with a slightly softer gross margin in Q1. Regardless, there are more opportunities for growth. And as mentioned, we are on track to reach long-term growth target, but we want to grow with profit, including us taking a fair share of the value that our products generate. So let's look at the profit. So you have surely noted, and Katarina mentioned, with an exceptionally strong quarter 4 at 13.9% operating profit margin adjusted, we are for the full year reporting 12.1%. And you should be wondering sort of why is that not the headline of the report, to deliver the midterm target of 12%, which was supposed to happen no later than 2027 already in 2025. And Katarina mentioned this, and the reason is quite simple. In 2024, as we shared at the time, we incurred significant cost on account of a supplier having delivered a nonconforming component to us. This Q4 results includes a partial compensation for the cost related to that incident. So the negotiation is still ongoing, and I will not go into detail on the amount for now. But just as those costs weighed down our result in 2024, the partial compensation now lifts the Q4 results and our full year operating profit margin tips over to the reported 12.1%. Now we expect to close this process in the first half of 2026, but we will wait with celebrating reaching 12% until we are there in a repeatable manner. But we shouldn't get distracted by that compensation because also without it, we are delivering our strongest full year margin in almost a decade and an operating profit adjusted, and this is the first best ever today. As you can see in the report, it's a profit of over SEK 1 billion. We continue to lift our margins back up again with cost control, including the restructuring of the organization this year, net revenue management, product portfolio and via fair pricing, and all the while, while continuing to invest behind our 10 Superbrands. And it is these actions that make Q4 our seventh consecutive quarter with improved margins versus the same period the year before. And it is these consistent improvements that puts our midterm target of at least 12%, no later than 2027 in sight already for 2026. Now I did say lift back up again. So let's move to the slide showing the margins by segment, and let me comment a little bit on that. So looking at the segments over and under, both segments margins improved in the quarter over last year and for the full year. And the Pick & Mix segment on the lower half, quarterly margin of over 8%. That's right in the middle of our target to be between 7% and 9%. We believe the targeted long-term range is the appropriate range to continue to drive growth in the category as well as geographic expansion in line with our strategy. On the full year, the margin is at the upper end of that range at 9.2%. For the Branded segment, the full year margin is just over 13%, which is a great recovery of 150 bps versus last year, including with the compensation that this brings us closer to the average margin we had during 2022 and 2023 when we were just shy of 13%. So Packed margins are still below the pre-pandemic levels, and we will continue to seek to further strengthen these margins and over time, return to the level where we were before the pandemic and the pricing compression. Now I should mention here that irrespective of the partial compensation, the Q4 margins are normally a bit stronger than in Q3 and the following Q1 margins are generally a bit down versus Q4, including due to portfolio mix. And for Q1 2026, given the mentioned shift with more Easter sales, which is Pick & Mix, that will negatively affect the margins for quarter 1, given the higher relative margin in the Packed segment. Nonetheless, let's move to the sales, general and administration. So the result is helped by the change in the operating structure we announced in Q2, executed in Q3, and we went live with at the start of Q4. We had shared that we expected that 20% of our full year announced savings of SEK 60 million to SEK 70 million will be realized in 2025. And I'm pleased to share that we have done better than that, delivering roughly 30% of the annualized savings this year. So just about SEK 20 million and the majority of that, of course, in quarter 4. Now in the table, you can see favorable items affecting comparability, and that's mostly about the provisions for the restructuring being smaller than the impairment for Nutisal the year before. So the items affecting comparability comes out as a favorable variance. But in Q4, we actually released some earlier provisions relating to the restructuring since we managed below the expected cost in certain areas, again, helping the Q4 margin a bit. And we are tracking well against our previously announced total budget of SEK 60 million to SEK 70 million. On the column with the currency effect, I should also say, you can see the translation effect that I mentioned earlier has also led to lower -- it led to lower reported sales, but it also leads to lower reported SG&A cost. That apart, the rest is a further step-up in spend to support our 10 Superbrands, both in the quarter and for the full year. There's also higher merchandising costs given higher volumes. There's a general inflation, and that is largely offset by the in-year savings from the restructuring. So overall, the SG&A costs are held in check. And for Q1, we will step up A&P further. We're launching a lot of new exciting products, which is a direct effect of our new strategies, third pillar to excel in marketing and innovation, and we will support these products to ensure they get a good start and help us drive the top line. We have fairly obviously created space in our P&L for a higher level of investments in our 10 Superbrands and then drive a virtuous cycle of growth leading to profit and reinvestments. Coming then to our cash flow. I shared in Q3 that the strong cash flow that quarter and year-to-date was not a phasing. And I can also show it with what is our second best ever, for the full year 2025, we have, for the very first time, delivered over SEK 1 billion in operating cash flow. It's actually SEK 1.057 billion. Now the operating cash flow is, of course, in the report, but it's not visible on this slide. But you do get a sense from it when you look at Q4 step-up in free cash flow by almost 50% from SEK 264 million last year to a strong SEK 394 million there in the middle of the upper graph. Now the key drivers of free cash flow are, of course, the stronger operating results and then a favorable working capital management. CapEx in the quarter, that's SEK 31 million. That continues to be on the low side, in line with what I have said throughout 2025, which is that the investment will start to rise in the future to secure the growth and profit, and we will come with an update on the strategy for operations in the first half of this year. And that brings me to my last slide, which is on the financial position and the third best ever, which is that our leverage where we closed the year with a net debt-to-EBITDA of 0.7, so well below our new target to stay below 1.5. And the result is a combination of the strong cash flow, resulting in a lower debt, which is now below SEK 1 billion at SEK 956 million and of course, the improved earnings. And with the low debt, we have plenty of access to additional unutilized credit facilities and commercial papers, which together with cash on hand, totals SEK 2.8 billion as we close the year. So we are pleased to have created good conditions also with respect to our fourth financial target on dividend and for the Board having proposed and assuming shareholder approval, what will be our fourth best ever for Cloetta, and that is an ordinary dividend for 2025 of SEK 1.40. That will be a 27% increase versus last year. And Cloetta will have paid out ordinary dividends of SEK 1.6 billion in the last 5 years, which is almost a 50% increase versus the 5 years prior. And on that promising note, I will again conclude that our financial position developing in line with our set target is really strong, and I hand back to you, Laura. Laura Lindholm: Thank you very much, Katarina, and thank you, Frans. It's now possible to either dial in and ask questions live or alternatively post your questions through the chat, and we have quite many questions already in the chat. So let's get going. The first question comes from DNB Carnegie. With the high volatility in cocoa prices, do you expect a consumer price drawdown in your chocolate offering going forward? And how do you roughly see the time line for this going into 2026? Frans Rydén: Maybe I'll take that one. So well, I hate to disappoint you in the sense that we are Northern Europe's leading confectionery company. And given where we are in the market, we shouldn't be price signaling what we will do going forward. So we will, of course, continue our fair pricing strategy and to ensure we get a fair share of the value that our products are generating and make sure that people continue to visit our customers to buy them and enjoy them. That's all I can say on that. Laura Lindholm: Very good. And we continue with questions from DNB Carnegie, still on topic of pricing. Maybe something on your current best guess regarding peers' pricing on chocolate products or general pricing in the market and current perception on consumer price elasticity for the chocolate brands? Frans Rydén: Okay. I don't want to comment on the competition. beyond that I hope that they also buy our products and enjoy them in their office. But no, but what we can say is we've said it before and that was quite -- it was visible to all the manufacturers is that when the cocoa cost was going up and prices were going up, consumers sort of moved into adjacent categories to enjoy the chocolate flavor, but not with the same level of cost. For example, you would take a chocolate muffin because it tastes chocolate, but there's not so much cocoa in it or some chocolate ice cream. And obviously, now depending on what happens with prices, you could imagine that some of those consumers will come back into the pure confectionery category. But for us, now chocolates is a little bit over 20% of our portfolio. So for us, this hasn't been such a big thing, but I can imagine for some of the competitors that are really dependent on the chocolate category that this would play a bigger part. Laura Lindholm: And then focus on 2 of our growth markets. Peers have cited some increasing price elasticity among consumers relating to cocoa prices, especially in Germany and U.K. towards the end of 2025. Do you experience similar market pressure in those regions currently? Frans Rydén: So -- well for us, chocolate is predominantly in the Nordics, in Sweden and Finland, and we don't really have a chocolate business in Germany and in the U.K. But I think, generally speaking, price elasticity is about people being insensitive to pricing and continuing to consume at the same level also when it goes up. And to some extent, I think consumers have gotten used to higher prices, but let's see what happens. I think for us, what we have flagged is that we have really strong growth in the Nordics, and it's been more challenged on the continent, although now in Q4, it's improved and it's a bit more stable. And that's -- but that is more about overall societal discussion around food pricing than any specific category. Laura Lindholm: Good. And then one last question from DNB Carnegie. I think, we touched upon this already, but maybe a recap. So you mentioned end of the year that you're ahead of the expected run rate to deliver 20% of the annualized savings from the April 2025 structure change. Can you give us some more details on that? Is that saving larger than expected or rather realized ramped up faster than anticipated? Frans Rydén: Now, that's nice. It's almost like I paid someone to ask that question because no, we're super pleased. I mean we announced it in Q1 -- sorry, in Q2, executed in Q3, and we went live beginning of Q4. So I think as a company, we move fast. And what we're saying is that out of the full savings of SEK 60 million to SEK 70 million. We are now delivering closer to 30% of that within the year. So it's a faster -- so we're phasing more of it into this year than what we had originally hoped. So we move faster. It's not that the total amount is changing. Laura Lindholm: Excellent. And it's a busy results today. So the questions from Nordea also comes through the chat. Looking at your long-term growth target of 3% to 4%, how should we think about the contribution from Nordic Superbrands versus the IKEA agreement and the U.S? Katarina Tell: Yes, I can answer that one. So as we presented during the Investor Day, in the beginning of our strategy, more of the growth will actually come from our Superbrands in our core markets, while on the longer term, we will see a bigger growth coming from outside our core markets. So I hope that answered the question. Laura Lindholm: It does. And then second one, could you also update us on the performance in Germany and the U.K., which had some softness in Q3? Frans Rydén: Yes. I touched on it as well that it's more stable, but it's not growing at the rate that our Nordic countries are. And this -- you could say that if you wonder why we made a specific strategic priority of growing beyond the core markets, this is kind of the reason why. We think that there's huge opportunities, but it was also an area that required extra focus, and you can see why we decided to put the focus on it. Laura Lindholm: Good. And then we move on to IKEA. Could we get some more color on the IKEA strategy and what you expect from that agreement? Katarina Tell: Yes. So we made a global agreement, as I said, during 2025. And of course, the details in this agreement is confidential, so we can't share. But what we can share is, of course, that we have our Superbrands. We have a portfolio now available in 14 different countries, and we have planned to roll this out in more markets during 2026 and 2027. Laura Lindholm: Very good. And then for the compensation, you received partial compensation for the 2024 supplier quality incident. What would Q4 margins have looked like on a normalized basis, excluding the compensation impact? Frans Rydén: So we are currently in negotiation around this. That's why it's a partial compensation. So we're not providing a specific number here. But what we've shared is that obviously, this gave an extra jolt to Q4, and it's sort of the full year tipped over to a 12% EBIT margin and which is why we're not really celebrating as we otherwise would have. We want it to be repeatable. But we shouldn't get too distracted by that. This is now 7 quarters of expanding margin versus the year before. And it's obviously come from what we are controlling on a day-to-day basis, which is innovation, pricing, mix, other margin-enhancing initiatives as well as our own cost control, and that's what's driven this. It would still be really, really good, but it would not have been 12% for the full year. Laura Lindholm: Good. And then a final question from Nordea before we move on to other people. Pick & Mix, showed softer profitability and growth in Q4 versus Q3. What explains the quarter-on-quarter change? And what should we expect in the near term? Frans Rydén: Yes. I think, we -- again, what we're doing is we are managing the full portfolio. We're looking to expand Pick & Mix, as we said also when we launched the strategy into new markets. Katarina shared about North America. We've also spoken about other markets. And we will do that in a profitable manner. And we're right in the middle of where we're supposed to be. And between quarters, sometimes it will go up a bit, sometimes it will go down a bit. But long term, I think it's the trajectory is very clear. Laura Lindholm: Very good. And then we have 2 more questions in the chat. They are on the same topic. So I will hence only take the first one. Is it possible to quantify -- it comes from Danske Bank. Is it possible to quantify the compensation amount during the quarter? And would Branded Packaged increase profits without the compensation? Frans Rydén: So it's a super popular topic here. But yes, so we didn't quantify it in 2024 when it happened. We obviously shared with the market and made it clear, and we're not quantifying it now given the fact that it's still an ongoing discussion, but we have received partial compensation. It did help the quarter. It helped the full year tip us over 12%. But by segment or for the full company, we would nonetheless have been improving versus the prior year. Laura Lindholm: Excellent. Thank you very much, Frans. Then Meruna, just to check, do we have any questions from the telephone lines? Operator: There are no questions from the phone. [Operator Instructions] Laura Lindholm: Thank you. It also appears that our chat questions have been answered. So Meruna, nobody there. No last question from the line? Operator: No. Laura Lindholm: Thank you very much. Then it's time to start to conclude our event today. Now some of you might have noticed that we actually used the same image of the delicious looking CandyKing candy that we have used in the presentation. I'm very happy to share on behalf of our Pick & Mix team that this CandyKing collab product will be available in stores in Denmark this week, and in Sweden and Norway next week. In Finland, you will find it during May. And in the U.K., you have to wait until fall. These collab products will exclusively be available in CandyKing points of sale. We, of course, also take the opportunity to remind everybody of our upcoming IR events. Our next report Q1 is published on the 6th of May. But in addition to that, as per usual, quite a lot is happening. Tomorrow, we attend an investor lunch in Stockholm hosted by Danske Bank. You can still sign up. And the IR program for the spring also includes 2 plant visits. I'm super happy that one of them arranged by DNB Carnegie's Montrose team, is especially focusing on private investors. Our next seminar will be Handelsbanken's Nordic Small And Mid-cap Seminar, which is held in Stockholm in the beginning of June. It's now time to conclude for today. Before we meet again, we, of course, hope that you get the chance to enjoy our wide portfolio of confectionery products during many joyful occasions. Many thanks for joining us today.
Operator: Conference is being recorded. Good day, and welcome to the Silgan Holdings Fourth Quarter 2025 Earnings Call. At this time, I would like to turn the conference over to Alexander Hutter, Senior Vice President, Strategy and Investor Relations. Please go ahead. Alexander Hutter: Thank you, and good morning. Joining me on the call today are Adam Greenlee, President and CEO; Philippe Chevrier, EVP and COO; Sean Fabry, EVP and CFO; and Robert Lewis, EVP Corporate Development and Administration. Before we begin the call today, we would like to make it clear that certain statements made on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including, but not limited to, those described in the company's annual report on Form 10-K for 2024 and other filings with the Securities and Exchange Commission. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements. In addition, commentary on today's call may contain references to certain non-GAAP financial metrics including adjusted EBIT, adjusted EBITDA, free cash flow, and adjusted net income per diluted share or adjusted EPS. A reconciliation of these metrics, which should not be considered substitutes for similar GAAP metrics, can be found in today's press release and under the non-GAAP financial information portion of the Investor Relations section of our website at silganholdings.com. With that, let me turn it over to Adam. Adam Greenlee: Thank you, Alex, and we would like to welcome everyone to Silgan Holdings Inc.'s fourth quarter earnings call. Before we begin our discussion on our fourth quarter and full year results and our outlook for 2026, I want to welcome Sean Fabry, who was promoted to CFO in November, to the call. Sean joined the company through the IPEC closures acquisition in 2010 and has served in senior finance roles in each of our operating segments, and most recently on our corporate development team. Sean brings a wealth of knowledge and experience to his new role, which I know will make him and our company successful well into the future. Sean is looking forward to meeting our analysts and investors in the coming quarters. Please join me in welcoming Sean to the call. I also would like to take a moment to thank Robert Lewis, who informed the company of his decision to retire in March, for his over twenty-one years of steadfast commitment to our company. Since Bob joined the company in 2004, our sales have nearly tripled, and our stock price has appreciated over seven times, representing a 10% compound annual growth rate. Bob's leadership in our finance and corporate development efforts has contributed meaningfully to our growth and value creation. He has been a trusted and valued partner to me, our executive team, and our advisers. We wish Bob all the same success as he enters his retirement. Moving now to our results. Our team continued to show exceptional focus and determination in 2025. Our business navigated evolving consumer spending trends throughout the year, which created a more challenging operating environment for our customers and our company. We delivered our second highest adjusted earnings and free cash flow in the history of the company, returned approximately $150 million in capital to our shareholders, and returned to within our target leverage range just over a year after closing the Vayner acquisition. We made significant progress towards our strategic goals in 2025 as we successfully integrated the Vayner acquisition, continued to outpace the market and our peers, and targeted organic growth products and end markets. We completed our multiyear cost savings program as expected. We continue to validate the success of our unique operating model in our customer partnerships and are being rewarded in the market with new business opportunities and awards as a result of our unmatched focus on operational excellence, market-leading innovation, and relentless efforts to provide the best total value solutions to our customers. Our dispensing and specialty closures segment, which now represents over half of our adjusted EBITDA, delivered another year of record sales, adjusted EBIT, and adjusted EBITDA, with continued EBITDA margin expansion and significant free cash flow generation. With the Vayner acquisition now fully integrated and our run rate synergies fully achieved, the business is positioned to continue to achieve organic growth well in excess of our peers as we continue to win an outsized proportion of new product launches in the market. The combined innovation engine of these two market-leading businesses has already yielded additional contractual business wins, and the business pipeline in dispensing products continues to accelerate. While 2025 included some unforeseen challenges, our team adapted during the year to the changing landscape and, more importantly, have used the learnings from 2025 to further strengthen our processes, which will help the businesses operate and serve their markets in an even more agile and adaptive way in the future. Our metal containers business delivered another year of positive earnings and volume trends, with 4% growth in volume led by 7% growth in pet food products. While our business was faced with a very challenging circumstance with one of our long-term customers during the year, our teams were focused on protecting our business ahead of this outcome and worked diligently to nearly fully offset the secondary impact of this customer exiting certain markets. More importantly, with the recently announced developments with this customer, we believe we are uniquely positioned to continue to supply this business in the future and at this time do not anticipate any further impact from this situation. In custom containers, our teams continue to build on our commercial success, and despite significant destocking in personal and home care products in the fourth quarter, delivered a record year of profitability driven by our cost reduction programs and continued commercial successes. Our adjusted EBIT and EBITDA margins expanded by 150 basis points to a level well above the target we laid out about a decade ago, and the business is now in a strong position to transition into an accelerated growth phase over the next several years. Our team continues to demonstrate and validate our unique position in this market, and despite being of smaller scale than some of our competitors, the levels of service we provide, new product innovation, and the value of our long-term customer partnerships create significant opportunity to deliver organic growth in this business. As we turn our focus to 2026, we continue to see significant opportunities to grow our company both organically and inorganically. Our teams remain focused, our strategic initiatives continue to bear fruit, our balance sheet is within our target leverage range, and we believe the opportunities for significant value creation for shareholders in 2026 and beyond remain as compelling as at any time in our history. At the segment level, we are expecting dispensing and specialty closures organic volumes to grow by a low to mid-single-digit rate in 2026, driven by another year of growth in our dispensing products and improved mix. We expect metal containers volumes to grow by a low single-digit percentage, driven primarily by another year of mid-single-digit growth in pet foods. In custom containers, after a record year of profitability, volumes are expected to be flat as the first quarter is expected to see some continued but limited impact from customer destocking. Importantly, we anticipate this impact to be offset in the remaining three quarters as the business repositions to longer-term growth with key franchise customers. As we enter 2026, we remain excited about the opportunities that lay ahead for the company and are confident that the structural changes and evolution in our portfolio have positioned us to drive growth in our business in the near and long term. Our teams remain focused on meeting the unique needs of our customers as we continue to compete and win in the markets we serve. Our strategic growth initiatives continue to shape the company's future. The power of our portfolio, the strength of our teams, and the discipline of our capital deployment model continue to drive significant opportunity to create value for shareholders in 2026 and beyond. With that, Sean will take you through the financials for the quarter and our estimates for the first quarter and full year of 2026. Sean Fabry: Thank you, Adam. As Adam highlighted, we reported another year of strong financial results for 2025, driven by the continued success of our long-term strategic initiatives, the discipline of our capital deployment model, and the resilience and growth of our products and end markets. During the year, we successfully integrated the Vayner transaction and achieved full run rate synergies. We returned our balance sheet leverage to within our target range in just over a year following the closing of the transaction and completed our multiyear cost reduction program. Turning to the fourth quarter 2025 results, net sales of approximately $1.5 billion increased 4% from the prior year period, driven primarily by the contractual pass-through of higher raw materials, mostly in our metal containers business, and favorable foreign currency translation. Total adjusted EBIT for the quarter of $150.6 million was relatively flat from the prior year, with higher adjusted EBIT in our Metal Containers segment offset primarily by higher corporate expense. Adjusted EPS of $0.67 decreased by $0.18 from the prior year period due to higher interest expense and a higher tax rate in the fourth quarter. The fourth quarter tax rate was negatively impacted by certain non-recurring, non-cash tax items, which impacted the tax rate in the quarter by approximately 3% and the year by approximately a half percent. Turning to our segments, fourth quarter sales in our Dispensing and Specialty Closures segment increased 1% versus the prior year, primarily as a result of foreign currency translation of 4%. Higher volumes for high-value fragrance and beauty products were offset by the destocking impact for products in the personal and home care markets. Fourth quarter 2025 dispensing and specialty closures adjusted EBIT was comparable to the record level in the prior year. As expected, the contribution of double-digit growth in high-value fragrance and beauty products and favorable foreign currency translation were largely offset by the anticipated impact of lower volumes of products for personal care and home care markets and related under-absorbed costs for production and inventory reductions in the quarter. Relative to our expectations entering the quarter, both sales and adjusted EBIT in Dispensing and Specialty Closures were largely in line. In our Metal Containers segment, sales increased 11% versus the prior year quarter as a result of the contractual pass-through of higher raw material costs, principally for steel and aluminum, and higher volumes of 4%. Our volume growth in the quarter was largely a result of higher volumes for pet food markets of 7%, as we continue to experience strong volume growth in this category. Additionally, we did see a limited amount of pre-buy volume in the fourth quarter, as certain customers pulled forward volume ahead of the anticipated raw material inflation in 2026. Metal Containers adjusted EBIT increased approximately 5% for the prior year quarter, as the segment benefited from both strong operational cost management, which was responsible for the majority of the outperformance in the segment versus our expectation entering the quarter, and a limited impact from pre-buy volumes. We estimate the impact of pre-buy volumes to 2025 adjusted EBIT was approximately $2 million. In Custom Containers, our results were largely consistent with our expectations as sales decreased 8% compared to the prior year quarter due to lower margin business exited as a result of a planned footprint optimization. Excluding these volumes, our volume increased 1% versus the prior year quarter. Custom Containers adjusted EBIT was comparable to the prior year levels. Looking ahead to 2026, we are estimating EPS in the range of $3.70 to $3.90, as compared to $3.72 in 2025, with higher operating income partially offset by higher interest and tax expense during the year. This estimate includes interest expense of approximately $205 million, a tax rate of approximately 25% to 26%, corporate expense of approximately $45 million, and a weighted average share count of approximately 106 million shares. Interest expense is expected to be above 2025 levels due primarily to the maturity of our 1.4% senior secured notes that come due in April. At the midpoint of our 2025 adjusted EPS range, we will exceed the prior year levels of adjusted EBIT and adjusted EBITDA achieved in 2025. From a segment perspective, low to mid-single-digit percentage total adjusted EBIT growth in 2026 is expected to be driven primarily by a low to mid-single-digit percent increase in dispensing and specialty closures adjusted EBIT and a low single-digit percent increase in metal containers adjusted EBIT. Custom Containers segment adjusted EBIT is expected to be comparable to 2025 levels as the business completes its multiyear cost reduction initiative and transitions to organic growth during 2026. Volumes in 2026 are expected to grow by a low to mid-single-digit percentage in dispensing and specialty closures, driven by a mid-single-digit increase in dispensing products. Metal containers volumes are expected to grow by a low single-digit rate as a result of mid-single-digit growth in products for pet food markets, which now represent more than half of the segment volume. Custom containers volumes are expected to be comparable to prior levels as first-quarter volume will be lower than the prior year due to a limited carryover of destocking activity, which is expected to be offset by growth in the subsequent quarters. Based on our current earnings outlook for 2026, we are providing an estimate of free cash flow of approximately $450 million as operating earnings growth will be partly offset by higher cash interest and tax, and slightly higher CapEx of approximately $310 million to support investments in future growth in dispensing and pet food products. Turning to our outlook for the first quarter of 2026, we are providing an estimate of adjusted earnings in the range of $0.70 to $0.80 per diluted share as compared to adjusted EPS of $0.82 in the prior year period. First-quarter interest expense is anticipated to be in the range of $45 million with a tax rate of approximately 25% to 26%. From a segment standpoint, first-quarter dispensing and specialty closures adjusted EBIT is expected to be below the prior year period, principally as a result of the year-over-year impact of the benefit of selling through prior year inventory in an inflationary environment in 2025 as compared to the headwind assigned to prior inventory in 2026 for steel food and beverage products in Europe. Metal containers adjusted EBIT is expected to be comparable to slightly below the prior year level in the first quarter as a result of the impact of limited pre-buy volume in 2025 that pulled volume forward from 2026. Custom Containers adjusted EBIT is expected to be modestly below prior year levels in the first quarter due to the carryover destocking activity into January. With that, we will open the call for questions. Melinda, would you kindly provide the directions for the question and answer session? Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one to signal for a question. We will take our first question from George Staphos with Bank of America. Please go ahead. George Staphos: Thanks very much. Hi, everyone. Good morning. Thanks for the details. Bob, congratulations on a well-earned retirement. And Sean, nice to chat with you again, and welcome to the call. I guess my first question, Sean, could you give us a bit more detail in terms of the first quarter outlook for DSC? Just kind of the puts and takes that you see. I think you mentioned there was also some impact from pre-buy. More broadly, with DSC having grown now to being the largest business, I would imagine maybe you disagree that the order patterns, the operations, the way that business runs might be different than what you know, you normally would have seen in a traditional Silgan business, say, you know, five and ten years ago. Philippe and Sean, what and Adam, you know, how do you manage the business? How do you manage forecasts? Do you keep your customers in a narrower band relative to say what traditionally you would have seen in metal? And then I might have one follow-on after that. Thank you. Sean Fabry: Sure. So I will take the first part of that question, Adam will take the second part. So for the DSC segment in the first quarter, we are seeing low to mid-single-digit volumes. And one of the challenges that we are facing there is that we do have some low-cost inventory that we put through the system in 2025. So a little bit of a headwind going into the quarter to overcome that EBIT benefit from that position. Adam Greenlee: And then, George, on the dispensing and specialty closures business, you know, the portfolio evolution that we have been talking about for the last decade, you are right. It has moved that business to our largest business in the portfolio now. And also correct that, you know, it is a bit of a different business than kind of the historic food can business for Silgan or maybe even some of the rigid plastic packaging businesses that, you know, the company started with when we were founded back in the eighties. You think about colocated facilities that, you know, you are integrated very deeply into your customers. In many cases, you are buying customer assets so you are part of their production model already right out of the gate. And I think as you think about, you know, the growth that we have had in fragrance and beauty and some of the care and home care products and dispensing, especially closures, it is a bit of a different supply relationship or more of a supply partner with an outside-in perspective versus being kind of on-site and in the weeds with how they are running their business. So I think, you know, it has we have some learnings from '25. We will be very clear about that. And I think what you know, part of those learnings are taking a broader view, broader perspective on the macro environment and other influences that may affect our customer businesses more so than maybe just what is within our own two, four walls. As we are on-site near site in those kind of food can operations. So yeah, part of that, George, is as we have talked, you know, we have taken a broader view of risk as we have come out with our guidance now for Q1 and also for 2026. To try to take into account some of the unknown risks that maybe we had not included in guidance before, again, taking those learnings from 2025. George Staphos: Adam, thanks for that. May my follow-on, I will turn it over to everyone else. If for you to be and recognizing there are no guarantees in life. Right? Forecast can be significantly above or below. That is the world that we are all in. At the low end of your guidance, what would be some of the key volume and margin considerations across the business? So, again, not saying that is where you are necessarily going, nothing is guaranteed. But at your low end of guidance, what is embedded in that? Thank you. Adam Greenlee: Yes. I think, George, I mean, Sean walked through kind of our volume expectations for each of the segments. I think we have got a pretty good feel for demand profiles and patterns with our customers and with the business that we have. I think maybe to try to answer your question, I would say, you know, broader market conditions that might influence our customers' demand for their products probably is one of the items I would point you to that move us closer to the low end of the range. But, again, we have taken a very broad approach to taking those risks into consideration to develop the range that we have and that is included in our guidance to the midpoint as well. George Staphos: Okay. Thank you. Operator: If you find that your question has been answered, you may remove yourself from the queue by pressing star 2. We go next to Matt Roberts with Raymond James. Please go ahead. Matt Roberts: Hey, Adam, Sean, Alex. Good morning. Congratulations to Sean and Alex on your new roles. First on the PSC volume for 2026, wondering if you could help me parse that out and bear with me. I am going to put about three in one here. But first, on hot fill beverage, how did volumes perform in 4Q? And the outlook there for '26 or contribution from new contracts there. In Home and Personal Care destocking, was there any lingering impact in 1Q in DSC that might have missed that? And lastly, in fragrance, I mean, that continues to grow double-digit growth. And by now, for comps alone, you would think that it would have slowed at some point, but based on customer orders or innovation pipeline, what are you expecting there? And is it a function of high-end consumer doing well or continued new product launches or partners expanding their distribution channels? What is going to sustain momentum there? Adam Greenlee: Sure. So maybe just jumping back to kind of fourth-quarter volume. So, you know, for DSC, Matt, really volumes were very close to what we expected. Right? So, you know, as Sean pointed out, double-digit growth in our fragrance and beauty volumes. You know, personal care and home care had anticipated the destocking. It did happen in Q4. It was essentially right in line with our expectation. I think there is a slightly different answer here than containers. So to be really clear, we think the destocking activity is complete in our dispensing and specialty closures segment. And so, you know, volumes were right in line with expectations, including food and beverage as well. So fourth quarter played out pretty close to what we thought. As we turn to the full year of 2026, you know, again, as Sean just outlined, you know, significant growth, again, expected in fragrance and beauty. You think about food and beverage and maybe some of my comments I just made to George. Our assumption for volume right now is going to be comparable. So you mentioned, you know, new contractual wins. Yes. There are some. We have taken an approach that we are going to include some conservative guidance for the market. For our food and beverage, hot fill products, and sports drinks, etcetera. As we are looking at 2026, and we will see how that plays out. Fragrance and beauty, it is really more of the same story. And I think, Matt, as we have talked before, you know, the development pipeline for these products, it is multi-year. It is probably not quite as long as some of our health care products, but you are talking two to three years. So all of this volume that we are going to deliver in 2026 has really been in the innovation pipeline for us for several years. So, you know, there is really no surprise to us. I think the really important point here is that we keep getting rewarded with our performance from our customers with new business wins. We get a disproportionate amount of the new product launches they have, and that is what is continuing to drive, you know, I will say the double-digit growth that we had in the last February 2025. In our estimate for 2026 as well. So maybe to go back to your question, Matt, I would say it is for fragrance and beauty, it is all of the above. All of the things that you outlined are the reasons why we continue to grow faster than the market. And, again, we take a lot of pride in that. We take it very seriously. We are right now on twenty-seven and twenty-eight product launches. And have a pretty good feel for what that is going to look like at this point. Given that development pipeline. So hopefully, that covered all your items. Matt Roberts: Certainly did. Appreciate all the detail there. And as a follow-on, I think I asked about metal. So 4Q EBIT came in better than I think your prior expectations and margin even improved with the higher pet volume mix. So you continue to invest and see pet food growth there, are there any contractual changes in metals that are going on as you continue margin expansion, excluding any raw materials impact, of course? Or was it cost outs that are driving strong results there? Any additional color you could have on margin expectations absent raw materials in '26? Adam Greenlee: Sure. There are probably three things to really think about. I think the single largest is the cost reduction initiatives that we put forward in actually all three of our segments. Certainly, metal containers have had a good portion of that cost savings program over the last two years. So they have executed really well against that cost savings initiative and have lowered the overall cost structure. As you can imagine, you know, volume leverage in this business is incredibly important. So as you continue to deliver growth in pet food and 4% growth in the entirety of the business, that leverage is pretty strong as well. So that it is helpful for the operating margin. And then finally, you know, you are right. We continue to invest to grow with our largest customers. I think it was and guys, correct me if I have got it wrong. It was 2024 that we announced a significant long-term extension with our single largest customer. And we said at that time that, you know, there is nothing structurally changing about the contract, Matt. But we thought that that contract would be margin accretive over the life of the agreement. And it is playing out the way we anticipated. So it is that is a little bit more on the margin versus our cost reduction initiative. But, you know, our anticipation is our largest contracts are going to be slightly margin accretive over the life of those agreements as well. Sean Fabry: Matthew, the only other thing to add is as you think about 2026, remember we have, you know, again, raw material inflation in this segment. So that will have a mathematical impact on margins, so probably stable on margins for 2026 given the incremental leverage on pet food offset partly by the higher sales from pass-through raw materials. Matt Roberts: Adam, Alex. Super helpful. Thank you again. Operator: We will go next to Ghansham Panjabi with Baird. Please go ahead. Ghansham Panjabi: Yes. Thanks, operator. Good morning, everybody. And my congrats to Sean, Bob, and Alex as well for all the news and the promotions. Best wishes into the future. I guess, you know, Adam, if we go back to the dispensing closure segment and thinking back from a high-level standpoint on 2025. Right? So if you know, I think you started to see the destocking impact on beverage pretty early on. Relative to your initial guidance, and then broadened to other categories as the year unfolded. Have you seen normalization in demand for the categories that were initially into the downturn? And just more broadly, where are we on destocking? Do you still see some lingering impacts into, you know, early part of the year, given the sequence of what unfolded last year? Adam Greenlee: Sure. Yes, I think you pretty much got that right, Ghansham. So the food and beverage destocking activity really took place for us. We saw that in Q2. And to your point, you know, the rest of the year in food and beverage roughly played out as we expected. We think those volumes are now normalized. We think that year-end inventory levels in the system are at the level that our customers had targeted for year-end. And as we turn the page going to 2026, you know, we are calling out comparable volumes for food and beverage. So we had a little bit of destocking in Q4 for our personal care and home care products in the segment. We believe that is completed in Q4 and will not have an impact on Q1 volumes for the dispensing of specialty closures segment. Shifting gears slightly, there is a little bit of a carryover of destocking for custom containers. And really, that just is a simple probably unique position that that business has in our portfolio. As you know, Ghansham, most of our customer relationships are direct. We have got a 10 to 15% distribution business in our custom containers or our plastic bottle business. And typically, destocking just takes a slightly different timeline in that distribution segment. Again, thinking just the simple fact that there is another layer of inventory in the supply chain. So typically, destocking starts a little bit later, ends a little bit later, and so we are seeing that carry over a little bit into Q1. Saw that activity a little bit in January as well. So that is included in our guidance. But to be really clear about DSC, that destocking activity is now completed as of the 2025. Ghansham Panjabi: Gotcha. Perfect. Thanks for that. And then Vayner packaging, you know, I think originally when you outlined it the logic behind the transaction, it was going to be additive as it relates to growth. It was very complementary, etcetera. It sounds like the integration is well underway. What about the commercial synergy specific to the asset? The underlying growth that you are seeing there? Any specific wins you can cite as it relates to, you know, step functioning, your position in pharmaceuticals and health care and so on? Adam Greenlee: Sure. You are right. It has been a great addition to our portfolio. I would say the acquisition integration is now complete. We achieved our synergy targets. You know, we are now at fifteen months, let us call it, post-acquisition. We have achieved our run rate synergy targets. And I think, you know, you are touching on an item that the commercial synergy is not really something we typically include in our synergies, but they are absolutely there in this business. And you are taking two market-leading dispensing businesses and combining them, you know, particularly you think about Vayner's position in North America, great products, very limited reach, and very limited scope in North America. We have been able to take some of their products, their technology, to our large food customers that Silgan has such a great history and relationship with. And we have been awarded new business not only on the food side but some of our other consumer products as well. So, you know, I think we are getting the best of both worlds. Between the two businesses, leveraging those relationships wherever they may exist, whether it is legacy Silgan dispensing or at the Vayner customer relationship level. And we are seeing growth opportunities on both sides of that equation. Ghansham Panjabi: Okay. Thank you for that. Operator: We go next to the line of Gabe Hajde with Wells Fargo. Your line is open. Gabe Hajde: Yes. Sorry about that. Adam, Alex, Sean, good morning. Wanted to ask, we are hearing a lot of mixed messaging from some of your peers as well as, you know, customers trying to navigate the current environment. Do not want to go down the laundry list but population trends, affordability, GLP-1, etcetera. We are seeing some restagings, some strategy changes at big CPGs. I am just curious, in this type of an environment, obviously, nothing has been sort of normal, let us say, the past five, six years. But just as you look across your portfolio, think about your go-to-market strategy, your long-term relationships and contracts, etcetera. Do you see the current environment where it seems like customers are looking to reduce costs complexity, things like that, in the supply chain, as an opportunity for Silgan? And, you know, how would you say that is incorporated into your thinking and or the guidance for '26? Adam Greenlee: Sure. I mean, I think, you know, '25 was a very volatile year for all the same reasons that you outlined, Gabe. And I think, you know, we all had to deal with that one way or another. And I think, you know, for us, you know, the vast majority I mean, almost all of our products are in consumer staples category. So, you know, we get away from the discretionary spend quite a bit of our portfolio. So, you know, I think we feel confident that our products continue to have good underlying demand even with population trends and affordability conversations. You know, the food can will continue to say even with some inflation that we pass through, is the lowest cost means of getting nutrition to consumers that need it. So we feel like our portfolio of products is advantaged in this kind of environment. And I would agree with you that we think there is quite a bit of opportunity with our customer relationships, our portfolio of products, and, you know, some of the sustainability initiatives that we have got underway, not only just at Silgan, but with our customers as well. Whether it is lightweighting or other cost-out initiatives, you know, those are always top-of-mind activities between us and our customers. So to answer your question, Gabe, you know, yes. We think those are opportunities. How that fits into our guidance for 2026, what I tell you is we have actually broadened the kind of view of the unknown risk as it relates to things like population trends, GLP-1s, affordability discussions. And, you know, we have taken probably a more conservative approach to how those opportunities might play out. But, you know, it gives us confidence that our products are well-positioned for the marketplace and the volatility that we are all dealing with. Gabe Hajde: Alright. Thank you for that. One, I guess, digging into maybe Ghansham's question a little bit with Vayner. As well as I want to say in 2021, you guys had acquired Unicep. But just anything that you can talk about maybe higher margin products beyond fragrance in the dispensing business. You are seeing growth opportunities I think you guys were working on a couple of maybe, you know, dose products and things like that. Adam Greenlee: Sure. Look. I think health care and pharma is probably the next logical step of the conversation. As we have talked about before. And clearly, the margin profile, the growth rates of that part of our portfolio really are similar, if not even stronger than what we have seen in our fragrance and beauty business. The size and scale of our pharma health care business, you know, it is growing rapidly, but it started from a much smaller starting point at Silgan. Obviously, with the Vayner acquisition, what we brought in from their health care, assets and business portfolio has been very complementary, very beneficial. We are continuing to grow. It is a longer development cycle than what I mentioned on fragrance and beauty as I think you will all appreciate. So, yes, we have been working for many years on some of these products. And have some that are reaching market now, some that are in final stage development. But the pipeline is as strong and active as we have seen, you know, really since you go all the way back to the acquisition of WestRock. And I think it you know, we were talking at one point that it would be disappointing if we did not double the size of our health care business and call the next three to five years. Gabe Hajde: Great. Thank you. Operator: We turn next to Mike Roxland with Truist Securities. Your line is open. Mike Roxland: Thanks, guys, for taking my questions. Sean, congrats on the role. Bob, congrats on your upcoming retirement. It has been great working with you. First question that, Adam, just want to follow up on what Gabe mentioned in terms of Vayner. Can you provide some more color just around the wins that you achieved? You mentioned that in your in some of your remarks. So can you tell me the type of products that were or be maybe speak broadly about the type of products that you are gaining wins in and what type of growth you are expecting this year from Vayner with those wins? Adam Greenlee: Yeah. I think, you know, again, we will try to say, Mike, that Vayner has been fully integrated into our dispensing business. So when we talk about dispensing products growing in a mid-single-digit, that is including Vayner. Again, we fully lapped the comparative. You know, we acquired the business, I think, in October of 2024. So yeah, those results, for the most part, were already fully comparable in our fourth-quarter results. So, you know, I think combined, we feel confident with that mid-single-digit growth. I mean, either the product portfolio and where we are able to get new business awards with the combination. I will give you a great example. Again, in the North American market, you know, we talked a lot about during the acquisition that they have a terrific valve technology for their business and for their portfolio of products. And that is really something that we were very small in Silgan. We have been able to take that technology and apply it with other customers that really advanced kind of Silgan technology with existing customers. So, you know, I do not know how we want to get credit there. It is an existing customer for Silgan. And we are using Vayner's technology. So I think we all win in that scenario, including our customers. But it is really the power of the combination as I think the bigger part of the discussion. Have some other products again just to, you know, deodorant products that are winning. I think they were a little stronger in some of their personal care kind of shower, you know, multi-use products with dispensing closures. And we have just been able to continue to leverage that strength on the Vayner side and grow out that part of our portfolio, particularly in North America, with our existing customer base. Mike Roxland: Very helpful. Appreciate the color there, Adam. And just one quick follow-up. In the past, I believe one of your peers around medical containers may have picked up some of the tomato business, which cost you some share. With this bankruptcy settlement, it appears that one of the asset buyers is getting some of that business back. So could you potentially regain some of the Tomato share that you previously lost? And then relatedly, you mentioned, in your script that you expect no further issues from this customer that was in bankruptcy. If there are no other changes on the assets continue to run as is, can you remind us as to the total EBITDA loss in medical containers if any? I am not saying there is any, but if there is any EBITDA, if there is a reset lower, could you remind us if that what that is? And does Silgan still intend to pursue any rationalization and consolidation in metal containers? Thank you. Adam Greenlee: Sure. And maybe I think the first thing I would say, Mike, is that, you know, the situation with that customer is not fully resolved. It is a process. And they are making progress in the process. So you are right. There was an auction, and there were three winners of the auction. I mean, the business that we are talking about really falls into three categories. There is a broth business, a fruit business, and a core vegetable business. So good news for us is that from an outcome, again, there are still procedural steps that have to be taken before, you know, the winners of the auction take over the assets and the brands. But the broth and the fruit are going to our customers that we supply today. And so we feel pretty good about the ongoing relationship there. The veg business is a new player into canned vegetables, but a prominent player in the fresh category. So, you know, I look at that and I say, you know, on the veg side, we are colocated. We are incredibly well-positioned to continue to supply all of the can requirements that that new customer would need to continue to operate the facility where we are colocated. So I think that, you know, again, we will see what happens as this final resolution plays out. You know, we are taking, again, a cautious approach to our thoughts here. We do not think there is significant upside. We do not think there is significant risk from where we are either because of those ongoing relationships and the supply situation of where we are. Regarding our facilities, again, we are going to wait and make sure we understand exactly what the go-forward position is once the proceedings have reached a resolution. But, you know, we as part of our $50 million cost reduction program, we had closed a facility in 2024 that was supplying fruit products to that customer. And we consolidated that into other operations to get the benefit of the consolidation. So really nothing to do from that perspective. And, you know, I think it is a great question for the next earnings call. Hopefully, the entire process will be resolved. But, you know, for us, Mike, I do not view 2026 as having any further risk than what we experienced in 2025. Mike Roxland: Great to hear, Adam. Good luck in the quarter and the year. Adam Greenlee: Thank you. Operator: Our next question comes from Anthony Pettinari with Citi. Anthony Pettinari: Good morning. With regards to the steel and aluminum tariffs, is it your view that customers and consumers have sort of fully absorbed the impact of the tariffs and it is reflected in their behavior and the price of the package? Or is it possible that you could see some kind of lagged customer change or consumer change over the course of the year? Either changing product positioning or consumer change in behavior, just wondering how you kind of think about that in 2026. Adam Greenlee: Yes. Well, maybe let us start with 2025. It was a very volatile year on raw material costs because of those tariffs and kind of the limited notice that we had to deal with that prior to the implementation of tariffs. And Anthony, as you very well know, you know, our contracts are sort of designed to make sure we are insulated from those kinds of activities. So, you know, we contractually pass through those costs and those tariffs onto our customers and they then onto the consumer. So, you know, I think, you know, those tariffs were kind of let us just round about, call it, midyear, you know, April, May, June of '25. So there is some full-year annualization of those costs in 2026 as we get a full-year impact of those. I do think the market has absorbed those costs. In many cases, our customers had passed those costs on through to consumers. And they are now really challenging themselves on kind of promotional activity trying to understand what the price elasticity is across the board for those products. But to be really clear, the food can we still think is competitively advantaged from a cost standpoint on the store shelf. Again, for those consumers that are looking for nutrition, we think it is the lowest cost means of getting nutrition to those consumers. So, you know, we are still talking to our customers about their pricing activities for 2026. It is a blend. It is different by customers. You can imagine there is a blend of promotional activity trying to drive some volume. There is also, you know, still some conversation about cost recovery. So I think we will see it play out more as we get through the year, but I think it is a balanced approach that all of that means I think it is fairly well absorbed in the market. I think our volumes, again, nice growth for food cans in 2025. See continued growth in 2026 as well. So we think that particular package is positioned very well even with the tariffs that they have already incurred. Anthony Pettinari: Got it. That is very helpful. And then just switching gears and following up on health care and the opportunity there. I think you disclosed that health care was 3% of sales in 2024, maybe at better than company margins. When you talked about doubling, I think, over the next few years. So, I guess, just make sure I got it right, should we think about healthcare maybe going from low single-digit percentage sales maybe to high single-digit percent of sales, you know, in the next three years or so or something like that? And I guess, related, are there acquisitions that could really accelerate that exposure or is it really more kind of the organic growth with clean rooms and all the stuff that you are doing internally? Adam Greenlee: Sure. Again, it is a great market. We are excited that we are continuing to grow and what the future looks like for our healthcare business. So I think you are right. I think you mentioned a 2024 number, so it has grown a little bit beyond kind of that number. I would say we are still in that 200-ish million just as a proxy of total revenue. So could that easily get to 400 million over the course of the next couple of years? Yes. We absolutely think so. How we get there? That is with our own pipeline, and that is with our own kind of contractual obligations that we have already secured over the next three to five years with the drugs and pharma and health care products that are in development with our largest customers. I think you raised a really good point, Anthony, that, you know, I think as we, you know, have continued to expand our dispensing and specialty closures segment, with each acquisition, we say it opens a broader horizon for future acquisition opportunities. Vayner is a great example. It brought a lot of products, but it brought a very strong health care business with it. And we think that opens up even more opportunities from a corporate development perspective and where we can inorganically continue to grow out the business as we have done in the past. So I think, yeah, we even said it in maybe some of the prepared remarks, you know, the opportunities for organic and inorganic growth for Silgan are probably as great as at any time in my twenty-one years that I have been with the company. And, you know, we are extremely positive and excited about what the future, particularly in health care products, looks like for the company. Anthony Pettinari: Great. That is very helpful. I will turn it over, and congrats to Bob and Sean. Operator: Move next to Daniel Rizzo with Jefferies. Please go ahead. Daniel Rizzo: Good morning. Thank you for taking my questions. So not to belabor the point, but on the last call, thought consumer caution within dispensing and also in custom containers was kind of something that they are watching because of, again, affordability issues and things like that. But it does it seems to have faded. So I was wondering if that was just kind of a temporary blip amongst your customers or something that kind of bears monitoring over the rest of the year. Adam Greenlee: Well, I definitely think it bears monitoring over the course of the year. I think, you know, what I was trying to convey, Dan, is that in that affordability discussion, we think our products are incredibly well-positioned to be a very positive value driver for customers that are seeking affordability across a whole bunch of different products. And that is really where a good swath of our portfolio sits. So we actually encourage that conversation and, you know, we will be watching it closely. But we think our products are very well-positioned for that discussion. Daniel Rizzo: Right. And then everything that has happened with your bankruptcy with the customer, does that change how you kind of, I do not know, design contracts or do business with the customer like that or just in metal containers in general? I mean, is this just kind of a one-off thing that you just move past? Adam Greenlee: Well, again, I think since our founding, it would be the first large customer bankruptcy that we dealt with in our metal containers business. And I, you know, I go back to the contractual nature of this part of our portfolio that it is just the contracts have been so well written over a long period of time that, you know, the company did not face any detriment during the course of one of our large customers going bankrupt during the year. So, you know, our teams did a great job of protecting the company, but in fairness, the contracts allow us to do that as well. So, you know, I think it is just again, it is more of the same as far as the contractual nature and the protections that we build into those contracts to make sure we protect our company and our shareholders from any adverse outcome. Daniel Rizzo: Thank you very much. Operator: We will go next to Anas Shah with UBS. Please go ahead. Anas Shah: Hi, good morning, everyone. Thanks for taking my questions. We have some new FDA food guidelines that came out recently promoting protein. It seems to me like that would be pretty positive for your metal cans business. Do you see that as a significant opportunity for you, or are there offsets elsewhere in the portfolio from these guidelines? Adam Greenlee: Sure. I think, you know, we are working very closely with our customers to make sure that we help them position products into the marketplace to really accommodate or maybe incorporate the new FDA guidelines. So, you know, we look at protein as part of our portfolio. And, you know, our high-protein products. Again, the can is a great vehicle to get that nutritional value to consumers. And, sure, I mean, we think it is an opportunity, but there are several opportunities that we continue to work on. You know? So I do think we are working with our customers. There is nothing specific that we are outlining in our guidance or anything at all. It is just one of the puts and takes. We would typically consider as we give forward guidance. Sean Fabry: And then noted just for context, protein is about 10% of the metal containers volume. Anas Shah: Right. Thank you. Okay. Thank you for that. And then also, just your CapEx this year is stepping up modestly. I think, $10 million year over year. And you mentioned dispensing and pet food growth sort of driving that. Any details you can give there on what way you expect CapEx to step up? Sean Fabry: Yes. I think our guidance was $310 million for 2026. And really, that is driven by increased growth in pet food, as you mentioned, and dispensing products. We are really happy with our pet food customers, and we are continuing to invest money in that space where we see the growth prospects. And, honestly, we are under a long-term agreement to do so. So we are happy to do it and to invest in that space where we see the growth. Adam Greenlee: And I think I just maybe to add to that, if you look back over the last thirty years of our CapEx portfolio, you know, investments in wet pet food have been very consistent in our CapEx profile. It might not be every year, but we are investing to support that customer growth, again, driving significant volume growth for the company over a very long period of time. Anas Shah: Great. Thank you. Operator: We go next to Arun Viswanathan with RBC Capital Markets. Please go ahead. Arun Viswanathan: I guess, yes, first off, congrats to Bob. Great working with you over the last several years. And Sean, look forward to working with you as well. And then just on the results. So, the guide, I guess, first on volume. So I think you said low to mid-single digits in DSC. And low single digits in metal driven by pet food. Just curious on the pet food item because you do face a pretty tough comp there, and you have seen some volatility. So maybe you can just kind of parse out, what drives that and I guess, where are you in kind of penetration in wet pet? And then on DSC, you know, I think you had a relatively kind of choppy year last year just given some of those consumer trends. Would you say that, you know, you have kind of settled down? And were there any execution issues that you had last year that you have maybe addressed, or was it just mainly market impacts? Thanks. Adam Greenlee: Sure. Maybe just to address the DST item. I think really, the big items that we talked about during the year were much more related. Right? So you had the food and beverage item, and sports drinks in Q2 that we talked about earlier on the call. Yes. A little destocking in Q4 for personal care and home care products. Those are definitely market-related activities that were the two items, I think, in DSC that went a long way to challenge kind of the performance and fragrance and beauty that was fantastic through the course of the year. So moving over to metal containers. Again, you know, I think if you think about wet pet food, this has been an annual grower for us for decades. And we have been a requirement supplier to our largest customer since we bought assets associated with their business. And, you know, they continue to invest in capacity. Arun, you know, I know we have talked about this before, but the primary animals that we are talking about here are cats and primarily cats and a little bit of small dog as well. So those populations have grown over time. They continue to grow going forward. I think wet pet food in these categories is considered to be a premium product. So, you know, we have not talked a lot about the k-shaped economy on this call, but it is as you get back to some of those larger macro trends, high-end consumer is still seemingly doing pretty darn well. And we see that in our wet pet food segment. And then the last piece of it, and we have seen this for decades again, once pet owners feed their animals wet pet food, it is very rare that they move out of the category and they in a cat or a small dog. Large dog moves in and out, and we have always talked about that. It is a very small part of our portfolio. But for cats, you know, we have seen the stickiness of that product with pet owners and with the consuming animals for a very, very long time. Arun Viswanathan: Thanks for that. And just as a quick follow-up, just on the cash flow. So the $450 million guide, was there any inventory impact? And is there potential for upside if that is not as bad? Or how would you kind of characterize that $450? Is there any, you know, kind of variability in that? Thanks. Sean Fabry: Yes. This is Sean. We normally have working capital improvement initiatives every year in our free cash flow and 2026 is no different in that regard. I would call it a modest amount of working capital improvement, but generally speaking, we are expecting our operating earnings to go up, call it, $20 million, $25 million. And that is offset mostly by cash higher cash interest and taxes in the year. And that gets us to the $450 million for 2026. Bridging that versus our 2025 number. Arun Viswanathan: Thanks a lot. Operator: And we will return back to the line of George Staphos with Bank of America. Please go ahead. George Staphos: Hi, guys. I will try to make it quick. So you have talked a lot about on this call here and there kind of the impact of healthier living and the like. As you have analyzed across your categories, is it a net positive, neutral, negative all that commentary relative to the end market growth and demand you would see across food can DSC and custom containers as you have analyzed it? Second question related we have seen over the last year or so new products, zero-calorie products on the beverage side. Anything that we should be aware of that could perhaps help growth in the dispensing segment for this year or in the next couple of years that you know. Last question from me, just on availability and supply chain in metal, steel, and aluminum. I assume you are doing fine. Just wanted to check the box on that. And has there been any commentary at all from your suppliers about maybe bringing back some tinplate capacity to the US? So thanks for that, guys. Again, congratulations to everybody to Sean, Alex, and Bon Voyage, Bob. Talk to you guys soon. Adam Greenlee: Thanks, George. As far as the healthier conversation that we were having and its impact on volume growth. I mean, I think it is relatively neutral to our volume growth. I mean, I think we are, you know, we are well-positioned already for a variety of outcomes across the portfolio that we have. It is a bit of the intentional nature of how we built out the portfolio that we can do well in different economic circumstances. We can do well with different consumer preference patterns evolving. And feel pretty good that, you know, we have got that captured. And we will support our customers in whatever way we need to. You are right. I think 2026 on the food and bev or on the beverage side, is going to be a year of innovation. You know, one of our largest customers has clearly stated that. And, you know, whether it is zero-calorie or better-for-you products, you know, we are watching very carefully to see what is new volume brought into the category versus cannibalizing some of the existing products. So, you know, again, I would say roughly we are neutral in that scenario because the cannibalization is just it is a similar volume comp volume to what we already had. I think they are looking at it from a value perspective as well. With potentially healthier for you products requiring a premium in the marketplace. And then as we think about, you know, aluminum and steel supply, you know, our two largest expenditures that we have and critically important to our success as well. So, you know, we have talked a lot about tinplate in particular and the US market, and the US market being a net importer now with significant tariffs. So it is a challenging environment. You know, we are one of the largest buyers for both steel and aluminum can sheet anywhere in the world. So you are right. You can check the box for us. We get the products that we need. Our contracts allow us to pass through those costs. Whatever they need may be to our customers. Take that very seriously, and we fight like crazy to get the lowest cost for ourselves and for our customers, George. But, you know, I think the market dynamics are continuing to evolve. I would love to tell you there might be more tinplate capacity coming on in the US. It has to be high quality, wide tinplate capacity. For it to really work well in the manufacturing systems and not just Silgan. But can manufacturers have assembled now over time. So there will be some hurdles to that. So I think our perspective is it is going to be more of the same as we go forward. We will get the products that we need. And regardless of where that supply comes in from, we would love to buy product raw materials in the market where we are making products and selling products. Unfortunately, the way the tinplate market in the US has evolved over time, we are no longer able to do that. George Staphos: Thank you, Adam. Adam Greenlee: Sure. Operator: We have no further questions. I will turn the floor back over to Adam Greenlee, President and CEO, for any additional or closing remarks. Adam Greenlee: Great. Thanks very much, Melinda. We appreciate everyone's interest in the company, and we look forward to discussing our first-quarter results near the end of April. Thank you. Operator: This concludes today's conference. We thank you for your participation. You may disconnect at this time.
Emelie Alm: Good morning, everyone, and welcome to the presentation of the Q4 and full year results for Husqvarna Group. My name is Emelie Alm, and I am joined here today by our CEO, Glen Instone; and also our CFO, Terry Burke. Glen and Terry will walk you through the presentation. And as always, we will finish with the Q&A session. You can ask your questions online in the web interface, and you can also ask them through the conference call. But just before we start with the presentation, we announced some management changes today. So Glen, would you like to comment? Glen Instone: Absolutely. First of all, good morning to all. We did announce some management changes today. So first and foremost, I'd like to welcome Yvette Henshall-Bell, who will take over as the Head of the Forest & Garden Division. That's been with us some 3 years and has been leading our European business within Forest & Garden, actually recording record sales in 2025 within that business area. So were the successor to myself in that case. So really pleased to welcome Yvette to the team. At the same time, both Terry and Karin will leave the company during the course of 2026. We've got a transition period to work through, and that's what we're working towards. So very confident in the strategy we have and the team we have in place to do that. But Terry, please say a word. Terry Burke: Thank you, Glen. Yes, just very briefly, after 16 years with the group, it was a difficult decision, but I have decided to take a new challenge to take some time out and to do something different. But it's very much business as usual for the next 2 quarters. I'll be here up until the end of quarter 2, business as usual, and we continue to execute on our new strategy. Glen Instone: Good. So let's move on and look at -- first and foremost, let's look at 2025. If we look at 2025, of course, it has been an extremely mixed year with a lot of mixed demand. Ultimately, we actually delivered an organic sales growth of 1%. There's been certainly a change in consumer sentiment as we've gone through the year. We've seen a soft or a softening of the consumer sentiment, particularly impacting North America, slightly more positive in Europe, but still a softening of that consumer sentiment that we saw in Q3, and it continues into Q4. As I mentioned, we've had a mixed demand. We've seen some signs of positivity. We've had growth in robotic lawnmower. We've had growth in power caters growth in watering. So some of our key areas we've seen growth in, but we've also seen some declines in other segments. We had headwinds during the year by way of FX. That was a negative, and Terry will take you through the numbers, but also tariffs. Tariffs, of course, came in during the course of Q2 and continued to impact us during the remainder of the year. In most cases, we managed to offset a large proportion of that, but we didn't fully offset the tariff headwinds. We launched some cost savings programs in recent years and the most recent one in 2022. We're actually going to bring that to a conclusion, and Terry will talk about the cost savings, but we actually had a very, very strong cost savings program impacting us positively in 2025, some SEK 745 million during the course of 2025. We maintain a solid financial position as well. We managed to reduce our net debt during the course of 2025 that we're extremely pleased with. And therefore, we've increased our net debt-to-EBITDA ratio. Again, we'll come back to that later in the presentation. As such, the Board are actually proposing to increase the dividend to SEK 1.25 from SEK 1. And of course, that will be ratified at the AGM in April. Going into 2030, shifting gears forward, of course, we are now changing the strategy and looking ahead. We launched at the recent Capital Markets Day some new cost efficiency measures. And when we talk about cost efficiency, it's a significant program, some SEK 4 billion in cost savings. Most of this should be delivered or 60% of that should be delivered in the midterm, i.e., during the next 2 to 3 years. And we'll give some more guidance on how we see that in 2026 later in the presentation. We also talked about a much more improved performance management. In the Capital Markets Day, we launched the term BPU, and that is business portfolio units and how we relook at the units and how they perform. And we give a very clear signal of how some are performing more structurally and going to be part of a structural growth, how some are going to be more in a profit improvement and how some are going to be in a turnaround mode. What I do want to be clear is that we've got to be very, very clear on time line here. Where we have a turnaround, we talk about a 24-month turnaround, either robust turnaround or we need to make some firm decisions on those segments. What I'm extremely proud about is our continued innovation. In 2025, we brought a lot of new products to market, and we continue doing that into season '26. I'll actually close today's presentation and give you a sneak peek in some of those product launches, we've got an extremely strong product lineup going into season '26. So just to recap on what we said at the Capital Markets Day in terms of the financial targets. We said we would -- we have ambitions to grow 3% to 5% when it comes to net sales. Those targets are applicable immediately. That is our clear target going into season '26 and beyond. We must get this company back to growth. Operating margin, we said we have an operating margin above 10%. The first step is to get to 10%, and that is when we talk about a near to midterm target, so the next 2- to 3-year time horizon. And then from a return on capital employed, that is very much in the 2030 time horizon. So just to frame the 3 financial targets we said and when they're applicable in terms of time. Looking back at Q4, of course, this is our seasonally smallest quarter, and we actually had a sales decline of 3%. When we get such sales declines in a small quarter, of course, it impacts from a volume perspective through to the bottom line. We certainly saw a mixed demand, as I mentioned, across the full year was equally applicable to the fourth quarter. Continued soft consumer sentiment, particularly in the North America space. However, we did see some growth in certain segments, actually in the professional segments, particularly around power cutters, of course, benefiting the Construction Division and also professional robotic lawnmowers. At the same time, despite having lower consumer sentiment, we saw some growth in watering in Europe and wheel products in Europe. So still some positive signs despite it being a seasonally small quarter for us. As said in the intro when I introduced Yvette into the group management team, actually Husqvarna Forest & Garden Division in Europe performed very, very well with record sales. So a big positivity in the European business area for Husqvarna Division. So just concluding the fourth quarter, lower volumes, some 3% lower in top line impacting the volumes, headwinds from tariffs and headwinds from currency, lower on the currency, but actually slightly higher impact on the tariffs than we've seen in the previous quarters. And of course, that does give a headwind to the EBIT. But all in all, our seasonally smallest quarter. So if we look at this from the usual slide we've been showing in recent periods, net sales, as I said, declined with some 3% when we FX adjust. We actually had a sales decline in 2 of the divisions in the Forest & Garden Division as well as Gardena Division, Forest & Garden declining with some 3% and Gardena declining by 10%. But we're very pleased to see the growth in the Construction Division. Very tough first half of 2025, and we started to see some growth coming into the second half year. And that's what we saw in the Construction Division, particularly in the North America space. So a 2% growth, but the growth actually coming from our North America construction business. I think I mentioned the challenging market conditions there in North America really relating to the residential, the consumer segments. From an operating income, we had minus SEK 841 million. This is a figure we are not proud about. This is a loss-making quarter, but of course, it is lower than we would have liked it to be. Lower volumes, as I said, negative headwind and negative impact from currency and FX and tariff, but we did manage to continue delivering on our cost savings programs. Terry will take this in the bridges, but we had some SEK 180 million of positive effect coming from the savings programs in the fourth quarter. Operating cash flow, we are seasonal, and therefore, in Q4, it is our season preparation quarter. So we start to build up inventory ahead of the season, and that is very much the case. So we had a negative cash flow impacting our fourth quarter of some SEK 1.3 billion. However, at the same time, we managed to reduce our net debt, and we'll come back to that later in the presentation. Robotic lawnmowers, we've had a lot of questions, and it's a big, big focus area and one of the core business portfolio units for this group going forward. We actually managed to grow 11% with robotic lawnmowers in 2025. Strong growth in professional robotic lawnmowers, but also growth in our residential offering, particularly in the premium end of the segment. So we're very, very happy with that. Since during the fourth quarter, we managed to actually have 2 fairly breakthrough announcements. One is we will be the title sponsors of the Husqvarna British Masters for golf, again, getting us much closer to the golf business, where we feel we get a fantastic awareness creation and boost the awareness and also a very good halo effect into the more residential spaces. We also entered into a partnership with a company called Relox Robotics. And this is actually where we get distribution rights for Europe for ball picking. So again, raising the awareness of Husqvarna in the golf business that we feel is going to serve us extremely well going forward. Precision grass care and precision grass coating, which Husqvarna is now really standing for. If we go into the divisions, and I've given a bit of a flavor in the intro. But the Husqvarna Division, again, a seasonally small quarter, declined with some 3% organically in the fourth quarter. FX had an impact of some minus 8%. So reported figures at minus 11% there. Challenging in North America from a consumer sentiment perspective had a knock-on effect into the demand. And also some of our channel partners also reported on actually very low storm levels in North America in the fourth quarter, and that was the case, and that has a knock-on effect for the demand for our chainsaw products. So they were very key aspects in North America. When we look at Europe, actually, we actually saw growth in several residential segments and particularly in wheel products, but also in Pro robotics. So even though it's a seasonally small quarter and certainly for grass cutting, we managed to see growth in both Professional Robotics as well as our wheeled assortment. The income, just like for the group, negatively impacted from FX as well as tariffs and lower volumes. So all in all, we managed to come in with some minus SEK 355 million. Zooming out to the full year, actually very pleased that the Husqvarna Forest & Garden Division showed a growth -- organic sales growth of 3% and an operating margin of some 7.8%. Strong growth in Europe with much more pressure sitting in our North America business area. Moving over to Gardena Division. Again, putting this in context, it is the seasonally small quarter. And in the fourth quarter, we actually had a decline of some 10% from an organic sales perspective. The main declines came from 2 areas: the electric products that we call our Powered Garden segment, but also the watering business in North America under our Orbit brand, largely the result of weak consumer sentiment. We did, however, see growth in the watering business in Europe. That is the business portfolio unit that we put into the strategic or structural growth segment at the Capital Markets Day recently. So very pleased to see the growth in the watering segment in Europe even in a small quarter. So given that, we managed to keep EBIT more or less flat to last year, slight improvement to some minus SEK 376 million, so fairly flat despite the lower volumes. On a full year basis, the division declined with 3% organically and managed to have an operating margin of some 6.4% Again, growth in watering with some pressure in the Orbit business in U.S. as well as the Powered Garden, the electric assortment globally. So very much the same comments I say, Q4 are applicable to the full year. Construction, very pleased, as I said in my intro, to say that we've had a growth in the Construction Division in the fourth quarter. Very tough H1 given the North America situation and the cyclical point, but we managed to see a recovery during the second half of the year, and that continued into Q4. So we actually had an organic sales growth of 2%. Strong growth in power caters, which is a very key area and a big part of our sawing and drilling business portfolio unit and also actually strong growth on aftermarket sales in the fourth quarter. That's been a continuation within the Construction Division. Operating income did decline as a result of FX and tariffs. Construction Division is the most exposed to FX given its stronghold in North America as well as the tariffs, but we managed to offset a large part of that. And as such, when we look at the full year basis, we're very, very pleased actually that we managed to maintain our absolute EBIT and actually improve the operating margin to some 8.9% despite the headwinds from FX and tariffs. So very, very strong cost-out programs and price mitigation activities. At that, Terry, I pass to you. Terry Burke: Thank you, Glen. As Glen described, a difficult quarter 4 for us. It is a small quarter and a loss-making quarter. Our margins moved from 8.2% margin in Q4 '24 to a negative 11.3% margin in quarter 4 this year. Just walking you through the bridge from left to right. We have a negative volume and mix impact. We've talked about the organic sales having a negative development in the quarter. And of course, that volume has impacted our EBIT. In addition to that, maybe also worth pointing out handheld, which is quite relevant in this quarter. Handheld was relatively weak in the quarter, which had a negative mix impact. And really, the reason for the handheld, there was a lack of -- shortage of storms in North America, in particular. And normally, with the storm comes the sale of chain stores, et cetera. But it's been quite calm in quarter 4. So that had a little bit of a negative impact on the mix. Good cost savings. We continued with our previously communicated programs and delivered SEK 180 million savings. And we managed to deliver a low single-digit price increase in the quarter, some SEK 60 million. We continue in a modest way with our transformational initiatives of some SEK 35 million. Currency headwind was a SEK 35 million in quarter 4, again, a continued strengthening of the Swedish crown against the U.S. dollar. So that has had a negative impact. And the tariffs approximately SEK 150 million negative in quarter 4. That takes us to the negative 11.3% margin in the quarter. Year-to-date, we have a slight margin decline in the full year, moving from a 6.6% margin to a 6.2% margin. And again, just walking you through the bridge from the left to the right. We actually had a pretty flat impact from the volume and the mix. We actually had a slight positive effect from a mix, but there were some costs that offset inflationary costs, et cetera, that offset that. So pretty flat from a volume and mix impact perspective full year. Cost savings program, SEK 745 million in cost savings achieved during the year. So that has contributed in a very positive way to our result during the year. Price, negative SEK 215 million, in the year. And that was really driven by the robotics price erosion. First of all, we had the boundary wired robotic that we were aggressively selling out and selling through. And there has been -- in the residential part of the robotics, there has been a margin erosion, price erosion, which we see here in the price reduction. Modest transformational initiatives of some SEK 115 million investments. Currency in the year, SEK 315 million negative and tariffs, which was around 8 months of the year because it only started in May, June time, that impacted with some gross SEK 375 million. All in all, that took us to a 6.2% margin full year 2025. We now want to close our previously communicated cost reduction programs that we communicated during 2022 to 2024. We have delivered approximately SEK 2 billion of savings in those cost-out programs, and we have reduced approximately 1,700 positions within the company during that time as well. So we feel quite satisfied about how we have performed on this cost-out program. But now we need to turn our attention to our newly communicated cost efficiency program up to 2030, which I'll come on to now. So at Capital Markets Day, we announced a SEK 4 billion cost-out ambition fully realized in 2030. This is about addressing sustainable cost reductions and improved operational efficiency. Now we want to try to drive a lot of that SEK 4 billion as early and as soon as possible. So we aim to get the majority of those savings in the short to midterm. What that means for 2026 is we expect some SEK 800 million of cost-out savings to be delivered in 2026. Maybe just to call out that during the course of 2026, the majority of the SEK 800 million will come in the second half of the year. We will get savings in the first half, but the majority in the second half as we really execute on our actions and our plans to deliver those savings. Just to remind everybody, items affecting comparability, SEK 1.5 billion is needed to support the SEK 4 billion of cost out. SEK 1 billion of that is cash impacted, SEK 0.5 billion noncash impacted. And for 2026, there will be approximately SEK 0.5 billion of nonrecurring costs incurred as part of this SEK 1.5 billion. So maybe one other thing to point out here as well is the 20% complexity reduction, which is a key enabler. We are focused. We will reduce our product range, and we will aim to take complexity out of our business. So that is a key enabler and will help us to deliver on some of these savings. Going back to our balance sheet. We have a very solid balance sheet and a solid financial position. A couple of things maybe to call out on the balance sheet for this quarter. Our inventory levels are now more or less flat with last year, but we did significantly ramp up inventory in the last quarter, some SEK 1.8 billion of inventory was increased during quarter 4 in readiness for the new season. So we feel like we have good inventory around us, and we are ready for the 2026 season to start. Maybe one other thing to call out on this slide, the borrowings. As you can see, we have reduced our borrowings. Our net debt has also come down, and we feel we have done some good work on the cash flow and managed our balance sheet in a good way. Moving on to the net debt EBITDA. We are now at a 2.1 ratio -- net debt-to-EBITDA ratio compared to 2.5 previously. So we are well within our financial policy. We have reduced our net debt to SEK 11.8 billion compared to SEK 14.5 billion previous year. So I think we've done well in this situation, and we've managed our cash flow in a good way and managed our working capital in a good way to help achieve this. Finally, on the cash flow. I think I would describe the 2025 cash flow profile as more of a normal cash flow profile year. So we tend to be negative at the start of the year as our accounts receivable build up as we continue to build inventory, et cetera. And then as we come out of quarter 2 and into quarter 3, we really maximize our cash flow position. And then quarter 4, it's a loss-making quarter. It's an inventory build quarter. We start to drop off a little bit in quarter 4. So I would say a solid cash flow year, SEK 3.3 billion and a normalized cash flow profile in the year. Glen, with that. Glen Instone: Thank you, Terry. So on sustainability, first and foremost, we're extremely happy with our sustainability efforts. In the fourth quarter, we continued to expand and advance our performance. We improved our emissions, so now reducing emissions from the 2015 baseline by 56%, our CO2 emissions, an improvement of 1% in the quarter. So extremely pleased with that and way above the target we set ourselves a couple of years ago. Circular, we advanced in the quarter with 4 additional ideas or innovations. So our circular innovation is now at 49%, so more or less on track with the 50% target we had, and particularly targeting recycled materials in product as well as in packaging. So really pleased with what we're doing on the circular side. On the people side, we set out to empower 5 million people to make the right choices, and we actually improved during the fourth quarter to 5.6 million from 5.5 million. So we've exceeded that target, and we're very pleased with what we've done there. And of course, as we go into 2026, we'll focus much more on the carbon CO2 reduction and our circular offering by way of percentage of net sales, and we'll come back to that. I mentioned in the intro that we will propose -- or the Board proposed an increase in the dividend to SEK 1.25 from SEK 1 per share. That is based on a payout ratio of some 40% and very much in line with our plans and also the dividend policy to pay out some above 40% of our net income. So very much in line with our policy there, the proposal. So very, very balanced based on what Terry just took us through, a much stronger balance sheet, strong financial position, reduced net debt, and therefore, we feel we can justify increasing the dividend as such. So we're pleased with this proposal. If I just summarize then the full year, and then we'll look at some of the product launches before opening up for some Q&A. Full year, despite the headwinds, particularly by way of FX and tariffs, we managed to increase our top line with 1%. So despite the headwinds, we still managed an improvement. We do have some weak consumer sentiment, particularly in the North America space, and that continues, of course, during the third quarter and into the fourth quarter, we saw that continuation. We've had a lot of successful product launches in 2025, and I'll show you on the next slide, a sneak peek into what we've got coming for 2026. Our savings programs, Terry just concluded that. We've had a very successful set of savings programs with some SEK 2 billion delivered in the recent years for the programs that we launched. And now we launched even more aggressive cost-out program for season '26 and beyond. And this is very much needed. We've got to be even more competitive in the marketplace and really free up the funding to invest in our aftermarket and our brands. So we'll continue with that. As mentioned, extremely solid financial position. We reduced our net debt significantly, as Terry took you through, and we've, therefore, proposed an increased dividend. Just on 2030, very, very strong product lineup, and I'm going to go through. Performance management is going to be key. We're going to give you much more clarity and information around our performing segments and less performing segments where we have less performing segments, we need to have very, very clear plans to improve them. And of course, the SEK 4 billion cost efficiency program is going to be a prerequisite. I would like to add a minimum before that. It's going to be a minimum SEK 4 billion. We need to actually bring in more savings earlier. That is very much what we are planning to do. So just to give you a flavor on some of the product launches, and I really emphasize the some because it's hard to fit them on one page. We start off in the robotics area and particularly under the Husqvarna brand, we actually have 7 new models coming for season 2026 under the -- in the residential setting. We have 4 in the 400 series for the larger landowner customers, and we have 3 in the smaller landowner customers using our scalable AI vision. We also have a new model coming in the professional segment that's covering lawn sizes or commercial screen spaces up to 8,000 square meters. And what we'll also add to the range is actually an accessory that is retrofit -- you can retrofit it to the 2025 500 series robotic lawn mowers, enabling the vision possibility for our mowers. So that's something that we'll offer for season '26. We also have a fantastic range of chainsaws that we're bringing to the market. We've recently launched a new 60cc petrol chainsaw, which we believe is best-in-class. We also are now adding more and more when it comes to our residential offering as well as our battery offering. We also are now adding more and more when it comes to our residential offering as well as our battery offering. So we actually now have a 50cc battery equivalent chainsaw coming to the market, our 550i XP. So that is very, very powerful battery chainsaw. In the Gardena assortment, of course, we use the group's strength in robotics, and we also have the Gardena Smart SILENO sense using the AI technology that we have across the group, and that would really target loan sizes from 400 to 800 square meters. We have some very strong offerings when it comes to our watering. We have hose boxes, we have new water tanks, and we also have the AquaPrecise, again, advancing our positions in smart watering. In the Construction space, and for those who managed to join us at Capital Markets Day, we showed this in action, but we actually take the robotics technology into the floor grinding space, and we have the first self-operated floor grinder under the Husqvarna brand actually in the industry. We're very pleased with this. This is now available for customers to purchase and early signs are extremely positive. We also expand our battery offering in the construction space. We have our high-powered PACE battery, the 94-volt PACE battery that we have more and more offering from. And we're very pleased actually with some new revolutionary technology that we bring to the diamond cutting space that's really going to help our sawing and drilling technology and offering. So a very, very strong and broad product lineup going into season '26 that is going to serve us extremely well. With that, Emelie, I think I pass to you. Emelie Alm: Thank you, Glen, and thank you, Terry. So with that, we will open up for Q&A. [Operator Instructions] So we will start with a question from the webcast, and it's from Henrik Christiansson at Carnegie. So could you walk through the main items on the EBIT bridge for 2026 over and above cost saves of SEK 800 million? What about FX, tariffs and price? Terry Burke: Sure. So okay, let's start with the price. We would expect a low single-digit price to come through during 2026. From a robotics perspective, in the residential, there's potentially still a price pressure. However, it's a much more normalized situation compared to what we faced in '25 when we were trying to sell out all the technology and some price adjustments in that area. So overall, a small single-digit price. When it comes to currency, we had a SEK 315 million negative currency in 2025, and I would expect about half of that in 2026. So somewhere between SEK 100 million to SEK 200 million of negative currency is how it looks at this moment in time. Tariffs, we've got 4 -- approximately 4 months from a year-over-year perspective to carry over into the first half of this year. And the gross impact of that will be some SEK 200 million to SEK 250 million impact in tariffs. And we would expect at least half of that to be offset with mitigating actions. Emelie Alm: Thank you, Terry. So operator, do we have any questions on the conference call? Operator: [Operator Instructions] Our first question comes from Adela Dashian with Jefferies. Adela Dashian: So first question, I know it's still early -- very, very early in the season, if you will, for '26, but would it be able to get some sort of understanding of what the weeks in January has given you more visibility? Maybe, I mean, if you could compare it to 1 year ago today, even, that would be some good color if we start there. Glen Instone: Adela, I think it's very early to say. Of course, we're very much in preparation mode, loading up the channel partners in preparation for the season. So I think it's very early to say just 5 weeks into the year. But our ambitions remain, as we set out at the Capital Markets Day that we want to see growth in 2026, and that is absolutely the case. Terry Burke: Maybe just to add on to that. From the inventory in the trade perspective, if we look at Europe, I would say the inventory in the trade is probably around normal to slightly above normal. This is all on a very high level, of course. There's some nuances between categories, but normal to above -- slightly above normal in Europe. North America, with that weak consumer sentiment that has really carried through all of 2025, I would say the inventory levels are above average in North America going into the '26 season. Adela Dashian: Would it be possible, Terry, to actually specify what those nuances are in the different categories? Terry Burke: Well, if we go back to Europe, if we talk about watering, I would say watering is normalized. Water and hand tools, they are pretty much normalized. Residential robotics is slightly above average in the inventory in the trade. Wheel, I would say, is pretty normalized as well. If that helps put a little bit of flavor on it. And the higher inventory in North America is pretty much across the board. Adela Dashian: Yes. That makes sense. On the tariff impact, if I may, you said that you expect to be able to cover half of it through price increases. Would it be possible to say anything about the competition at this stage? And if in the past year or so, if there's been any change in your market share? Glen Instone: I'll take this one. I think it's -- we don't like to comment on competition necessarily, but price increases, we managed to pass on. We've done that during the course of last year, of course, later in the season, and therefore, we get the benefit into season '26. Hence, we give that sort of guidance of covering about half of the tariff exposure. We've got to stay competitive in the marketplace as well. But I don't like to comment on what competitors are doing in that respect. Terry Burke: And I think it's different -- it's very different between divisions as well. The competition, some have a very local competition. And because we have such a broad range, it differs even within the division. So there are areas where there's local competition, which obviously aren't impacted by the tariffs. And then there are some parts that are European manufacturers. But even some of the European manufacturers have manufacturing in the U.S. So it's a very complicated picture. And as Glen says, we don't really focus too much on the competition. It's what we can influence ourselves internally. Operator: [Operator Instructions] We have no more registrations over the phone. Emelie Alm: Okay. Let's go for a question from the webcast again. Could you please elaborate on your inventory position? How much of this still relates to products that you are currently phasing out? Glen Instone: I think it's -- first and foremost, we're in season preparation mode. We said that a couple of times today. So Q4, as Terry said, a normalized profile is to start building inventory. So our elevated inventory in the fourth quarter was according to plan. But we have been selling through obsolete inventory in old models, and that's continued to be the case. So I would say we're at a much, much lower level when it comes to our obsolete inventory, much lower than we were closing Q3. Terry Burke: Yes, nothing really much more to add. I think we're in a much better position now with the older technology than we were in 2025, as you say, Glen. So I think we've dealt with that issue. It's more normalized and overall good healthy inventory. Emelie Alm: Thank you. Can we get the next question from the conference call, please? Operator: The next question comes from Bj�rn Enarson rn Enarson with Danske Bank. Björn Enarson: You said you will mitigate half of the tariffs and it was assumed that, that is through price. Is that correct? Is it primarily price that will offset this? Or are there any other actions in place to compensate tariffs? Glen Instone: Bj�rn, it is predominantly price and it's actually price that we already managed to pass on during the second half of next year that will carry over into 2026. So it is predominantly price. But in some cases, we look at supply mitigation activities as well. But the lion's share is price increases. Björn Enarson: And on -- for Europe then, are there similar target for you to also see some net price hikes for the year? Glen Instone: I think as Terry said, our price guidance for the year is minimal given how fluid the market is. But as a market leader, I expect we can always take some price, but it will be minimal single digit this year, as Terry said. Emelie Alm: Thank you, Bj�rn. We have another question in the webcast from Alexander Siljestr�m, Pareto. Can you quantify the step-up in marketing investments in 2026, considering the British Masters title partnership and your ambition to increase marketing spend by 1 to 2 percentage points of sales? Glen Instone: Yes. It's a very good question, a very positive question. So we will increase our marketing efforts, as Terry mentioned at the Capital Markets Day, we want to increase from 3% to 5%, so 1 to 2 percentage points increase. That will be, I would call it, marginal during the course of 2026. We want to start proving ourselves with the cost-out program to really fund that investment. So there will be a marginal increase, but I would say our total strategic investments or transformational investments are more around the SEK 100 million, SEK 150 million mark across the full year. Emelie Alm: Thank you. And in the Q4 EBIT bridge, what was driving the negative SEK 170 million in volume mix and other? Terry Burke: Yes. As I touched upon during that slide, of course, we have a negative volume in the quarter. Our organic sales was 3% down. Then you have a slight positive price. So if you put that into it, it's 4% down negative volume in that sense. So that has had an impact, and that is the majority of the SEK 170 million. Also, as I mentioned, handheld has been a weaker quarter than normal, which would have a negative mix impact. And that's really due to the lack of storms in North America, where usually there are storms and immediately after that, chain saws are sold out. It was quite calm in quarter 4. So that had an impact on our handheld business. Glen Instone: And maybe the attached P&A that goes with that handheld goes hand-in-hand with that. So that was lower as well in the fourth quarter. Emelie Alm: Thank you. And do you include an improvement in consumer sentiment in the U.S. to the back -- to achieve positive organic growth for 2026? Glen Instone: Given that we have 2 of our 3 divisions working very much in the consumer space, orbit a consumer or Gardena or it in the consumer space, Forest & Garden around 2/3 in the consumer space, then, of course, we were -- we are -- we have hopes and ambitions that there's a consumer sentiment uplift. But at the same time, we need to take market share despite how the consumer sentiment is. So that's very much what we plan to do. On the professional side of the business, both Forest & Garden as well as Construction, then we do see the positive signs or some more positive signs than the consumer market. So all in all, that's how we see it. Emelie Alm: Thank you. And given new entrants offering wire-free vision-based navigation at aggressive price points, how is Husqvarna defending its market share in the North American residential markets? Glen Instone: Yes. It's still fairly small in North America residential market in robotic lawnmowers. The awareness is still fairly small. We need to keep building that also a big reason for the brand-building activities. So whilst it's still small, we've got to make sure we continue the market leadership position. We do have some great offers. We came in season 2025 with a particular North America offering, much higher wheels for different grass cutting, different grass types, I should say. And we'll continue to have that offering for North America. What is being successful in North America, the early awareness is actually in the professional space. And the reason I start to mix up professional residential there is that the halo effect from the professional into the consumer residential space is very apparent, particularly in golf. So we're very, very pleased with, if you like, what we have today, and we have a strong product pipeline for '26 and particularly into '27, that's going to support the North America space. Emelie Alm: Thank you. And how large share of sales is robotics and battery now for the full year? Terry Burke: 22%, that is now the share. So previously, it was 20%. So we've moved the needle yet again in a very positive way, and we now become 22% of our total sales is through robotic and battery. So again, continued very positive journey there. Emelie Alm: Thank you. So operator, do we have any further questions on the conference call? Operator: There are no more questions. Emelie Alm: Okay. All right. So with that, let's conclude the Q&A session and today's call. And thank you very much for watching, and we are looking forward to seeing you at our upcoming road shows. Thank you.
Alexis Bonte: Good morning, and welcome to the Stillfront Q4 Presentation. I am Alexis Bonte, the CEO of Stillfront. I'm joined today by our CFO, Emily Villatte, who joined us in December. I would like also to take the opportunity to thank Tim Holland for his work as interim CFO during 2025. As we summarize the first quarter of 2025, I am pleased to report that Stillfront is delivering margin expansion despite revenue decline. We successfully expanded our adjusted EBITDAC margin to 27%, up from 25% in Q4 last year despite an organic revenue decline of 9%. This follows our cost savings efforts during the year, disciplined deployment of UAC alongside the continued rollout of our direct-to-consumer channel. Looking at our business areas. In Europe, we delivered a big franchise new game launch with early positive signs, and we divested our noncore narrative portfolio, which has been impacting our organic growth. In North America, the continued revenue decline reflects a deliberate strategy of prioritizing cash flow and efficiency over short-term volume. MENA and APAC delivered strong results with 7% organic growth. Now let's dive into the details. So first, turning to Europe. Net revenue in BA Europe landed at SEK 622 million for the quarter. That represents an organic decline of 6%. The revenue performance in Europe has been heavily impacted by the narrative games portfolio. And in late December, we concluded the divestment of the narrative franchise for a total consideration of $4 million. That reflects a 4x EBITDAC multiple for that portfolio. So excluding the narrative portfolio, organic growth for BA Europe was actually flat in the quarter. In December, I'm happy to announce the release of the new game Big Farm Homestead. The game did not have material revenue impact in the quarter, but early performance metrics were encouraging. You will note that user acquisition costs correspond to 37% of net revenue, which is higher than the 31% we saw last year. This is -- this reflects a deliberate choice as we increased UA within the big franchise to capitalize on the good momentum there. The Supremacy Warhammer 40,000 game, which was expected to launch in the middle of Q4 2025, did not meet yet the higher quality thresholds that we now report to ensure a strong launch. And therefore, we're polishing the game a bit more. We're adding some content, and we'll launch it later in the year. Adjusted EBITDAC for BA Europe came in at SEK 94 million with a margin of 15% in the quarter. The lower margin compared to last year is primarily due to the lower revenue volume combined with the increased growth investments in UA, particularly in Q5 towards the later part of the quarter. Moving on to North America. Net revenue for the quarter came in at SEK 197 million, corresponding to an organic decline of 31.3%. The decline was driven by our commitment to focus on profitability and cost efficiency over short-term revenue growth. While our volumes are lower, the quality of our revenue in North America has improved. Gross margin increased to 83%, up from 79% last year. A key driver here is the accelerated rollout of our direct-to-consumer channels in North America. Following successful Webshop integration in Bitlife in Q3 and the Home Design franchise in Q4, direct-to-consumer bookings now account for 24% of the total, a significant jump from just 7% in Q4 last year. And during the quarter, we have exercised continued strict cost discipline. User Acquisition Costs were reduced to SEK 88 million compared with SEK 258 million in the same period last year. Personnel expenses were up to SEK 30 million, down from SEK 60 million before, and that demonstrated the full effect of the cost savings program that we implemented, in particular, Storm8 and Super Free. The result of these actions is a clear turnaround in profitability for North America. Despite the lower revenue base, adjusted EBITDAC increased to SEK 23 million for the quarter, up from SEK 6 million last year, and this translates to a margin expansion to 12% compared to just 1% a year ago. And full year EBITDAC was up from SEK 100 million to SEK 108 million in North America. Finally, let's look at MENA, APAC, which delivered a very strong performance this quarter. Net revenue amounted to SEK 537 million, representing a solid organic growth of 6.6%. This was primarily driven by the continued strong performance of our Jawaker and Board franchises. In addition, we see the structural effects of transferring the word franchise from North America to this region, which has increased the total revenue base. User acquisition landed at SEK 40 million, corresponding to 8% of net revenue. This is slightly higher than last year where we're at 5%, and which is natural given the inclusion of the Word franchise as that portfolio carries a structurally higher UAC level. So the combination of organic growth and cost control has resulted in the high profitability. Adjusted EBITDAC grew to SEK 288 million. This delivers an impressive margin of 54%, an increase from the 51% of last year. And now I'm going to hand over to Emily for the financials. Emily Villatte: Thank you, Alexis, and good morning, everyone. It's really great to be here finally. Okay. Let's talk through the group financial results for the fourth quarter. We reported net revenues of SEK 1.356 billion for the quarter, representing an organic revenue decline of 9% year-over-year. While revenues were down, our strategic focus on our direct-to-consumer channel has been yielding results and our gross margin increased by 3 percentage points year-on-year, reaching a strong 83%. DTC revenue now accounts for 45% of bookings, which is a proper step-up from the 34% we had in Q4 last year. And this is strengthening not just our margins, but also our direct engagement with our player base. User acquisition spend for the quarter was SEK 356 million, down from SEK 504 million a year ago. And as a percentage of revenue, UA spend was 26% in this quarter, down from 30% in Q4 of 2024. And this shift was primarily driven by our North American business area, as Alexis just mentioned, where we have refined our strategy to prioritize long-term profitability over low-margin revenue. Moving on to profitability. Adjusted EBITDAC was SEK 368 million in the fourth quarter compared to SEK 410 million last year. And as noted in the report, you will have seen that the adjusted EBITDAC decline was driven by FX headwinds of approximately SEK 45 million explaining that shift. Despite the decrease in revenue, our adjusted EBITDAC margin amounted to 27% in the quarter, up from 25% last year. And this margin improvement is a direct result of, firstly, our successful cost savings program, which was concluded in Q3, but also our DTC focus and rollout of that channel and, of course, disciplined approach to user acquisition spend. Moving on to cash generation. Our free cash flow for the quarter was SEK 290 million, bringing our LTM free cash flow to SEK 922 million. And let's have a closer look at those cash flows. Overall, in 2025, we had a strong cash generation, allowing us both to deleverage and fund our earn-out obligations as well as to self-fund the investments that we're making into the business. In the quarter, cash flow from operations were SEK 440 million, which included a positive working capital movement of SEK 62 million, primarily driven by phasing of payments for user acquisition spend towards the end of the quarter. Cash flow from investing activities was SEK 122 million, and this primarily reflects our continued investment in product development, of course, which was slightly offset by the divestment, Alexis mentioned, of our narrative portfolio amounting to USD 4 million, USD 2.5 million of which was settled in 2025. Cash flow from financing activities of SEK 371 million in the quarter were mainly driven by first debt repayments of SEK 234 million, but also share buybacks of a total of SEK 146 million in the quarter, in line with the share repurchase program we announced in conjunction with the Q3 report. On an LTM basis, we generated a robust SEK 922 million in free cash flow for the full year 2025. And if we break that down, SEK 583 million of that went towards earn-out cash payments in the year, minority buyouts and the divestment of the narrative portfolio. SEK 273 million was directed towards deleveraging. And additionally, we completed a total of SEK 248 million in share repurchases over the full year. Now you will have seen no doubt that we did take a noncash goodwill impairment in the quarter. And this follows our annual impairment test, which did result in an impairment totaling just under SEK 2.3 billion related to goodwill write-downs in business area Europe and other acquisition-related intangible assets in business area North America. Turning now to our financial position. We ended the fourth quarter with a total net debt of SEK 5 billion, which is a significant SEK 1.1 billion reduction from the SEK 6.1 billion in total net debt we had in the prior year. This, of course, reflects our commitment throughout 2025 to settle our earn-out obligations and to deleverage the balance sheet. In terms of our net debt, including next 12 months cash earn-outs, it decreased from SEK 4.7 billion in Q4 of 2024 to SEK 4.2 billion in Q4 of 2025. And even with this decline that we've seen in the full year reported EBITDAC, we did achieve a decrease in our leverage ratio, which was 2.02x EBITDAC in Q4 of 2025, down from 2.1x EBITDAC in Q4 of 2024. And looking at our maturity profile in the center of this slide, you will note that we have no material debt maturities until 2027. So with that being said, I would like to hand back to you, Alexis. Alexis Bonte: Thanks, Emily. You will have seen that we today also announced a change to our segment reporting structure effective from the first quarter of 2026. During this year, we have made progress in focusing our North American business by transferring and closing games where it made sense. We have divested our narrative portfolio, as we've already said. And so following these developments and in line with our strategy to focus on our key franchises, we have aligned our reporting structure to reflect this. Going forward, we will move from geographical segments reporting to consolidated group reporting. This will be complemented by a set of clearly defined alternative performance measures to provide greater transparency into the performance and development of our key franchises, which are really the important part here. We have started by including our key franchise revenue data in the financial data pack that is reported alongside the Q4 report, and I would encourage you to have a look at those. Our key franchises will have the following: more than SEK 200 million of annual revenue and the consistency of core experience, a clear product pipeline and long-term growth potential, a common base of technology and game mechanics and recognizable and scalable IP. For our other games that do not fall within the key franchise grouping, we'll be focusing on product and operating efficiency to yield healthy cash flows to the group. As a business, we step into 2026 more focused, continuing the work of making incremental improvements to our operations. We'll be increasing our focus and reporting transparency related to our key franchises. We will continue to assess the performance of our games portfolio and we'll undertake measures, including sunsetting games where necessary. We will continue to make disciplined investment decisions and delivering healthy cash flows. In parallel, with our focus on day-to-day operations, the strategic review initiated in April of 2025 continues and the divestment of our narrative portfolio will improve our organic growth profile and allow us to redeploy resources towards higher potential projects. I appreciate the patience and trust that shareholders have shown during this process. On the final note, I want to thank the Stillfront team for the dedication and resilience they have shown during a year which has seen significant change. I am looking forward to 2026, and we'll approach it both with continued discipline and ambition. And now I suggest we open it for questions. Thank you very much. Operator: [Operator Instructions] The next question comes from Nick Dempsey from Barclays. Nick Dempsey: So just in terms of your commentary for 2026, so can we assume that you are aiming for an improved rate of organic revenue -- organic net revenue growth, in other words, less of a decline. Is that what you're shooting for in '26? And in terms of your commentary on investments, can I try and understand -- can I try and understand what that could imply for EBITDAC margins, whether we're talking about those going down or stable or up or whatever you can say about that to make that a little bit more precise? And then just a final thing. In terms of the other games, we're looking at the key franchises and then we have other games. how much of that is some of the U.S. franchises that we know have been challenged for multiple years versus how much of it is some other areas where there's perhaps a bit more hope. Alexis Bonte: Emily, why don't you start with the organic growth and invest may be back and I can talk about the other games and core. Emily Villatte: Absolutely. Let's do that. And I think you're right, Nick, to note that we've had a year of varied trading performance. We've had double-digit organic decline in 2025, 9 percentage points organic revenue decline in Q4. And we're, of course, aiming to take the business back to organic growth over time. You will have noted our notes around making incremental improvements to the business holistically to continue on that path. Of course, different quarters can have variations, and we will not give sort of a quarter-by-quarter forecast, but the holistic ambition is, of course, to get back to organic growth over time by doing incremental improvements. When it comes to the EBITDAC margins, looking at those on a quarter-by-quarter basis is sometimes misguided, for example, when you have a quarter where you have the opportunity to deploy more UA spend, capturing opportunities to drive future organic growth. So whilst our margin might fluctuate quarter-by-quarter, we are holistically aiming to make disciplined investments to support us on this path back towards organic growth. Alexis Bonte: Do you want to answer on the EBITDAC as well, I mean? Emily Villatte: Yes. When it comes to EBITDAC, I think our general comments there are that we will make disciplined investments to support this business back to organic growth. We're not going to guide on EBITDAC margin quarter-by-quarter. But for example, we've seen early positive signs from our big franchise Big Farm Homestead launch and where we see opportunities to deploy UAC in a disciplined and way that meets the robust criteria for those campaigns, we will deploy that to support the growth ambitions for the company. Alexis Bonte: I think to build on what Emily has said, really, if you look at 2025, 2025 has been a turnaround year. We've really been focusing on setting the business straight with the right priorities back to a healthy level is difficult for North America, but also making some of the required things that we have to do for -- in Europe. Of course, we've got EMEA and APAC that is continuing being very strong. What we're seeing is 2026 is really going to be kind of more of an investment year. We're seeing, as I said, encouraging signs with new game launches such as Big Farm in Europe. And that's something that we will see what kind of UA we can deploy around that, but there are some. But again, as Emily said, the objective is over time to return to organic growth. In terms of your question for the other games, and if most of that is the U.S. franchises. Actually, there's -- one of the U.S. franchises, Bitlife is one of our key franchises. We have a clear path in terms of how that franchise can grow. We're seeing -- we saw a good update to that franchise by putting a full accounting system that allows us to do a lot more live operations that we're not able to do with Bitlife. And we've also had a successful Vampire update, which is something that the comm really, really wanted to see. So that's been working. But we do have in other franchises, the Home Design Makeover franchise. where we've actually done a complete change of the economy, and we are seeing some improvements, but we still want to see more work being done there, and we want to see a bit more KPIs before we decide if that's a franchise that is -- that we should basically be investing more in or not. So we're being very, very focused and very disciplined about what we consider a key franchise and what we consider something that is not a key franchise. Operator: The next question comes from Rasmus Engberg from Kepler. Rasmus Engberg: I was just wondering with regards to the cash flow, how do you see that being able to maintain roughly the current levels? Or what's the ambition for the current year? Alexis Bonte: Do you want to take that? Emily Villatte: I love cash. I'll be delighted to take that question. We are, of course, aiming to maintain very healthy cash flows within the business. This has been one of our core strengths. When it comes to our core KPIs, we have not only market-leading EBITDAC margins, but we also have strong cash conversion from that baseline, and we have consistently delivered very healthy cash flows. And we, of course, want to continue to be a business that has strong healthy cash flows moving forward. You will have seen that in 2026, we have no debt maturity. We do have an earn-out obligation that we're due to settle. You will have seen that in our report. And the final earn-out obligation comes in 2027. So with no debt maturity in 2026, we are hoping to be able to utilize our free cash flows in an efficient way, both for earn-out obligations for deleveraging and to continue to fund the investments into the business that set us back to organic growth over time. So maintained healthy cash flows. Rasmus Engberg: Right. And with your new reporting structure, how do you sort of think about that in 2026? Is it continued like single-digit organic growth in the core franchises and continued big decline in the rest of the business? Or how do you sort of -- how do you think about that? Alexis Bonte: Yes. I think I'll start and then Emily, maybe you can build on that. We're looking at these key franchises, and we're seeing that we have the -- basically the density in terms of the team, the talent density to really kind of make them work and really be winners in the market. So we think that these key franchises are franchises that we can grow not only for the short term but over the long term. So that's what we're seeing. What we're seeing that is not in the core franchises are basically games that we feel are more about either optimizing for cash flows or potentially we'll also have some experiments in there. So that kind of allows us to really organize better how we're doing things. Also, a lot of the questions that we kept having was like what are the kind of the core -- how are the core franchises performing, how are the core games performing at Stillfront. And we think this is -- with this reporting, we're really giving you that transparency so you can understand how Jawaker is performing. You can understand how the Board franchise is performing. You can understand how the Supremacy franchise is performing year-on-year and quarter-on-quarter. And I think that will allow you to much better understand the business, and it also is a much closer and much more kind of accurate description of how we're actually running this games company. Emily, do you want to build on that? Emily Villatte: I think that's comprehensive. Nothing further to... Rasmus Engberg: So it looks -- I mean, we have very little history here, but it seems that what we're seeing is a maintained UA spend in terms of relative to revenues in the core franchises and then a decline or a low level in the other games. Is that sort of what we could expect going forward as well. Emily Villatte: That's a correct reflection of the numbers that we just posted this morning. And with Alexis' guidance on the focus on our key franchises, key investments, not just in product development, but deploying UA spend towards those key franchises as well. That is our strategy. Rasmus Engberg: And the question that many investors think about the strategic review, should we see that as now clearly indicating that it's not among the key franchises that we should expect a deal? Or is it disconnected from that? Alexis Bonte: So basically, as I've said before, so we -- the strategic review is still ongoing. The latest development of review has obviously been the sale of the narrative games, which were holding back our organic growth. But as I said before, we still consider that we should have everything on the table that we believe can create shareholder value in the best way, but we've been quite disciplined in making sure that we're focusing on selling first the things that we think are holding us back. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Alexis Bonte: Thank you very much for your questions, and thank you for joining the Q4 Stillfront report, and have a great day. Thank you. Bye-bye.
Unknown Executive: Good morning, everyone. Welcome to 2025 Results Conference Call. First, let me introduce our management. CEO, Khun Pratthana; CFO, Khun Tee; Chief Enterprise Business, Khun Phupa; and Chief Retail Business, Khun Prapat. Khun Nattiya and myself also joined this call and will be briefing you to the results and running this session. At this moment, please allow our CEO to give an opening remark. Pratthana Leelapanang: Good morning, everyone. I would like to take this opportunity, firstly, to address the very most recent incidents of the misuse of AIS corporate Internet from one of our corporate customers. You may already seen our formal disclosures, but I would like to really emphasize that we take this matter very seriously. We view this matter as a reminder of our responsibilities as a national digital infrastructure provider. While this is one of the isolated incidents, we are using it to really strengthen our internal processes and technologies to enhance the capabilities of detecting, preventing and monitoring, in order to make sure that we protect our stakeholders properly. Governance, integrity and trust remain at the core of our business that we run. Safeguarding our reputations, trust from the investor, as well as public are our priorities, and we will continue to invest in that what I'd like to address as the first part. Secondly I'd like to say that we do expect that the market will be pleased on the capital return we deliver, or rather surprised and pleased the capital return we deliver. I would like to reiterate that AIS is not about maximizing our short-term cash return. We are building sustainable digital infrastructure business with scale and financial strength. Our capital reallocations, I'd like to put it, reflecting our confidence in long-term business growth with a strong cash flow and balance sheet. We will continue to invest in leadership, grow responsibly and return capital only if it strengthens long-term shareholder value. So that's the second piece I really like to address here. Lastly, I'd like to address our business direction going forward. This year forward is about laying foundations of AIS's next road chapter. Beyond the connectivities, we are expanding our capability in network intelligence, advanced IT, and very important digital backbone of data centers, cloud and AI. With all of these foundation components, we truly believe it will support AIS to capture new opportunities across consumer, businesses, and expanded digital ecosystem. So that's in brief what I'd like to start with. Thank you. Unknown Executive: Thank you very much. Now let me begin with a short brief and going directly into Q&A. At this time, you may also reserve to ask the question through the chat box. Please type your name and corporate name. So firstly, we delivered this year with a strong and resilient performance, supported by growing customer demand and solid content proposition to upsell our existing base, amid the modest economic recovery. In mobile, growth momentum remained strong, driven by rising data usage. In the latest quarter, the data consumption exceeded 34 gigabyte per subscriber. This is up 16% year-on-year. The 5G adoption continued to be a key driver, reaching 17.9 million subscribers or 38% of our subscriber base, growing nearly 50% year-on-year. The broadband service continued to grow steadily with subscribers exceeding 5.2 million and ARPU at THB 530, both were up more than 4% year-on-year. Take note that the net add was softer in this latest quarter due to temporary resource allocation to support the flood relief efforts in the Southern Thailand. The Enterprise business delivered double-digit growth, supported by strong connectivity demand. Our data center business through GSA is progressing as planned. The 01 is already commercialized, and 02 and 03 are expected to be ready by 2027, bringing total capacity close to 200 megawatts. The retail sales grew 15% year-on-year, driven shop renovation, stock training and better channel and product mix. Our virtual bank initiative is also progressing well with commercialization targeted within this year. With the above, we exceeded the upper end of our guidance for both core service revenue and EBITDA, driven by strong operating performance and efficiency. The net profit was THB 47.9 billion up 37% year-on-year. The normalized profit was THB 46 billion, excluding FX impacts and onetime tax item related to tax loss carryforward utilization. This is up 32% year-on-year. Our performance remained strong with good momentum from 2024. The Board approved an ordinary dividend of THB 15.30 per share, representing a 95% full year payout ratio. In addition, the Board also approved a onetime special dividend of THB 19 per share, paid from retained earnings to unlock shareholder values. The ordinary dividend remains our priority, aligned with the earnings growth. The rationale for unlocking the special shareholder value is based on 3 key considerations. First, we have strong visibility on growth and cash flow generation across our businesses, even after accounting for necessary investments to sustain leadership and build long-term digital foundations. Secondly, we remain committed to maintain prudent leverage and an investment-grade credit profile while preserving financial flexibility for future opportunities. Third, this visibility allows us to optimize the balance sheet and return excess capital to shareholders without compromising financial discipline. Importantly, our dividend policy remains unchanged with a minimum payout of 70% of NPAT. And again, the ordinary dividend continues to be our priority. Let us put this into the context. Operating cash flow is approximately around THB 100 billion, with expectations to grow alongside the business. The annual investments are around THB 50 billion, covering CapEx, current and future spectrum and JV investments. This would result in the free cash flow approximately THB 50 billion to THB 60 billion after investment. With improved cash flow visibility and strong leverage profile, we see an opportunity to unlock shareholder value through balance sheet optimization while preserving our investment grade rating. This optimization is executed in a favorable interest rate environment to support our investment requirements while the special dividend is funded from operating cash flow, which remains a dynamic over time. We expect the leverage to gradually decline with improved performance while maintaining room for financial flexibility. Turning briefly into sustainability. We received an MSCI ESG rating AA. This places us the ESG leader category. AIS is the only Thai telecommunication company to achieve this MSCI rating. In addition, we also received a AAA ESG rating from the Stock Exchange of Thailand, the highest level, reflecting clearer development plans, strengthened supply chain practice, enhanced stakeholder engagement, and this is in alignment with strong corporate governance standards. Looking ahead in 2026, we guide core service revenue growth of around 3% to 5%. The EBITDA growth of around 2% to 4%, and the CapEx investment excluding spectrum of THB 30 billion to THB 35 billion. The growth will continue to be driven by connectivity demand across consumer data usage and enterprise digital connectivity. The higher expense and CapEx are deliberate investment to build foundations for midterm and long-term growth. The CapEx increment reflects a new investment phase. This is aligned with the anticipated growth in data consumption and long-term network quality leadership with year-on-year increase primarily reflecting higher mobile network investment. Beside network modernization, we also emphasize on IT enhancement for customer stickiness while this would lay a strong foundation for future revenue growth. The allocation within the CapEx is approximately 55% to 60% mobile, around 20% broadband, 10% enterprise and 15% for IT and others. Before we move to Q&A, I would like to remind you our upcoming event for which invitations have been -- already been sent. If you have not yet registered and would like to attend, please kindly confirm your participation by today. The online session will be arranged for overseas participants and the access link will be sent following the confirmation. With that, we are happy to take your questions. Unknown Executive: Please be reminded that you may reserve to ask the question through the chat box with your name and corporate name. And also please limit your questions to 3 per round to allow others to also participate. We have the first one from Khun Pisut from Kasikorn. Pisut Ngamvijitvong: Congrats on your record breaking results and dividend. Pisut from Kasikorn Securities. I have 3 questions for this round. The first one is about the core revenue growth guidance, which basically comes down from 7% last year that you achieved to 3% to 5% this year. Just want to know that, I mean, the key reasons why the growth is coming down, that's coming from the competition, it's going to be more intense or the economy, which is quite subdued, which 1 is going to be weaker in your perspective? And also from the 1-month operation that's passed -- just passed, what do you see about the revenue momentum from the previous quarter? My second question is about your EBITDA growth guidance. Why the growth also came down from 9% last year to 2% to 4% this year, and why the magnitude of the growth target of 2% to 4% go below the core revenue growth of 3% to 5%. I understand that you mentioned about the initial loss from the new venture that you may have booked in the share of profit, probably from virtual bank data center. But if you're stripping out share of profit from your associates, is it possible for your 2026 EBITDA to grow faster than your core revenue growth, and also from the operating leverage effect? My last question is about your tax loss carryforward. In the note, you have remaining tax loss carryforward of about THB 15 billion, which could save tax about THB 3 billion spreading over 2 to 3 years. If I am correct, could you please confirm about this couple of numbers? And what's your plan to utilize most of it? Nattiya Poapongsakorn: Let me take the question on guidance. I think overall, if you look at our total guidance from revenue to EBITDA and CapEx, we're trying to say to the market that we're actually looking for new growth areas. In the past few years, a lot of our growth has been built in with more rationalization of the competition within the market. Going forward, we need to build a lot of new foundations for new growth areas. However, going into 2026, especially now at the beginning of the year with the Bank of Thailand and many houses announces the GDP forecast, we've also seen that consumer sentiment and the potential spending and the underlying economic growth of Thailand may seem to be on the low side, likelihood somewhere lower than 2%. So I think that's the main concern we may have and reflected on the 3% to 5% in terms of the revenue growth. Rather than the issue around competition, I think for the past year and also in the fourth quarter, we have not yet seen anything that put us in a concerned mode in terms of the competition. Fourth quarter may not be the best quarter to reflect in terms of the growth partly also because in terms of fixed broadband, as you see, the net add has been a bit slow because we were mobilizing our effort to address the southern flood for quite a long period of time. But we expect some of that growth to be able to resume within this year. On the EBITDA guidance, as I mentioned, because we now want to establish new growth initiatives, whether it's in the IT system, you see that we are now having more diversified business portfolio going into building a stronger retail distribution channel across online, offline. A lot of that will require that we advance or modernize many parts of our internal IT system. Plus another thing that we have started last year was on the entertainment business, which covers the sports and entertainment content. So this year, we are also looking forward to be selective in some of the key strategic contents that we want to continue building our brand, perception and customer engagement. So with all of that, we do see that some of the building foundation will incur costs within 2026, and that's why the EBITDA guidance is landed slightly lower than the revenue growth. Another point would also be that in the past 3 years, we did integrate 3BB with AIS operation. So you see some of the early cost savings from the integration effort, which would be mostly done for 3 years period. Last question on the tax loss remaining amount. I don't think we can say how we plan. But yes, as we disclosed in the notes to financial statement, those are -- there are the schedule of the tax loss to be expired within each year. So I think our intention is continue to build the broadband business as a single operation entity and making profit. So with the entity making profit, we'll be able to utilize the tax loss. Unknown Executive: Now we move to Khun Wasu from Maybank, please. Wasu Mattanapotchanart: So 3 questions from me. The first question is about the projection of net debt to EBITDA on Page 28. My question is regarding this chart of the declining net debt-to-EBITDA is that have you factored in any more special dividend in that projection? And what is your assumption of payout ratio in that chart? So that's the first question. The second question is about the forward-looking of the net debt to EBITDA. Let's assume that AIS pay special dividend every year, and the net debt to EBITDA stays in the range of 2 to 2.5x, will AIS be able to keep the credit rating with S&P? So that's the second question. And my third and final question is regarding Page #6 of the slide. It is mentioned that CapEx budget will be 15% of the total revenue in the medium term. My questions are, how long is the medium term? And will the CapEx budget go up or down after the medium term? Nattiya Poapongsakorn: Thank you for the question. On net debt to EBITDA forecast that in corporate how we see the business growth and upcoming investment we need to make across different businesses, including the spectrum. On special dividend, we would like to emphasize again that this is a one-time nonrecurring capital return. We execute this because at this point in time we see a low interest rate environment. And we see that we have accumulated a fair amount of retained earnings to be able to return this capital to the shareholder. And this leads to the retained earnings number -- post this distribution of dividend, you will also see that the retained earnings remaining would be fairly minimal. So it comes back to the point that this special dividend is really a onetime that we restructure or optimize our balance sheet to be at a more efficient level. On the credit rating, as you see, because we have looked into that. So I don't think we have any concern around the credit rating. The last question on the CapEx level, which is 15% of revenue in medium term. I think when we talk about medium term, basically, we look across the technology. Right now, we would say that we're approximately may be in the mid-cycle of the 5G. So I think we have a pretty solid idea of how much in terms of 5G capacity is needed in each year, given the forecast of the traffic growth from consumer point of view, embedding in with the AI. If there are more AI use case for the new 60 technology upcoming, you see that normally in those new cycle there may be a period of time where the CapEx as a percent of revenue may increase. And then afterwards, I think it should -- for us it should come down to more of a normalized level. Wasu Mattanapotchanart: So how long is the medium term? How many years? Nattiya Poapongsakorn: I think for us 3 years outward is a fair outlook we see -- even that we haven't seen the 60 technology becoming materialized in the next 2 years. Unknown Executive: Now we could have Khun Thitithep from KKPS. Thitithep Nophaket: I have 3 questions. Number one, do you think that you have to adjust the long-term strategy given the big change in the shareholder of your competitor, True? Number two, is it fair, both you and True suggest that the payout ratio has become more aggressive than a year ago. Do you think it's fair to say that it's a suggestion that the mobile phone business in Thailand is reaching a situation of becoming a mature stage. And that's why there is no need to be aggressive in reinvestment in the mobile phone business? Number three, your payout ratio, including special dividend, it's rather aggressive like you said you don't have any [ return ] left after the payment. But then you did say that you are in the process of laying the foundation for new growth. Do you have to reserve some cash in order to invest in the new growth areas? Pratthana Leelapanang: Let me address the strategy piece. We are very firm on the strategy we are taking especially the expansions of the digital infrastructures from mobile, 5G, to broadband and to the enterprise of which it expanded into data centers, cloud and AI. And on top of that, it would be digital ecosystem around the distributions as well as digital finance. Regardless of what True about to be, I think these foundations are key to serve customers across multiple segments, as mentioned, on consumer side, on the enterprise side and other related party. We remain firm on that piece. On the competition, we do expect that competition will continue on, having multiple prong of strategy anyway. So I'd like to address that we stand firm our strategy. Add on to that, related to the maturity of the markets, if we look real hard on how consumers behave and use the product and service. On mobile side, we still continue to see the growth in consumption. Thailand has roughly about 30-plus percent 5G penetrations. We have not reached 50% yet. In many countries ahead like China, it went on to 60%, 70%. And about to come on new service and applications as we've seen from AI related, they're going to be introducing more data on the uplink. So on the consumption side, I don't think we are near saturation on consumption. In our plan that we described earlier, we have factored in our midterm forecasts of how the consumption would grow on mobile, broadband and enterprise as part of our medium-term plan. Unknown Executive: I think a lot of questions about the payout ratio and special dividend. I think as Khun Nattiya mentioned, when we look at the -- I think expect that investment in the future and also the growth prospect of our business. I think we have sufficient investment that we -- or cash reserve that we have within the company to invest in the growth and also provide, I think, extra return to the shareholders. I recall that also many quarters or even many years now, I think most of the analysts asked about payout ratio, whether it can be more than 100%. So when we does -- when we do that, then the question is also a little bit concerned on whether we have enough cash reserve to invest. And I just want to point out that we do feel confident in the industry right now, the dynamics, the growth industry, we do feel mobile, broadband, enterprise and also the new businesses that we are expanding into can provide sufficient growth for the future. And with the -- I think the current leverage status, we do feel that we are not taking on [ more risks ], we basically optimize capital structure that we have to be able to provide, I think, optimal return to the shareholders and also to provide growth for the business as well. We have deleveraged quickly since the time that we took over 3BB, that based on a lot of synergies that we create, the industry repair and also the growth in the business that we expanded into. So all those things gave us the opportunity today that we can do the thing that we think it's the most optimal to the shareholders. Unknown Executive: Next we can have Ranjan from JPMorgan please. Ranjan Sharma: Congratulations on the results. A couple of questions from my side. Firstly, on your guidance for EBITDA, if you can help us understand the major investments that you are planning on the OpEx side, which results in EBITDA growing slower than revenues. And I can completely appreciate that you're taking a longer-term horizon for our business rather as it should be. So if you can also walk us through the revenue opportunities that you can unlock with the investments that you're planning in this financial year. The second question is, there are related party transactions with GSA02 as disclosed in your release. I think the financing arrangements or details have not been disclosed, especially for GSA02, if you can share more details around it. Nattiya Poapongsakorn: On the EBITDA guidance, I think basically, the IT is one of the big part that we would see OpEx costs coming into 2026. That's one of the big part. And then the second part would be on the content entertainment related business. That's the main second part. There could be a fair bit of some of the incremental in utility and maintenance stores are more likely in line with the growth of the network that we have been seeing. So those are the major ones that we would see. Ranjan Sharma: So if I can just follow up. So the impact on revenues or the revenue opportunities that these investments can unlock in the next 3 to 5 years, if you can comment on that as well. Unknown Executive: Let me put this way. Sorry, my voice a bit hard to understand today. Basically, if you look at last year performance, we did deliver higher growth on EBITDA than revenue. And I think probably going to be the same for the year before as well. But we can't keep that trend as we embark into a lot of new things. I think in the end, we want to make sure that we do spend on the things we need to spend to make sure that we modernize our system, both on the network side and also on the IT side because the business model has changed a bit. Actually, going forward, we also want to do a lot more things with our customers because to me, the real asset that we have is the vast base of customers, both on mobile, broadband and enterprise side. So to go to do new services, we need to modernize a lot of our infrastructure. So that's one part. What else we can sell, the channel that we're going to sell to them, the way you're going to sell to them, the personalization that we talk about all along and even the AI at the back end, right? So all these require investment, both in the network and in the IT system, plus in the capability of the people as well. All this, including the apps and everything we have to be modernized. So I think we are going through that journey. That's why you see a bit of an elevated forecast on CapEx for the next few years. We can't give you a pinpoint portion to go which one is which, but -- and those are directions we want to go. Whether it can unlock? Which revenue can unlock -- I think there will be a lot one mobile, we can optimize the package for each of the users. We can also lay on more detailed services. Same thing with broadband and enterprise, right? So all those, I think, hopefully, we can keep growing the ARPU. Then the question, why we forecast lower revenue growth this year versus last year? I think a lot of that is coming from the headwind on macroeconomics in a situation. If the country can grow at a higher GDP, we are happy to push the growth of the company as well. So I think that's more or less the first question you asked. We do hope that the -- I think, investor community understand that we want to spend a bit this year or next year to make sure that we have a stronger foundation to embark on the next growth phase of the company, right? I think for GSA, normally, it's -- I think, project finance. So it takes a bit of time to be able to get the funding from the bank. So we need to pass certain stage to be able to get the funding from the bank. So a lot of time we did a bit of the own funding first and then we get the loan back from the bank and then we use that money to reinvest in the next project. Nattiya Poapongsakorn: This upcoming Friday, when we have the Analyst Meeting, I think the presentation from the management will lay out more clearly about the strategy and the growth that you asked. Unknown Executive: Now we have Piyush from HSBC. Piyush Choudhary: Congratulations for a set of results and special dividend. A few questions. Firstly, you mentioned about CapEx being higher, right, around THB 30 billion to THB 35 billion this year. In addition to this, can you talk about capital allocation and other growth initiatives? Like how much of capital will be going in virtual bank, data center in 2026, '27 and if you can, in 28? Just want to get the 3-year kind of capital commitment to the growth areas? And secondly, if you can talk about the outlook for the mobile and broadband ARPU for 2026, any initiatives being taken by you or your competitor to uplift ARPU? How is the consumer sentiment at the moment? Unknown Executive: Yes. On the new investment through the JVs that we have set up, in the end, I think we estimate it to be about THB 8 billion to THB 10 billion over the next 2 years because a lot of those are in the JV format. So we don't hold 100% of the whole company. As for virtual bank, I think you know the detail from the regulation that the first year around THB 5 billion paid up. And if we want to exit DR5 and as we have THB 10 billion paid up. So that will be -- if you need to forecast something, then that's the number for you to look at. For GSA and other JVs that we have on the cloud as well, that mostly was subject to the project that we can secure. I think so far, we have disclosed up to GSA03. Anything you can maybe forecast the growth of the JV of the data center business and then work backwards for any capital commitment that we need to make. But in the end, it is proportionate to the shareholding level that we have. Pratthana Leelapanang: For overall customer needs, which is get translated into our services, we continue to see and we forecast that the consumption will grow higher for both sides, mobile and broadband. For mobile, as mentioned, there are still huge amount under 4G moving forward to 5Gs that would help consume more and also uplift the ARPUs. For broadband, we see 2 important expansions. The first one is the expansion to home whereby they have not had our broadband before. At this point, the broadband penetration is roughly about 50-plus percent towards the occupied household. So there are room to expand on broadband in terms of customer. And second prong is in terms of consumption and services. We also see more demand in consuming broadband at home as well as extra services, inclusive of content and digital services, which cuts across back to mobile as well. So as those 2, we do expect ARPU to continue on increasing. The overall economic situation may taper off a bit of sentiment, that's why we also be mindful about how we offer the product and service for customers, what's the price point we are going after. So I think that's the big picture. Piyush Choudhary: Just to clarify on that THB 8 billion to THB 10 billion over 3 years, that is AIS contribution, right, into the JVs over 3 years? Unknown Executive: Yes, that's our position. Unknown Executive: Now we have Khun Kijapat from Bualuang. Kijapat Wongmetta: Congratulation on strong performance and solid results. I have a few questions. First is about the special dividend. From my calculation, I think it's over THB 50 billion for this special dividend. So I calculated that the equity part may drop like half. And can I imply that how it will go double? And at the same time, for the gearing ratio, could it also like go to 3x? And will it affect our credit rating? Do we have any debt covenant on DE ratio. This is the first question. Nattiya Poapongsakorn: Yes, in terms of special dividends, it's over THB 50 billion. The equity definitely will drop and therefore the IE will substantially increase. However, I think your gearing number might be on the high side because as we presented earlier on our chart, we do not expect the gearing -- in this definition is net debt to EBITDA, whereby net debt already include the lease liability and the spectrum payable should not exceed to 0.5x net debt to EBITDA. Kijapat Wongmetta: So we don't have it on DE, right? Nattiya Poapongsakorn: No, none of our debt has covenant. Kijapat Wongmetta: Okay. For the second question, I would like to ask about the -- in the medium term. Do we have, like, comfort range of gearing or equity level that would trigger another special dividend? Nattiya Poapongsakorn: I think the questions around target gearing has been asked by many investors in the past. Our capital allocation framework doesn't fix on any target gearing. In terms of financial resiliencies, one key point is that we are committed to being an investment-grade credit profile. That's number one. Number two, we want to ensure that the leverage aligns prudently with the risk appetite we aim on the business growth. That also implies that we need to ensure that we have sufficient financial flexibility to exercise any future initiatives that we aim for, not just in the existing business that we are running, but also in new opportunities that we aim to grow. So rather than fixing on any particular target gearing, we actually look at where we want to grow the level of risk appetite and the prudent level of the balance sheet we aim at any given point in time. Kijapat Wongmetta: For the last question, I would like to ask about the recent change in major shareholders in our key competitors. Do you think about -- does it -- will have any potential implication for the mobile and broadband industry? Pratthana Leelapanang: We believe that we're always in the situation that in the market we all compete even before changing in major shareholder of competitors, every day we see mobile, broadband and even enterprise, we both compete in the arenas of providing service for customers. My belief is the focus of competition may shift a bit as they address in the public. And I think you pick it up as well. But once again, coming back to AIS, our goal remains unchanged, that we are expanding our digital infrastructures and building the foundations that we have said in the morning and there are some reinforcement along the way that we are investing in technology and building blocks to support that. Unknown Executive: We have Khun Pisut coming back for a second round. Pisut Ngamvijitvong: I have 2 follow-up questions. The first one is about data center. As also mentioned that AIS and the partners, we will have 200-megawatt data center capacity under 3 phases of GSA. But when I read your financial statements, a lot of restructurings inside. So just want to update about your economic stake on this venture on this business, I mean, data center, is it still 25% at the bottom line? And if this 200 megawatts being fully utilized, I mean, how much the amount of share profit we will be able to generate? The ballpark figures is [ 5-megawatts ] per year. And also, what is your capacity target in the next 3 to 5 years from 200-megawatt to at what certain level? My second question is about the 6G technology. As you may see some global leading operators increasingly investing into the low earth orbit broadband satellite business. My question is, have you been ever exploring into this new technology at this point? And also, will this be real thing or just a nice to have technology for telco to deploy at this stage in your view? Nattiya Poapongsakorn: Okay. So under the JV where we invest for the data centers that have already been 3 phases. The first 2 phase is a JV among 3 shareholders. AIS has 25% share in the first 2 phase. On the Phase 3, it is a shareholding between 2 shareholders, where AIS has shareholding of 30%. You asked about the contribution, I think, because this is the early stage. So in the next 3 years' time, it might not be a big move to the bottom line yet unless we have more because at least the Phase II, Phase III, it only begin in 2027. So it will be fairly small to the bottom line in terms of share profit. Pratthana Leelapanang: For the future of emerging technologies, [ LEO ] is a very important one. The low orbit satellite is the latest technology on a satellite whereby it can cover globally with multiple thousands of satellites cover all over the place around the globe. It will definitely support and complement other communications, especially on the outdoor and outdoor very far away as well as in the sea. So we see as the very much complement technology, even though in Thailand right now, there has no right to provide a service yet. And some have started to provide a service like NT. We look at it very carefully amongst many of the collaboration model. At this point, we may not be able to release any information, but we look at it very carefully. The second piece is 6G. 6G standardization may come out in 2030, putting extra important functionalities like sensing network and collaboration with mobile and satellites. So those pieces are upcoming, but not very fast. It will be the second way from now, maybe 2031 onwards. We also look at it very closely as well. Overall, for now, we understand that consumers, enterprise and businesses and others require to use Internet bandwidth whereby it can be served with the current technology of fiber and mobile 5G. We see upcoming uptick in consumption generating in the very near future from AI and a lot of interactivity of things to things that would require more bandwidth and a variety of connectivities. As an overall, we consider all possibility of technology we can adopt. Unknown Executive: We have Khun Nuttapop from TNS. Nuttapop Prasitsuksant: Two questions from me. On data center, I believe GSA is more external service. You didn't touch much about what you might need to build on your own to serve your enterprise business, if I may call. Is that already included in your guidance? Or do you prefer to go asset light for the enterprise service that you may rent someone else, including GSA? The second question on IT CapEx. It feels one-off to me when we talk IT CapEx. Is it going to be like that? Or it will be recurring for a few years? And may I ask whether it will be more the revenue unlocking factor, or I should see it as the long-term cost-saving machine? And you touch on retail channels with this IT investment. Can we dream of like open platform of the retail business or it has better efficiency of your product sales? Lastly, I would like to say, may need to please with your capital management plan nicely done and congratulations. Pratthana Leelapanang: Maybe I address as the big pictures for infrastructures. As I mentioned, one of the very strong building blocks, new one coming in as the digital infrastructure is data center, cloud and AI. The data centers that we have built in GSA01, 02 and upcoming 03 are by and large, serving a very big computer system. That computer system will definitely serve in both cloud and AI in combined. That will be also be part of serving inside that we need to expand the system. So the answer is, yes, both inside, internal that we are expanding the system as well as for external customer. When it comes to external customers is both hyperscalers as well as the local enterprise. So I think that's the big picture of data center infrastructure. It is very important infrastructure for the modern AI era that must have locally. I haven't addressed the important piece so-called a sovereign cloud and sovereign AI, of which it will play a very important role as the backbone of the AI era that we are going after. In IT, as mentioned earlier, is the very important piece when it comes to IT, intelligence and AI. Software infrastructure as well as intelligent, which provide both as the customer experience, the personalization engines will help us uplift revenue. On the other side, it also provide automation and intelligent to serve to uplift the operation efficiencies. So both are very important. When I talk about operational efficiency, it cuts across network planning, optimizations, customer operation as well as internal operations. So the IT CapEx may be mixed with the OpEx that as a core engine for us to bring in intelligence from now on. Lastly, when it comes to retail, IT-related sometimes we call it omnichannel, is the distribution platform, whereby we would serve customer in many ways that they like, reaching them at the right point, right time with the most convenient. You can also imagine that with the ecosystem that we have been working with, the platform of the distribution will also open -- it has been open some for our partner to be on board jointly with AIS distribution platform. The answer is yes. Unknown Executive: We have Khun Arthur from Citi, please. Arthur Pineda: Two questions, please. Firstly, with regard to the THB 8 billion to THB 10 billion contribution that you were putting in into the JVs over the next few years, is this on top of the CapEx target that you've stated and the 15% long-term capital sales trends that you do it earlier? Or is that built into these targets? I'm just trying to better understand the free cash flow trends for the company. Nattiya Poapongsakorn: It's on top of the CapEx. Arthur Pineda: That's on top? Nattiya Poapongsakorn: Yes. JV is not guided in the CapEx. CapEx is purely from operational core businesses guiding. Arthur Pineda: Understood. And the second question I had is with regard to capital management. So you opted for a one-time bumper dividend instead of a staggered release of capital over several years, which I think would have allowed you to better match higher yield while your investments are in GSA, digital bank, are gestating. Why the urgency for an upfront dividend payment instead of an extended payment cycle wherein you could keep yields higher for longer? Unknown Executive: I think in the end, you have always asked us whether we need the cash to do investment or we're going to release it back to shareholders. I think we have waived the option of giving one-time versus over a period. And then in the end, with the current situation, current environment, we do feel that giving a one-time could potentially maximize the shareholders' return. I can't give you much more than that. In the end, we will look at this, and we feel it's the optimal time to do so. Unknown Executive: Yes. And last person, we have Khun Wasu from Maybank, again. Wasu Mattanapotchanart: And I have one follow-up question for Khun Nattiya. So I think you mentioned that there are 3 key items for the OpEx increases that would impact EBITDA growth in 2026. The first one is IT OpEx, the second one is content and entertainment, and the third one is utilities. My question is about the first item, the IT OpEx. Could you please elaborate what is it for, the increase in IT OpEx for the 2026? Nattiya Poapongsakorn: I think what both CEO and CFO mentioned earlier about the overall business strategy and how we want to serve our customers, that's all embed into both the IT CapEx and OpEx, which embed into the guidance of 2026. So I don't think we would be able to break down into the system. But basically, it incorporates both customer-facing engines as well as some of the back end data-related, data analytics engine that can help serve the hyperpersonalization, how we build the omnichannel to ensure that customer walked into whether online or offline, we'll be able to seamlessly -- we will be able to seamlessly deliver a seamless customer experience across different channels, how we upsell and cross-sell to customers, as well as some of the back end for operational efficiency. Unknown Executive: Thank you for today's question. And please be reminded that you can still register for our Investor Day upcoming Friday, 6th February, at Pearl Bangkok Building. The main session will be from 1:00 p.m. to 3:30 p.m. in the afternoon half. So thank you all for participating and see you again in the Analyst Meeting or our Investor Day. Thank you.
Howard Andrew Digby: I think we're -- I think we'll get started. I think more people will probably join. We have a very large registration and a proportion of those registrations have already signed into the Zoom, but I will get started and then hand over to Yoav. My name, everybody -- I'd like to welcome you all to all our investors in Australia, and good morning to those joining from abroad. I'm Howard Digby, Non-Executive Director of Elsight. I'll be your host for today's session as we review what has been a truly transformative fourth quarter and full year for the company. So before we dive into the results, I direct your attention to the disclaimers on Slide 2. Look, I won't read them in full, but I want to highlight the key pillars of this. For information purposes only, this presentation provides an overview and is not a financial product advice. And as to forward-looking statements, we will discuss our expectations and targets today. These involve known and unknown risks that could cause actual results to differ. Look, on the financial context and some housekeeping here, a quick reminder on our reporting. All figures discussed today are in U.S. dollars, unless stated otherwise. And we operate on a calendar year basis. So when we say Q1, it's the quarter that we're in at the moment, finishing in March. And today, we are focusing on the record-breaking Q4, the Q4 that we've just had, the full unaudited 2025 annual performance and our future plans. And regarding the logistics for today, we will have a dedicated Q&A session at the end. [Operator Instructions] So it is now my pleasure to hand over to our CEO, Yoav Amitai, to walk through the perfect storm we are seeing in the market and how Elsight is positioning itself as the future backbone of uncrewed systems. Yoav, over to you. Yoav Amitai: Thank you, Howard, and thank you, everyone, joining us today. I'm super excited, as always, to share with you, our results. But today, I'm even more excited to share with you Elsight's next phase of growth. 2025 was not just another year of growth for Elsight. It was the year we reached our inflection point. We're no longer a company talking about potential. We are a company delivering on performance. And today, I'll walk you through the perfect storm driving our market. The record-breaking numbers we've just reported are why the next chapter will be the time we cement our position as the future backbone of uncrewed industry. That said, 2025 was a breakout year for Elsight, but I want to be very clear from the start. What we all have seen is the foundation, not the peak. I recently find myself saying and writing to many asking me that we're just getting started. Some people laugh hearing this from a company that just grew the revenue by 11 fold over the previous year. But I truly believe this is our reality. The business, the markets we're in, the programs we're part of and the pipeline we are only now moving into scale. Let's start with the why. What we are seeing and what we're witnessing is a fundamental shift in global defense and commercial robotics. It's the iPhone moment for the uncrewed industry. Look at those maps on this slide, 10 years ago, drones were niche luxury for a few advanced military. And today, they are primary requirement. We're seeing NATO countries move their defense target from 2% GDP to 5% GDP, and that's not only there. That's a global trend. Not only the governments today are investing more in the defense spending, a lot of these budgets are allocated specifically for uncrewed systems. There isn't -- there are even more for that. The most important trend is the shift towards COTS, known as commercial off-the-shelf technology. Government no longer have 10 years to develop a radio. They need a solution that works today at scale. Let it sink for a moment. The speed of war and the speed of commercial delivery have converged. This is the perfect storm that Elsight was built for, and this is why this moment in time is where Elsight should and need and will scale. Perfect storm like this don't create hundreds of winners. They usually create a small number of category leader, and we're in those moments in time when giant companies emerge. Elsight is uniquely positioned to become 1 of these as we are in -- right in the spot and right in the center of this perfect storm that we're talking about. We're not selling a feature or capability. Elsight is enabling mission completion, where empowers uncrewed systems to safely and effectively complete their mission while ensuring unauthorized entities are kept at bay. We're taking our 500,000 drive and flight hours of experience and applying it to more product into more domains, and this is what will position us as the core backbone of this new industry that is emerging. Elsight is going to be the future backbone of the uncrewed industry. But before we talk about future and how we're going to do that, let's look at our performance first. The numbers for 2025 are quite frankly, unprecedented. We hit approximately $23 million in revenue for the full year. And to put that into perspective, this is an 11-fold increase over 2024. Importantly, we're starting 2026 with already $22 million in confirmed order, which is 96% of our total '25 revenue. We reached profitability this year, proving that our model has operational leverage and a great outcome. We ended the year with $59 million in cash, and this is a massive strategic asset. It means we can execute our 2026 plan and push harder and faster. Elsight is 1 of the very few companies in our space that isn't just selling a vision. We are actually selling hardware, software and capabilities at scale with super high profit margin and a profitable business model that create this business so interesting. Speaking about hardware, we're not factory-constrained business. Capacity scales ahead of demand and not behind it. We developed global manufacturing capabilities through contract manufacturers, which means it does not require additional capital investment. We're not doing it to only to expand our production capacity. We're also doing it to be closer to our customers, to serve them where they need us to make sure that we have all the local existing presence to be able to serve our customers in the best way, and that's why we're doing those developments. I want to pause here for a moment because I think this slide is super important, and it has changed. For those of you who follow us, will notice that the cumulative pipeline today stands at $137 million compared to the $157 million we showed previously. That reduction is not a deterioration. It's the opposite actually. During Q4, we converted approximately $10 million of pipeline into recognized revenue. That's exactly what this funnel is supposed to do. Our focus during the quarter was deliberately on execution, delivering contracts, building our global sales team and pushing existing opportunities down the funnel, which we did with great success. We optimized for moving opportunities down the funnel rather than just increase the top line size. What the slides really show is conversion discipline. With our expanded sales force now hired across the U.S. and Europe, we're entering the next phase, converting existing opportunities faster while adding net new opportunities at the top of the funnel. Just to remind you all, this pipeline isn't based on headlines or market commentary. It's built on actual active programs we're already engaged with and part of, and we are seeing how we accelerate those conversion from the top of the funnel down to the bottom line, which then makes it much better visibility and much higher probability to convert it into actual revenues. Speaking of team expansion, we are fortunate to recruit top talent recently. The reason we could bring them in is due to our product unique value proposition, our brand name in the industry and the vision we all share together. We're not just expanding our global footprint. We're doing it also locally with discipline. We're making sure we are recruiting people where and when we need them and not just bringing in headcount that will make us less efficient. We also added a new strategy function that looked at the long-term growth, ensuring we succeed not only here and now, but also years to come while seeing big trends and big movements in the market, making sure that we're analyzing correctly, and we're being prepared for them correctly. Speaking about expansion, this is how we do it. This marks a super special important transition point in Elsight history. We started as a connectivity company, and that remains our core. Everything we do still starts there. But over the last 18 months, we've become so deeply embedded into our customers' mission that they are stopped asking only about links. They are asking about the whole mission and how we can enable them and help them complete their mission. This transition is driven by customer pool. I want to make it very clear. We're not moving away from connectivity. We're building on top of connectivity. That expansion is happening along 3 main dimensions: capabilities, moving towards a broader mission-enabling product and not only connectivity, geographies, like I said, expanding our local manufacturing to support partners where they operate and have the right business development folks and salespeople with boots on the ground closer to our customers and end users. And domain expansion, the air, land and maritime environment to make sure we are getting more into these domains. The common denominator isn't the vehicle, it's the need for communication and resilient mission completion in contested environment. We're taking a proven core and extending it responsibly into more feature, more capabilities, more geographies and more domains. I want to take you through how this expansion we've been discussing across geographies, domains and products translate into actual larger serviceable available market for Elsight. This is not a total addressable market slide. This is our serviceable market, which means areas where we already have the right and the tools to compete. On the left, you see our current SAM, roughly $250 million. This reflects what we already do today, high reliable connectivity for BVLOS uncrewed system, primarily in defense and regulated commercial use cases. This is a market where we know well, we're executing in and where we're already converting into actual revenue. The first step in SAM expansion comes from adjacent capabilities and broader operational scope. Not only chasing new customers, but by adding more capabilities like positioning and mission-enabling software on top of Halo and by supporting additional operational domain like land and maritime systems, we expand the value we deliver within the same programs. At the same time, as programs scale across territories, our footprint expands geographically. Following customer into new regions that combines more customers, more domains, more territories and more capabilities per system, expand our serviceable market into the multibillion-dollar range. Looking further out, as these capabilities mature into a unified platform, Elsight move from being a connectivity component to a mission stack layer. At that point, the SAM expand again, not because we assume market dominance, but because the scope of what we can reliably service increases. This includes more system per customer, more mission types, and higher software and service content per deployment for every system we're selling. What's important here is that this expansion is layered and disciplined. Each step built on existing deployments, proven technologies and active customers' demand. We're not assuming new markets suddenly open, we're expanding our role in markets we're already part of. So when you look at the SAM expansion, it's really a reflection of execution, expanding where we operate, what we enable and how much value we deliver permission, all anchored into the SAM. To give you some examples of how it's looked like and how we came to those numbers. When you look at the defense budget in Sweden, Germany, in Japan, in the U.K., in the U.S., you see exactly where those SAM figures come from. This expansion is really a reflection of execution, and from global trends that I described before of how governments today are putting more budgets into defense and how they allocate those budgets into uncrewed systems. Now let's talk about the product expansion in more depth. Everything on this slide follows 1 rule and 1 rule only. If it doesn't strengthen our core position in enablement, we do not pursue it. We're expanding horizontally and not vertically. This means higher value per system for the same customers and procurement path. And importantly, we're doing this from a position of profitability and cash strength and not force diversification. We're expanding from communication only to more comprehensive communication to autonomy feature, to video and sensors and positioning. And by that, we will be able to provide our customers with more comprehensive solution, and it's all built on our long experience and brand name that we have in this industry, and that's how we're going to grow it. A key part of our growth is our relationship with the OEMs. We often get asked, don't the big defense prime build this themselves? The answer is they don't want to. They want to focus on the airframe and the sensors. They want to buy the backbone from a specialist. We are the Intel inside for uncrewed system. We aren't their competitors. We are their most radical partners. We're helping them excel in front of their end customers to perform their mission and to provide them with the best technology available out there. Our go-to-market strategy is focused. In the U.S., being local is a requirement for defense procurement. In Europe, the shift in defense posture is structural and not cyclical. We've invested in local teams and regional execution, not just distribution, and we're also building the necessary flexibility in the organization to react to other territories and opportunities and not be locked on those markets only. In this moment of time, like we have in front of us, we must be adaptive and react quickly, and we need to make sure we have all the tools we need to be able to execute on opportunities that come across us. A good example for that localization and this adoption is the Project G.I. that we announced during the last quarter. I want to spend a moment on it because I think that is often misunderstood by a lot of the audience we have here on the line today. The DIU is not a pilot program for innovation theater. It's a structured pathway into operational adoption and procurement. Advancing to Phase 3 means Halo has demonstrated reliability in contested environment and is moving through final fielding and testing. This phase is funded and aligns with real procurement time lines. That's actually put us in a very strong position within the U.S. DoD, which is obviously the biggest market of where we're playing. Now how do we monetize all these great features that I was talking about? Every Halo deployment starts with hardware. We used to think that the hardware is a bug of ours, but now we understand that it's a big feature of ours because that provide us that foot at the door to be able to do -- to put more capabilities and more features and products into the same platform. But that's only the entry point. On top of the hardware sits mandatory software and cloud services that every single hardware that we're selling have built into it as a long tail of every sale that we're doing. As our portfolio expands, more value moves into the software layer. That's basically where all of what I just described is sits. This is where software layers where margins are higher and revenues are recurring. Most of the new development and capabilities I mentioned earlier are getting exactly to this line. The beauty of it is that we don't only sell it to net new systems. We can also upgrade, upsell and cross-sell to already deployed units as it's only software features that sits on the same platform, and the same hardware platform, and that's a big leverage point that we are seeing and that's how we started to deploy beta versions to first customers. Speaking a little bit about how we leverage all the experience and all the deployments that we have in the field. This slide is about how our platform supports AI, not how we brand ourselves. AI only works if the underlying data is reliable and structured. With 500,000 operational hours, we have a data set that reflects real missions, not simulation, which is growing on an hourly, daily and monthly basis in different parts of the world with different partners and different use cases. We built AI feature where it adds operational value, not where it adds buzzwords. Alongside our core business that I described so far, as we updated the market a couple of months ago, we've established a parallel business unit currently operating in stealth. It is built on our core competencies, connectivity and data fusion but addresses a separate $20 billion adjacent market. This is structured so it does not distract from the core business. We will be able to share more as we pass milestone as we feel that we have a good enough moat and protection around the IP, the technology and the customer base. And as we have all of those, we will start to share more information. This is optionality with discipline. Looking ahead, our focus is execution, continuing to convert the pipeline, expanding sales productivity and releasing additional software capabilities like I mentioned. Each milestone is designed to build on what's already deployed, and we're doing it with a pragmatic approach, making sure that we are putting more efforts only in vectors that we're seeing actual success. We are expecting to expand our existing customer base. We are expecting to expand what we're doing with already existing customers, and we're also expecting to have the first design partners for the new business unit that I just described. In summary, Elsight is uniquely positioned in this market. We combine a proven product in real-life deployment experience, capital discipline, very efficient business model and deep customer relationship and integration. That combination is difficult to replicate. And this is why we feel that Elsight is in such a great position. Elsight have demonstrated that we can execute, and we know how to execute at scale, convert opportunities into actual revenues and performance and do so in highly profitable margin, while expanding our role across missions, geographies and domain. I will say it again, we believe we're only getting started. The energy level and excitement inside the company is something I can't even describe in words here. People are working seriously around the clock and around the globe to deliver those opportunities. We literally have, while I'm speaking today, people in 3 different continents working with different customers in different trade shows and conferences to bring net new opportunities. So to close, 2025 marked a clear inflection point for Elsight, not just in growth, but also in maturity. The opportunity ahead is significant. But what gives us the confidence is not the size of the market, is our position inside the market and our past performance of execution. With that, I'll hand it over back to Howard, and we'll open the session for questions. Howard, back to you. Howard Andrew Digby: Thank you, Yoav, for sharing the update on Q4 and our prospects for Elsight ahead. We've received a number of questions already. Please type in your questions in the Q&A section. I've also received some questions from people by e-mail as well. I hope to cover them as well. We hope to get through all your questions today. Can I start with -- Yoav, the first question is when will you receive cash from the $22 million in additional contracts that delivered in first half '26? Yoav Amitai: Sure. So just to remind you all, when we're talking about our business model or in general, the way we're working with customers, today, we're charting 40% upfront. It means that it's included in this $22 million that we are -- we have announced the market of backlog, 40% of the cash is already in our account. So when we're saying that we have backlog, that's only after we get the advanced payment of those programs. So the answer is it's already in our account. It's actually already in the account from the last 4C. So you see it in the last report we put out last week. Howard Andrew Digby: Thank you, Yoav. Another question about that backlog. The order backlog contains -- does it only contain hardware sales or recurring revenues as well? Yoav Amitai: No. So the back -- the way we're looking on the backlog, that's net new sales. That's not -- does not include any recurrent revenue coming from previous years and also not taking into account the following recurrent revenue that will be generated from 12 months, and that's huge. Just to have -- to let everyone know how we structure or how we recognize revenue in general, when we have a program that works for a year, for example, we recognize it month by month. So every quarter, we will recognize the portion of the total year. That's also correct for the bookings. So what we put on the booking, that's a net new, and that does not include recurrent revenue or ARR coming from previous years. Howard Andrew Digby: So Yoav, just to clarify for everybody, that $22 million, that doesn't include the recurring revenue. The recurring revenue will be added to our numbers afterwards. Yoav Amitai: Correct. Howard Andrew Digby: Yes. Okay. So a question about 2025 revenues. How much of -- a similar kind of question really in the breakup sense. How much of 2025 revenues, FY '25 revenues are from the Elsight cloud business. So what portion of the sales are ARR? Yoav Amitai: So yes, that's exactly connected to what I just said before about how we recognize the video. In 2025, you can see it in the quarterly report we put out last week, $2.6 million was from recurring services, which is the Elsight cloud basically and all the services that are attached there. When we're looking on the numbers, I would say that we are expecting 2026 to be much higher because in '25, as you all know, we started to scale rapidly the deployment of new product that we're putting out. And because of how we recognize the revenue over time, like I just mentioned, we do expect to have a very big jump in the recurrent revenue during 2026 because sales that was already done in '25. But just to answer directly the question, in '25, the ARR was $2.6 million, and we are expecting it to grow -- actually already growing in '26 because of the reasons of -- because the way we recognize the revenue. Howard Andrew Digby: I've got a question here about the 2025 results and also looking forward at the opportunity funnel. So what does that represent in number of active clients? Yoav Amitai: So in terms of design win, that's -- in general, I will talk about the design win concept. I'm not sure I covered it enough during the presentation. Our all approach, our all go-to-market approach is, what Intel said in the '70s design win. It means that every OEM, every platform manufacturer that's starting to use our systems, we want them to use all our features, software features, hardware features and so on. We want them to do all the compliance and certification based on our product. And the reason being is because we want the stickiness level of the product to be the highest possible. So for us, every new design win is basically a tip of an iceberg that as long as they ship out units for their clients, we will get POs because we're part of the bill of material, and we are in the heart of the systems, as I said during this presentation and those partnerships and those relationships with the OEMs are just getting better and better as we scale and as we deploy more systems with them. To answer the question directly, in 2025, the revenue came from 92 different design win customers, means that they have different OEMs. They -- each 1 of these can make multiple type of drones or the same type of -- only 1 type of drone or a robot but that came from 92 design win partners. We have more than 110 total. Today, I would say that we are more focused on the Pareto of the industry, meaning that the big OEMs that create the vast majority of the platforms out there and not necessarily onboarding net new. Having said that, I would say that we're still investing a lot in small startups and new innovations that are coming or that we're seeing in the ecosystem. And the reason being is because we want to be as widely exposed as possible to this market. By the way, not only in the defense market, it's the same in the commercial market as well. So when the commercial market will start to see the same scale that we're seeing in defense or when a small defense startup that come with a new innovation will start to sell their product, we will make sure that we're with all the winning horses. And that's why we are investing there and not only on the very big one, but like I said, most of our efforts and focus is going to the pareto of the industry, which is very clear in our case. Howard Andrew Digby: Okay. So just to clarify, the pareto, meaning the 80/20 rule. But don't forget the long tail. As Yoav have said, if you have any -- let me put in a little plug here. If you have any drone companies that you're invested in or you're close to that can shortcut and vastly improve their development process when it comes to communications and their performance, please introduce them to us. Another part of the same question, Yoav, was what change talk market expectations do you see with regard to the civil use of drones and a recent drive, for example, the U.S., but to work out a regulatory path. Yoav Amitai: So we do see a progress there. For example, in the U.S., the Part 108, which helps a lot in designed a framework, and there is already a clear time line of where -- when and where and how it will be started to be executed and started to be in place. I would say that -- I said it over the presentation, I'll say it again. When we're looking into the future in the -- at least in the next 18, 24 months, we are seeing that the defense market because of the macro politics and because of the geopolitical environment in the world today, the defense market is growing much faster. I do think that as many other technologies that was initiated in defense world like the GPS or actually the Internet that we're doing this call over, then it's shifting over the commercial market and become bigger in the commercial market. And I do see this process happening also in the uncrewed system market, not only drone by the way, it's same for cytorobotics or maritime robotics, but I think that it will take time until we will get there. Having said that, taking our last announcement that we have done around drone as a first responder, DFR program that we are part of, that started to have meaningful revenue. That was a nice number of a little less than $0.5 million. It's not very big, but it's starting to get there. I think it's super interesting, and we can definitely cannot ignore it. It's something that we are looking at that and making sure that we're there having our brand recognition in the civil or commercial market as well and not only in the defense. But speaking of actual revenue split, I do think that a lot of it will come from home and security and defense market in the foreseen future. Howard Andrew Digby: Now I've got 2 questions about manufacturing. And the first question -- I'm going to ask both of them. First question is a kind of if you just tuned in now question because the answer is an awesome one. Are you up to date with the production of your hardware? And the second question -- so you'll probably answer that. I can see the smile on your face. The second question jumps off from that. While Elsight currently has plenty of spare manufacturing capacity given current growth rates, existing capacity could potentially be utilized within the next 2 years? What are the costs and time frames associated with potential, say, doubling of manufacturing capability? Yoav Amitai: So I try to address it during the presentation, but I think those are good points. I'll start with the point that we used to think in Elsight that hardware is bug and not a feature. We wanted to look to be pure software solution, hardware is hard. There is time lines there. It's more expensive sometimes and so on and so forth. In our case, because we're active in the physical world, we're not active in the software space, which is pure Internet space, all virtual. Having hardware onboard those platforms provide us a very, very strong feature and very high level of stickiness within those products. So hardware becomes a feature and not a bug, and that's part of why we can I do this expansion of product portfolio, like I just mentioned because we have the access to those platforms unlike many other software companies that look for hardware to run the software on. So that's 1 part. The other part of my answer or the other part of the question, I would say that we are designing all the hardware that we're doing, and that includes the Halo that, include the Aura, which we can talk about. That include all the hydro that we have in our pipeline or in our road map, sorry, today, we are designed in a way that will be super simple to manufacture. We will put more effort on the engineering side. So the manufacturing will be simple. We'll be able to do it in every contract manufacturer worldwide that is doing electronic. There is nothing special in terms of the manufacturing process. And that results in super easy upscale in manufacturing capacity and being able to do that. Going to the question of how much it cost us, since we are working with contract manufacturers, we don't have a steady cost of production lines. We are -- utilize them only when we actually need them in terms of having orders or need to be deliveries or need to be to do production and so on. And it's also very helpful if we want to scale or reduce the scale of the production. It's -- for us, it's literally sending an e-mail saying that we need more capacity. And like I said during the presentation, one of the reasons why we are opening new lines outside -- in other regions is because -- not because of capacity, more so because of being closer to the customer, because of localization that we're seeing globally. And because of these reasons, not only because of capacity. So just to answer directly, today, we are very comfortable with our production capacity with our lead times that we're providing to our customers. I think our customers see it as 1 of our advantage that we can provide them with what they order very timely, very quickly versus other hardware components that they have on board. And we don't have a lot of cost that is on the shelf there. It's literally our contract manufacturer that are doing it for us. And that's an approach. That's how we develop every hardware that we're having. So that's super important to notice and to mention. We're not expected to have any Elsight production facility whatsoever nowhere in the world. I always say to people here in the company or in general, people will ask me if General Electric or those kind of companies are using contract manufacturer, who we are to do our own manufacturing. And I don't think -- we want to focus where we're good at and not where we're not. And manufacturing is definitely not our job. Howard Andrew Digby: Yes, I've -- the question is from -- is, as Elsight expands its product lines beyond connectivity solutions, how will the company maintain a competitive advantage in each market it participates in? Yoav Amitai: So markets here -- that's an interesting question. Market here can be different segment. It can be different domain like I mentioned, the aerial, ground, maritime domain and it can be different product lines. I think what we're doing in this development or this expansion of our product portfolio is basically provide a different approach to many of the OEMs, which, like I said, we're solving the issues that they don't want to tackle or they don't want to deal with. And we are coming as a Tier 1, basically providing them with all these solutions, and we highly believe that there is a very strong synergy between all those solutions. Like I said during the presentation, we are building on top of the connectivity and not replacing the connectivity. We think that the synergy between connectivity, positioning, autonomy and video and sensors is so deep and so related to each other that it's kind of strange that there is no -- a lot of -- not a lot of companies that are dealing with all those different components or all the different elements together. I think our competitive advantage or our competitive edge will be exactly on this point of how to make a whole product approach that basically provide all the solution in 1 place, and they kind of complement each other. So I think it will make our value -- our competitive edge stronger and not weaken it. Howard Andrew Digby: Yoav, going back to the core product, I guess, this question is about how many drones do you expect your system to be on when you exit 2026? Yoav Amitai: That's a good question. I would say I will just put it as a plug number, I would expect to be tens of thousands of drones. Not getting too much into details because we are trying not to combine prices and quantities. There are a lot of people or there are a lot of competitors out there, and we're trying to save some of the numbers, which we think is part of our assets, but I can comfortably say that, that will be tens of thousands of drones in 2026. Howard Andrew Digby: And some of those drones aren't coming back either, I think. Yoav Amitai: Yes. Howard Andrew Digby: Now another question is, I'd love to understand what is left to complete the third stage against the DIU? I guess, generally, about the status that we have in our U.S. market. Yoav Amitai: Yes. So those of you who are not familiar with the DIU, DIU is the Project G.I. announcement that we have done during the last quarter. That's a 3-stage basically process. We started in the first stage. We had -- there were 140 companies that were competing, that was a paper analysis. The second stage was reduced to only 12 companies that was competing with new innovation or new product or drone capabilities, let's call it. And from there, only 6 companies was chosen to the actual Project G.I., the Phase 3 of the Project G.I. Now Elsight is first and foremost, the only communication platform that is in those 6 companies. We're the only 1 actually that is not a pure platform, which is super interesting. The phase that we're currently at, the third phase, is actually -- first of all, already funded. It's not that we're doing anything for free there. We already got a nice amount of money for participate and to provide them with first units that they can take and start deploy in real life or in real deployments on their side. They are looking to -- or they are deploying it in different theaters around the globe. As you know, the Americans are working globally, not only within the U.S. continent. And what we're currently -- the stage we're currently at is that we are working with them to onboard them basically on all the capabilities and features. It's kind of moving -- transfer information and knowledge from our teams to their teams. We literally have our team there this week as well, working with the end users with the actual units. It's a SATCOM unit that is running this experiment or this program, and basically, the time line there is that, that should be concluded by the end of March. This phase should be concluded by the end of March. And from there, we should expect to start to have procurement after we conclude the third phase. So that's how the program works. I would expect to see first revenue coming from this project something like a quarter after the project concludes. So let's call it, towards the end of the second quarter or during the third quarter of the year, we are expecting to start to see revenue coming from this project specifically. Howard Andrew Digby: Are there any risks that could affect revenues and margins from tariffs? Yoav Amitai: As of today, we're not exposed too much to tariffs. As I said during the presentation, we are -- open a manufacturing facility in the U.S. We already have a U.S. company with all the employees that are in the U.S. are employed by the U.S. entity, which have its CAGE Code and all the different certification and compliances to be certified for different kind of DoD projects. And it's the same for the tariffs. We are expecting to have during the first half of the year, we are expected to have the first production batch done in the U.S. by a U.S. manufacturer, and then we're not at all exposed to tariffs. So the answer is absolutely not. We are not seeing any risk there in terms of that. Howard Andrew Digby: What sort of R&D spend do you plan to spend to realize the new service addressable markets, SAMs, that you are targeting? And do we need to do some M&A? Yoav Amitai: So on the first part, it's mostly headcount. That's how we spend on R&D today. We are growing the team a little bit. But like I said during the presentation, we're not onboarding tens or hundreds of people. We are -- our approach or our vision is to build a super efficient and super profitable business and not just super large organization. I think in today's world of AI agent and tools that every developer, every good developer can become a superhuman or super developer, that's how we utilize it. And we're spending -- a lot of the spend is on headcount and talent basically to bring the right people and to develop all those capabilities that I mentioned to get to the serviceable addressable market. In terms of M&A, I would say that we're -- the answer is definitely yes. Our market is super fragmented market. There are a lot of small companies, smaller than us. We are also small but smaller than us that have super interesting technologies out there, and we're definitely looking on those kind of activities as well. We are, as I said, we're looking for companies that will complement or will be connected to our vision and to have high synergy with what we're doing. And as long as it helps to enable mission as long as it creates an interesting technology, as long as we can translate into revenue, those are the opportunities we're looking at in terms of inorganic growth or inorganic development or product portfolio development. So we don't necessarily need to do it, but we are definitely looking at that as 1 of our growth engines. Howard Andrew Digby: And Yoav, are you able to comment on the time line of this? Or is it open-ended? This is the next question. Yoav Amitai: The time line of the M&A? Howard Andrew Digby: The M&A kind of activities. Yoav Amitai: So we are looking on a couple of targets that are interesting already. It's -- those processes can be long, as everyone knows here on the line today. I would expect -- I won't expect anything to happen in the first quarter of the year, but definitely looking further, that's something that we are expecting to start to see moving -- movement there on this front. But I would say, Elsight in general, our strategy to M&A, we're not going to buy revenue. We're going to buy value, and we're going to buy something that we know how to take the synergy and to leverage it. We're not just buying revenue of low profit. I think 1 of the Elsight's strongest assets is our profit margins that we are working. We want to make sure we keep those profit margins. And to do that, we need to look on technologies or companies that have super interesting technologies with super strong competitive edge. Howard Andrew Digby: How likely is it that Phase 3 of DIU is successful? And I guess you've kind of addressed this before, but what would you think are the chances of success? And is this -- and you've already commented that, that would likely, with success contribute to revenues probably this year, right? How likely that would be? Yoav Amitai: So far, we're getting very, very positive and good feedback, both when we are out in the field with the end users there also when we're doing our weeklies with there, there is like kind of a weekly update that is happening there on a weekly basis. We're getting very, very positive feedback and updates from there. I think that we are positioned in a very good spot to get to the next phase, and I already spoke of how that will unfold into actual revenue. So that's the best I can say. Howard Andrew Digby: Okay. Two questions here. One can lead on to the other. A broader question is -- the first question is, are there any geographical areas where you run into licensing or connectivity hurdles? And then broader question, this could be 1 of them, but what negative events can affect Elsight? Yoav Amitai: So the first part, the answer is yes. There are a lot of places where you do need to have local certification and local licenses. I'm not talking about frequency licenses. That's important to mention. Many RF radio frequencies, radios that require RF or frequencies licensed, that becomes super hard hurdle. For us, it's not the case. Elsight is not actually creating a new infrastructure, as you all probably know, we are utilizing existing infrastructure. So that does not require us to do licensing, but it does require sometimes to do certification for some networks. Over the years, we invested a lot of capital in being certified for different networks in different parts of the world. I think today, it's more than $1 million accumulated that we invested over the last 5 years. So the Halo and all the systems that we are developing will be certified. But I don't see it as necessarily as a hurdle for us. We're just going to a new region, a new area and start to operate there. And in terms of the other part of the question, I think it's part of our -- it's actually part of our unique value proposition, being places that have connectivity issues and have strong or have sophisticated EW environment or a contested environment, that's exactly where Elsight is a champion. So that's actually good for us and not bad. And about the negative effect that can affect Elsight are probably many negative effects that can affect us. I will answer it from a risk perspective of what I see as our -- what keep me awake at night, maybe. I would say that Elsight today, it's in -- like I said, in the middle of a perfect storm happening around us. There is a massive disruption happening currently in the market we're active in. We came into this storm with a lot of experience with a very strong brand recognition. We're in a very strong position and exposure to this market. But I'm constantly thinking -- my job, part of my job, and I say to our employees, part of my job is to be paranoid and think what we're not doing and what we can do more to make sure that we are becoming this giant company that I mentioned in the presentation. I truly think that this disruption that we're seeing at the moment is the time when huge companies are created and Elsight, we have a willing, or we want or we will become 1 of those giant companies. So if you ask me what keeps me up at night is what we don't know and what are the opportunities that we're not going after more than any other risk that I'm looking at in terms of events that can happen and a lot can happen for the good and for the bad. But I think we built the company with a lot of built-in resiliency, both in the team and the business model and the market that -- or the way we're go to market. And I'm feeling very comfortable in -- where we're at the moment in terms of that. Howard Andrew Digby: Yoav, how long would it take to expand into new environments like land and marine? Does the solution need to be tweaked? Or is it basically the same? Yoav Amitai: First of all, I must say that we're already active in those fields. When I say that we want to expand more, it's making sure that we're getting to more places, more use cases in this field, but we are active in both aerial, land and marine applications already. If it requires a different tech or tweak to the technology, in most cases, the answer is no. In the end of the day, those uncrewed systems require the same set of capabilities. Sometimes there are small tweaks, but when we're moving from air to land to maritime, in most cases, that does not require R&D customization, I will call it. It more require configuration that can be done by our professional services team or by the customer themselves depend on their technical competencies. It definitely does not require R&D customization on our side so far from what we've seen so far. Howard Andrew Digby: Question is, are you considering expansion into search and rescue beacons, both defense and civil? I guess -- or our customers, I guess. Yoav Amitai: Yes. I'm not sure what is the -- what -- whoever asked the question, what he meant or she meant by beacons, but we do have customers that are using our systems for search and rescue. As of now, it's -- it doesn't seem like a very big market at the moment. Obviously, that can grow, but we do have customers that are using our systems for search and rescue applications, yes. Howard Andrew Digby: Yes. And if you've just tuned in now, this is essentially saying that we are -- the Halo solution, at least, is agnostic to the industry. And if there's a civil or defense application, where you need this reliable connection confidence and spectrum superiority, then it could suit any vertical. Another question. What about different types of carriers and unmanned systems? Is it basically the same solution with slight configuration tweaks, is a similar kind of thing? Yoav Amitai: Carriers, I guess it means different OEMs or different kind of platforms. Howard Andrew Digby: Yes. I think platform. Yoav Amitai: We used to have a slide like this to explain it, maybe we need to bring it back. The Halo is kind of 1 size fits all. By the way, it doesn't matter if we're talking about commercial application or defense, if we're talking about aerial vehicle or ground vehicle or maritime. It's 1 size fits all in terms of the software feature and the hardware configurations. Inside of that, obviously, different companies or different customers can use different configuration, they can do it themselves. But in terms of the flexibility that the product provides, it's specifically designed for uncrewed systems. But between aerial, ground and maritime, it's pretty much the same. The reason we specifically designed for that is -- I used to say in the past, I'm still saying it today, sorry, is that, we want to create those aha moments for our customers. We want the customers that first time seeing it. And I used to tell the story that we saw time and time again when we're coming to a new customer for integration or whatever. And for us, it's kind of another day in the office. For the customer, it's kind of the feeling of this epiphany moment saying that where have you guys been? This is the product that we're looking for. The only way to do it is by being focused on what we want to achieve and what is the pains and the problems and knowing the pains better than what our customers know their own pains. This is how we get there. And this is, I think, why we have the success that we have is being in love with the problem we're solving and not necessarily with the solution we're providing. Howard Andrew Digby: Stepping back, a context of everybody, Elsight wasn't necessarily formed as a company to create solutions in the drone market. It was about this resilient communication. And when Yoav mentioned focus, 1 of the key things we can be proud of as a team is the focus, focus, focus. And this industry is what we're focused on. But at the beginning, Elsight had all the possibilities and there's so many other verticals we could be in, which may give you some hints about the future of the company. But this is the focus that's created the results. I've got maybe a couple more questions. There's a question here about the margins and the operating leverage because you talked about this a little bit, but we've got very high gross margins of approximately 77% with this record revenue. As you scale into 2026 and your product mix shifts more towards the backbone portfolio and recurring software services, should we expect these margins to expand further? Or is it 77% to 80% the sort of long-term steady state we can expect? Yoav Amitai: Definitely, we should expect those margins to go higher. Like I said, we are investing today in those software features that that's where a lot of margin is created, having -- I mean, even though the margin on our hardware is super high as well, adding more on the software side with the same cost structure, I think that's what will bring our margin to even higher places. And I said it before -- I mentioned it before. Sorry. I mentioned it before, our margins -- I think the margin in Elsight is 1 of our core assets. And the reason we have it is because of the competitive edge or the superior technology that we're providing to our customers. And we're definitely looking to expand it, and we are expecting it to grow. If you look -- if you compare previous quarter to this quarter, we increased the revenue -- I'm sorry, the margin from 82% to 90% on the software stack, and that's because of these activities, and we are expecting to do more of it. Howard Andrew Digby: Yes, I have a question about Aura because we didn't really talked about this much. You've discussed the expansion of the portfolio from pure connectivity into positioning and autonomy. Can you provide more color on your early market reception for the Aura product and how it differentiates itself in U.S. and European defense markets compared to traditional tactical radios? Yoav Amitai: Yes. So Aura, first of all, like we said in the announcement, that's initiated in a program that we're part of with a big prime that is creating not only, by the way, radios for uncrewed system, but also that should go for any kind of communication for defense forces. I think what it provide, provide the same capability we have in the Halo but in a smaller form factor. We will reduce in terms of performance and capabilities because we needed to have a lower-cost product. Like I said, we wanted to keep the same margin. So we had to reduce some of the capabilities there. We're getting great feedback from the first production batch that we already shipped on the back end of last year. And we are expecting it to grow. I think it's another component within the portfolio of our product showing that we have different flavors for different type of use cases, and this is why we came up with the Aura. Overall, we get good feedback for it, and that will be part of everything I said today here in terms of broadening our portfolio, not only in the communications space, but also in the other spaces that I mentioned. Howard Andrew Digby: I've got 2 more questions here. Hopefully, we can fit them in, if you don't mind going a minute over. The -- as you finish up that question about the Aura product, if you're an analyst and you're looking at the size of the market, especially if you're focusing on defense, you'll probably look up and find that communications is a very, very large and significant proportion of defense spending. In some calculations up to 11%. So have a look at that. A question I've got about serviceable available market growth. Slide 17 shows a significant jump in your serviceable addressable available market to $5 billion in 2026 and $10 billion by 2028. How much of this growth is dependent on the release of new products like Aura versus simply expanding with your existing Halo design win customer base? Yoav Amitai: A lot of it is related to the new product that we're going to deploy into the -- to put in to the market. By the way, part of it is connectivity and providing a wider connectivity solution, I will call it, but definitely going, like I said, to more geographies, go to more domains and have a wider product portfolio. That's how we increased our serviceable addressable market. And the fact that we're not talking in TAM, and we're talking in SAM, total addressable market, but serviceable addressable market, is to be more precise and to make sure that these numbers are numbers that we can go after, and it's not including services or actual platform or that's actually the layer of what we are targeting and where we are active in. And that's why we were talking about those numbers or those figures and not talking about total TAMs, which are not necessarily relevant for us. But it's definitely driven by both development of new products, geographies and going deeper into more domains. Howard Andrew Digby: I've got a question. How quickly do systems become out of date or obsolete? Is it quick? How quickly are you -- if it's quick, how quickly are you able to update the systems? Yoav Amitai: So in general, I would say that in the drone space, and that's sometimes true in the commercial and defense. But if I'll try to give an average, a drone lifespan will be between 3 to 5 years. Once it's went through all those years, and that's a super vibrant and super harsh environment, the customer or the user will have to replace the entire thing. And that's where the -- when they update their hardware. I would say that today, we have Halos that are out in the field for more than 6 years already, operating on different drones and different robots. So we are very comfortable with that. In terms of life, there are components that are getting to end of life. We are good until 2032 in terms of that. And obviously, if we will get there with the same set of hardware, we will find replacements. We're feeling very comfortable in terms of the lifetime value of the Halo. Howard Andrew Digby: We've come to the end of the session. I've got 1 last question. Just a specific 1 about your supply chain. And everyone's noticed that the memory market seems to be significant pricing increasing global memory. Given your capital-light manufacturing model and the simplified hardware design of Halo, how is Elsight mitigating these supply chain costs to ensure your hardware margins remain protected? Yoav Amitai: I will start by saying that I think that will go and will be more challenging over time because seeing what the U.S. are currently doing with not being able to buy any Chinese components, thankfully, we are already there. But I think those supply chain challenges will only get worse over time, not for Elsight, in general, in the electronic market. But on our side, I must say that we're not feeling very much this lead time constraints or this tensions because of how we run our supply chain. I want to remind you, for those of you that with us since COVID when there was a crisis for chipset all over the world, we were able to get through that by having those very steady and resilient supply chain, I would say. In terms of margin and cost, we do see some increase in prices on the component. I think we have a lot to do there yet in terms of -- until it will actually affect our gross margin. And obviously, as the prices will continue to increase there or if the prices will continue to increase there, that will be also rolled down to our price of our product, and we will keep the same margin. Our customers are very well educated in terms of cost and production costs and component costs and so on. So I don't think that will hurt our margin -- our gross margins in general. Howard Andrew Digby: Well, that's the last question, Yoav. Thank you very much for your -- for the presentation, and thank you to all of you attendees for your questions and your support. On behalf of the Board, I want to congratulate Yoav and his team on a fabulous job and the work they're doing to set this company up and our investors for a strong future. Thank you, again, everybody, and good afternoon, good morning.
Operator: Welcome to Tobii Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Fadi Pharaon and Interim CFO, Asa Wiren. Please go ahead. Fadi Pharaon: Good morning, everybody. This is Fadi Pharaon, new CEO of Tobii. And I'm joined here by Asa Wiren, our Interim CFO; and Rasmus Lowenmo Buckhoj, who is heading Communications. It's my absolute pleasure to be addressing you today in my new role at Tobii, and I'm really looking forward for a good collaboration together. So let's start. We ended the year with solid and significant cost efficiency measures that are here to support our journey towards profitability. However, the fourth quarter of 2025 has been weak in terms of both revenue and results. We've witnessed continued headwinds from the global state of geoeconomics as well as currency-related challenges as the Swedish krona continued to strengthen. All in all, this has led to generally weaker sales. But at the same time, the solid work towards cost efficiencies has continued, and in Q4, SEK 43 million have been achieved in run rate cost reductions. Well, this means that we have already achieved SEK 72 million in total cost reductions since Q2 of last year. And hence, we are moving steadily towards the SEK 100 million. Now these lower costs have contributed to an underlying EBIT for the company of negative SEK 1 million. Furthermore, we've made substantial noncash fair value adjustments and write-offs to a net value of negative SEK 195 million. So these comprise write-offs of goodwill and projects as well as fair value adjustments of contingent considerations for previous acquisitions, mainly related to Autosense. These adjustments are mainly because new business deals haven't materialized in the anticipated rate. And that has delayed the original plans for Autosense. In addition, we've seen that the international automotive market has developed weaker than expected at the time of the acquisition, which has further now affected negatively. So all in all, the reported EBIT for Q4 is negative SEK 196 million. Now for those wondering why we published the report earlier than planned, is because as soon as the Board decided on these adjustments and write-offs, we released the press release as well as the report. Now we're also encouraged by the fact that our free cash flow has strengthened during this period to positive SEK 57 million. And as we informed earlier, Tobii continues to evaluate and engage in strategic initiatives that will help us strengthen this cash position. As one outcome of such initiatives, we had a driver monitoring system technology asset licensing deal was actually secured in Q4. And that resulted in onetime revenues that we partially paid in Q4, while the remaining majority will actually be paid in the first half of 2026. So now let's review the performance of the 3-year business segments. As you know, we at Tobii have 3 business units. We address different use cases and different customer segments. I'll start from the top with the Products & Solutions business unit, which delivers vertical solutions to thousands of customers yearly, ranging from university research lab to enterprises as well as PC games. In Q4 of 2025, the Products & Solutions business represented 57% of Tobii's net sales. The EBIT result in Q4 is negative SEK 1 million, and it's not been impacted by any adjustments or write-offs. The result is partially due to the strengthened Swedish krona but mainly due to trade barriers that continue to affect our product sales in the U.S. as well in China. We are focusing on our consultancy services as a way forward to balance out the mix. Second, the integrations business. This unit engages with customers who want to integrate Tobii's technologies into their own offerings like assisted communication or VR technologies. Again, in Q4 of 2025, this business represented 24% of Tobii's net sales, and the EBIT was negative SEK 24 million. But if we exclude the adjustments and write-offs, the EBIT would be -- or would have been a positive SEK 8 million. We also saw a new design win for a VR headset, which was secured during the quarter. And we noted an uptick in interest in smart glasses. And the third business unit, Autosense is one that focuses on developing and providing driver and occupant monitoring solutions to automotive OEMs and Tier 1s. And in the fourth quarter of '25, this unit represented 19% of Tobii's overall net sales. This is actually a significant increase compared to last year. And the reason for that is the onetime of revenues that were generated by the DMS technology licensing agreement that was signed in that quarter. As I mentioned, the majority of the revenue of this segment will come in the first half of 2026. This segment delivered a negative SEK 172 million EBIT. And if we, again, exclude adjustments and write-offs, it would have been a negative SEK 9 million. Here, I'd like to invite our CFO, Asa to please go through the financials. Asa Wiren: Thank you, Fadi, and good morning to everyone. The fourth quarter continued with weak revenue development with total revenue amounting to SEK 193 million. The stronger Swedish krona had a negative impact of SEK 17 million in the quarter. Reported EBIT amounted to minus SEK 196 million and includes the noncash impairments of goodwill and projects together with adjustments of contingent considerations, totaling a net of minus SEK 195 million, resulting in an underlying EBIT of SEK 1 million. Although this represents a decrease to previous years, cost reductions have efficiently offset lower revenue. This is also evident when looking at the development over the past 8 quarters. Please turn to the next page for further comments regarding products and solutions. Fadi mentioned explanations for weaker sales. But here, it's clear how cost reductions have -- are having an impact. The drop in results in Q2, as you may recall, was impacted by project impairments of SEK 33 million. On the next page, we can see the development for integrations with both lower revenue and margins. One contributing factor is imagining related revenue that ceased in the second quarter of 2025. The margin on this revenue was 100%. Underlying EBIT adjusted for goodwill impairment of SEK 32 million amounted to a positive SEK 8 million. On next page, we can see the development for Autosense during the quarter. Revenue have been positively impacted by the initial part from the DMS agreement. Reported EBIT includes noncash goodwill impairments, a minor part, SEK 36 million regarding Tobii's legacy automotive business and SEK 176 million relating to the acquisition of FotoNation. The seller's opportunity to receive additional considerations in the first case, expired on last of December 2025, resulting in the reversal of a previously recognized earnout liability of SEK 18 million. SEK 49 million of the reversal is attributable to the revaluation of variable considerations related to the FotoNation acquisition. In addition to this, projects have been impaired by SEK 18 million during the quarter. All in all, as previously mentioned, noncash adjustments add up to minus SEK 195 million. Underlying EBIT adjusted for noncash impairments and revaluation amounted to minus SEK 9 million. The goodwill impairment is a result of the annual goodwill review for which Fadi previously presented the reason in his presentation. The reported values represent management's and the Board's best assessment at the time of the report. And then if we turn to the next page and take a look at the balance sheet. Tobii's balance sheet has naturally been affected by actions taken, such as lower intangible assets via impairment, reduced liabilities due to repayment to the Swedish Tax Authority earlier this year or last year, reduced liabilities due to revaluation but also due to the stronger Swedish krona, which decreased the debt denominated in U.S. dollar. Cash and cash equivalents as of December 31 amounted to SEK 117 million. We report a strong free cash flow for the period, SEK 57 million, key components include the payment of SEK 47 million from Dynavox, which I mentioned already in the third quarter was to come in the fourth and the initial payment for the DMS transaction in the fourth quarter. Our credit facility of SEK 50 million was utilized with SEK 47 million as of the balance sheet date and is reported in the Q1 2025 report the credit runs until 31st of March this year, and we are in ongoing discussions regarding financing solutions. During 2025, SEK 91 million relating to the COVID loans was repaid to the Swedish Tax Agency and a further SEK 40 million will be repaid during Q1 2026. Given the company's current position, there remains a risk that Tobii may not have sufficient financing for the coming 12 months. Addressing this is one of our top priorities and also describe additionally in the year-end report. I would like to take this opportunity to summarize a number of the strategic measures that have been implemented during the year. The ongoing strategic review encompass the entire organization and can be structured into 4 different categories, one being cost adjustments, another one being product portfolio valuation, third divestments or development of partnerships for various business segments and the fourth, of course, being strengthening our financial position. Some examples. When it comes to cost adjustments, in 2025, the initial savings program was completed, resulting in a reduction of OpEx by SEK 263 million. The goal was SEK 200 million. A further savings initiative of SEK 100 million was launched in Q3 with additional cost reductions already identified, SEK 43 million in Q4 and SEK 29 million in Q3. Several projects aim to enhance competitiveness and improve cash flow. When it comes to product portfolio evaluation, such as duplicated functions arising from the acquisition have been consolidated, and a clearer prioritization is being applied to future investments with unprofitable segments discontinued. For divestments and partnerships, noncore assets have been divested including the [ tech ] spin-off as well as nonstrategic patents that were divested during the first quarter of 2025. And new forms of collaboration and partnerships are being developed, and the DMS deal presented in Q4 is a notable example to that one. And to strengthen our financial positions, all the mentioned categories are designed to improve the company's financial position and cash flow resulting in a more focused and efficient Tobii. In addition to operational measures and divestment, work is being conducted in parallel with advisers to explore various financing and capital market solutions. While significant progress has been made across all areas, the review process is ongoing and will continue over several quarters. By that, I would like to hand over to you, Fadi, for some final words. Fadi Pharaon: Thank you very much, Asa. So let's summarize the quarter. Q4 2025 was a weak quarter for us, but with strong delivery on our SEK 100 million cost-cutting program, as well as a strategic review initiative with the DMS technology licensing agreement as one proof point. This has enabled us to achieve a healthy cash flow for the quarter of SEK 57 million. Now we took significant write-offs and adjustments mainly towards Autosense. We remain fully committed to grow our business with DMS and OMS and the recent single camera DMS+OMS launch with a premium European OEM has garnered keen interest in our interior sensing offering. Our ambition for the long term is to achieve a sustainable positive cash flow, so we can enable value creation and also ensure we have the full capabilities to drive profitable growth. We will continue our focus on our sales and commercial initiatives to do so. Now in the near term, we remain focused on addressing our financial needs. These previously announced cost reduction target is progressing well, and it will definitely improve our liquidity in 2026. We continue executing on strategic reviews, which include potential divestments. And as earlier announced, the Board has engaged an external adviser to evaluate financing and capital market options. So the ongoing work is aimed at resolving our financial needs, and that allows us to further focus on our objective to achieve sustained profitability and positive cash flow. Considering all of what I mentioned, the Board decided to remove the current financial targets announced in 2024, and we will be sharing new ones in due times. Finally, on a personal note, I'd like to share that I'm very delighted to joining Tobii, and I'm highly motivated and energized to work closely together with the team in shaping the company's trajectory forward. Thank you very much for listening. And Rasmus, can we please now open the Q&A. Rasmus Buckhoj: Yes. Thank you. And we will start with questions online. And we have a question from Daniel Thorsson from ABG Sundal Collier. Let me let you into the call, Daniel. Operator: The next question comes from Daniel Thorsson from ABG Sundal Collier. Daniel Thorsson: Yes. Fadi and Asa, can you hear me? Asa Wiren: Yes, Daniel. Daniel Thorsson: Excellent. So a couple of questions. I'm a bit curious, how large was the free cash flow from the DMS deal in Q4 alone? And then what do you expect in H1 from this one? Asa Wiren: We don't comment on specific customers or projects, but as we've said, there was a part coming in Q4, but the significant part will come in Q1 during the first half year of 2026. Daniel Thorsson: Okay. So more expected than we saw in Q4, at least? Asa Wiren: Yes. Daniel Thorsson: Was the underlying business in Q4 free cash flow positive? Asa Wiren: Yes. Daniel Thorsson: Okay. And then for your full year 2026, you mentioned a comment that you -- if I heard correct, that you may not be 100% financed throughout the next 12 months. But do you expect a positive or a negative free cash flow in 2026 based on what you see today? Asa Wiren: We don't comment -- we don't do forecasts or outlooks in that way. We have mentioned like the long term and the assessment of the 12 months ahead of us. And I think that is what I can comment on at this stage. Daniel Thorsson: Okay. Excellent. Then I have 2 questions regarding the business. First one, in terms of automotive progress, is the market more challenging due to higher competition and price pressure? Or is it just customers delaying some projects that you expect to come later? Fadi Pharaon: Well, the market is part of the expansion for the delays. As we all know, the automotive market has had a lot of different competitive forces, strategies between conventional fuels and electricity. So there's a lot of moving parts, let's say, in the entire supply chain, and that would naturally sometimes lead for certain delays. However, of course, with the EU regulation coming in, in this 2026 year, we will see that putting in, let's say an acceleration on those plans. Daniel Thorsson: Okay. It doesn't sound like you have lost business to competitors, it's more the market being delayed? Is that correct? Fadi Pharaon: We're seeing now more and more keen interest actually in our single camera DMS and OMS solution since we have press released last year, we are working with a European OEM. So we believe that we will have to work, of course, on all this keen interest and do our utmost to put it in the pipeline. Daniel Thorsson: Okay. Excellent. And then the last question on the business here. I'm a little bit curious around the smart glasses market. Do you have any design wins that you can share or customer names or any expected design wins that will result in product launches within the next 12 months or so? Fadi Pharaon: No. I mean we don't share any forward-looking statements on design wins or not. But I mean, as you can see from the general trend, the smart glasses is a developing market. It's still being shaped. I would say, early days, a lot of course, of technology interest, and eye tracking would play a certain role in the smart glasses market. So we are very keen here at Tobii to make sure that we cement our role in that market and let's see where that would lead us. Daniel Thorsson: Okay. But can you comment if you are involved in any projects that you expect to start production phase in the next 12 months or not? Fadi Pharaon: Once these events take place, we will be able to communicate it. At this moment, we won't comment on any projects. Rasmus Buckhoj: We have no more people in the queue waiting to ask a question online, but we do have a number of questions written in the chat. So we will head over and start to go through them. Now the first question comes from [ Jeppe ] asking. Can you explain what the major automotive supplier will receive through the DMS licensing agreement and what the total revenue for Autosense will be from this deal? Fadi Pharaon: I'm assuming the question is targeted towards the newly signed DMS technology license agreement. So as the word in itself says, it is actually a technology licenses. So it's a new way for Tobii to monetize on the R&D work that we've done. In terms of explicit terms on the value, that's something that we will not be commenting on. But we will see, of course, the outcome of the payments that will come in H1 of 2026. Rasmus Buckhoj: And a follow-up question from Jeppe. What revenue contribution was recognized from the DMS licensing agreement with the major automotive supply in Q4? And what contribution is expected in Q1? Additionally, from which quarter, should we assume that no further revenue will be recognized under this agreement? Asa Wiren: As I mentioned, when Daniel asked the question that we are not commenting on specific customer deals or amounts. So -- but what we have said is that part was recognized in Q4, and the remaining part will come during H1 2026. Rasmus Buckhoj: A follow-up question from Jeppe. Why haven't new business deals materialized in the anticipated rate for Autosense? Fadi Pharaon: I mean, as I mentioned before, partially, it's because of the international automotive industry where we've seen a weaker-than-expected development. But also mainly because we have been working very hard on getting that very important single camera DMS and OMS project out with the European premium OEM. And since we've done that, I think it has been a clear signal to the industry that single camera interior sensing does provide a very high value. So we are going to definitely leverage on this kind of a premium flag project that has been now out in the market, and we're going to put all of our efforts to ensure that we can work with all of the interested parties and engage in the sales engagement as required actually to turn those into hopefully, contracts in the future. Rasmus Buckhoj: Another follow-up question from Jeppe. With no new OEM design wins for SCDO, should we interpret this as evidence that competitive intensity is higher than expected, driven by peers delivering solutions that match or exceed your offering? Fadi Pharaon: I think it is no secret that this is a competitive market, and I'm sure you have seen consolidations as well over the past few months. But that's why our strategy is to carve a clear leadership role by being first with a market implemented and validated single camera for DMS and OMS. Rasmus Buckhoj: Follow-up question from Jeppe. Autosense competitors have secured design wins that include alcohol impairment detection. When will Autosense be in a position to deliver this capability? Fadi Pharaon: I think I need to get back to you. I don't have the full road map to be honest yet in my head, but let's get back to you with this, Jeppe offline. Rasmus Buckhoj: Another follow-up question from Jeppe. What was the license revenue contribution for SCDO in Q4? Asa Wiren: We don't comment on that specifically for SCDO. Rasmus Buckhoj: And [ Jacob ] is asking what was the impact of the DMS payment? And what is the expected sales of DMS contract in Q1 '26 and Q2 '26? Asa Wiren: And I think I repeat myself once again that we don't comment on specific customer deals, and we don't give any forward-looking statements. Rasmus Buckhoj: And a follow-up pressure from Jacob. You utilized SEK 47 million of the credit facility. Will we have to repay this in Q1? And will you be able to extend the credit liability? Asa Wiren: We have described the situation in the report. And as we say there, we are in discussions. So I think that is what I leave it to that at the moment. Rasmus Buckhoj: A question from Peter. How much of the performance in Autosense is driven by onetime licensing agreements? And how does the performance excluding any onetime payments compared to Q4 '24? How much of the performance in Autosense is related to the Autosense division is driven by the commercial market versus the passenger vehicle market? And the fourth question, let's break them up. Let's start with how much of the performance in Autosense is driven by onetime licensing agreements? And how does the performance excluding any onetime payments compared to Q4 '24? Asa Wiren: The answers to those questions would be too detailed to share publicly. So we don't comment on that. Rasmus Buckhoj: How much of the performance in Autosense is related to the -- is driven by the commercial market versus the passenger vehicle market? Fadi Pharaon: Again, I would say, same answer that Asa has already given. We will -- we're not in a position to deep dive into proprietary information. Rasmus Buckhoj: And final question from Peter. Does your outlook for this division differ between these 2 segments versus the performance so far? Fadi Pharaon: Same as... Rasmus Buckhoj: A question from Jacob. Have you received cash for the DMS deal? Can you elaborate on the... Fadi Pharaon: Working capital... Rasmus Buckhoj: Working capital dynamics of the deal. Asa Wiren: We have received one part of it, but the main part will come during the first half of 2026. And what was invoiced during the fourth quarter was also received in 2025. Rasmus Buckhoj: And a question from [ Emil ]. So no more revenues from the Tier 1 deal after H1 and the Tier 1 deal referring to the DMS licensing agreement, I understand. Asa Wiren: As we've communicated, it will come during the fourth quarter and the first half year of 2026. Rasmus Buckhoj: And I don't see any further questions in the chat. Is there any other questions? Fadi Pharaon: If not, thank you, everybody, for listening in and your interesting questions, and we'll be meeting you for the next quarter financial report. Thank you very much. All the best. Asa Wiren: Thank you.
Even Westerveld: Welcome, everyone, and good morning. Welcome also to everyone following us on the stream because we are also online with the stream, we need to wait until the right time to start this session. And now it's 9:30, and we are ready to present the results for the fourth quarter and for the full year 2025. We see a lot of smiles in the audience. We hope it's because of the dividend. And I will give the floor to our CEO, Kjerstin Braathen, and also to our CFO, Rasmus Figenschou, for the first time on this stage. We will go through the results, and there will be time for questions after also from the online audience. Please, Kjerstin. Kjerstin Braathen: Thank you so much, Even, and a very warm welcome to all of you, even if it's cold outside to this presentation of our fourth quarter results but where also I would like to highlight some of the key points for the year 2025 as a whole. I think it surprises no one if I say that these are historic times in terms of uncertainty. But we often say also that uncertainty does not mean that there are not opportunities out there for businesses and across industries. In fact, we almost see the contrary. Uncertain times in a bigger picture does not mean either that we need to forget the little things. And today is an important day for us because of our results but it was also an important day to pick because it's an important day for a few of our colleagues. And in DNB, we like to talk about the importance of people. So first, I need to say that we have also invited you to celebrate Even's birthday today. But more importantly, we have invited you to celebrate Stig, our long-term photographer, who turns 60 years today. So that is an illustration to the DNB team. In this environment where uncertainty is the new normal, the economy continues to perform well and prove its resilience in Norway. We also see that our customers continue to have a high activity, and they perform well across sectors. We focus on our core with our unwavering commitment to our customers and the development of our relationship and our business with them. We are, we believe, presenting a solid set of numbers today, demonstrating the activity level in the Norwegian economy and also the strategic value of the positions that we continuously build across the business. I would like to start with a couple of highlights concerning our customers because we like to start with the customer in DNB. First, DNB Carnegie. In 2025, DNB Carnegie was the institution that took part in the highest number and the largest volume of IPOs across all of Europe. The position and the strength of the position is clearly demonstrated by being #1 in the Nordics in investment banking, #1 across equities and #1 in Norway and Sweden on also mergers and acquisitions. On the retail banking side, we continue to make life easier for our customers. One of the things they achieved in '25 was to reduce the time it takes for a mortgage application to be implemented by 24%. We also note that Montrose, which is our challenger platform for retail savings in Sweden was awarded the best bank in Sweden in '25 and this only after having been in operation for a year. And we are motivated to see that the level of customer satisfaction is on its way upwards across many areas of our operation and that we see the highest level of customer satisfaction in Sbanken after the integration. For the smaller customers, we have made it easier not only to become a customer in the bank but also in terms of registering your new business with an automatic process and through this, reduced the time consumed by these 2 activities by 37%, more time for our customers to focus on the business and creating value. I am very proud of the team that works very hard to deliver all of these results across the group and creates value for our customers every day. Key highlights financially for the quarter is a return on equity that comes in at 16.6% in the quarter, driven by growth across lending and deposits but also very high activity in other areas. The return on equity is well above the minimum targeted level of 14%. NII is up by 1.2%, driven naturally by growth in the business as well as other interest income elements, and it's partly offset by mix effects as well as rate cuts that takes effect in this quarter. Net commission and fees is up by more than 40%, 40.3% from fourth quarter last year, naturally reflecting the integration of the Carnegie activities since then. But I would highlight the fourth quarter with very strong performance across asset management and investment banking. Our portfolio remains very robust. 99.4% of our exposure is in Stage 1 and 2. There are no negative migration. On the contrary, there are positive development in credit quality in areas such as large corporates but we do book some impairments in the quarter and have a cost of risk of 15 basis points. These are primarily related to specific customer situations. Earnings per share, up by 9.6% compared to the third quarter this year, for the year, NOK 28.45 per share. And this is thus the basis for our Board's decision to propose a dividend of NOK 18 per share as a cash dividend for the year. This is up 7.5% from last year, fully in line with our dividend policy. Our capital ratio remains rock solid, I would say, with a capital core equity Tier 1 of 17.9% after the deduction of dividend and after the deduction of an additional share buyback program of 0.5 percentage points that we do announce today, a headroom of 160 basis points towards the expected and required level by the FSA, comfortably to support a growing business as we move ahead, but also to deliver on dividend policy. The outlook for the Norwegian economy remains robust. Our economists expect a healthy growth this year by 1.5 percentage points GDP, 1.6% next year. Unemployment remains low, 2.2%, and this is the level where we expect it to remain in the coming years. And unemployment is probably the most important factor for financial stability and economic health across the Norwegian economies and households. While inflation is still not fully down at the targeted level of 2%, we continue to see that it comes down. There is also an expectation in the market that the annual wage growth this year will lead to a growth in real wage for most people, and this will continue to drive consumption as a key element to support further economic growth. We have seen, as you may recall, 2 cuts in the key policy rates during 2025. DNB Carnegie expects another cut in key policy rate in June this year and thereafter, a stable level for the key policy rate. With an additional cut, this would take the policy rate from 4% today to 3.75%, and this is the level it's expected to remain at for the remainder of the forecasting period. While the level of global economic uncertainty remains high, the activity level and the underlying fundamentals for our business and the opportunities that we see for our customers continue to provide a very favorable backdrop for our business as we move ahead. A few highlights on the business areas and now for the full year of 2025. The growth in lending in '25 comes in at 4.9% across the group. Deposits are up 2.8% for the year. The growth is slightly above the 3% to 4% that we usually indicate. We believe this is a strong point. This is profitable growth. And I think it clearly demonstrates the value of our growth platform where we have talked about having a slightly different position than many, given our growth platform internationally, both in the Nordics but also outside in specific industries. And we see that this growth platform over time enables us to deliver even when the market is in Norway is somewhat slower. Deposits, on the other hand, 2.8% is slightly below the 3% to 4%. What is important is that the attractive growth in deposit we see comes across Personal Customers and corporate customers in Norway by 7.7% for Personal Customers and 3.9% for our corporate customers. These are the areas where the deposits are the most sticky and the most valuable. There is a decrease in large corporates. This is related to a desired reduce on specific volumes on specific names and not very accretive to the NII. So all in all, 2.8% is also a number that we're pleased with. On the personal customer side, we've seen a high activity, a growth of 2.2% for the year, a year with a lot of activity also generated by the fact that we have seen rate cuts. The net interest income is up for the year despite 2 rate cuts. And there is quite a substantial uplift in other income by 30.2%, of course, due to the integration of Carnegie but very strong contributions from assets under management and continued increasing quarter-by-quarter of the savings accounts that we offer to our customers. We see during the year '25 that our real estate broker is doing increasingly better and better. And it's a good reference to note that of the sales that we saw in the previous quarter, we finance 32% of the sales that we have brokered, almost 10% higher than our market share, an element that demonstrates the value of having that type of a business within the group. Cost-wise, nominally, it's up. If we look at the underlying cost development ex the effects from Carnegie, there is a flat cost development in this area, clearly demonstrating a very strong cost control. For our corporate customers, we also see profitable lending growth, 7.7%. There are growth in commercial real estate but I would like to highlight also growth among SMEs. We do follow that. We like to see that also the broader and regional part of the businesses are growing, which they are at a higher pace than the market. And the growth in NII is accompanied by an even stronger growth in revenues related from other areas than the interest-bearing one. Higher customer satisfaction, in particular, for the smaller customers that are very attractive to many. We're working hard on that. And during the year, we have seen an uplift in the market share for start-ups, newly established companies by 3 percentage points up to 28.7%, which is a very strong position long term for the business. Large Corporates, total revenue up 12% and NII growth of 4.4% also here despite the rate cuts. Other income, a strong up 29%, demonstrating the cooperation across with DNB Carnegie, a strong development in asset management and a strong development of the business as a whole. The quality in the portfolio is improved. The impairments across both Corporate Customer Norway and Large Corporates are this quarter related to customer-specific situations but the portfolios and the credit quality remains very robust. A couple of comments on DNB Carnegie and our business in wealth management. You can see the uptick in revenues that we deliver in 2025. We believe this clearly demonstrates the value in the improved strategic position that we have across these 2 businesses, together with DNB Carnegie. The customer income in DNB Carnegie in '25 is up by 27%. More so, I would say we're very motivated by the strong reception from customers, having experience that we are working on and being awarded many transactions that we have not been -- we not would have been able to compete on if we had not joined forces. We have received strong recognition of our positions or not even strong recognition, but I would say a strong track record in terms of the magnitude of the business that has been done. And we increasingly see how the organization works well together and markets are active across ECM, across DCM and even across M&A as we enter into 2026. Wealth management, total income is up by a whole 41.7% from the prior year, NOK 527 billion growth in assets under management. More importantly, there is also a meaningful contribution from flow in this number, NOK 47 billion for the year as a whole, and 40% of this is related to retail volumes. This is a solid development. It solidifies our position as Norway's largest asset manager but it also demonstrates the value of having built a broader position. We see that we are also continuing to strengthen our share as -- our market share in distribution of funds to the retail segment and see that now NOK 4 out of NOK 10 that are saved in mutual funds in Norway are actually saved in a DNB fund. We're still not even a year into having merged the Carnegie business into these 2 areas, and we continue to look forward to putting our efforts into further strengthening these positions, a broader offering to add even more value to our customers as we move ahead. Lastly from me, I talked about the dividend and our Board's intention to propose a dividend of NOK 18 per share, which is a nominal increase per share per year, in line with our dividend policy. We have completed 2% buyback. So with an additional 0.5 percentage point of buyback, that brings us to 2.5% and a total payout for the year 2025 of 86.3%. We expect to continue to have a share buyback program with the Board asking the general assembly for a proxy also this time around. We have a strong capital position and ability to support our customers in their future growth and deliver dividend, and we continue to remain very firmly committed to our dividend policy that we have been for many years. And with that, I have the pleasure to welcome on stage our rock-solid brand-new CFO, Rasmus Figenschou. Rasmus Aage Figenschou: Thank you, Kjerstin. I will now take us through the financial results for the fourth quarter in more detail. We noted strong activity across the group with a currency-adjusted volume growth of 2.2%. In the personal customer side, the growth was 0.3% for the quarter. And on corporate customer Norway had a strong lending growth of 5.2%. This was driven primarily related to several specific transactions within the commercial real estate side and is expected to be syndicated and taken out in the bond market during the first quarter of this year. Growth in Large Corporates and International came in at 2.7%, driven by increased activity across both geographies and industries in mainly low-risk customers. Currency-adjusted deposits are up by 0.2%. Firstly, corporate customers in Norway increased by 4.3%, driven by increased volumes across industries as well as public sector related to increased allocation through the government budget. Both within Personal Customers and LCIC, there is driven by seasonal effects and the underlying development in the portfolio remains stable. We continue to maintain a strong deposit-to-loan ratio within the customer segments of 72.2% in the quarter. The net interest margin was up by 1 basis point in the quarter, ending at 181 basis points, supported by volume growth and an increase in other NII. Combined spreads in the customer segment was down by 6 basis points, driven by repricing effect, product portfolio mix effects and margin pressure from stronger but rational competition. NII is up 1.2% for the quarter. The effect from the lower combined spreads showed on the previous slide is noted here with a reduction of NOK 504 million. Keep in mind that in the fourth quarter, we had full effect of the August repricing and partial effect of the November repricing, which will have full effect in this coming quarter. Interest on equity is up NOK 40 million, driven by average increased volumes of equity. Amortization effects and fees are up NOK 47 million, reflecting higher activity during the quarter. Other NII is up NOK 476 million, of which NOK 171 million is related to nonrecurring year-end adjustments. Please note that from year-end, regulatory change related to tax accounts in Norway, which means that corporates will no longer be required to maintain a separate liquidity buffer in their banks for tax payments. The estimate is to have a negative annual effect on the NII of approximately NOK 300 million. Moving on to commission and fees. We have a robust and well-diversified fee platform and the performance this quarter clearly signals the potential for continued future growth. Customer activity picked up during the quarter and net commission and fees are up NOK 1.3 billion or 40.3% from an already all-time high in the fourth quarter of 2024. Real estate broking was up 6%, where reflecting higher activity in the real estate market and the number of properties sold came in at 4.7%. Investment banking services was up by 101%, a strong performance compared to an already strong quarter in the previous year. We note particularly strong performance within ECM, DCM and bank syndication, driven by high activity and several landmark deals in the quarter. Asset management and custodial services was up by 68%. Assets under management was up NOK 88 billion, well balanced between the commercial -- the retail segment and the institutional investors, retail being an attractive segment for us. We noted a positive net flow of NOK 20 billion, also evenly split between the retail and the institutionals. And finally, we noted a positive development in the number of savings schemes. Money transfer and banking services were down by 25%. The result in this quarter is mainly driven by increased use of credit insurance and LCIC. This is a tool to ensure capital efficiency, driving origination and distribution strategy and ensuring increased profitability for the group as a whole. In addition, we saw pressure on profits from the used car sales in DNB Finance this quarter. Sale of insurance product was up by 15%, supported by continued strong income from defined contribution in our life insurance business and positive development in the non-life insurance business as well. In addition to what can be seen on this slide, we also noted positive momentum in other income with strong results from our life insurance business, DNB Liv and our non-life insurance company provider, Fremtind. The strong performance and high level of activity is also reflected in our costs, where operating expenses are up NOK 878 million. The high activity during the quarter resulted in an increase of NOK 330 million in variable salaries. The fixed salary uptick is related to Q3 lower costs due to Swedish holiday pay. Further reflecting seasonally high activity, we noted increasing costs in the next 3 categories on the slide. We also note a one-off effect on NOK 200 million, driven by an integration cost of NOK 50 million as well as year-end effects related to variable salaries and other operational expenses. To paint the full picture, I also want to highlight the full year cost perspective as well, where inflation outgrew the underlying cost growth. Norwegian core inflation came in at 3.1%, where underlying growth in DNB was 2.6% for the year. The tax rate for 2025 came in at 18.5%. And going forward, as previously indicated also, our tax guiding is adjusted from 20% to 23%. We note integration costs of NOK 250 million in 2025 also communicated to the market in relation to the Carnegie transaction during the year. For 2026, we estimate up to NOK 200 million of integration costs for the same. At year-end, we have 226 more FTEs than we had at the same time of last year, while at the same time, welcoming 840 new FTEs with the Carnegie merger. This illustrates a considerable gross reduction in FTEs in line with the cost reduction measures communicated at our Capital Markets Day in 2024. Now over to our portfolio, which remains robust and well diversified with 99.4% of the portfolio being in Stage 1 and 2. The Personal Customers portfolio, which accounts for roughly half of our exposure, remains strong. Continuing the trend over the last few quarters, we note record low request for installment holidays and continued reduction in interest-only loans. For the Corporate Customers, impairments came in at NOK 793 million. The portfolio remains robust and well diversified. There is no structural changes to the portfolio or migration in general to note, negative migration. The impairments in Stage 3 is related to specific names and specific situations in both LCIC and Corporate Banking Norway. These are typical exposures that we have been following closely and most are in industries that have been challenging for some time, such as residential, real estate, construction. Relating to the legacy portfolio in Poland, we incur a NOK 34 million provision. We remain comfortable in the credit quality in the portfolio but please bear in mind that losses will vary from quarter-to-quarter. I brought that from Ida and continuing on. Now moving on to capital. Our CET1 ratio remained strong at 17.9% with 160 basis point headroom to the regulatory expectations. Pillar 2 guidelines was reduced by 25 basis points during the year from the SREP. The CET1 ratio was positively impacted by profit generation and the repayment of excess capital from DNB Liv. It was offset by the proposed cash dividend of NOK 18 per share, and the annual operational risk adjustment, which is driven by the average income over the last 3 years. We recently finalized the previous 1% share buyback program and today announced a new 0.5% buyback program, reducing the CET1 by 19 basis points. We expect that the Board of Directors will request an authorization from the AGM for a share buyback program as they have done so in previous years. The leverage ratio remains strong at 6.6%, well above the regulatory requirements of 3%. Combined with a CET of 17.9%, our capital position remains strong and enables us to continue to deliver on our dividend policy. Summing up, we delivered a strong quarter in the with key figures of 16.6% return on equity, 39.7% of cost income and earnings per share of NOK 7.65, an increase of nearly 10% from the previous quarter. And with that, I thank you for your attention and open up for questions. Even Westerveld: So much, Kjerstin and Rasmus. We have some microphones in the audience. Please wait for the microphones before you ask your questions. Anyone wants to be the first one out, Thomas Svendsen, SEB, in this side. Thomas Svendsen: So question to the capitalization. Why are you not using the opportunity today to sort of adjust the CET1 ratio lower down towards the requirements? And is that a signal of your growth opportunities during '26 or maybe some smaller M&As? Kjerstin Braathen: We have a capitalization level that remains fairly consistent to what it has been in previous quarter, and it's an ample room to have 160 basis points above the expected and required level. We are proposing a dividend with a substantial uptick. That's in line with our dividend policy. And we are mindful of having the capacity to grow for further growth and also have an intention to continue to do some share buybacks. You will, when you look at the growth in the previous quarter, see that in this quarter, in particular, the growth was very capital efficient. So probably more efficient than it is likely to be over time. There is no signaling or no change in the way we think about our capitalization. Priority #1 is to support our customers and to grow. And beyond that, we aim to pay out excess capital over time to shareholders, and this gives us an ability to amply deliver on that. Thomas Svendsen: Okay. And just a final question on the growth on the Personal Banking side, it was quite slow in the quarter. Do you have some reflections on that? Kjerstin Braathen: In our mind, the growth is not so slow in the fourth quarter. It's usually not one of the strongest quarters in the year. The fourth quarter this year also saw a lower activity in general compared to other quarters because the rate cuts that happened in the second and third quarter generated a lot of activity where customers reoriented themselves where they looked at swapping banks, and we could see a very positive impact on this on our Sbanken brand, which is typically a strong offering in such a situation, whereas fourth quarter is a calmer market where what we primarily see is refinancings and people buying new homes. We have a decent growth. We have a sound development of margins given the market where competition is strong. So all in all, we're pleased with the performance of the teams throughout the year with 2.2% but also fourth quarter and how the business develops. Even Westerveld: Yes, Simon in ABG. Simon Skaland Brun: Simon Brun, ABG Sundal Collier. Following up on Thomas' questions but turning to the Corporate side. As you mentioned, strong lending growth in Corporates in the quarter but also for the year, around 8%, well above the market growth. When you -- when you take market share on the corporate side, do you do that without any compromising on the margin? Are you -- are you comfortable with sort of the profitability on that growth? Yes, that's the first question. Kjerstin Braathen: Yes. Good question. We are very comfortable with the profitability and the sustainability of the growth. If I start with large corporates, it's primarily a growth in low-risk category of clients, which is also one of the reasons why it's very capital efficient. Bear in mind that half of this growth comes from our international platform. So it's very hard to measure the credit growth and certainly in the specific quarter towards market share. And if you look at our growth platforms outside of Norway, they are industry-specific. And if you look at the Nordics, we have more of a challenger position. So we have a much broader room to grow, and we do this together with our team members from DNB Carnegie, where we have offerings where we package together a broader spread of products. Growth will vary from quarter-to-quarter. But of course, we are very pleased to see that for the year 2025 for Large Corporates, our growth platform enables us to deliver 7% growth. Now moving to Corporate customers in Norway, there are 2 elements to consider. One is commercial real estate, which is a substantial part of that portfolio. And the other is SMEs. SMEs is where we look at market shares. And SMEs, our growth for the year was 2.8%, I believe, whereas market growth of 1.8%. So that confirms the picture that we have communicated for some years that we are able to take some market share on the SME side due to our offering having competitive advantages amongst others in areas such as the broadness of product [indiscernible]. This is a very profitable business, a complex business to deliver on, which is also why we're happy to see customer satisfaction increase and an increased market share for start-ups. Competition is strong. we don't win every deal. We are focused on the profitability in the growth. And when we see we're able to deliver on that, we are happy to see that. The area that is still lagging because the growth is lower than what you have been seeing for many years up until a couple of years ago is the construction activity for homes. That has still not picked up. We ask our team every day. And from what I hear now, they are seeing more inquiries for new projects, but it's a little bit early to say how well they will sell, and it's going to take a while before those volumes come back on the book but they will at some stage. Now in '24, there is also some substantial transactions on the property side, commercial real estate. And this impacts the number, the overall gross number and is also why you cannot read the total number as a market share indicator. Typically, we do the transactions that are more complex that requires delivery of more than just the debt. And fourth quarter growth in Corporate Customers Norway, there are such deals in the numbers. And there are also some of these transactions that already have been syndicated, distributed to the market, which means that, yes, there is a tailwind going into the first quarter but maybe not as strong as it looks at the outset end of year numbers. Simon Skaland Brun: Thank you for a very comprehensive answer. Maybe one for Rasmus then on the NII bridge you showed. Obviously, a negative impact on the spreads, which I guess relates to the rate cuts and fierce competition, as you say. But on the other NII, very helpful in this quarter, I guess, and some nonrecurring items. But in general, how should we think of the other NII? Is that untypically beneficial this time around? Or how sustainable is that sort of tailwind from other NII? Rasmus Aage Figenschou: The other NII will vary from quarter-to-quarter, as you see, and it's related to non-direct deposit and lending interest income. That could be, for example, on the prime financing, which externally we call... Kjerstin Braathen: Securities financing. Rasmus Aage Figenschou: Securities financing. Thank you. And within treasury, et cetera. So this quarter, there were some of numerous factors that point to positive. Others, there will be more balanced and sometimes more on the negative side. So I think in some, there is -- we see in this quarter some of several positives playing in on the other NII. Even Westerveld: Yes. Herman Zahl in Pareto. Herman Zahl: I have 2 questions on costs. So first, you say underlying costs are up by 2.6% year-over-year. So I know you have a cost income target but could you help us with what we should expect on the underlying cost into next year and highlight some cost lines where you think there will be some cost pressure and where you will be able to be more cost efficient medium term? Rasmus Aage Figenschou: Cost pressure is related to underlying inflation is obviously driving the costs and FTEs directly hitting that, some of those 2. IT costs are also hit in terms of cost pressure. So the -- looking at -- that's directly sort of the posts that are driving it. For us, I think looking at the year as a whole is much more conducive to looking forward rather than the quarter as a whole. The quarter as a whole -- the quarter, sorry, this last quarter was driven by high activity, as mentioned, also one-offs of NOK 200 million, as mentioned, NOK 50 million being to -- relating to the integration costs and also some year-end adjustments on variable costs, et cetera. So I think looking at the year as a whole is a more correct way of looking at the cost going forward. Kjerstin Braathen: So the clear guidance we have, as you're saying, it's sub 40. We don't nominally guide on cost, but I think comments were given on the quarterly development where there are several sort of activity-related elements as well as one-offs. But I think to add to just what Rasmus is saying, the annual development demonstrates that we are underway also in terms of delivering on the cost initiatives that we described at CMD with a reduction of more than 600 employees. So it very much highlights the fact that we are growing and we have specific areas of the business that we're growing, but we're also, at the same time, very much focusing on competitiveness and efficiency. Herman Zahl: But then on the parts of the SEK 200 million nonrecurring, just to understand it correctly, some of it is related to sort of accrual of bonus payments and should be seen in the context of the strong fee performance? Kjerstin Braathen: Not in the quarter as such but as an adjustment for the year, which is why we're also showing the full year because it's not representative for the quarter as such. Herman Zahl: Yes. And then just on the associated companies accounted for by equity method, Fremtind, obviously very strong. And -- but it also seems like maybe other contributions are improving. Could you update on the profitability in Vipps and Luminor or the other contributions there? Kjerstin Braathen: I think definitely, Fremtind is delivering very well, and we're pleased to see that new strategy, new management, better pricing. I mean, of course, they've been through the same cycle as many other non-life insurance businesses but we certainly also see strategic effects from repositioning the company, which is working well. They are the largest contributor to associated companies, representing roughly half -- more than half of the contribution. We are not obviously specifically guiding on the other companies but we're seeing a healthy development. Vipps had a positive contribution for the third quarter in a row. So all of these businesses are doing well. Nothing in particular to highlight or that stands out, and we expect a meaningful contribution for them also as we move ahead. Even Westerveld: Thank you. Roy Tilley from Arctic next up. Roy Tilley: Just 2 questions from me. Just one quick one on tax. You had a 14% effective tax rate in the quarter, which I guess is that usual tax deductibility of interest expenses. In the national budget, they tried to change that regulation. So just wanted to check if your long-term tax guidance, is that still around 23% or 20%. Rasmus Aage Figenschou: That's correct. We affirm the long-term tax guidance of 23%. Roy Tilley: So this will be the last year with this effect most likely. Rasmus Aage Figenschou: Correct. Roy Tilley: All right. And then just on -- just one follow-up on growth and margins. So looking at your lending margins in the personal customer segment, it's down 18 basis points in the quarter, which I guess could be some timing effects, but also the competitive pressure we talked about. So just how do you see those margins into 2026? And if we look at the full year '26, will you -- is your guess that your -- most of your growth will come on the Corporate side? Or are you kind of targeting still high growth -- higher growth in Personal Customers given the backdrop? Kjerstin Braathen: Thank you, Roy. We are targeting growth and profitable growth across all sectors, and I think we've proven our ability to do so throughout this year. Now looking at margins and in particular, when rates are moving, it's important to look at the volume weighted to have a representative move. And I think that is -- that's not what is 18. That is a lower number for Personal Customers. But clearly, as highlighted with the 6 basis points decrease on the margins volume-weighted wise for the group, there is a meaningful impact from rate cuts where they are impacting with a little more than one rate cut for the quarter as such, and there is the rest of the second rate cut that takes effect in the first quarter this year. There is also a mix effect due to higher growth on the lending side than on the deposit side. And there is a competition impact in the margins. There is also the fact that the growth in large corporates happens on low risk, which normally you would expect lower margins. So there's a mix of effects. I think we could add that we have competitive prices. And our observation on the personal customer activity is that the margin pressure in fourth quarter was less than it was in the third quarter. But we do work very actively and very proactively in terms of leveraging the performance competence and platform, if you will, in order to deliver the growth that we do with the platform we have across all of Norway. Even Westerveld: Thank you, Roy. Since it's my birthday, I will allow a second question from Thomas. Go ahead. Thomas Svendsen: Final question, just on the number of employees was slightly down Q-over-Q. So is it fair to assume stability over the next 12 months? Kjerstin Braathen: Nice question. We do not guide on FTEs. We guide on costs. Even Westerveld: Nice try. Rune, any questions from those working remotely? No, not today. Okay. So thank you all for joining both remotely and physically. And for those of you who are from the press, there will be a press session in the area outside afterwards where members of the management will be available. And with that, this concludes our session. Thank you so much for listening and being here. Kjerstin Braathen: Thank you.