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Michael Green: Good morning, everyone, and welcome to this presentation of Handelsbanken's results for the fourth quarter and full year of 2025. The bank reported a solid fourth quarter with net profits from continuing operations, up slightly compared to Q3 and a return on equity of 13%. The savings business continued to perform well with strong inflows in customer savings. Assets under management reached an all-time high in our home markets. Household lending has started to grow again in most of our home markets. And in the U.K. and the Netherlands, we now have also seen several quarters with steadily growth also in corporate lending. All in all, the income increased in the quarter, while the normal seasonal pickup in expenses was fairly modest. Asset quality remained very strong, and we added yet another quarter with net credit loss reversals, bringing the consecutive count to 8 quarters in a row with net reversals. So given the solid asset quality and strong financial position of the bank, the Board proposes a dividend of SEK 17.50 per share to the AGM, which an ordinary dividend of SEK 8 per share and an extra dividend of SEK 9.50 share. The CET1 ratio of 17.6% was 2.85% above the regulatory requirement. In other words, the bank is now back again in the long-term range of 100 to 300 basis points above the regulatory requirement. Now if we look closer at the financials of the fourth quarter compared to our previous quarter, ROE amounted to 13% and the cost-income ratio was 41%. Operating profits were down marginally, but net profit from continuing operations increased slightly. Adjusted for currency effects, the NII declined by 3%. The drop was explained by negative margin effects due to lower short-term market rates and by a year-end calibration of the deposit guarantee fee for 2025. Fee and commissions increased by 5% and were driven primarily by continued strong net inflows into assets under management and positive stock market develops, boosting the savings business. The NFT increased somewhat and over income -- and other income, sorry, was supported by VAT reassessment in Sweden and Denmark of around SEK 200 million. So all in all, the income grew by 1%. Expenses usually increased some in Q4 as the activity level is always higher after the preceding summer quarter. The increase of 2% was, however, relatively low compared to in previous Q4s, which reflects the increased cost focus in the bank. Net credit losses amounted to SEK 5 million. If we switch over and look at full year of 2025 compared to 2024, ROE amounted to 13% for the year and the cost-income ratio to 41.5%. And adjusted for currency effects, the NII declined by 7%, again, mainly as a result of the material cuts in central bank policy rates during this year, affecting the margins. Net fee and commission income, on the other hand, remained resilient and increased by 2% adjusted for FX effects. The key contributor was again the savings business. The NFT was down due to temporary negative effects in the second quarter in 2025. All in all, total income dropped by 9%. Expenses at the same time dropped by 7%. And when adjusting for the FX restructuring expenses and Oktogonen, the underlying decline was 3%. The reduction of the running cost base of the bank came as a result of the initiatives carried out over the year -- the last year-and-a-half. This enabled the bank to counter general inflation and annual salary increases by a wide margin. Net credit losses reversals amounted to SEK 313 million compared to the SEK 601 million a year ago. All in all, the underlying operating profit was down by 12%. Now if we take a closer look on the NII development compared to the previous quarter. As said, the NII dropped by 4%. Over a number of quarters, we have seen positive signs of recovering growth in particular in the U.K. and the Netherlands, but also in the mortgage lending market in Sweden. Overall, however, volume development only contributed with SEK 14 million to the NII in the quarter. The main effect in the NII rather related to effects from policy rate cuts with lower short-term rates, which impacted the net interest margins. In Q4, we received the final bill for the deposit guarantee fee in 2025 from the Swedish National Debt Office. It was a touch higher than expected and resulted in a top-up in Q4, burdening the NII with around SEK 50 million. Currency effects were negative due to the strengthening of the Swedish krona. Net fee and commission income increased by 5% in the quarter. The bulk of fees and commission relates to the savings business, especially in the mutual funds offering. That's an area where the bank has seen the bulk of the increase in fees and commissions due to both positive market development as well as continued strong net inflows into our funds under management. In both Sweden and Norway, the bank's market share of inflows into mutual funds exceeded the market share by the outstanding volumes by more than 2x in 2025. This has consistently been the case for over a decade in Sweden. In Norway, it has been the case since the bank refocused 2 years ago to a more balanced growth between lending and savings. Other fees have grown a bit more moderately. Now over to the expenses. As shown in the slide, the trend of increased cost has broken in 2024 and the expenses have since then traded -- trended down despite annual salary revisions and general cost inflation. Central and business support functions have been streamlined and the use of external consultants materially reduced. The positive trend has continued also in Q4 in 2025, and we can note that the underlying staff costs are down by 5% compared to the same quarter last year. Looking at the other expenses, they were down 4% -- were 4% lower compared to the same quarter in 2024. And the bank is now in a very good position in regards to cost efficiency. But that does not stop us from continuing to strive every day to increase our productivity. And as part of that daily endeavor, we always explore and embrace new opportunities arising from technological advancements. One obvious field today is the AI, where we spend a lot of time and resources in examining the potential for improved operational excellence and productivity as well as for further improvements of the customers' experience and the bank's value proposal. Now over to asset quality and the credit loss reversals. When summing up the last 5 years, meaning since before the pandemic, the bank has in total booked net reversals and as said now the 8 quarters in a row with reversals. The absence of credit losses is an evidence of the prudency in the bank when it comes to managing credit risk. It reflects the bank's underwriting procedures and policies, the risk appetite and the customer selection as well as the preference for collateralized lending. But also not least in the ability to detect early signs of credit risk deterioration and the ability to quick make this necessary actions and decisions. In this context, the local presence through our branches and the close relationships with our customers is essential, but cannot be emphasized enough. Now turning to Slide 9, a few words about our respective home markets. To start with our largest home market, Sweden, which accounts for 71% of group earnings. The market position for the bank is strong with the bank being the largest combined lender in private and corporate lending. Mortgage volumes are now growing again and have been since the last spring, although with a bit moderate pace. The market share of the net new mortgages was 6% in the first half of 2025, but doubled to 12% in the second half. Corporate lending volumes remains a bit on a standstill, but expectations for recovery along with general economic growth in Sweden going forward. The saving business, as I've touched upon earlier, continued to develop well. The cost-to-income ratio was 33% in Q4 and the profitability around 15%. The U.K. accounts for 14% of the group earnings. Household lending volumes has consistently grown since early 2025 and we were up another 1% in Q4. Corporate lending has grown consistently since the summer of 2024. In Q4, the volumes were up by 2%. We also see deposit volumes increasing steadily on both the household and the corporate side. In the recent quarters, the efficiency has gradually improved, and we are now starting to see initiatives filtering through in the cost base that offset margin pressure on the NII relating to lower short-term rates. The cost-to-income ratio improved in the quarter to 57.5% from 59% in Q3. The operating profit increased by 3% in local currency and the profitability was 13%. Norway accounts for around 9% of the group earnings. After a refocus period that started during the spring in 2024, the business is now gradually becoming more balanced between lending, deposits and savings. While the competition in especially the mortgage market is fierce, the bank continues to focus on deepening our customer relationships and also in the fields of deposits and savings. As mentioned, the savings business is progressing very well in Norway. In 2025, the bank attracted 6% of the net inflows into mutual funds in Norway compared to the market share of just about 2% on the outstanding volumes. For the full year, the cost-to-income ratio improved to 43% from 46% in 2024, and the profitability improved from -- to 11% from 10%. And finally, the Netherlands account for 2% of the group earnings. And just like in the U.K., the trend shifted 1, 1.5 years ago on the household and corporate lending side. We have now seen a steadily growth month by month. The positive volume development was, however, offset by the margins due to lower short-term euro rates. The ROE fell slightly in the quarter. The bank is in a very solid financial position. Credit risks, funding risks, liquidity risks and market-related risks are prudently managed and the capital position is strong. After the proposed dividend of SEK 17.50 per share, the CET ratio stood at 17.6% or 285 basis points above the regulatory requirement and therefore, now within the long-term range of 100 to 300 basis points. The dividend proposal corresponds to 146% of the earnings generated during the year. The bank should always be considered as one of the most trustworthy and stable counterparts in the industry. This is also the view in the lending rating agencies who rates the bank the highest among comparable banks globally. And finally, to wrap up, we see now positive household lending growth in most of our home markets and within corporate lending growth also in the U.K. now again and in the Netherlands. The commission business is growing, and we see momentum continuing to build in the savings market -- savings business with strong inflows of assets under management into the bank. Income was up in Q4 and the cost discipline is maintained. Asset quality is robust and the financial position is very strong. The customer satisfaction levels during the year follow the long trend of being higher than average of our peers in all of our home markets and on both the household and on the corporate side. And we will continue our endless efforts on making sure that our advisers in our branches are close and easily available to our customers, simply providing an offering in the customer ask for and appreciate, local and personal as well as through our digital offer and by our 24/7 service over the phone. And finally, I'm also pleased to note that the total shareholder return created during 2025, meaning the share price performance plus paid out dividends exceeded 30% in 2025. And with those final remarks, we'll now take a short break before moving into the Q&A session. Thank you. Peter Grabe: Hello, everyone, and welcome back to this Q&A session. This is Peter Grabe, Head of Investor Relations speaking. And with me, I have Michael Green, CEO; and Marten Bjurman, CFO. [Operator Instructions] And with those words, operator, could we please have the first question? Operator: [Operator Instructions] The first question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: Well, one question then. Can we talk about volumes. I'm looking at -- I mean, you're growing nicely in the U.K. and Holland, as you say. But in Sweden, there's been no growth in the fourth quarter or year-on-year on lending or deposits while we know there's growth in the market. So could you tell us what's driving that and how you're going to turn that around? And same question for Norway, where loan or lending actually fell quite a bit in the quarter and so the deposits, how are you going to turn that around? Marten Bjurman: Andreas, this is Marten speaking. On Sweden first, I think it's fair to say that we are the largest lender totally in Sweden. And by that, it's fair to say that we struggle a little bit to grow more than GDP over time. So as we have now a little bit of a steady market or slow market in the corporate lending side, I think we suffer from that a little bit. And also, I think you should bear in mind on the corporate lending side that you're looking at the net number, and that is not very impressive. But still, there are things going on underneath that. We are leaving connections that we do not see fit in our book for various reasons, and we are bringing on things as well. So things are going on. We strive for activity, of course, and we hope that the market picks up a little bit. We believe so. We've been waiting for it quite a bit. So that's on the corporate side in terms of lending in Sweden. On household lending in Sweden, I think it's fair to say also that what Michael was saying earlier on that we have seen a pickup in our volumes in the second half of the last year. And I'm pleased to see that increased activity, and we have high hopes for that continuing into this year '26. In Norway, I think it's fair to say that it's been a tough quarter in Norway. I agree with you, Andreas, on that point. We have seen consolidation in the market. We have seen compressed margins also as a result of cuts in policy rates. And above all, I think we have seen fierce competition. So it's tough for us in the quarter. But bear in mind, we are long term. A quarter is a very short period of time. We have a deep trust in our way of banking. So each and every branch manager out there is fit to navigate through this. And I'm very confident that they will do so in the future. So we have to be patient a little bit. And if you look at the year, the total year in Norway, it's not good, but it's decent, I would say, in terms of volumes. Operator: next question comes from Magnus Andersson from ABG SC. Magnus Andersson: Just one question on capital. If you could tell us what made you change your mind now to move within the management buffer range as -- I mean, in previous couple of years, you've chosen to be above your management buffer range because of an uncertain environment. And now you seem to think that the environment is less uncertain. Just trying to get some predictability into it. Should we now expect you to remain within the buffer for the foreseeable future? And what could trigger you to revise that stance? Marten Bjurman: Thank you for that question, Magnus. Yes, the short answer is yes. I think you should expect us to strive to be within the interval as from now on, but let's come back to that a little later. I think you should also bear in mind where we're coming from. We're coming from years back, we had a huge surplus of capital for various reasons. So that's the starting point. And then we have gone from there, taking it down step by step. And I think we've been fairly clear on our intention on moving into that interval. I think we touched upon it quite a bit during Q3 closing that our intention is to move into the interval. So it shouldn't come as a complete surprise in my world at least. So I'm very pleased to see us taking that step. It has not so much to do with us changing views. We still think that our credit book is of superior quality, of course, and we don't see anything else that is worrying from that sense. So it's just a matter of prudency taking it step by step into the interval, I would say. Magnus Andersson: Okay. And just on capital on Slide 19, when we look at your risk-weighted asset progression, it's down 3% quarter-on-quarter. Is there anything in there that you would say could -- anything that could impact that level in 2026, we should be aware of? I saw that you moved your op risk change to Q4 from Q1. But is there anything else? Or is this a reasonable starting level? Marten Bjurman: No, I think -- I don't think that there is anything to highlight in that picture. It's nothing to be worried about looking forward, no. Operator: Question comes from Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So following up on the question on capital. So now that you are within the target range for the first time since before the pandemic, could you maybe help us understand how we should think about the long-term average buffer within this range because it's a pretty big range. So should we think that you want to be in midrange over time or rather at the top end of the interval? Marten Bjurman: I don't want to guide where we want to end up in certain situations. I think it's -- you should bear in mind that this interval was set so that it can fluctuate a little bit. That's the whole purpose of it. Is it a reasonable size interval? You can debate that, of course, but it was set a bit back in the years. When it comes to the outlooks, I think as it regards anticipated dividend and all that, we'll come back to that in Q1 closing. So we don't -- I don't want to guide anything further. I'm extremely pleased that we are now in the interval again. Operator: Next question comes from Shrey Srivastava from Citi. Shrey Srivastava: Just one from me, please. You talked about the momentum in the U.K., where I see average lending and average deposits plus 1% sort of on an annualized basis. Is this sort of volume growth something you're happy with or sort of how should we look at it? Is it more the momentum that you're carrying in, in terms of sort of pipeline into next year? Or is it the realized performance? Marten Bjurman: Thanks for that question. I'm happy to print those figures for U.K. And I feel that this momentum in the business is now stable. It is a broad and healthy growth that we see. It's not something odd in it. It's across our branches that we are growing now. And I feel confident that, that will continue. I had the pleasure to go over there a couple of weeks ago. And it's evident that the branches in U.K., they are in a different space now compared to a bit back. So it feels good. Are we happy with the speed in terms of lending growth in U.K.? I think we can -- we always want more, of course, but I'm happy to conclude that this has reached a turning point in that sense. Michael Green: And I can just -- it's Michael here. I'll just chip in here. I think the -- overall in the bank right now, the ambition level and the goals for -- in each country and also in every branch for 2026 is quite higher than it has been before. So the willingness and the ability to work with more customers, especially in the U.K. and the Netherlands and also in the Norway to some extent, are on a much higher level when it comes to ambition, and we will be very close following up how this will work out in the -- in our different home markets. Operator: Our next question comes from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So just going back to kind of the growth in Sweden, could you maybe just comment a little bit how you see competition for mortgages, what the outlook is, how much kind of growth you would expect in mortgage lending? And also related to this, do you see any risk for -- kind of the risk rate for housing associations, which I believe is 3.7% currently that, that could be increased to kind of low teens or at least double-digit levels? Marten Bjurman: No. Okay. Again, I think bear in mind the size that we have in the mortgage market in Sweden. It's difficult to grow extensively. So in terms of outlooks, it's hard to tell. Again, I'm happy to see the momentum that we have later in the quarter, and hopefully, that will continue. I think as it regards to your second question, the housing association and the risk weights, we don't have any view in that for the moment, no. Operator: Our next question comes from Namita Samtani from Barclays. Namita Samtani: Can we just go back to the corporate lending market in Sweden? And can you just talk a little bit more of how you see competition there? And how do you see pricing as well? And could you maybe just also touch on the property management lending where it looks like the loan book on a net basis didn't really grow in Sweden in 2025. Michael Green: Yes. So in general, when it comes to the lending book in Sweden and the market there, so we always follow our customers. When they grow, we are there and do our fair share of the business. And the activity from our corporate partners or clients has been a bit muted even this year. I think many of us were a bit more optimistic when we entered the year. But then you had the liberation day and the tariffs and all that, and that actually made the customers a bit reluctant to invest and also the consumers. It all starts with consumers, and they've also been a bit hesitant to really invest or increase their spending in the year. But I'm very hopeful actually if we listen to our experts in macroeconomics in the bank, they're very positive to the growth in Sweden. Now we need, of course, to bear in mind that things can change as we saw last year. But the general view now is that we will have a quite high growth in GDP in Sweden, which we will benefit from because our customer -- we follow our customers when they grow. I think there is a bit more interest in investing from our corporate clients in the late of the year. And you should also, as Marten previously said today, it's -- we -- of course, we report always net figures, there is a change in the portfolio. So there are volumes that we actually more or less has welcomed us to come out of our books, and there are much more strong corporate business that has come on to our books in the last year. So the risk level and the performance of -- in the lending book is better than it was when we started the year. Operator: Question is from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So I saw the margins are taking the NII down this quarter again quite a lot. And you have probably upcoming rate cuts in the U.K. and in Norway. Do you expect NII to trough in Q1 or during the first half year? Or do you have any expectations on when we should see growth? Marten Bjurman: I don't want to guide and be that specific on the Q1 number, of course. But yes, you're right. We are expecting rate cuts in those countries. The margins in U.K., they are pretty healthy as it is. So if we end up in a policy rate where we think, then we can do healthy business there. And a reminder also, I think the volume growth in U.K. can compensate quite a bit as it regards to the fall in margins. Norway, yes, we are struggling a little bit this quarter. We'll see what happens. We have -- we don't guide into Q1, but obviously, we see a lot of activities in our branches and hope for the best. Operator: Questions comes from the line of Max Jacob Kruse from Bernstein Autonomous. Jacob Kruse: So just on the growth you're talking about, could you -- should we read this as the cost management side that you went through over the past couple of years that is changing here and looking at investing a bit more into your business and perhaps staff levels? And if I could just also ask the VAT refund that you took in the quarter, is that all the ones you're looking to get? Or do you have other applications in the pipeline? Marten Bjurman: Thank you for those 2 questions. On costs first, I think, yes, I'm personally a little bit surprised of the outcome here. It's extremely impressive if you ask me that we continue to perform well on the cost side. For the future, yes, I expect that we gradually pick up a little bit in costs and have investments near the customer, near the business, and we are happy to do so. But first, we need to see the business growing and the need for us to spend more money. But again, you should remember who we are. We are Handelsbanken, and we keep the money tight to our body. So it's about being stringent from that perspective. The VAT recoveries, yes, you saw us print SEK 200 million. It's booked on the line other income. Some of that -- a portion of that, I think the number is SEK 142 million is related to the parent company for the year of 2019. So yes, potentially, we have a little bit more coming from that and in terms of reimbursements for the year after that, obviously, it's a little bit too early to go into details in that. But yes, potential is there. Operator: Next, we have the line from Riccardo Rovere of Mediobanca. Riccardo Rovere: Just a quick one. Again, on the management buffer, what should happen to bring this to the midpoint of the range to 200 basis points? Because you ramped it to 400 basis points on uncertainty. The situation doesn't look different at least to me at the moment, even probably worse, but you bring it down to 300 basis points now. So I was wondering what could drive it to 200 basis points? And is this your decision or a decision that you have to take together with the Swedish FSA because by magic, all the Swedish banks now got to 300 basis points exactly at the same time. So I was wondering whether this is a management decision or someone else decision? This is my first one. The second one I have is, if you could shed a little bit more color on the decline of RWAs in the quarter. What is driving that? Michael Green: So can I just take the last part of the first question, I'd say it's absolutely a discretionary decision within the bank's Board, and there's nothing to do with any authorities or something else, if I understood your question correctly. And we -- and I emphasize, we're not on the 300 basis points range, we're 285 basis points. And we just do what we said. We said we're going to go and move into the interval, and we've said it for many quarters now. And we will always assess every quarter or year actually where we would like the bank to be. So that's something we work with. But now we're in the range, and that could vary within the range. And it's up to our decision to make sure that we always run the bank prudently, but also has the capacity to be one of the largest lending providers in our home markets. And this is the assessment we do right now. Marten Bjurman: And on the question -- the second question there, the movement in RWA, I think you can see the details in the slide pack there. There are different components, obviously, volumes, migrations and risk weight floors and currency effects and other, but those are explained in the pack. Operator: [Operator Instructions] We have follow-up questions from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: Now I was just coming back to costs since you're taking them down or at least being quite much below what people expected in Q4. What's your feeling about how staff are taking this? Are they -- do you feel that they're happy? Or do you -- are you afraid of that you should lose important people as the compensation is not up to standards? Michael Green: No, on the contrary, actually. So the thing -- when you manage a downturn in a number of employees, if you have the right kind of leadership and the story with that and you see that the effects on the bank are there, you actually create the opposite. You create a very strong sense of -- and the feeling for the bank. You really want to be part of something that is actually evolving in the right way. And also the -- it also puts the finger on performance. So we always need to have people working very intensively, very hard on the business. And what happened, we actually -- most of the downturn in staffing was not customer -- in close to customers. It was on the head office and central apartments. And what happens there is that the branches, they feel that everybody who's supporting the business is being more productive, more cost efficient that really empowers them to do more business. And the mindset within everybody who's still there and most of us are, we are much more business-oriented this year than we were a few years ago from the central department. So we always -- we really make sure that we are there for our employees dealing with customers, and they really feel that. So I think absolutely doing -- having less people as we have now creates a lot of good energy. And the -- when you look at the employee survey we do every fall, it has never been on a higher level as this year. So we have a very, very strong committed workforce, if I put it that way, both in the -- close to our clients, sorry, on the branches, but especially nowadays also in central head office. So I'm very happy with the mindset of how you work and what we do here in the bank for whom. Operator: Follow-up questions from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Thanks again for taking my second question. So just a follow-up on Oktogonen. We saw that there was a small reversal this quarter of SEK 39 million. How should we think about Oktogonen going forward? Is it fair to assume that, that will be kind of 0 going forward? Or -- and is that important any longer for your staff? So if you could just kind of help us how we should think about Oktogonen contribution going forward? Marten Bjurman: Yes. I think Oktogonen still plays a role, obviously, in our corporate culture. I think it's expected for that to last a bit. When it comes to the actual number going forward, I think we just have to wait and see. It's always a little bit of a guessing game where we come out. Now we have had a little bit of a reversal in Q4. So -- but I don't want to predict the future from that sense. Is the Oktogonen here to stay? Yes. I think it's fair to say that it still plays a big role for our employees. Sofie Caroline Peterzens: But what drove then the reversal in the quarter? What was the rationale for reversal? Marten Bjurman: It's a huge calculation behind that. And obviously, it's related to our corporate target to have a stronger ROE than our peers in our way of looking at it. And that's mainly driven by where do we want to compare us versus the peers in terms of geographies and different things. So there's quite a bit of calculation going on there. And in this case, we had to revert a little bit that -- the number in Q4 again. Michael Green: And we also wait for the British Bank to post their Q4s in order to make the correct calculations. So this is the best assessment with the information we have right now from our competitors that has posted their Q4s. Operator: We also have a follow-up question from Namita Samtani from Barclays. Namita Samtani: Thanks for taking my followup. And I just wondered what's happening to the IRB model review in the U.K. And also what's happening to the Swedish IRB model review? I think there's a 50 bps requirement in your CET1 requirement. So just wondering what the update is? Michael Green: Yes, I understand the question, but the complexity and the processes that goes into that work is really evident, and it's far too many details to go into that in this call, I'm afraid. The outcome, we don't really know. We are working on the situation that we have in the IRB world, both in U.K. and for that matter, in other places as well. It's too early to tell -- to be concrete in that matter. Operator: Lastly, we have the questions from Riccardo Rovere from Mediobanca. Riccardo Rovere: Thanks for taking a quick followup. Just wanted to ask you at the beginning of the call, when you were asked about loan growth in Sweden, if I understand and remember correctly, you stated something like you see in the market, something that does not, how can I say, kind of comply with your risk profile. If I understood it correctly, could you shed a little bit more color what you were referring to, if I got it right? Marten Bjurman: Yes. No, let me clarify that. And sorry for being a little bit vague if that was the case. What I was saying, and I think that you're alluding to here is that we are a large lender in Sweden. So to be able to grow significantly more than GDP, that would mean that we would have to alter our risk appetite, and we obviously do not want to do that. So in the long term, I think it's fair to say that you should expect us to grow with GDP more or less. So I think that was the core message. Operator: At this time, there are no further questions from the line. Allow me to hand the call back to the presenters. Please continue. Peter Grabe: All right. Thank you, everyone, for listening in and for all the questions. And we wish you all a good day. Thank you. Michael Green: Thanks. Bye-bye.
Jeffrey S. Knutson: Welcome to the Twin Disc, Incorporated Fiscal Second Quarter 2026 Conference Call. We will begin with introductory remarks from Jeffrey S. Knutson, Twin Disc's CFO. Good morning, and thank you for joining us today to discuss our fiscal 2026 second quarter results. On the call with me today is John H. Batten, Twin Disc's CEO. I would like to remind everyone that certain statements made during this conference call, statements expressing hopes, beliefs, expectations, or predictions for the future, are forward-looking statements. It is important to remember that the company's actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are contained in the company's annual report on Form 10-Ks, copies of which may be obtained by contacting either the company or the SEC. Any forward-looking statements that are made during this call are based on assumptions as of today, and the company undertakes no obligation to publicly update or revise these statements to reflect subsequent events or new information. During today's call, management will also discuss certain non-GAAP financial measures. For the definition of non-GAAP financial measures, a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. Now I'll turn the call over to John. John H. Batten: Good morning, everyone, and welcome to our fiscal 2026 second quarter conference call. Despite a challenging operating backdrop, our diversified portfolio continued to demonstrate resilience. The demand remained robust across marine, defense, and select industrial applications. This strong demand continues to fuel confidence in the positioning of the business as our six-month backlog reached a record level once again during the quarter. As anticipated, tariff impacts were elevated in the quarter, approximately 3% of the cost of sales, as they continue to create friction across the industry, influencing customer behavior related to order placement timing and shipping lead times. Importantly, these impacts reflect modest delays in timing rather than lost orders. In response to these pressures, we continue to make progress implementing the mitigation strategies we've outlined in previous quarters, including pricing discipline, operational enhancements, and footprint optimization. During the quarter, we advanced planning efforts focused on evaluating footprint utilization and operating flexibility across our existing manufacturing network. Including actions such as adjusting production flows, or where appropriate, overtime, relocating certain activities to reduce structural tariff exposure. For example, we are planning to move RF assembly to our Lufkin facility, which allows us to assemble products in a tariff-advantaged environment, reducing the impact of import duties on finished goods. In the coming quarters, we'll expect tariff-related impacts to moderate, mix to improve, and our mitigation tactics to take effect. Our actions, combined with a record backlog, leave us well-positioned to capture underlying demand and drive further progress toward our long-term growth and profitability objectives. Defense continues to be a strategic growth driver for Twin Disc as demand builds across multiple programs and geographies, supported by elevated defense spending in The United States and NATO. Defense-related opportunities represent an increasingly diversified and durable portion of our total backlog, up 18% sequentially. As governments prioritize the modernization of marine, land-based, and autonomous platforms, we continue to support a broad range of defense platforms, including naval vessels, autonomous and unmanned systems, and land-based applications. This includes higher content items on US Navy patrol and autonomous vessel programs, as well as drivetrain and power transmission solutions supporting NATO land-based vehicle initiatives. Overall, our defense-related pipeline exceeds $50 million, which, in combination with our robust backlog, reflects our growing presence in the defense market. To support this growth, we have a substantial portion of the required capacity in place today, particularly in North America, leveraging our existing footprint and operational flexibility. Investments regarding capacity are expected to be related to European demand, focused on test stands and assembly capacity, not machining capability. Now let me walk you through the segment performance. Our marine and propulsion business demonstrated mixed results as sales were flat year over year. Robust demand across workboat, government, and specialty marine applications, supported by ongoing interest in higher content systems, hybrid propulsion, and advanced maneuvering solutions, drove performance during the quarter. However, this strength is partially offset by challenges in our commercial marine business in Asia Pacific amid a dynamic environment. Jet Propulsion specifically performed at a high level during the quarter, with customer engagement remaining strong. We also continue to see progress in autonomous and unmanned vessel applications where Twin Disc technologies are increasingly specified in higher value platforms. Aftermarket activity experienced some short-term softness late in the quarter, driven largely by customer timing and year-end dynamics. Encouragingly, early indications in the subsequent period point to improving activity, reinforcing our view that the demand environment remains constructive. With land-based transmission, sales decreased 8.1% year over year, to $17.5 million, primarily driven by shipment delays to ARF customers. Oil and gas customer behavior remained cautious, particularly in North America, where rebuilds and refurbishments continue to outpace new equipment purchases. That said, we are beginning to see signs that this cycle is maturing, which could support replacement demand over time. Internationally, oil and gas demand showed early signs of improvement, including increased activity in China, where customer engagement exceeded our initial expectations. We recently received a strong order for our 8,500 transmission and continue to see favorable demand trends in the region moving forward. International ARF demand remained healthy. We continue to advance next-generation electrified and hybrid solutions that position us well as customers evaluate longer-term fleet upgrades. Our industrial business continued to benefit from the breadth of our portfolio and the contributions from recent acquisitions, with sales up 22% year over year, to $11.5 million. Demand remains steady, and we are increasingly leveraging CASA's engineering and manufacturing capabilities across the broader organization. While the quarter included temporary operational disruptions, we are encouraged by underlying customer demand and the opportunity to drive higher content solutions across industrial applications as we work to enhance mix, further differentiate our offerings, and support long-term margin performance. Our backlog of $175.3 million was up 41.4% year over year and 7% sequentially. This record backlog remains a key strength for Twin Disc, providing solid visibility into 2026, reflecting underlying demand across our markets, with particular strength in global defense-related applications. Inventory levels increased during the quarter, primarily due to delayed shipments. However, inventory as a percentage of backlog improved by approximately 400 basis points sequentially, underscoring the strength of our backlog position. As these dynamics unwind and backlog converts, we expect working capital to improve as we move through the remainder of the year. Moving forward, our long-term strategy remains unchanged. We are focused on global footprint optimization, operational excellence, and disciplined capital allocation. We are continuing to streamline our organization and operate as a more integrated global platform, an important enabler of our tariff mitigation and capacity utilization strategies, as improved cross-business coordination allows us to better centralize sourcing, optimize resource allocation across sites, and respond more quickly to changes in demand or cost dynamics. Looking ahead, while near-term volatility remains, we are confident in our ability to execute through the cycle. Our diversified end markets, growing defense exposures, strong backlog, and ongoing operations initiatives position Twin Disc to improve performance as conditions normalize, and we deliver sustainable value over the long term. With that, I'll now turn the call over to Jeffrey S. Knutson to discuss our financial results in greater detail. Jeffrey S. Knutson: Thanks, John. Good morning, everyone. During the second quarter, we delivered $90.2 million in sales, up 0.3% from $89.9 million in the prior year period, primarily driven by strength in the marine and industrial product groups as well as the addition of CoVelt. On an organic basis, adjusting for M&A and FX, revenue decreased approximately 7.9% in the quarter, partially due to shipment delays related to customer attempts to time tariff impacts. Second quarter gross profit rose 3.2% to $22.4 million, and gross margin improved 70 basis points to 24.8%, reflecting the absence of inventory-related charges recorded last year, partially offset by unfavorable product mix in the quarter. ME&A expenses were $20.7 million in the second quarter compared to $18.9 million last year. The increase reflects the addition of CoVelt as well as ongoing wage and professional service inflation. Net income attributable to Twin Disc for the quarter was $22.4 million or $1.55 per diluted share compared to income of $919,000 or 7¢ per share last year. This large year-over-year improvement is due to an income tax benefit of $21.8 million, primarily related to the reversal of the domestic valuation allowance. EBITDA was $4.7 million for the second quarter, representing a 25% decrease versus the prior year, due to higher M&A expenses, tariff-related impacts that affected mix, and nonrecurring items. Geographically, sales growth was led by North America and Europe, supported by sustained demand for Veth products and incremental contribution from recent acquisitions. As a result, North America represented a higher share of quarterly revenue, while Asia Pacific and Latin America made up a smaller portion, reflecting regional market dynamics, a trend that we expect to continue and should soften tariff impact moving forward. Net debt increased to $29 million in the second quarter, primarily reflecting our strategic acquisition of CoVelt. We ended the quarter with a cash balance of $14.9 million, down 6.4% from the prior year. Turning to cash flow, we generated $1.2 million in free cash flow during the second quarter, representing a meaningful sequential improvement from the first quarter. This improvement was driven primarily by stronger operating performance and disciplined capital spending. However, working capital remains a headwind during the quarter as shipment delays and customer behavior resulted in higher inventory levels. As these shipments convert and backlog is realized, we expect working capital to improve and cash generation to strengthen as we move through the second half of the fiscal year. As such, our focus remains on disciplined inventory management, converting backlog into cash, and improving overall cash flow consistency over time. Although lower sequentially, gross margin improved 70 basis points compared to the prior year period, reflecting the absence of prior year inventory-related charges. Margins in the quarter were pressured by several temporary factors, including unfavorable mix due in part to delayed aftermarket shipments as well as incremental costs associated with an isolated warranty replacement. While these near-term pressures weighed on results this quarter, they are largely timing-related or nonrecurring in nature. Moving forward, as shipment patterns and mix normalize, we remain confident in our ability to deliver sustainable, profitable growth. From a capital allocation perspective, our priorities remain unchanged. We continue to focus first on supporting the business through organic investment, including capacity, operational efficiency, and product development, while maintaining a strong and flexible balance sheet. We remain disciplined in our approach to capital deployment with an emphasis on preserving liquidity, managing leverage, and selectively evaluating acquisition opportunities that align strategically and meet our return thresholds. At the same time, we continue to balance growth investments with cash generation and working capital efficiency, particularly as we focus on converting backlog into revenue and cash in the second half of the fiscal year. I'll now turn the call back to John for his closing remarks. John H. Batten: Thanks, Jeff. In closing, while the second quarter included near-term challenges, the underlying fundamentals of our business remain strong. Demand across our core markets continues to be supported by a strong and diversified backlog with growing defense exposure and a portfolio that is well aligned with our customer needs. We are actively addressing the factors that impacted results during the quarter, including mitigating tariff exposure, improving operational execution, and continuing our focus on converting backlog into revenue and cash. As these actions take hold and shipment patterns normalize, we believe Twin Disc is well-positioned to deliver improved performance over the balance of the fiscal year. With that, I would like to open the line for questions. Operator: Thank you. We will now begin the question and answer session. Raise your hand and join the queue. If you would like to withdraw your questions, our first question comes from David S. MacGregor from Longbow Research. Please go ahead. David S. MacGregor: Hey. Good morning. This is Joe Nolan on for David. Hi, Joe. Joe? Jeffrey S. Knutson: Hey, guys. David S. MacGregor: So this quarter, you guys faced a pretty difficult revenue comp of up 23%. Year ago, compares get a little bit easier in the second half, but are still up low double digits. I guess my question is, just with the delayed shipments and some of these factors, just wondering how much push for it on some of that business you got from 3Q and what do you think is achievable for top line growth for the balance of the year? Jeffrey S. Knutson: Yeah. I mean, it's a good question, Joe. Think tariffs are unpredictable. I think you know, we expect to see good growth in the second half and sort of progressing from Q2 to Q3 to Q4. So with March being our stronger quarters, I don't really have a percentage growth, but I think, you know, we should trend sort of like what we did in the previous years as we grow through the year. With the you know, like, we had the noise in Q2. Right? Which it's a little bit unpredictable what customers are going to do regarding tariffs, and it's unpredictable how the tariff environment will evolve. Sort of day to day, week to week. But given some consistency in that, I think we're set up for a pretty good second half revenue-wise. Got it. Okay. David S. MacGregor: And then on gross margin, could you just talk about the puts and takes in sequential gross margin bridge from '26? I know you mentioned the delayed shipments, and I believe you mentioned the warranty cost impact, if I heard correctly in the prepared remarks. Jeffrey S. Knutson: Yeah. We had a few things happen. So some isolated things. I think you know, if we get into the details of it, they're all kind of you know, not huge impacts, but, you know, they move the needle. For instance, as we invoice tariff revenue, so the tariff expense flows through our revenue line with no margin, that serves to gross up our revenue and dilute our margin percentage. That has an impact of 50 or 60 basis points compared to Q1. We had an operational delay at our factory in Finland. We had an isolated quality issue that we captured in the quarter. Those two in combination are about 60 basis points. So those are what we would call kind of noise in the quarter that wouldn't recur. And then the rest is essentially mix. So aftermarket, you know, being our higher margin business saw some delays in the quarter. Again, with customers pushing out shipments and orders related primarily to tariff and timing of when they're gonna get that inventory. And outside of that, it's, you know, project-related revenue and margin at Veth, some of that was a bit of a drag on the quarter compared to Q1. So, you know, kind of a broad-based mix impact outside of those two kind of discrete items impacting the quarter. David S. MacGregor: Got it. Okay. And then, just on tariffs, it sounds like you're expecting tariff impact to moderate as we move through the year. If you could just maybe give any detail on just how mitigation efforts are going on your end and just kind of how you expect that impact the trends for the year? John H. Batten: Yeah, Joe. I would it's John. So I guess what will so the tariffs, the 230 Twos, Right Now, Our Assumption Is That We're Gonna Have The Same Percentage On Steel, And Aluminum So We're Not So What's Gonna What's Gonna Help The Overall Mix Of Tariffs Tariff Impact That We're Going To Be Selling More Products That Aren't As Affected As Much By The Tariffs. The Primary So The Products That Have The Most Impact Are ARF Transmissions Where A Lot Of It Is Sourced A Lot Of The Components Are Sourced Overseas. We Assemble And Test In Racine, Wisconsin. And then ship out overseas. So we get a big a 50% tariff on a lot of the parts and we ship the transmission out from Racine. The other part the other components sorry. The other product line that's the most effective is our industrial products at Lufkin. Again, a lot of those parts come from India. They're now tariffed at 50%. And the majority of the shipments are into The US. So there's the tariff impact there. One of the things that we're doing, and it won't affect this year, but it will set up 27, is we're moving assembly and test of the majority of the ARF transmissions down to Lufkin, which is in a free trade zone. And so we can bring the parts in from India or wherever they're coming in from, assemble and test, and paint in Lufkin, and then ship out, and we won't have the tariff impact. And that's about Right now, the tariff impact on those units is probably 10 full percentage points of gross margin. So thankfully, the balance of the year, the ARF transmissions aren't as big a percentage of sales as they were the second quarter. Or the first half. So the margin improvement we're slated is to take effect in fiscal 'twenty seven. So that's the big I would say biggest thing that we're focused on right now is changing the location of assembly test paint of our RF transmission to mitigate the gross margin percentage. But that won't have an effect on the balance of this year We'll see that in the '7. David S. MacGregor: Got it. Okay. That's helpful, Pete. I also just wanted to ask about that margins. You guys had a nice margin performance. I assume those margins are continuing to improve. Can you just talk about your confidence in that business and confidence in growing margins over the next few quarters? John H. Batten: Yeah. It's John again. So they have done a great job coming out of COVID where a lot of projects were quoted. At a fixed price, and then we saw the inflation and supply chain issues. They've done a much better job at estimating their cost. Building in known inflationary increases, But then just on pricing discipline, understanding the value in the marketplace, and going after markets that appreciate the value of what they're selling. So I'm fairly confident that they can, you know, continue this level and even continue to grow. They've they have now tapped into our supply chain in India. And are finding alternate sources that may have been sourced in Europe in lower-cost countries. So pretty confident in that group. They're doing a very good job understanding their business. What the cost drivers are, how they can mitigate it, and more importantly, where they can find value in the market to warrant a higher price. David S. MacGregor: Got it. Okay. Alright. And then also on oil and gas, the international oil and gas business, you mentioned seeing some improvements in China and then that Yeah. Exceeded expectations. Can you just talk about what was happening there? John H. Batten: Yeah. So, I can't make a direct correlation, but we got the order more or less within a week of Venezuela. So, I can't say there's a direct correlation. But it seems like the activity for domestic production in China started to grow, and they realized that there may not be a reliable supply chain coming from someplace else. No one said that, but it was just kind of interesting timing When we've been hearing that for the last quarter, of the calendar year, so our fiscal second quarter, that things were slow. They had too much inventory sitting idle. And then all of a sudden, you know, the very first week of the year, They basically came in. What he anticipated we were hoping for a budget you know, for the entire fiscal '26. They came in with one order and exceeded that budget. David S. MacGregor: Got it. That is interesting timing. And then just just last one for me. Could you just update us on I think, military orders you said backlog up 18% sequentially. Just talk about the strength in that business. John H. Batten: Yeah. It's I Jones, it's I'm a broken record. It's really, again, two buckets primarily. It's the unmanned vessels that the navy are doing. We got more orders for those vessels. And in Europe, at our at Casa in Finland, more orders for the four sorry, the six by six and the eight by eights. That are being built for the NATO countries. So the OEM got more orders from more countries and therefore, we got more orders from the OEM. So that is, you know, the focus for us is to make sure that we have the capability to we can meet production today, but we're fully anticipating that both programs are gonna grow significantly. We've been told that. So you know, there's focus here in The US to make sure that we have capacity for those marine transmissions. And likewise, in Finland, make sure that we can grow that we have the capacity to meet that growing demand. And keep all of our other business. So we're hyper-focused on both of those areas. David S. MacGregor: Okay. Great. That's all for me. Thanks, guys. I'll pass it on. John H. Batten: Alright. Thanks. Thanks, Joe. Operator: There are no further questions. I would like to turn the call back over to John Batten, CEO, for closing remarks. John H. Batten: Thanks, Jericho. We hope that we've answered all of your questions today. If not, please contact either Jeff or myself. And we'll answer as quickly as possible. And, again, we appreciate your continued interest in Twin Disc and we look forward to speaking with you in May after our third quarter results. Jerica will turn the call back to you. Operator: Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect.
Michael Green: Good morning, everyone, and welcome to this presentation of Handelsbanken's results for the fourth quarter and full year of 2025. The bank reported a solid fourth quarter with net profits from continuing operations, up slightly compared to Q3 and a return on equity of 13%. The savings business continued to perform well with strong inflows in customer savings. Assets under management reached an all-time high in our home markets. Household lending has started to grow again in most of our home markets. And in the U.K. and the Netherlands, we now have also seen several quarters with steadily growth also in corporate lending. All in all, the income increased in the quarter, while the normal seasonal pickup in expenses was fairly modest. Asset quality remained very strong, and we added yet another quarter with net credit loss reversals, bringing the consecutive count to 8 quarters in a row with net reversals. So given the solid asset quality and strong financial position of the bank, the Board proposes a dividend of SEK 17.50 per share to the AGM, which an ordinary dividend of SEK 8 per share and an extra dividend of SEK 9.50 share. The CET1 ratio of 17.6% was 2.85% above the regulatory requirement. In other words, the bank is now back again in the long-term range of 100 to 300 basis points above the regulatory requirement. Now if we look closer at the financials of the fourth quarter compared to our previous quarter, ROE amounted to 13% and the cost-income ratio was 41%. Operating profits were down marginally, but net profit from continuing operations increased slightly. Adjusted for currency effects, the NII declined by 3%. The drop was explained by negative margin effects due to lower short-term market rates and by a year-end calibration of the deposit guarantee fee for 2025. Fee and commissions increased by 5% and were driven primarily by continued strong net inflows into assets under management and positive stock market develops, boosting the savings business. The NFT increased somewhat and over income -- and other income, sorry, was supported by VAT reassessment in Sweden and Denmark of around SEK 200 million. So all in all, the income grew by 1%. Expenses usually increased some in Q4 as the activity level is always higher after the preceding summer quarter. The increase of 2% was, however, relatively low compared to in previous Q4s, which reflects the increased cost focus in the bank. Net credit losses amounted to SEK 5 million. If we switch over and look at full year of 2025 compared to 2024, ROE amounted to 13% for the year and the cost-income ratio to 41.5%. And adjusted for currency effects, the NII declined by 7%, again, mainly as a result of the material cuts in central bank policy rates during this year, affecting the margins. Net fee and commission income, on the other hand, remained resilient and increased by 2% adjusted for FX effects. The key contributor was again the savings business. The NFT was down due to temporary negative effects in the second quarter in 2025. All in all, total income dropped by 9%. Expenses at the same time dropped by 7%. And when adjusting for the FX restructuring expenses and Oktogonen, the underlying decline was 3%. The reduction of the running cost base of the bank came as a result of the initiatives carried out over the year -- the last year-and-a-half. This enabled the bank to counter general inflation and annual salary increases by a wide margin. Net credit losses reversals amounted to SEK 313 million compared to the SEK 601 million a year ago. All in all, the underlying operating profit was down by 12%. Now if we take a closer look on the NII development compared to the previous quarter. As said, the NII dropped by 4%. Over a number of quarters, we have seen positive signs of recovering growth in particular in the U.K. and the Netherlands, but also in the mortgage lending market in Sweden. Overall, however, volume development only contributed with SEK 14 million to the NII in the quarter. The main effect in the NII rather related to effects from policy rate cuts with lower short-term rates, which impacted the net interest margins. In Q4, we received the final bill for the deposit guarantee fee in 2025 from the Swedish National Debt Office. It was a touch higher than expected and resulted in a top-up in Q4, burdening the NII with around SEK 50 million. Currency effects were negative due to the strengthening of the Swedish krona. Net fee and commission income increased by 5% in the quarter. The bulk of fees and commission relates to the savings business, especially in the mutual funds offering. That's an area where the bank has seen the bulk of the increase in fees and commissions due to both positive market development as well as continued strong net inflows into our funds under management. In both Sweden and Norway, the bank's market share of inflows into mutual funds exceeded the market share by the outstanding volumes by more than 2x in 2025. This has consistently been the case for over a decade in Sweden. In Norway, it has been the case since the bank refocused 2 years ago to a more balanced growth between lending and savings. Other fees have grown a bit more moderately. Now over to the expenses. As shown in the slide, the trend of increased cost has broken in 2024 and the expenses have since then traded -- trended down despite annual salary revisions and general cost inflation. Central and business support functions have been streamlined and the use of external consultants materially reduced. The positive trend has continued also in Q4 in 2025, and we can note that the underlying staff costs are down by 5% compared to the same quarter last year. Looking at the other expenses, they were down 4% -- were 4% lower compared to the same quarter in 2024. And the bank is now in a very good position in regards to cost efficiency. But that does not stop us from continuing to strive every day to increase our productivity. And as part of that daily endeavor, we always explore and embrace new opportunities arising from technological advancements. One obvious field today is the AI, where we spend a lot of time and resources in examining the potential for improved operational excellence and productivity as well as for further improvements of the customers' experience and the bank's value proposal. Now over to asset quality and the credit loss reversals. When summing up the last 5 years, meaning since before the pandemic, the bank has in total booked net reversals and as said now the 8 quarters in a row with reversals. The absence of credit losses is an evidence of the prudency in the bank when it comes to managing credit risk. It reflects the bank's underwriting procedures and policies, the risk appetite and the customer selection as well as the preference for collateralized lending. But also not least in the ability to detect early signs of credit risk deterioration and the ability to quick make this necessary actions and decisions. In this context, the local presence through our branches and the close relationships with our customers is essential, but cannot be emphasized enough. Now turning to Slide 9, a few words about our respective home markets. To start with our largest home market, Sweden, which accounts for 71% of group earnings. The market position for the bank is strong with the bank being the largest combined lender in private and corporate lending. Mortgage volumes are now growing again and have been since the last spring, although with a bit moderate pace. The market share of the net new mortgages was 6% in the first half of 2025, but doubled to 12% in the second half. Corporate lending volumes remains a bit on a standstill, but expectations for recovery along with general economic growth in Sweden going forward. The saving business, as I've touched upon earlier, continued to develop well. The cost-to-income ratio was 33% in Q4 and the profitability around 15%. The U.K. accounts for 14% of the group earnings. Household lending volumes has consistently grown since early 2025 and we were up another 1% in Q4. Corporate lending has grown consistently since the summer of 2024. In Q4, the volumes were up by 2%. We also see deposit volumes increasing steadily on both the household and the corporate side. In the recent quarters, the efficiency has gradually improved, and we are now starting to see initiatives filtering through in the cost base that offset margin pressure on the NII relating to lower short-term rates. The cost-to-income ratio improved in the quarter to 57.5% from 59% in Q3. The operating profit increased by 3% in local currency and the profitability was 13%. Norway accounts for around 9% of the group earnings. After a refocus period that started during the spring in 2024, the business is now gradually becoming more balanced between lending, deposits and savings. While the competition in especially the mortgage market is fierce, the bank continues to focus on deepening our customer relationships and also in the fields of deposits and savings. As mentioned, the savings business is progressing very well in Norway. In 2025, the bank attracted 6% of the net inflows into mutual funds in Norway compared to the market share of just about 2% on the outstanding volumes. For the full year, the cost-to-income ratio improved to 43% from 46% in 2024, and the profitability improved from -- to 11% from 10%. And finally, the Netherlands account for 2% of the group earnings. And just like in the U.K., the trend shifted 1, 1.5 years ago on the household and corporate lending side. We have now seen a steadily growth month by month. The positive volume development was, however, offset by the margins due to lower short-term euro rates. The ROE fell slightly in the quarter. The bank is in a very solid financial position. Credit risks, funding risks, liquidity risks and market-related risks are prudently managed and the capital position is strong. After the proposed dividend of SEK 17.50 per share, the CET ratio stood at 17.6% or 285 basis points above the regulatory requirement and therefore, now within the long-term range of 100 to 300 basis points. The dividend proposal corresponds to 146% of the earnings generated during the year. The bank should always be considered as one of the most trustworthy and stable counterparts in the industry. This is also the view in the lending rating agencies who rates the bank the highest among comparable banks globally. And finally, to wrap up, we see now positive household lending growth in most of our home markets and within corporate lending growth also in the U.K. now again and in the Netherlands. The commission business is growing, and we see momentum continuing to build in the savings market -- savings business with strong inflows of assets under management into the bank. Income was up in Q4 and the cost discipline is maintained. Asset quality is robust and the financial position is very strong. The customer satisfaction levels during the year follow the long trend of being higher than average of our peers in all of our home markets and on both the household and on the corporate side. And we will continue our endless efforts on making sure that our advisers in our branches are close and easily available to our customers, simply providing an offering in the customer ask for and appreciate, local and personal as well as through our digital offer and by our 24/7 service over the phone. And finally, I'm also pleased to note that the total shareholder return created during 2025, meaning the share price performance plus paid out dividends exceeded 30% in 2025. And with those final remarks, we'll now take a short break before moving into the Q&A session. Thank you. Peter Grabe: Hello, everyone, and welcome back to this Q&A session. This is Peter Grabe, Head of Investor Relations speaking. And with me, I have Michael Green, CEO; and Marten Bjurman, CFO. [Operator Instructions] And with those words, operator, could we please have the first question? Operator: [Operator Instructions] The first question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: Well, one question then. Can we talk about volumes. I'm looking at -- I mean, you're growing nicely in the U.K. and Holland, as you say. But in Sweden, there's been no growth in the fourth quarter or year-on-year on lending or deposits while we know there's growth in the market. So could you tell us what's driving that and how you're going to turn that around? And same question for Norway, where loan or lending actually fell quite a bit in the quarter and so the deposits, how are you going to turn that around? Marten Bjurman: Andreas, this is Marten speaking. On Sweden first, I think it's fair to say that we are the largest lender totally in Sweden. And by that, it's fair to say that we struggle a little bit to grow more than GDP over time. So as we have now a little bit of a steady market or slow market in the corporate lending side, I think we suffer from that a little bit. And also, I think you should bear in mind on the corporate lending side that you're looking at the net number, and that is not very impressive. But still, there are things going on underneath that. We are leaving connections that we do not see fit in our book for various reasons, and we are bringing on things as well. So things are going on. We strive for activity, of course, and we hope that the market picks up a little bit. We believe so. We've been waiting for it quite a bit. So that's on the corporate side in terms of lending in Sweden. On household lending in Sweden, I think it's fair to say also that what Michael was saying earlier on that we have seen a pickup in our volumes in the second half of the last year. And I'm pleased to see that increased activity, and we have high hopes for that continuing into this year '26. In Norway, I think it's fair to say that it's been a tough quarter in Norway. I agree with you, Andreas, on that point. We have seen consolidation in the market. We have seen compressed margins also as a result of cuts in policy rates. And above all, I think we have seen fierce competition. So it's tough for us in the quarter. But bear in mind, we are long term. A quarter is a very short period of time. We have a deep trust in our way of banking. So each and every branch manager out there is fit to navigate through this. And I'm very confident that they will do so in the future. So we have to be patient a little bit. And if you look at the year, the total year in Norway, it's not good, but it's decent, I would say, in terms of volumes. Operator: next question comes from Magnus Andersson from ABG SC. Magnus Andersson: Just one question on capital. If you could tell us what made you change your mind now to move within the management buffer range as -- I mean, in previous couple of years, you've chosen to be above your management buffer range because of an uncertain environment. And now you seem to think that the environment is less uncertain. Just trying to get some predictability into it. Should we now expect you to remain within the buffer for the foreseeable future? And what could trigger you to revise that stance? Marten Bjurman: Thank you for that question, Magnus. Yes, the short answer is yes. I think you should expect us to strive to be within the interval as from now on, but let's come back to that a little later. I think you should also bear in mind where we're coming from. We're coming from years back, we had a huge surplus of capital for various reasons. So that's the starting point. And then we have gone from there, taking it down step by step. And I think we've been fairly clear on our intention on moving into that interval. I think we touched upon it quite a bit during Q3 closing that our intention is to move into the interval. So it shouldn't come as a complete surprise in my world at least. So I'm very pleased to see us taking that step. It has not so much to do with us changing views. We still think that our credit book is of superior quality, of course, and we don't see anything else that is worrying from that sense. So it's just a matter of prudency taking it step by step into the interval, I would say. Magnus Andersson: Okay. And just on capital on Slide 19, when we look at your risk-weighted asset progression, it's down 3% quarter-on-quarter. Is there anything in there that you would say could -- anything that could impact that level in 2026, we should be aware of? I saw that you moved your op risk change to Q4 from Q1. But is there anything else? Or is this a reasonable starting level? Marten Bjurman: No, I think -- I don't think that there is anything to highlight in that picture. It's nothing to be worried about looking forward, no. Operator: Question comes from Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So following up on the question on capital. So now that you are within the target range for the first time since before the pandemic, could you maybe help us understand how we should think about the long-term average buffer within this range because it's a pretty big range. So should we think that you want to be in midrange over time or rather at the top end of the interval? Marten Bjurman: I don't want to guide where we want to end up in certain situations. I think it's -- you should bear in mind that this interval was set so that it can fluctuate a little bit. That's the whole purpose of it. Is it a reasonable size interval? You can debate that, of course, but it was set a bit back in the years. When it comes to the outlooks, I think as it regards anticipated dividend and all that, we'll come back to that in Q1 closing. So we don't -- I don't want to guide anything further. I'm extremely pleased that we are now in the interval again. Operator: Next question comes from Shrey Srivastava from Citi. Shrey Srivastava: Just one from me, please. You talked about the momentum in the U.K., where I see average lending and average deposits plus 1% sort of on an annualized basis. Is this sort of volume growth something you're happy with or sort of how should we look at it? Is it more the momentum that you're carrying in, in terms of sort of pipeline into next year? Or is it the realized performance? Marten Bjurman: Thanks for that question. I'm happy to print those figures for U.K. And I feel that this momentum in the business is now stable. It is a broad and healthy growth that we see. It's not something odd in it. It's across our branches that we are growing now. And I feel confident that, that will continue. I had the pleasure to go over there a couple of weeks ago. And it's evident that the branches in U.K., they are in a different space now compared to a bit back. So it feels good. Are we happy with the speed in terms of lending growth in U.K.? I think we can -- we always want more, of course, but I'm happy to conclude that this has reached a turning point in that sense. Michael Green: And I can just -- it's Michael here. I'll just chip in here. I think the -- overall in the bank right now, the ambition level and the goals for -- in each country and also in every branch for 2026 is quite higher than it has been before. So the willingness and the ability to work with more customers, especially in the U.K. and the Netherlands and also in the Norway to some extent, are on a much higher level when it comes to ambition, and we will be very close following up how this will work out in the -- in our different home markets. Operator: Our next question comes from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So just going back to kind of the growth in Sweden, could you maybe just comment a little bit how you see competition for mortgages, what the outlook is, how much kind of growth you would expect in mortgage lending? And also related to this, do you see any risk for -- kind of the risk rate for housing associations, which I believe is 3.7% currently that, that could be increased to kind of low teens or at least double-digit levels? Marten Bjurman: No. Okay. Again, I think bear in mind the size that we have in the mortgage market in Sweden. It's difficult to grow extensively. So in terms of outlooks, it's hard to tell. Again, I'm happy to see the momentum that we have later in the quarter, and hopefully, that will continue. I think as it regards to your second question, the housing association and the risk weights, we don't have any view in that for the moment, no. Operator: Our next question comes from Namita Samtani from Barclays. Namita Samtani: Can we just go back to the corporate lending market in Sweden? And can you just talk a little bit more of how you see competition there? And how do you see pricing as well? And could you maybe just also touch on the property management lending where it looks like the loan book on a net basis didn't really grow in Sweden in 2025. Michael Green: Yes. So in general, when it comes to the lending book in Sweden and the market there, so we always follow our customers. When they grow, we are there and do our fair share of the business. And the activity from our corporate partners or clients has been a bit muted even this year. I think many of us were a bit more optimistic when we entered the year. But then you had the liberation day and the tariffs and all that, and that actually made the customers a bit reluctant to invest and also the consumers. It all starts with consumers, and they've also been a bit hesitant to really invest or increase their spending in the year. But I'm very hopeful actually if we listen to our experts in macroeconomics in the bank, they're very positive to the growth in Sweden. Now we need, of course, to bear in mind that things can change as we saw last year. But the general view now is that we will have a quite high growth in GDP in Sweden, which we will benefit from because our customer -- we follow our customers when they grow. I think there is a bit more interest in investing from our corporate clients in the late of the year. And you should also, as Marten previously said today, it's -- we -- of course, we report always net figures, there is a change in the portfolio. So there are volumes that we actually more or less has welcomed us to come out of our books, and there are much more strong corporate business that has come on to our books in the last year. So the risk level and the performance of -- in the lending book is better than it was when we started the year. Operator: Question is from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So I saw the margins are taking the NII down this quarter again quite a lot. And you have probably upcoming rate cuts in the U.K. and in Norway. Do you expect NII to trough in Q1 or during the first half year? Or do you have any expectations on when we should see growth? Marten Bjurman: I don't want to guide and be that specific on the Q1 number, of course. But yes, you're right. We are expecting rate cuts in those countries. The margins in U.K., they are pretty healthy as it is. So if we end up in a policy rate where we think, then we can do healthy business there. And a reminder also, I think the volume growth in U.K. can compensate quite a bit as it regards to the fall in margins. Norway, yes, we are struggling a little bit this quarter. We'll see what happens. We have -- we don't guide into Q1, but obviously, we see a lot of activities in our branches and hope for the best. Operator: Questions comes from the line of Max Jacob Kruse from Bernstein Autonomous. Jacob Kruse: So just on the growth you're talking about, could you -- should we read this as the cost management side that you went through over the past couple of years that is changing here and looking at investing a bit more into your business and perhaps staff levels? And if I could just also ask the VAT refund that you took in the quarter, is that all the ones you're looking to get? Or do you have other applications in the pipeline? Marten Bjurman: Thank you for those 2 questions. On costs first, I think, yes, I'm personally a little bit surprised of the outcome here. It's extremely impressive if you ask me that we continue to perform well on the cost side. For the future, yes, I expect that we gradually pick up a little bit in costs and have investments near the customer, near the business, and we are happy to do so. But first, we need to see the business growing and the need for us to spend more money. But again, you should remember who we are. We are Handelsbanken, and we keep the money tight to our body. So it's about being stringent from that perspective. The VAT recoveries, yes, you saw us print SEK 200 million. It's booked on the line other income. Some of that -- a portion of that, I think the number is SEK 142 million is related to the parent company for the year of 2019. So yes, potentially, we have a little bit more coming from that and in terms of reimbursements for the year after that, obviously, it's a little bit too early to go into details in that. But yes, potential is there. Operator: Next, we have the line from Riccardo Rovere of Mediobanca. Riccardo Rovere: Just a quick one. Again, on the management buffer, what should happen to bring this to the midpoint of the range to 200 basis points? Because you ramped it to 400 basis points on uncertainty. The situation doesn't look different at least to me at the moment, even probably worse, but you bring it down to 300 basis points now. So I was wondering what could drive it to 200 basis points? And is this your decision or a decision that you have to take together with the Swedish FSA because by magic, all the Swedish banks now got to 300 basis points exactly at the same time. So I was wondering whether this is a management decision or someone else decision? This is my first one. The second one I have is, if you could shed a little bit more color on the decline of RWAs in the quarter. What is driving that? Michael Green: So can I just take the last part of the first question, I'd say it's absolutely a discretionary decision within the bank's Board, and there's nothing to do with any authorities or something else, if I understood your question correctly. And we -- and I emphasize, we're not on the 300 basis points range, we're 285 basis points. And we just do what we said. We said we're going to go and move into the interval, and we've said it for many quarters now. And we will always assess every quarter or year actually where we would like the bank to be. So that's something we work with. But now we're in the range, and that could vary within the range. And it's up to our decision to make sure that we always run the bank prudently, but also has the capacity to be one of the largest lending providers in our home markets. And this is the assessment we do right now. Marten Bjurman: And on the question -- the second question there, the movement in RWA, I think you can see the details in the slide pack there. There are different components, obviously, volumes, migrations and risk weight floors and currency effects and other, but those are explained in the pack. Operator: [Operator Instructions] We have follow-up questions from Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: Now I was just coming back to costs since you're taking them down or at least being quite much below what people expected in Q4. What's your feeling about how staff are taking this? Are they -- do you feel that they're happy? Or do you -- are you afraid of that you should lose important people as the compensation is not up to standards? Michael Green: No, on the contrary, actually. So the thing -- when you manage a downturn in a number of employees, if you have the right kind of leadership and the story with that and you see that the effects on the bank are there, you actually create the opposite. You create a very strong sense of -- and the feeling for the bank. You really want to be part of something that is actually evolving in the right way. And also the -- it also puts the finger on performance. So we always need to have people working very intensively, very hard on the business. And what happened, we actually -- most of the downturn in staffing was not customer -- in close to customers. It was on the head office and central apartments. And what happens there is that the branches, they feel that everybody who's supporting the business is being more productive, more cost efficient that really empowers them to do more business. And the mindset within everybody who's still there and most of us are, we are much more business-oriented this year than we were a few years ago from the central department. So we always -- we really make sure that we are there for our employees dealing with customers, and they really feel that. So I think absolutely doing -- having less people as we have now creates a lot of good energy. And the -- when you look at the employee survey we do every fall, it has never been on a higher level as this year. So we have a very, very strong committed workforce, if I put it that way, both in the -- close to our clients, sorry, on the branches, but especially nowadays also in central head office. So I'm very happy with the mindset of how you work and what we do here in the bank for whom. Operator: Follow-up questions from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Thanks again for taking my second question. So just a follow-up on Oktogonen. We saw that there was a small reversal this quarter of SEK 39 million. How should we think about Oktogonen going forward? Is it fair to assume that, that will be kind of 0 going forward? Or -- and is that important any longer for your staff? So if you could just kind of help us how we should think about Oktogonen contribution going forward? Marten Bjurman: Yes. I think Oktogonen still plays a role, obviously, in our corporate culture. I think it's expected for that to last a bit. When it comes to the actual number going forward, I think we just have to wait and see. It's always a little bit of a guessing game where we come out. Now we have had a little bit of a reversal in Q4. So -- but I don't want to predict the future from that sense. Is the Oktogonen here to stay? Yes. I think it's fair to say that it still plays a big role for our employees. Sofie Caroline Peterzens: But what drove then the reversal in the quarter? What was the rationale for reversal? Marten Bjurman: It's a huge calculation behind that. And obviously, it's related to our corporate target to have a stronger ROE than our peers in our way of looking at it. And that's mainly driven by where do we want to compare us versus the peers in terms of geographies and different things. So there's quite a bit of calculation going on there. And in this case, we had to revert a little bit that -- the number in Q4 again. Michael Green: And we also wait for the British Bank to post their Q4s in order to make the correct calculations. So this is the best assessment with the information we have right now from our competitors that has posted their Q4s. Operator: We also have a follow-up question from Namita Samtani from Barclays. Namita Samtani: Thanks for taking my followup. And I just wondered what's happening to the IRB model review in the U.K. And also what's happening to the Swedish IRB model review? I think there's a 50 bps requirement in your CET1 requirement. So just wondering what the update is? Michael Green: Yes, I understand the question, but the complexity and the processes that goes into that work is really evident, and it's far too many details to go into that in this call, I'm afraid. The outcome, we don't really know. We are working on the situation that we have in the IRB world, both in U.K. and for that matter, in other places as well. It's too early to tell -- to be concrete in that matter. Operator: Lastly, we have the questions from Riccardo Rovere from Mediobanca. Riccardo Rovere: Thanks for taking a quick followup. Just wanted to ask you at the beginning of the call, when you were asked about loan growth in Sweden, if I understand and remember correctly, you stated something like you see in the market, something that does not, how can I say, kind of comply with your risk profile. If I understood it correctly, could you shed a little bit more color what you were referring to, if I got it right? Marten Bjurman: Yes. No, let me clarify that. And sorry for being a little bit vague if that was the case. What I was saying, and I think that you're alluding to here is that we are a large lender in Sweden. So to be able to grow significantly more than GDP, that would mean that we would have to alter our risk appetite, and we obviously do not want to do that. So in the long term, I think it's fair to say that you should expect us to grow with GDP more or less. So I think that was the core message. Operator: At this time, there are no further questions from the line. Allow me to hand the call back to the presenters. Please continue. Peter Grabe: All right. Thank you, everyone, for listening in and for all the questions. And we wish you all a good day. Thank you. Michael Green: Thanks. Bye-bye.
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: Ladies and gentlemen, welcome to the Carlsberg FY 2025 Financial Statement Conference Call. I am Hillie, 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 Jacob Aarup-Andersen, CEO. Please go ahead. Jacob Aarup-Andersen: Thank you very much, operator, and good morning, everyone, and welcome to Carlsberg's Full Year 2025 Conference Call. As said, my name is Jacob Aarup-Andersen, I'm the Group CEO, and I have with me our Group CFO, Ulrica Fearn; and Vice President, Investor Relations, Peter Kondrup. 2025 has been an eventful year. We executed on major initiatives that will shape the future of Carlsberg, while at the same time, we navigated through quite a volatile environment in the year. Let me summarize the key headlines for the year. We closed the Britvic transaction in mid of January. We upgraded synergy expectations and overdelivered on expected 2025 synergies. We delivered good underlying gross margin improvement, and we increased our capability investments across the company. As a consequence, we delivered continued solid profit development. We delivered operating margin improvement and improving cash flow and delivered at the top end of the guidance range. Finally, we increased adjusted EPS by 11%, and we are increasing dividends by 7% to DKK 29 per share. Before going into the usual presentation, I'm going to hand over to Ulrica, who will go through the changes to our reporting that has and will be implemented. Over to you, Ulrica. Ulrica Fearn: Thank you, Jacob. And now please turn to Slide 3. So as you will have noticed in the release this morning, we have introduced Management-defined Performance Measures or MPMs in our review of the performance and the results. And this, we have done for 2 reasons. Firstly, due to the significant impact from amortization of intangible assets recognized in the PPA that is related to the Britvic acquisition; and secondly, as we're preparing for IFRS 18. So firstly then, Britvic has had a significant impact on the group's reported financial results. And as part of the purchase price allocation that is done in accordance with IFRS 3, a significant proportion of the purchase price was allocated to the Pepsi partnership to brands and customer relationships and all intangible assets that must be amortized. So for 2025, the amortization of these intangible assets amount to some DKK 640 million, and this is, of course, noncash. So the amortization of brands is reported in cost of sales, while the amortization of the Pepsi partnership and customer relationships is reported in sales and distribution expenses. In our internal management performance reviews, we don't include the PPA-related amortization. And therefore, to align the internal and external reporting, we provide reported figures adjusted for the PPA-related amortization. And these we call -- these figures we call MPM, and they are short for these Management-defined Performance Measures. And there is a full bridge of MPM and reported on Page 3 in the announcement and key figures are shown on the next slide. But just to make it perfectly clear, there is no change in our presentations in organic development. And then secondly, as you probably know, the new IFRS 18 reporting requirements will be the mandatory reporting framework from 2027. IFRS 18 will introduce requirements for subtotals, like operating profit, and they will include all income and expenses if they do not meet the definitions of investing, financing, income taxes or discontinued operations categories. And that means that IFRS 18 does not allow for the use of special items as these items has to be classified for the functional area where they derived. However, IFRS 18 do open up for the introduction of Management-defined Performance Metrics or MPMs, in order to improve clarity and consistency in the financial reporting. So to prepare for the new reporting requirements and avoid unnecessary confusion down the line, we have chosen to use this IFRS terminology for the PPA-related adjustments we have done in our 2025 announcement. And we plan then to be early adopters of the new reporting requirements already from this year. And that means that we will report half 1 in accordance with IFRS 18, and we aim to provide more information on what this means for our future reporting compared to the current framework at a later point. So then on Slide 4 then, we show the reconciliation of MPM with reported figures for 2025. Going forward, organic development and commentary will be based on changes compared to the previous year's reported MPM figures. MPM adjustments will be the PPA-related amortizations and from 2026, all IFRS 18 related adjustments. Consequently, MPM figures will be fully aligned with our internal KPIs, our incentive schemes and so on, and will reflect how we run our business. And we will reconcile all MPM adjustments, including the PPA-related amortization in a new line below EBIT, and this will be somewhat similar to what we today call special items. So with that, over to you, Jacob. Jacob Aarup-Andersen: Thank you, Ulrica. Always great with an accounting class here. I appreciate that. So let's go to Slide #5 and a brief overview of the 2025 results. So we delivered very strong top and bottom line growth due to Britvic. Total reported volumes were up by 17.7%. Reported revenue grew by 18.8% and operating profit by 22.7%. The organic development was impacted by the loss of San Miguel in the U.K. from the 1st of January '25 and of course, the soft consumer sentiment across our regions. Given the challenging trading environment, we are satisfied that when you adjust for San Miguel, revenue grew organically by 1.1%. Volumes declined slightly, mainly driven by Asia. Our organic operating profit grew by 5% with an acceleration in the second half. Ulrica will go through the financials in more detail. So please go to Slide 6 for a few strategic highlights of 2025. 2025 was another busy year with many activities and strong progress on a number of our key priorities. Most significant was, of course, the completion of the Britvic acquisition in mid-January and the integration of this business. That started immediately upon completion. I'll come back to Britvic in a few slides, but I'm just going to repeat our excitement about this business and the significant opportunities it's created not only for the combined U.K. business but for the Carlsberg Group as a whole. One such opportunity was the Pepsi license in Kazakhstan and Kyrgyzstan. As highlighted during the year, a lot of work went into the preparations for what is an exciting expansion of our business. On the back of our strong results for the Pepsi portfolio, we were proud to be awarded European Bottler of the Year by PepsiCo. In the U.K., we were very successful in driving other premium world lager offerings to our customers and consumers in replacement of San Miguel. Of course, we didn't get there in the first year, but we've been very pleased to see the strength of our premium brands and the results that we can achieve with the right level of support. Poretti volumes more than doubled. That's a remarkable achievement in the mature and highly competitive U.K. market. In China, we continued growing the 1-liter can format in response to the growing importance of the off-trade channel. This pack format, which many of you saw at our Capital Markets Day in the fall, is designed to be shared amongst friends on social occasions, and it offers a crafty and premium look that stands out on the shelf. Two other exciting initiatives that will strengthen our brands in the coming years with the new multiyear UEFA sponsorship, which we announced back in March and the announcement in October that Robert Pattinson will be the global ambassador for 1664 Blanc. We advanced strongly on our digital journey with development projects across the business. As an example, in the commercial area, I want to highlight our new and advanced value management tools and the launch of the new and advanced online B2B platform, [ Served ]. Finally, it almost goes without saying that we continue the execution of our sustainability agenda, including carbon emission reduction initiatives and actions to reduce water consumption and replenish our water use in high-risk areas with solid progress shown in many areas. Slide 7, please, and our growth categories and international brands. As you can see on the slide, our 4 growth categories combined account slightly more than half of total volumes now. It was encouraging to see that all growth categories except the smaller Beyond Beer category delivered solid growth in 2025. Our premium portfolio grew by 5%, driven by good growth in all 3 regions. We saw particularly strong growth for Carlsberg and for local premium brands such as Wind Flower Snow Moon in China, Pirinsko in Bulgaria and Zatecky in Poland. Soft drinks more than doubled due to the Britvic acquisition and now accounts for 30% of total volumes. Soft drinks grew organically by 3%, supported by solid growth in Western Europe and the shipments in Q4 in Kazakhstan ahead of taking over the Pepsi license. We saw particularly good growth for the Pepsi portfolio in Sweden and Switzerland for the relaunched Tuborg Squash brand in Denmark and good initial results for the soft drinks launch in China. We also saw very good growth for Pepsi in the U.K. and Ireland. Alcohol-free brews grew by 4%. Excluding Ukraine, which is a large AFB market, volumes grew by 7%. Growth was broad-based across most markets in Western Europe and CEEI. While alcohol-free brews accounts for 4% of total group beer volumes, the category accounts for 7% of beer volumes in Western Europe and 5% in our Central and Eastern European markets. In 5 of our markets across Europe, AFB's share of beer volumes is around 10%. Beyond Beer volumes declined by 4%. We saw good growth for Garage, which for the first time exceeded the 1 million hectoliter mark and for Wind Flower Snow Moon in China, but this was more than offset by lower Somersby volumes. Looking at our international brands, total Carlsberg volumes grew by 4%, while the brand's premium volumes were up by 13%. The strong premium growth was driven by CEEI and Asia with very good growth in China, Laos and India. The mainstream volume growth was mainly thanks to the growth in the U.K. Tuborg volumes were up by 2%, supported by growth in China and many CEEI markets, in particular, India, Kazakhstan and Nepal. In January 2026, we announced a refreshed, bold brand identity, amplifying the brand's energy and modernity while staying true to its iconic roots. 1664 Blanc grew by 2%. We delivered solid growth in multiple markets, but the total volumes were impacted by Blanc's super premium price point in the large Chinese market, where consumer sentiment remained under pressure. Now let's move to Slide #8 and an update on Britvic. We're very pleased with this acquisition, and our first year of ownership has been excellent, both in terms of underlying performance, which was strong and the efficient and seamless integration. We began integration immediately after closing in January, and all people changes in the U.K. and Ireland related to the integration were concluded ahead of initial plans, and we're in the process of integrating procurement. We upgraded the cost synergy target to GBP 110 million at the Capital Markets Day on the 1st of October, mainly due to higher-than-expected people-related savings. The cost synergy delivery in 2025 amounted to approximately 30%. That was well ahead of our initial expectations of 10% to 15%. The synergies were achieved in both Britvic and the legacy U.K. business. And for clarity, that, of course, means that they contribute positively to both the P&L in both the organic and the inorganic contribution. That means included in the operating profit of Britvic of GBP 253 million and in the organic operating profit growth. The fast integration, of course, also meant that the integration costs in 2025 were higher than expected. Alongside the integration, we've had a razor-sharp focus on business continuity and sustaining Britvic's growth trajectory. That entails a step-up in commercial investments to support long-term growth. Britvic volumes in the U.K. grew by 4%, with particularly strong performance towards the end of the year, driven by very strong performance on the Pepsi brand, especially Pepsi Max. The Pepsi portfolio gained more than 1% volume and value market share, which is a stellar performance in a year of integration and strong competition. In Ireland, volumes grew by 3%. The Teisseire business in France performed worse than expected due to an inefficient cost structure. Just a couple of weeks ago, we made a joint announcement with the employee representatives regarding a comprehensive reorganization of the business as we had originally announced on the 16th of October last year. This reorganization will enable us to adapt the company to the challenges of tomorrow and ensure Teisseire's long-term competitiveness. Volumes in Brazil declined mainly due to soft demand and our own portfolio rationalization. We continue to optimize the long-term value of this business. Total reported volume and revenue contribution from Britvic and Carlsberg accounts were 24 million hectoliters and DKK 15.6 billion, respectively. The operating profit contribution was DKK 2.2 billion or GBP 253 million, slightly higher than expected due to the higher synergy delivery, but partly offset by lower profits in Teisseire in France. Please turn to Slide #9 in Western Europe. The region's profile has changed significantly following the acquisition of Britvic with soft drinks now accounting for more than 55% of regional volumes. Total reported volumes grew by almost 50% due to Britvic. Excluding San Miguel, volumes grew organically by 1.3% as a result of soft drinks and other beverages growth of 4.3% and almost flat beer volumes in Western Europe. Revenue per hectoliter improved organically by 1.1%, positively impacted by price increases and growth for premium and AFB, partly offset by channel and product mix. Revenue, excluding San Miguel, grew organically by 1.7%. Operating profit grew by 40% to DKK 7.4 billion. Organic operating profit grew by 0.7%. Cost initiatives across markets, Britvic synergies in the legacy U.K. business and certain compensations, including insurance indemnifications related to events that had a negative operating profit impact during the year more than offset the material net impact from the loss of San Miguel, and higher logistics costs and in the first half, higher IT costs. The operating margin was up by 40 basis points to 14.3%. Looking at key markets, it was a very busy year for our U.K. business due to the integration of Britvic and the significant efforts to replace the lost San Miguel volume. Excluding San Miguel, the business delivered high single-digit organic volume growth with market share gains in the on- and off-trade and strong growth for both mainstream and premium for brands such as Carlsberg, Poretti and Kronenbourg 1664 in both channels. The Nordic markets delivered low single-digit volume growth. We saw good growth for all growth categories except Beyond Beer. Total premium, AFB and soft drinks volumes delivered mid-single-digit growth rates in all 4 markets. We saw solid market share performance across markets and across categories. The French beer market was flat. Our volumes grew slightly, driven by premium beer and AFB. Mainstream beer volumes declined due to the continued softness of Kronenbourg, Red & White. Now Slide 10 and Asia. In Asia, where beer volumes declined by 1.5% as growth in China was more than offset by soft volumes in particularly in Laos and Vietnam. Soft drinks and other beverage volumes continue to be impacted by energy drinks in Cambodia and therefore, declined by 8.1%. Revenue per hectoliter increased organically by 1.3%, resulting in an organic revenue development of minus 1.2%. Operating profit grew organically by 0.7% and the operating margin improved by 60 basis points to 23.2%. The weaker organic operating profit development in the second half versus the first half was due to soft volumes in some markets and higher sales and marketing investments, particularly in China. Looking at the markets and starting in China, our volumes grew by almost 4% in Q4, supported by market share gains and on the back of easier comps. That led to full year volume growth of 1% in a market that declined by an estimated 1%. The volume and market share growth were driven by mid-single-digit volume growth in big cities and a growing presence in e-commerce and O2O. Our Western strongholds, which is predominantly mainstream and therefore, more exposed to the soft consumer sentiment, developed largely in line with the market. The channel shift to off-trade continues, in particular to e-commerce and modern off-trade and on-trade remains soft. Our premium portfolio continued to outperform, seeing strong growth for Carlsberg and for Wind Flower Snow Moon and solid growth for Tuborg and WuSu, supported by strong growth of our 1-liter cans. Revenue per hectoliter was flat as the premium growth was offset by the negative channel mix. During the summer, we increased our sales and marketing investments in China, and therefore, our market share improvement was more pronounced in the second half. Building on the successful big city trajectory, we intend to seed the handful of new cities in 2026. In Laos, consumer sentiment was severely impacted by the weak macro economy. Our full year volumes declined by mid-single digit, but with a stabilizing trend seen in the second half, we saw good premium beer growth fueled by Carlsberg, while mainstream declined. Our Vietnamese business was hit by a perfect storm in 2025. In the first half, the mainstream Huda brand lost market share and its stronghold in the central part of the country due to an intense promotional activity in the market. And at the same time, we went through a reorganization of our route to market in the South. In Q4, Central Vietnam was hit by heavy rainfalls and floodings, which, of course, had an adverse impact on our volumes. The rainfalls and floodings in November in Vietnam last year were the heaviest in the history of the country with the heaviest rainfall ever. On the back of all of this, full year volumes declined double digit with an improving trend in the second half. As we continue to improve our business in Vietnam, we expect volume growth to resume in 2026. Then we move to Slide 11 and the CEEI region, which delivered strong results for the year. Reported volumes grew by 8.6%, positively impacted by the consolidation of our business in Nepal, the inclusion of Britvic's Brazilian business and the sell-in of Pepsi products in Kazakhstan in Q4. The organic development of minus 0.6% was impacted by the soft market conditions across the region. Revenue per hectoliter improved by 3.3%, thanks to price increases and a positive product mix. Consequently, reported revenue grew by 10.4% and 2.7% in organic terms. Operating profit grew by 13.6%, supported by organic growth of 9% and acquisitions. The very strong organic profit growth in the second half was the positive result of tight cost control, supply chain savings and also certain compensations, including insurance indemnifications related to events that had a negative operating profit impact during the year. Operating margin strengthened by 50 basis points to 19.0%. If we look at the key markets in the region, we had another good year in India. Our business delivered high single-digit volume growth following a strong end of year performance. We strengthened our market share in most of our states, and we saw very strong growth of Carlsberg Elephant and continued solid growth of Tuborg Strong, which is our largest brand in India. We launched 1664 Blanc early in the year, and the brand has come off to a good start. I would, at this point, like to mention that we are exploring different options for increasing shareholder value, and that may potentially include an IPO of our business in India, but no final decision has been made at this time. It was a very difficult year in the Ukraine with war activities intensifying, particularly in the second half, creating an increasingly volatile and unsafe environment for people across the country. Consequently, our volumes declined by double digit, but our market share was flat. We're very excited about our business in Kazakhstan, where we are now a combined beer and soft drinks player after the takeover of the Pepsi license. Our volume growth was in the mid-teens with good results for the alcohol-free brews, Beyond Beer and the local mainstream brand. We were able to start early shipments of Pepsi products already in Q4, and this led to very strong growth for soft drinks. Volumes in our export and license business declined slightly. We saw good growth for Carlsberg, Kronenbourg 1664 and our alcohol-free, Moussy brand in the Middle East, but this was offset by soft Tuborg and Somersby volumes. And with that, back to you, Ulrica. Ulrica Fearn: Thank you very much, Jacob. And now let's go to Slide 12 and the P&L. So the reported revenue was, of course, positively impacted by the inclusion of Britvic, which meant that revenue grew by 18.8%. And the organic development was minus 0.6%. But as Jacob already explained, this figure was impacted by the loss of San Miguel in the U.K. and without which the organic revenue growth would have been plus 1.1%. The currency impact was minus 2.0% and mainly due to currencies in Asia, Ukraine and Kazakhstan. Revenue per hectoliter was up organically by 1.4% as a result of price increases and also a positive category mix. And we continue to work to deliver supply chain efficiencies that mitigate inflation and help cost of sales per hectoliter to be flattish and rebuild gross margin to enable the growth investments that we do in brands and commercial activities. And cost of sales per hectoliter increased organically by slightly less than 1% as these efficiency improvements offset most of the inflationary pressure and the product mix impact and the underabsorption of fixed costs from lower volumes. Group profit per hectoliter increased organically by 2% and resulted in an organic improvement in gross margin of 30 basis points. And as expected, gross margin MPM declined by 60 basis points to 45.2%, and this is due to the consolidation of Britvic that came in with a lower gross margin. We increased sales investments organically by 5%, mainly due to the higher level of activity in China and in preparation for the takeover of the Pepsi business in Kazakhstan. And as expected, reported marketing over revenue was down by 50 basis points to 8.3%, and this is due to the inclusion of Britvic. Operating profit MPM grew by 22.7%, of course, significantly supported by the Britvic acquisition. And organic operating profit grew by 5%. And as you will have noted, we saw quite a sequential improvement from half 1 to half 2, and this was due to expected higher synergy delivery from Britvic and cost initiatives as well as certain compensations, including insurance indemnifications, which related to events with negative operating profit impact during the year. Reported special items amounted to minus DKK 1.9 billion. And the main items here were the Britvic-related costs, restructuring charges and impairment costs, and this was across all 3 regions. Special items MPM includes the PPA-related amortization and amounted to minus DKK 2.6 billion. And you can find the specification of special items in Note 4 in this morning's release. Net financials were minus DKK 2.4 billion. And excluding currency gains and losses, these financial items amounted to minus DKK 2.2 billion. And this was an increase of DKK 1.1 billion and due to the significantly higher net interest-bearing debt. The effective tax rate was 22.9%, and this is in line with our expectations. Adjusted net profit MPM was DKK 8 billion, and adjusted earnings per share NPM grew by 11.1% to DKK 61, and this was positively impacted by the consolidation of Britvic and organic operating profit growth. So now to Slide 13, please. The free operating cash flow amounted to DKK 7 billion versus DKK 6.4 billion in 2024 and with the main driver here being the higher EBITDA, thanks to Britvic, but also organic operating profit growth. The change in trade working capital was plus DKK 730 million. And although we saw a significant improvement in trade working capital in Britvic, it is below the level of Carlsberg. And therefore, average trade working capital to revenue for the year declined as expected, ended at minus 15.6% on a rolling 12-month basis. And looking at the Carlsberg Group, excluding Britvic, average trade working capital to revenue was stable at minus 20.1%. CapEx then amounted to DKK 5.6 billion, and this is below our initial expectation, but it is equal to 6.3% of revenue, and this is in line with our general guidance for CapEx, which is to be 6% to 7% of revenue. And as with all other cost items, we do actively manage CapEx to align with the revenue development. And CapEx was in particularly impacted by the expansion investments in India and Vietnam, the building of the new soft drinks plant and sales investments ahead of taking over the Pepsi license in Kazakhstan. Net interest-bearing debt was, of course, impacted by the acquisition of Britvic and amounted to DKK 61.6 billion. Net interest-bearing debt to EBITDA was 3.28x, and we maintain our expectation of reaching our leverage target of max 2.5x net interest-bearing debt to EBITDA by the end of 2027 at the latest. Return on invested capital MPM was 10.8% and mainly impacted by the Britvic acquisition. Excluding goodwill, return on invested capital MPM was 30.9%. So then to Slide 14 and the proposed dividend for the year. At the Annual General Meeting in March, the Supervisory Board will propose another step-up in dividends to DKK 29 per share, which is an increase of 7%. We have been very clear that we are maintaining our dividend policy, which stipulates a dividend payout of around 50% of adjusted net profit despite temporarily being above our leverage target of max 2.5x net interest-bearing debt to EBITDA. The proposed dividend equals an adjusted payout ratio of 48%, so in line with the policy. We are increasing dividends while at the same time reducing leverage from the pro forma level of 3.4x at the time of the acquisition. And as a reflection of the financial performance of our business, dividend per share has more than tripled since 2015 when it was DKK 9, as you can see here on the slide. And this is a reflection on an increased payout ratio and doubling of earnings per share over the past 10 years. And we expect dividend per share to continue to grow in line with adjusted EPS. And as soon as the financial leverage is below 2.5x, we will aim to be there at later -- no later than by the end of 2027, as you know. And then we can again return cash -- excess cash to shareholders through share buybacks. And now Slide 15 and the full year earnings outlook. 2026, we are expecting here to be relatively stable but subdued consumer environment. We also expect that the volatile and uncertain environment will stay with us for some time due to the geopolitical situation, and that will impact consumer sentiment and behavior in many of our markets. We will get some volume support this year from the takeover of the Pepsi license in Kazakhstan and Kyrgyzstan, which will add approximately 1.5 percentage points to the organic volume development. And we continue to see inflation through the P&L. And for COGS, we expect to mitigate the underlying inflation and achieve flattish COGS per hectoliter through our continued focus on delivery of supply chain efficiencies. On SG&A, we implemented a number of cost initiatives in half 2 2025, and we will keep this tight focus on SG&A costs and expect a slight increase in marketing investments and higher capability and digital investments. And then while the integration of Britvic is ahead of schedule, positively impacting 2025, our expectations for 2026 are unchanged, and we expect to deliver 30% to 40% of the GBP 110 million cost synergies then. Consequently, we have -- we expect to have delivered up to 60% to 70% of cost synergies already after 2 years of ownership. And as a result of all this, we expect an organic operating profit growth of 2% to 6% on operating profit MPM in 2025, and that was DKK 13.996 billion. Please note that in the announcement also include a similar guidance on reported organic operating profit growth, and this is due to regulatory requirements. And based on yesterday's FX rates, we assume a translation impact of around DKK 100 million negative for 2026. And please note that we've ceased the hyperinflation in Laos in July 2025. On financial expenses, excluding foreign exchange losses or gains, it's expected to be around DKK 2.2 billion. The reported effective tax rate is expected to remain around 23% and CapEx is expected to be DKK 6 billion to DKK 7 billion. And with that, back to you, Jacob. Jacob Aarup-Andersen: Thank you so much, Ulrica. Before we open up for the Q&A, let me just summarize the key highlights of 2025. First and foremost, we closed the Britvic transaction, and we upgraded synergy expectations and overdelivered on expected 2025 synergies. We delivered good underlying gross margin improvement and increased our capability investments across the company. We delivered continued solid profit development, operating margin improvement and cash flow growth, and we delivered at the top end of the guidance range. We increased EPS by 11%, and we increased dividends by 7% to DKK 29 per share. I'm sure you may have many questions as always, but can we please limit the number of questions to 2 per person to ensure as many as possible, get a chance to get through. After your questions are welcome to join the queue again. And I think with that, let's take some questions. Operator: [Operator Instructions] The first question comes from the line of Trevor Stirling from Bernstein. Trevor Stirling: Two questions from my side, please. The first one, Jacob, concerning China, you had 1% volume growth for the full year. But what do you think your read on the exit rate from China coming out of Q4 and into the first few weeks of 2026? And some of the high-frequency data is looking a little bit more encouraging, particularly for mainstream beer. And second one, maybe for Ulrica. Ulrica, with guidance, I hesitate to use the word cautious, but you've got Britvic synergies coming through, that's probably a 2% boost to operating profit. There's something coming through from Kazakhstan as well. And in that context, your 2% to 6% looks prudent, should I put it that way? Jacob Aarup-Andersen: Thank you, Trevor. Let me start, as you suggest on China. So listen, you know us, we don't give monthly exit rates, et cetera. But there's no doubt when you look at Q4, we're quite pleased with the performance in Q4. So we did 4% growth in Q4. Of course, we had easier comps as well, but it was clearly better than the market. What drives it is, I think you can put it down to 3 things. It's -- our big city growth continues to be strong. We're doing well in the channels that are clearly the winning channels. So that's O2O and it's e-commerce and it's convenience. And then the third element is some of the new winning formats. We've also been playing that well. So 1-liter cans, of course, is the most clear one of that. So I think those 3 elements are important. As we go into '26, I'm not going to give you a status on January numbers, but you say, overall, as we look at '26, we think the consumer is stabilizing. We're not giving you any euphoric statements around China suddenly changing growth trajectory. But we think we're seeing a stable beer market, which gives us opportunity to perform. We're also, of course, looking at a year where, as always, it will be interesting to see also what policy measures we may see, et cetera, around stimulating the consumer. But overall, the way we're set up the strategic approach we've chosen in China, we've proven in the last quarter again that there's growth to be had for us, continued growth to be had for us. And as we look at 2026, I think that continues. So we would expect to see growth out of our Chinese business in '26. I'm going to be cautious around how the consumer is going to develop through the year. You know us, we prefer to start the year a bit conservative, and I'll do that as well when I look at the Chinese consumer. So -- but with the environment we're in right now, we do expect to be able to deliver growth also in '26 in China. I'll hand it over to you, Ulrica, on the guidance question. Ulrica Fearn: Yes. Thank you, Trevor. And I think, well, Jacob just mentioned it around China. You are right. We are in the very early time of the year. The world, when you look around, remains pretty uncertain and volatile. So we are a little bit conservative given where we are in the year. But you are also right, there will be support through Britvic synergies coming in, giving us 200, a little bit more basis points of support. We do have one negative against that. I guess, we do have the Carlsberg boom, which is our property gain in 2025 that we talked about, which sits in the half 1. So that goes a little bit against us. But other than that, we do also expect some increase in our marketing investments and a bit pressure on SG&A from both underlying inflation and IT capability building projects that we continue even in these environments. So albeit, as you also know, we try to offset those by efficiencies. So all of that gives you a little bit of color on the uncertain and volatile world and why we are maybe early in the year a bit conservative with a 2% to 6%. Operator: We now have a question from the line of Sanjeet Aujla from [ Calstock ]. The next question comes from the line of Simon Hales from Citi. Simon Hales: So my 2 questions, please. My first one is just on Britvic, Jacob. But I wonder if you could just talk a little bit more about the performance of the business in Q4, particularly in the U.K., some of the share and brand, sort of trends and momentum you saw? And also, you talked a little bit about how having Britvic now in combination with that broader beer business in the U.K. is enhancing your relationships with the key retailers? And is that meaning anything because you've come into this year's price renegotiation rounds in U.K. and the rest of Europe? So that's my first question. And then secondly, just on Kazakhstan and the Pepsi license. Can you say how much of an impact those early shipments had on Q4? And how do we think about the build of the rollout of Pepsi in Kazakhstan over the first half of this year and 2026 more generally? Jacob Aarup-Andersen: Simon -- we don't know what happens to Sanjeet there, but I'm sure he will try to come back. But thanks for stepping in so far. Listen, let me speak to the Britvic question, and then Ulrica will talk to Kazakhstan. So on Britvic, listen, if you look at the performance, you asked specifically around Q4 as well. We're very pleased with what we saw in the U.K. in Q4. The U.K. volumes were up 7% in Q4, and we saw a very strong performance, especially from the Pepsi brand. When we look at our December, so the 4-week rolling in December, which, of course, is a very important month for all of us, the Pepsi Max took more than 2% value share in December. So really strong performance in the fourth quarter. We're not going to extrapolate that as the new run rate. But there's no doubt that, of course, in the fourth quarter, our business started being more unconstrained as the integration -- the initial integration efforts were over. So there's no doubt that the team was more able to focus purely on the commercial side of things. So quite pleased to see the performance in Q4 and a very, very strong holiday period as well. We said from the beginning that we think there is a lot of the potential to unleash in the Pepsi brands, and we're really seeing that play out, especially as we move towards the end of the year. So strong performance there, but it's also strong performance from a number of the breakthrough brands, whether it's Plenish, whether it's Jimmy's, those types of brands also doing very well. 7UP Pink Lemonade has also been a very strong performer. So a number of brands carrying that Britvic performance in Q4, but really, really strong, as you point to. In terms of the key retailers, I'm not going to specifically comment on the negotiations. They are, of course, tough as they should be because we -- everyone needs to fight their own corner. But I think we're having very strong strategic partnership discussions across the board. It's really -- it's given us a different vantage point post the Britvic acquisition. And it's great to see the partnership discussions we're having with the major retailers also around innovation pipelines, not just for the next 6 months, but for the next couple of years, being able to plan more strategically around also major launches of new products and thinking shared business plans to a larger degree. So we are excited about what we're seeing in the U.K. I think many people would have expected that 2025 would have been a transition year. But I have to say when you look at the numbers, it's very strong numbers already in '25. And as we go into '26, we do think that we can continue the strong momentum given the relationships that are being built. That doesn't mean that I'm guiding for Q4 run rate to just be the run rate going forward, but at least it's a taste of what we can achieve with this business. So very pleased with the first year of Britvic. Over to you, Ulrica, on Kazakhstan. Ulrica Fearn: Yes. So a few comments on that, Simon. So yes, we did agree with PepsiCo to take over the license already in Q4. So there were some volumes coming through towards the end of Q4. It's a small proportion of the total, but there are some. And if I then lean into 2026, as we mentioned earlier on, about 1.5% group volume growth will come from the top line of -- supported by Kazakhstan as we ramp up. And it is a little bit hard to say because there's uncertainty due to dependency of co-packers and it's a pretty long supply chain there. And -- there is always, of course, market reactions as well as you come to market. But so far, no major hiccup. So we are -- that 1.5% group volume growth at the top line is what probably is the most likely at this point in time. And I will also say that -- take the opportunity to say that we are producing, as you heard with co-packers, so outside Kazakhstan. So our facility is not up and running yet and we will, therefore, have not had any profits in 2026. Jacob Aarup-Andersen: But there is no news... Ulrica Fearn: There's no new news. Same as before. Operator: The next question comes from the line of Sanjeet Aujla from UBS. Sanjeet Aujla: A couple from me, please. Firstly, on Western Europe, your volumes in beer were minus 9% in Q4. I appreciate San Miguel might be a bigger impact, but can you just walk us through the underlying dynamics in Western Europe beer? What's really down in Q4? How you're thinking about it into '26? My second question is around the potential IPO of India. Can you just walk us through the strategic rationale for that? Is it just to pay down debt? Or what are the benefits would you anticipate from an IPO? Jacob Aarup-Andersen: Sanjeet, good to get you back online. So that's good. Let's just take your 2 questions. So first of all, on Western Europe. So yes, you're right that if we look isolated at beer in the fourth quarter in Western Europe, so the trend was worse than it was in the quarters before. There are 2 reasons for that, if I can be very high level. One is we had a major conflict in one of our countries in October, November and into December. That conflict has been closed and resolved, and we're back on the shelf in December. But there was a major conflict there that impacted us. And then the other one is San Miguel. The impact of San Miguel was more pronounced in Q4 if you look at the year-on-year comps than it was in the 3 other quarters. So it's a combination of that conflict and then the San Miguel impact. Your other question on India. So you're right, we are today confirming the intention to explore an IPO of India, and we have not made any final decisions yet on that. It also, unfortunately, restricts me from a legal perspective in terms of what I can say and not say around that. But I can -- so what I can say is that this exploration is due to -- is driven by our aim to create shareholder value. So we are assessing this on the back of assessing whether we can create shareholder value. So it's purely driven from a shareholder value perspective. And the assessment we're doing right now is whether it's -- it will create adequate shareholder value. Beyond that, we cannot comment more around the potential IPO. If we do make a decision to go ahead, of course, we can be more specific. But at this stage, that's all we're saying. But it's shareholder value-driven, the deliberations. Operator: We now have a question from the line of Olivier Nicolai from GS. Jean-Olivier Nicolai: A couple of questions. First of all, you're running ahead of schedule on the cost synergies on Britvic. I was wondering if you could perhaps quantify the potential revenue synergies as well that you could see, whether it's in the U.K. or also about exporting some of Britvic brands like Jimmy's or London Essence into some European markets? And then secondly, just on the CapEx guidance, DKK 6 billion to DKK 7 billion, so for 2026, an increase compared to '25. Is there any new greenfield brewery there? Or how should we think about CapEx in the long run? Jacob Aarup-Andersen: Olivier, I'm going to disappoint you on the first one, and you probably knew I was going to say this, but we're not going to quantify the revenue synergies. I think we -- as we said in the past, I think with the way we want to be measured on revenue synergies is if you look at market growth rates, we need to be able to beat those market growth rates across categories, and that's how you measure the revenue synergies. We've seen enough car crashes around the companies giving specific revenue synergy targets because it becomes very difficult to separate hot and cold water, and we don't not want to end up being that type of company. So we're giving you cost synergies. We're delivering ahead of plan on them, and we will continue to power ahead on delivering value to you through the cost synergies. And then the revenue synergies will play out in the coming years. I think it's quite clear. also if you just look at the Britvic performance, but our Carlsberg Britvic performance, both on the soft drinks and the beer side towards the end of the year, you're seeing that there are revenue synergies clearly coming through here. But we do think that we've only so far we're only scrapping the surface. So we think there is significant revenue synergies in the coming years from this. And as you say, part of those will come longer term from some of these excellent brands migrating to other countries. What we have made very clear is that our 100% focus for the team has to be to go and overdeliver, as we've now said to you on the cost synergies. And then before everyone gets distracted by wanting to launch brands in other markets as well. You will see in the coming time that there will be some of the brands starting to travel. And we will let you know as they launch. But for now, the focus still has to be on delivering on the execution plan in front of them. I don't want people to get too distracted. But revenue synergies is clearly there. And I think the last couple of quarters have only put 2 lines under the potential that's there. Ulrica, on the CapEx? Ulrica Fearn: Yes. On the CapEx, no, there's no major greenfields in there. The main spend this year will be on maintenance, et cetera, but also capacity and commercial expansion rather than greenfield. There is also a little bit of an inclusion of CapEx continuation in Kazakhstan, where we had to also purchase a new site. So there's a little bit of spillover from that into 2026, but that all fits into that guidance we've given of DKK 6 billion to DKK 7 billion for 2026. Operator: The next question comes from the line of Edward Mundy from Jefferies. Edward Mundy: Two questions, please. So the first is on top line. I know you're not guiding on top line, but are you able to comment on how you think about fiscal '26 relative to your medium-term run rate of 4% to 6%. Western Europe seems to put a firmer footing. You've got Britvic in the organics. San Miguel drag is gone. Asian markets moving in the right direction. You've got the Kazakhstan boost. I'd love to get your sense on your growth for fiscal '26. And then the second question is really picking up on your point around getting recognition as the European Pepsi Bottler of the Year. Could you comment on how conversations are progressing around opening the door for further Pepsi licenses? Jacob Aarup-Andersen: Ed, good to speak. Let's start with the top line. So if you look at the top line, you know and you also said it yourself, we don't provide an annual guidance on revenue growth. The 4% to 6% ambition is a through-the-cycle ambition. If you look at it, if we just look at the components of it, so first of all, we don't expect any major change in consumer sentiment. When we look at our business plans and when we look at the guidance we've given you, we're not assuming any change there. So we are assuming a subdued consumer environment in most markets. So let's see how that develops. You're right, the Pepsi business in Kazakhstan is going to have a positive impact. It's going to drive, as Ulrica said earlier, around 1.5% volume growth. Then we do expect continued growth of our growth categories. So that's premium, that's soft drinks, that's alcohol-free, and we should also see Beyond Beer moving back into growth. So -- and as you know, that's now a bit more than half of our entire business, these growth categories. Then there are markets where we have easier comps for '25. That's Vietnam, as an example, of course, Q3 in India, we had bad weather in Poland, some big markets. But we also have some markets that are tough comps like we had great weather in the Nordics and U.K. And then Ukraine is a question mark. We simply -- no one knows how that will develop during the year. Then you have the World Cup in football. Of course, we're going to do football-related activations. I'm pleased to see that a lot of our countries have qualified. So that's good. Our home market is still struggling, but we'll take that in another conversation. But the timing of matches is not ideal for European and Asian consumers. So it's more -- as always, I will caution that weather is more important than football for us in the summer as always. And then we're taking price increases in most markets as well. If you look at that, I think we have quite a constructive setup for 2026. The consumer will be a key variable, of course, consumer sentiment, but it is a constructive setup, and we are expecting both volume and revenue growth in 2026, but I am not going to put a number on it. We -- as you know, what we guide you for is how we convert that into earnings growth, and that's what you heard about the operating profit growth. Then you asked about more Pepsi opportunities. Listen, we have not been shy around the fact that we have a great partnership with Pepsi. We've been very pleased with the how that has developed over the last couple of years. Kazakhstan is off to a good start. Britvic is off to a fantastic start as a relationship. We're seeing good performance across our different markets. So very pleased with that. And yes, we do have conversations with Pepsi around potential further opportunities. So that is progressing. I would be surprised if we don't come back to you during 2026 with some updates on that. But of course, these things take the time they take. The important thing for us is we don't want to just add more countries because we feel any type of pressure from people like you, Ed. We want to add countries that create value for our shareholders. And that's -- this is not a flag setting exercise. It's not about having as many flags on the map as possible. Every single market, it has to make sense for our existing business. It has to create true value for our beer portfolio and therefore, creating those multi-beverage synergies in the market and creating stronger moats around our beer business. And we see some opportunities in front of us. We're having good conversations on those, and let's see if anything happens. We -- I would think we will come back in '26 with some news on that. But we'll leave it at that. Operator: We have now a question from the line of Soren Samsoe from SEB. Soren Samsoe: Just a couple of questions. A follow-up on Britvic. Quite impressive integration so far, but what parts of the integration has been going faster than you originally planned for? And will this lead you to adjust the original target of 5-year obtaining the synergies to maybe a shorter period? And then secondly, an accounting question for Ulrica. You are preparing for IFRS 18, you say. But to my knowledge, then you -- that gives, you say, a different way of defining special items, so you will need to bring some of them above the EBIT line. Could you maybe elaborate a little bit on how this will impact your numbers going forward in terms of special items and maybe other items that you have looked at? Jacob Aarup-Andersen: Soren, thank you for that. Let me take the Britvic question, and Ulrica will go into the depth of accounting, which is lovely. Listen, on Britvic, you're right, we are ahead of plan, which is great. And when you look at the original 5-year horizon, I think at this stage, we are going to realize the synergies faster than the 5 years. That's the expectation. When you look at it at the end of this year, we will have delivered between 60% and 70% of the cost synergies. And then there is a tail, that's correct, but we don't think that tail will be 5 years anymore. So -- which is very pleasing because, of course, we're also at a stage where we want the business to focus on driving commercial outcomes and not focusing on driving cost synergies. So the faster we can execute on this, the better. And you can say the majority of the people-related synergies are fully in the numbers now that we've guided you for. What we're looking at right now, so it is also people-related synergies that have gone faster than expected. What the focus is on now and which is the remainder of the synergies is basically procurement and logistics. And on the procurement side, the reason why there was a tail is that part of some of the procurement is renegotiation of major contracts that may have a duration. So we need to wait for them to expire before we can renew them. Because overall, that sale is becoming shorter. And you're right. So we will do this faster than the 5 years. But the guidance for this year stands with the 30% to 40% realization of cost synergies, which we're very pleased with. Ulrica, on the MPMs? Ulrica Fearn: Yes. So the question was on the IFRS 18 and the special items and how that relates. Yes, it is -- you're absolutely correct. IFRS 18 means that basically you have to put back special items to where they -- in the category which they belong. So for this year, our MPMs includes taking away the amortization of this intangible assets. But as I talked about, but for 2026, when we implement this IFRS 18, we will also show a track as to how we add back the special items and then come back to pretty much the same number as where we were before, but through the MPM metric rather than the definition we had before. So this is all done, to be able to compare and come back to the same place where we have special items and amortization adjusted for, if that makes sense. And we are doing this early now just to introduce some of this terminology right now as we had to change anyway. And rather than to change to something now and then to something else later on, we will just continue to use the same terminology and adjust with what IFRS 18 will expect from both us and others to do in the future. Hopefully, that's clear. Operator: The next question comes from the line of Andre Thormann from Danske Bank. André Thormann: I just have 2 questions as well. First question is maybe a bit on the longer term here. Can you maybe talk a little bit about how you see the underlying organic EBIT growth potential for Carlsberg? If you strip away everything that is related to new contracts in Pepsi and potential Britvic synergies, et cetera. So if we strip away that, how does the underlying organic EBIT growth profile looks for the company longer term? And then my second question is related to Q4. So I'm just curious how much of the organic EBIT growth or maybe in 2025 as a whole is easier, is driven by essentially synergies from Britvic that was from, yes, the Carlsberg U.K. business that Jacob alluded to in the beginning? That's my questions. Jacob Aarup-Andersen: Andre, so on the underlying EBIT growth, so of course, first of all, I'll make the statement that you know I will always make, which is you will never ever get a year where there's no impact from anything. But of course, if you look at the underlying, also because we -- you say the added Pepsi contracts, et cetera, et cetera, that's all adding organic earnings growth to the business as well. But if you look at it, we firmly believe in our growth algorithm, and we firmly believe that this business should be delivering 4% to 6% revenue growth. And as that -- in that algorithm, we believe that it should be delivering a higher EBIT growth than 4% to 6%. So our algorithm is pretty clear around that. The -- and as such, we don't see any change to that. So the 4% to 6% top line growth or revenue growth needs to convert into a higher EBIT growth, and we don't see any change to that. That's also what we are confirming again and again also when you look at this year. Then I'm fully aware that -- and I also -- I read your research, which is excellent, but I'm also aware that you would have liked a slightly higher guidance. But as Ulrica has already answered the guidance question earlier today around how we start out the year with the uncertainties in front of us. But we do have undiminished belief in our growth algorithm, which is that conversion. Then on the -- the impact from inorganic on synergies, it's slightly less than 1% of our EBIT growth. So if you look at the 5% EBIT growth we just delivered, it's slightly less than 1%, which is driven by synergy realization on the organic side. We are not going to go into the exact math on it, but we can obviously track that because we can see where the synergies are being realized. And it's natural when we are combining 2 major businesses that some of the synergies will be in the organic business. Do remember that the Britvic U.K. business was significantly bigger than the Carlsberg U.K. business. So of course, there would also be synergies on the Carlsberg side of things as well. So slightly less than 1% total contribution to the 5% growth. André Thormann: Can I just ask a quick follow-up on the first answer you gave, Jacob. It's just to be sure, this higher EBIT -- organic EBIT growth than the 4% to 6% volume growth that you guide, isn't it true that, that will be significantly lower if you strip away Britvic synergies and Pepsi? Jacob Aarup-Andersen: I'm not sure why I should strip away Pepsi because Pepsi is part of our business, and it's organic. It's... André Thormann: [ Contracts ] and Pepsi, sorry. Jacob Aarup-Andersen: Well, if I'm adding Pepsi into a market, it's like adding a -- launching a new beer into a market. It's an organic. We're adding a category. We're adding a product to our business. So -- when we're looking at organic business, it's not different than from that perspective. And by the way, not to go into a long discussion on it. But by the way, when you look at Kazakhstan this year, I think Ulrica said it earlier, it's not adding any material EBIT growth for us. So over time, I think Pepsi growth is, of course, part of our organic growth. When we are acquiring something, it should be inorganic until it's introduced. Synergies from Britvic is incredibly important. But of course, our underlying business needs to deliver. So of course, I fully contend to what you're saying around synergies. That's a specific element. And if you look at the long term, of course, you're not going to have synergies every year playing into that. But these businesses are our growth businesses. When you look at our categories, our growth categories are all helping us deliver within the algorithm. So we're super excited about the growth potential that this portfolio gives us. Operator: We have now a question from the line of Laurence Whyatt from Barclays. Laurence Whyatt: A couple from me, please. Firstly, just on the U.K. business, good to see the good results you're getting through there. Of course, we've seen a lot of news in the U.K. press around the difficulties the hospitality industry is facing. And one of your peers in the distribution space has already sort of commented on that with one of their recent announcements. Just wondering if you're seeing any issues within the U.K. market, if you've seen any deterioration over the past couple of months and going into 2026? And secondly, it's also great to see your success in soft drinks in the Nordic market. I was wondering if you could split that out between the areas where you've got Coke contracts and Pepsi contracts and perhaps comment on how the relationship is with Coke as you embed yourself further with Pepsi, whether anything has changed there or if that continues to be a very strong relationship. Jacob Aarup-Andersen: Laurence, so no, we do understand what it is you're referring to from a peer in the market. So if you look at the U.K., there is no doubt that on-trade is going through a difficult time or the hospitality industry is going through a difficult time. We don't think we're seeing a step change, just to be clear. It has, as a channel, been under pressure for quite a long time, but we're not seeing a step change. We're not going to go that far. If you look at it, we're quite pleased with the fact that we've been taking market share in both on-trade and off-trade. But as channels go, there's no doubt there's more pressure on on-trade than off-trade, which is, let's be honest, that's a trend we're seeing across most markets. I know it's getting a lot of attention in the U.K., but it's what we're seeing across most markets. Part of this is, of course, cyclical. I'm not going to wait into a bigger political debate around the U.K. market as such. And of course, I'm fully aware there are some structural debates around also the conditions for the hospitality industry. So -- but overall, we don't see a step change. We're not flagging that it's deteriorating at a faster pace than it's done over the last couple of years. So we have our own momentum at the moment. We've taken market share in on-trade, driven especially, as you know, with the focus we've had, especially around Poretti and 1664. And then Carlsberg, Danish Pilsner has done quite well in that channel as well. So we see -- in on-trade, we see continued opportunities for us also as we bring the combined portfolio into the on-trade space. So of course, we hope it stabilizes, but I'm not going to flag a significant step change in trend in recent months. You asked about the Nordic region. We don't split Pepsi versus Coke. We don't do that for legal and competitive reasons. So hopefully, you can bear with me on that. So I'll focus on your -- the second question you had. But I would say that, listen, we're seeing good soft drinks performance in all 4 markets, that I can say. But I'm not going to be specific on market versus market. You spoke about the Coke relationship. Listen, we have a fine relationship with Coke. I keep reminding you that we have for 30 years, almost been operating Pepsi and Coke in the Nordic region in different markets. And that, that has been a peaceful coexistence in those markets. As long as we're delivering for our partners in these markets, it hasn't been a major issue. So we still have good relationships with Coke. We have longer-term contracts with them. And I think that's basically it. So unchanged messaging on that. Operator: The next question comes from the line of Richard Withagen, Kepler Chevreaux. Richard Withagen: I have 2 as well, please. First of all, on the U.K., you mentioned high single-digit volume growth for the organic business, excluding San Miguel. I guess your beer brands have benefited from the soft drinks distribution and to some extent, also from the loss of the San Miguel brand. So on the existing brands, how should we think about the potential for further market share gains in 2026? And then the second question is on your objective to reduce debt. What is the main focus to generate cash flow organically and thereby reduce debt? And also, besides the India IPO consideration, are you considering other inorganic initiatives to lower debt? Jacob Aarup-Andersen: Richard, let me talk to the U.K., and Ulrica will speak to the net debt. So you're right, if you look at '25 performance, we're quite pleased with how the beer brands were doing. If you look at it, Poretti more than doubled. 1664 in the U.K. had high teens growth. Blanc almost doubled and Brooklyn had mid-single-digit growth. And at the same time, Carlsberg had mid-single-digit growth. So very pleased with that. Of course, that strong performance. Part of that was, of course, driven by some outlets where it was easier to replace San Miguel, et cetera. And as we go into '26, that tailwind will be harder, of course. We do expect the brands will continue to drive growth. Market share growth will likely be less than it was in '25 due to that effect. But we do see quite strong momentum behind our brands and especially Poretti and 1664. Ulrica, on the net debt? Ulrica Fearn: Yes. So the question around continuing deleveraging, what we're doing organically, we expect to continue to reduce the debt through 2026 and much of that will be organically. And it will be the traditional levers. I mean the big one being really driving EBITDA growth in terms of getting the leverage down, that's a big impact, so focus on growth. But then the other one on the other side, operational free cash flow, we are continuously working on trade working capital, every lever there is. And this is in the organic business, but it's also in Britvic, where we feel there's a little bit more work to do. And we are also, on top of that, to your question, investigating whether there are other inorganic opportunities that we can look into. So any cash-generating opportunities we will look into to make sure we continue this trajectory that we started. And I can say it's so well ingrained into the business. We've also put an additional incentive scheme in place to make sure we drive the focus on this in the short term when it's so important. So you'll see a combination of the 2, but the organic being a very big focus for 2026. Jacob Aarup-Andersen: And with that, I'm told that we have one last question. So let's do that. Operator: So the last question comes from the line of Thomas Lind from Nordea. Thomas Lind Petersen: So also 2 questions, a bit sorry, accounting here. Just the other operating activities, you recorded, I think, DKK 550 million positive in '25, significantly above the last couple of years. That's almost 5% basically your entire EBIT growth for '25 is recorded here. Can you just elaborate a little bit on what is this? And then also going forward, is it then fair to assume that it will be like the past couple of years? So basically, I guess, around DKK 50 million, DKK 100 million. So I guess, a significant headwind into next year? And then the 2 other questions, I guess, or one other question, a bit more also accounting, amortization, DKK 640 million, DKK 25 million, special items, DKK 1.9 billion. How should we think about this going into '26? Is it fair to assume that it's sort of the same levels? That would be my question. Jacob Aarup-Andersen: Thanks, Thomas. Good to end with a bit of accounting. So I appreciate that. I hope you're well. I'll do the OOI and then Ulrica will speak to the technicalities of the PPAs, et cetera. So you're right, OOIs are higher this year. They are for some very specific reasons. You say the majority of the OOIs, and I think this is a very important point. The majority of the OOIs, they are basically a wash for the year. because most of these OOIs are compensation for events that have happened during the year and has impacted our EBIT negatively. So basically, the compensations then get booked on OOI, while the negative EBIT impact is, of course, non-OOI, but it's basically a wash. So we understand that the OOI line looks bigger this year, but it's driven for those reasons. So most of it is basically a wash on the year. A few examples just to make it concrete. We had major floodings in Italy in the first half. You know our brewery was completely out and the insurance was received in the second half. We had a work kettle implosion in France in the first half, which had significant impact on our business and insurance again received in the second half. And we had a major breakdown in Sweden, a bottle washer, which basically took us out of capacity. And again, insurance received in the second half. So we had a number of these things where we had reported EBIT losses that were then compensated by OOI. In the end, it's the same and it's within the year. So it's basically a wash. So we know the number looks big, but it's very clearly basically a wash on the lines. And if accounting was looking different, you wouldn't even notice it because it would just be netting each other out. That also -- you're right that we don't expect that level of OOI next year. Of course, we can never -- given the things I've just explained to you, of course, we cannot predict those types of things. So it could be high next year, but we don't expect it to be as high next year. And that also means when you look at our 2% to 6% guidance, of course, the OOIs are not going to be repeated. So of course, that's also -- that makes the guidance -- gives also some perspective on the guidance and shows the ambition within that. So we're not being helped by the OOIs in the guidance for 2026. Ulrica, on the PPA? Ulrica Fearn: Yes. So that's -- I think it was on the amortization and the special items together, the DKK 2.6 billion. So the DKK 640 million that is the amortization is easy to answer. That will be the same coming in next year. It's an amortization that we now will face. And then in terms of the rest of it, which is about DKK 1.9 billion, that's about half of it is related to Britvic and then the other half of it is related to restructuring. And of course, these are special items and costs that we've incurred to drive benefits into the future. So we're expecting that to be a lot lower next year. But again, special items is one of these items that hard to predict, but these are extraordinary levels. Jacob Aarup-Andersen: We have made the second largest acquisition in our history. So of course, you will see special items in a year like that. Okay. I think with that, operator, I think we -- that was the last question. Thank you so much for your interest. And as always, we look forward to seeing many of you in the coming days. So until then, have a great day. 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.
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: Good day, and thank you for standing by. Welcome to GE HealthCare Technologies Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now turn the call over to your speaker host for today, Carolynne Borders. Please go ahead. Carolynne Borders: Thanks, Operator. Good morning, and welcome to GE HealthCare Technologies Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. I'm joined by our President and CEO, Peter Arduini, and Vice President and CFO, Jay Saccaro. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides available on our website. During this call, we'll make forward-looking statements about our performance. These statements are based on how we see things today. As described in our SEC filings, actual results may differ materially due to risks and uncertainties. With that, I'll hand the call over to Peter. Peter Arduini: Thanks, Carolynne. Good morning, and thank you for joining us. As I look back on our performance in 2025, our third year as a public company, I'm incredibly proud of the meaningful progress that we're making on our innovation renaissance to deliver for our customers and improve patient lives. In the fourth quarter, we delivered strong financial performance above our expectations. This included double-digit organic revenue growth in pharmaceutical diagnostics and mid-single-digit growth in imaging and advanced visualization solutions. We delivered strong bottom-line and cash performance in the fourth quarter, excluding tariffs. The overall capital equipment environment remained healthy. Demand in the US and EMEA remained strong. In our recent US customer survey, we saw an increase in the number of large customers that plan to invest in capital equipment in 2026. We secured multiple large agreements in the quarter and extended several others. A great example is our seven-year agreement with the University of Rochester Medical Center to advance diagnostics and precision medicine. This collaboration crosses every aspect of our enterprise. From AI-enabled imaging equipment and radiopharmaceutical production to system-wide patient monitoring solutions and services. In November, we announced the planned acquisition of IntelliRed. We expect this will accelerate our fully connected cloud-first imaging ecosystem by adding digital tools and SaaS offerings that enhance clinical operations, drive recurring revenue, and enable more personalized patient care. As a reminder, in the first full year of ownership, we expect IntelliRed revenues to be approximately $270 million, which is growing in the low double digits, with an adjusted EBITDA in excess of 30%. Finally, we advanced Heartbeat, our proprietary business system, which we implemented midyear as the next step in our lean journey we started a few years back. And I'll talk more about this shortly. Moving to 2025 highlights on slide four. We made meaningful progress across the three pillars of our strategic framework. Let's start with precision care. With diseases becoming more prevalent, complex, and chronic, the need for integrated solutions has never been greater. As the only diagnostic imaging company with a full portfolio of contrast media and radiopharmaceuticals, we differentiate ourselves with our D3 strategy. We bring together smart devices and drugs across disease states enabled by digital AI and cloud to help support earlier, more accurate diagnosis and ultimately therapy delivery. Our three-year vitality rate for new products is strong at 55%, up approximately 5% from our prior year. Recall, this means 55% of our revenue is coming from new products. This reinforces that we're delivering the right offerings for our customers. We're making solid progress on our launches. For example, our Omni Total Body Pet and NexGen spec are commercially available in Europe, strengthening our position in diagnostics. Our regulatory timelines for products we announced at RSNA are all on track, including Photonovo Spectra Photon Counting CT and Cigna MR with Freelance. Additionally, customers have great things to say about VividPioneer, our most advanced cardiovascular ultrasound system, which has been contributing to strong growth in AVS. And Forcado for myocardial perfusion, both of which are currently in the market. We're pleased to report that our Flaccato ramp has been progressing well. You may recall at our last earnings call that we said we're going slow to go fast to help ensure customers have a high-quality experience. And that starts with being able to deliver doses consistently. I'm happy to say we're starting the year with our CMO partners more consistently operating at approximately 95% on time to delivery to meet customer demand, which allows us to begin bringing on more patients. In the week ended January 23, we delivered 220 doses of FERCATO. And we expect the weekly dose rate to continue to increase throughout the year. These improvements allow us to onboard more customers, and we've been making solid progress in reducing the cycle time to activate a new customer. Overall, the customer experience with FERCATO has been quite positive based on its many advantages. Also, recently, the American Society of Nuclear Cardiology recommended PET as the preferred imaging modality over SPECT, the current standard of care, reinforcing a meaningful shift towards PET and nuclear cardiology. As I stated before, our confidence in our ability to deliver $500 million or more in Vorcado revenue by year-end 2028 remains intact. And in the long run, we see a billion-dollar opportunity for this novel molecule. Turning to our second pillar, we accelerated growth with more than $7 billion in enterprise deals globally since our spin. For example, we entered 2025 with one of the largest collaborations, Sutter Health. In addition, we signed a multiyear agreement with the Ministry of Health in Indonesia, where we have installed more than 300 advanced CT scanners in urban and remote hospitals. Many of these deals have a service component that delivers strong recurring revenue with attractive margins. In 2025, our service business grew mid-single digits. With the launch of many new advanced products, we would expect our capture rate of service agreements to increase in the future with all the new wave of innovation entering the market. We're also executing on our disciplined capital allocation strategy with tuck-in acquisitions like Neon Metaphysics and Eichometrics, and our planned acquisition of IntelliRed. These transactions elevate our portfolio and are expected to drive recurring revenue and supplement top-line growth and profitability. Turning to business optimization, our third strategic pillar. We continue to advance our business system Heartbeat to improve the customer experience and drive productivity to deliver margin expansion. Our teams accomplished this by remaining focused on helping clinicians provide care for patients, delivering greater value for customers and shareholders. We're gaining momentum with our clinical and solution selling strategy in EMEA, with several multimodality deals, including a twenty-year collaboration with Nuffield Health, the UK's largest healthcare charity. The combination of our differentiated portfolio, our team's deep expertise across disease states, and best-in-class services sets us apart with our customers globally. Turning to slide five. Underpinning our execution is a step change in how we run the company, anchored in key metrics around safety, quality, delivery, cost, and innovation, or SQDCI. Heartbeat is about driving the right leadership behaviors, culture, and KPIs supported by disciplined processes and tools for problem-solving and continuous improvement. Think of Heartbeat as the steady pulse that ultimately runs through our organization to deliver results. An example of where we've deployed Heartbeat in the back half of 2025 was related to a key priority to improve past-due backlog, which relates to site readiness or our ability to deliver product. Heartbeat provides a structured approach to problem-solving by eliminating steps, improving information flow across the value stream from our plants all the way to the customer. We increased visibility to orders to help ensure timely delivery, strengthened alignment with our factories, and improved how we manage customer site readiness. Because of this, we were able to drive an average monthly improvement of 25% in past-due backlog versus the prior year, ultimately translating into improved sales and cash conversion in 2025. It's early days, but we're building our Heartbeat muscle and already seeing the impact. I'm excited about the progress our teams have made to date. With that, I'll turn it over to Jay to discuss our financial results. Jay Saccaro: Thanks, Pete. Let's start with our financial performance for the fourth quarter on Slide six. We delivered revenue of $5.7 billion, which grew 4.8% organically year over year, exceeding our expectations. On a reported basis, product revenue grew 7.9% and service revenue grew 5.5%. In the quarter, orders growth was 2% following 5.6% growth in the year-ago period. We exited the quarter with a record backlog of $21.8 billion, which grew $2 billion year over year and $600 million sequentially. We delivered a book-to-bill ratio of 1.06 times. Adjusted EBIT margin was 16.7%, down 200 basis points. Margin was negatively impacted by approximately $100 million in tariff expense as well as unfavorable mix. This was partially offset by volume and price. Adjusted EPS was $1.44 per share, down 0.7%, including approximately 17¢ of tariff impact. Excluding this impact, adjusted EPS grew 11%. Lastly, free cash flow was $916 million in the quarter, up $105 million, which included an approximate $90 million tariff impact. Turning to our full-year results on slide seven. We made excellent progress in 2025, supported by strong end markets, particularly in the US and EMEA. This enabled us to deliver revenue of $20.6 billion with organic growth of 3.5%, ahead of guidance. On a reported basis, product revenue increased 4.5% and service revenue grew 5.6%. For the year, organic orders grew in the mid-single digits. We recorded record backlog, and book-to-bill was solid at 1.07 times. 2025 adjusted EBIT margin of 15.3% declined 100 basis points versus the prior year, and adjusted EPS of $4.59 grew 2.2%. Full-year results included a tariff impact of approximately $245 million to EBIT and 43¢ to adjusted EPS. Excluding these impacts, adjusted EBIT margin would be up 20 basis points for the year, and adjusted EPS would grow 12%. The improvement was driven by volume and price. Turning to margin performance on Slide eight. Mitigating tariff impact is another example of Heartbeat in action. For example, we enhanced manufacturing flexibility by shifting a PETCT line from the Middle East to the US and a surgery line from Asia to the US, leveraging existing infrastructure. We also partnered with large vertically integrated contract manufacturers to reposition production within their global networks to more favorable geographies. This is a clear proof point of how Heartbeat enables execution, accelerates change, and delivers measurable results. We're pleased with the work our teams are doing to drive operational efficiency, productivity, and SG&A optimization. At the same time, we deployed more than $1.7 billion of innovation investment in 2025. We're doing this in a targeted way, prioritizing programs that strengthen our competitiveness and support durable, profitable growth. Let's move on to segment performance, starting with imaging on slide nine. Organic revenue in the quarter was 5.3% versus the prior year, driven by strong execution in EMEA and the US, particularly in nuclear medicine. Segment EBIT margin benefited from volume and price but declined year over year due to tariff pressure. Imaging margin was accretive excluding tariffs, and EBIT margin improved sequentially as a result of continued operational rigor. Overall, we expect to continue to grow this business through large enterprise deals and new product launches. Turning to Advanced Visualization Solutions on slide 10. Organic revenue for the quarter was up 4.2%, with continued strong performance in the US and EMEA. New product adoption across the portfolio also contributed to revenue growth. EBIT performance was driven by volume growth and productivity gains, offset by tariffs and inflation. EBIT margin increased excluding the impact of tariffs. We've seen progress driven by NPIs with growth in surgery, cardiovascular, and women's health. Key introductions like Vivid Pioneer are strengthening our leadership in cardiovascular ultrasound. Looking ahead, our roadmap is focused on differentiated data-driven technologies to accelerate recurring revenue. Turning to patient care solutions on slide 11. Organic revenue improved sequentially, with restoration of shipments from the third-quarter product hold. Organic revenue declined 1.1% versus the prior year due to a decline in life support solutions. EBIT margin improved 530 basis points sequentially, driven by volume recovery from the product hold, but declined 380 basis points year over year largely due to unfavorable mix and tariffs. Our monitoring transformation remains on track, driven by digitally integrated NPIs that enable improved clinical decision support and workflow management as well as large commercial agreements. Looking ahead, we are also confident that our cost productivity funnel and structural optimization actions position PTS for profitability improvement in the future. Moving to pharmaceutical on Slide 12. We delivered another strong quarter with organic sales growth of 12.7%. This was driven by global growth in contrast media, pricing execution, and adoption of our US radiopharmaceutical NPI portfolio. EBIT grew 10%, and sequential margin expanded 20 basis points. While margin declined 330 basis points year over year due to ongoing planned investments in NPIs, along with the Nehan Metaphysics acquisition. We're executing our strategy and expect continued robust growth driven by global demand for contrast media and radiopharmaceuticals for PET imaging. Now let's look at cash performance and capital deployment on slide 13. For the year, we delivered free cash flow of $1.5 billion. This included approximately $285 million tariff impact. Free cash flow conversion was 72%. Reinvesting in innovation and organic growth is a top priority. This is translating into a differentiated product portfolio that we expect to improve our competitive position globally. We also look to deploy capital inorganically, as evidenced by the seven acquisitions we've closed since spin. We're pleased that we've also been able to deleverage the balance sheet and solidify our investment-grade credit ratings. During the year, we returned capital through our dividend and new share repurchase program, which was authorized by our board in April. Since that time, we've repurchased $200 million in shares at an average price of $71. We continue to demonstrate conviction that our business strategy will drive meaningful shareholder return over time. Let's turn to our outlook on Slide 14. For 2026, we expect organic revenue growth of 3% to 4%. We've taken a prudent approach to this guidance, which reflects a healthy capital equipment environment and continued commercial execution while factoring in a cautious outlook on China. Relative to foreign exchange, we expect the benefit to revenue to be approximately 150 basis points for the year. Adjusted EBIT is expected to be in the range of 15.8% to 16.1%, reflecting 50 to 80 basis points of expansion. We continue to expect the impact from tariffs in 2026 to be less than 2025. We plan to continue our tariff mitigation actions in 2026, including supply chain shifts, product transfers to more tariff-efficient geographies, and expansion of duty-free USMCA efforts. Our adjusted effective tax rate is expected to be in the range of 20% to 21% for the full year. On adjusted EPS, we expect to deliver a range of $4.95 to $5.15, representing 8% to 12% growth. Lastly, we anticipate free cash flow of approximately $1.7 billion for the full year, representing growth of 13%. For the first quarter, we expect year-over-year organic revenue growth to be in the range of 2% to 3%. While we expect to see the largest tariff impact in the first quarter of the year, given the timing of the 2025 policy changes, we still expect mid-single-digit adjusted EPS growth driven by an increase in volume. For the first quarter, recall that we had particularly strong orders growth last year supported by a strong US market, along with the initial booking of a large enterprise deal. As Pete mentioned, we've got a robust pipeline of NPIs upon clearance, and we expect these to drive future orders growth beginning in 2026. With that, I'll turn the call back over to Pete. Peter Arduini: Thanks, Jay. In conclusion, we entered 2026 with strong momentum. As part of our ongoing commitment to innovation, we're proud of the demonstrated progress in our pipeline of new products. We are deploying our business system Heartbeat across the enterprise to drive top and bottom-line growth. We have significant opportunities in large, resilient end markets, a record backlog, and are accelerating innovation both organically and inorganically. We also see a solid runway for additional margin expansion over time. Lastly, I'd like to recognize our colleagues worldwide who have navigated a dynamic environment while remaining focused on delivering for our customers and patients every day. With that, we'll open up the call for Q&A. Operator: Thank you, Peter. I'd like to ask participants to please limit yourself to one question and one follow-up. Operator, can you please open the line? Thank you. Question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press 11 again. Please stand by while we compile the Q&A roster. Now first question coming from the line of Matthew Taylor with Jefferies. Your line is now open. Matthew Taylor: Hi. Thanks for taking the question. I did want to ask first for a little bit more color about the 2% order growth. If you could talk about the composition of that and just the outlook for orders and book-to-bill as you look into 2026, given now trailing twelve-month orders in kind of the mid-single-digit range, what are some of the puts and takes I guess, what are some of the headwinds and tailwinds for orders next year? Peter Arduini: Sure. Matt, thanks for the question. So we were actually pleased with the order book performance in the fourth quarter. And as I've said in the past, when we think about the health of the business, we really look at three different areas. We look at book-to-bill, which was 1.06 times in the fourth quarter, 1.07 times on a trailing twelve-month basis. So robust book-to-bill. We look at the backlog. The backlog sits at a record level. It was up $2 billion year over year. And then finally, we look at the order growth rate. Now when we look at orders, we do look at it in a couple of different ways. We look at the trailing twelve-month as you pointed out, solidly in the mid-single digits. And we also look at a kind of two-year comparison, two-year compounded growth or stacked growth to eliminate some anomalies there. And, again, this gets us to about 4% in the quarter. So we feel pleased with the order backdrop. And then as we look to next year, a few things are gonna happen. Now first, we'll have a difficult comp in the first quarter of the year related to the Sutter deal and some of those bookings. Then as we move through the rest of the year, we'll start to see the benefit of many of the new products that we highlighted at RSNA start to come into the order book. So we're really gonna see a bit of an acceleration as we approach the second half of the year, versus early in the year. We think this is a really good setup for '26. But, you know, as we think about sales impact, we start to see a great sales impact in 2027. Pete, anything to add? Peter Arduini: No. Just to the point that you mentioned, Jay, for '26 this year, with all the new products we launched in Q4, it's not untypical. You know, we have we're on track to all of those approvals. But until we have those approvals, we can't take an order on this. And once we get that approval, the orders will come in and ramp up rather quickly. And if you recall, you know, there's nine products that probably are the nine biggest ones. We got in the last decade. So all of those have, you know, $100 million plus type capabilities in growth. So once we get the right global regulatory approvals, we'll be able to start bringing those into the order book. So from that standpoint, the size of our backlog, I mean, we feel very good where we're positioned here as we start. Matthew Taylor: Great. And as a follow-up, can I ask a question on Fortetto? It's my favorite topic. So just wanted to get more color on the current state of supply, how things are going with the big partners that you signed, the kind of reception that you're getting from facilities adopting Mercado into existing Rubinium or SPECT workflows? Peter Arduini: Yeah. No. Look. I think, you know, broadly, as I mentioned in the prepared remarks, we feel really good about where we are with Arcado. The feedback, what's always so important here is how do clinicians feel about this product and making a difference in the diagnosis of a patient. And it is unanimous on the feedback relative to what we're hearing, relative to the image quality, the specificity, the sensitivity that it brings, and then also, ultimately, the convenience that it will bring to people that just can't ultimately have a generator on-site. So it has all of those capabilities. That being said, the process to implement is different. And so you know, the thing that we talked about in our last call, I mentioned it here in the comments, we're consistently delivering the doses as a critical item for us to focus on. To provide the best experience. Because, again, if that doesn't show up that morning, that's a missed patient. So we really, you know, throttle back how many patients and customers we would bring on until the what we call OTD, on-time delivery, is at a 95% rate. And we're roughly in that rate. So, you know, you heard the numbers that I talked about. You know, January, you know, roughly 220 was kind of what the weekly number was. I think we said on January 23. The important part then is now that we have that CMO level, we can continue now to be able to increase that level. And so we would expect that the doses will go up each of the following weeks. So I think that's the really important part here in that that consistency is key. We'll be bringing on more CMOs to go into more geographies. And specifically to your point, you know, with the CVA, CDL, two of the biggest players really in North America here. We're on the go slow to go fast, but I think both of those, we have great relationships. They see the potential. They see the opportunity to continue to expand. And so we feel very good about where we are at this point in time. Matthew Taylor: Great. Thanks for all the color. Operator: Thank you. Our next question coming from the line of Robbie Marcus with JPMorgan. Your line is now open. Robbie Marcus: Hi. Thanks. This is Alan on for Robbie. Just to start off, can you talk through some of your assumptions for China and how we should think about potential upside when it comes to EPS versus street expectations as well? Jay Saccaro: Okay. So I think we got two questions here. One on China and then EPS. And I think that's related to 2026. The you know, from a from a China standpoint, really, this has evolved broadly in line with our expectations. We previously commented that the second half would be worse than the first half. And we also anticipated that the fourth quarter would be the most challenging quarter of the year largely driven by prior year growth. So I would say all of that kinda came in line with our expectations. While we feel very good about the progress that our team is making in China, and we are seeing some improvements in things like VBP win rates, we're also seeing a more robust imaging funnel and some tender wins there. You know, we really wanted to take a cautious approach to China when we put together this guidance. And so in our 3% to 4% total company guidance, we're anticipating a decline in China in 2026. You know, we'll watch this as we move throughout the year. But, again, we wanted to take a prudent approach at this point. And then let's see how things evolve. Pete, anything to add to this? Peter Arduini: I would just say, look. I think it's a good perspective on how we're thinking about China early in the year as this prudent approach. We're seeing improved commercial execution. I think Will and his team have pivoted to focus more on how we think about provincial interactions as well as the clinical selling. And so just to kinda give you a little bit proof point why we feel good about the progress is, Jay mentioned the VVP tender win rates. I know, you know, you've heard from us. You've heard from others that some of the tenders and are being disputed, which lengthens them out. Before orders are issued. But we have good insights into those ones we want. Which aren't converted to orders yet. And so we know that our rate in the last six months versus the prior twelve we're doing better. And then we would expect as those orders become issued through those tenders that later Q2 and beyond we'll start seeing some of that coming through. All that being said, I think what Jay talked about is we're taking a prudent approach when it comes to China. And, obviously, if things come through at a stronger level, that will be an upside to us. But as we enter the year, I think we're coming in at the right spot. Jay Saccaro: And then I think you said well, can you confirm you're asking about 2026 guidance? Is that the question? Robbie Marcus: EPS? Yeah. Just, you know, how you got to the range, why this is the right range. Alan: Start off the year, and, you know, how you see upside to the initial targets. Jay Saccaro: Okay. No. Listen. Thank you. I just wanted to make sure. So as we think about the EPS guidance for 2026, maybe we pause for a second on 2025. One of the things I think our team was really proud of the ability to deliver 2% EPS growth despite a 43¢ tariff headwind. And so the result of that is we saw about 50¢ of EPS growth in 2025. You know, we were able when tariffs hit, we took action not only to reduce tariff exposure, which is something we spent a lot of energy and effort on, but we also did some self-help cost management across the business. And we saw some performance from our Heartbeat business system help improve our operating margins and reduce waste, cost productivity, etcetera. So all of that was contribute all of those things contributed to a solid performance in 2025. Now moving to 26, we're gonna see many of those things resulting in positive impacts in our numbers again without the hopeful without the drag of incremental tariffs because now tariffs are neutral to positive to our financial performance. The other thing that happens in 2026 is we start to see some benefit from new products. Although that will be more predominant in 2027. But things like Florkado, things like some of our AVS launches will impact performance on sales. In the second half of the year. And hopefully, we'll see that impact. So as we think about the growth in EPS, in 2026, at the midpoint of the range, it's about 45¢. And as we think about the drivers of it, about 30¢ will come from volume growth. About 30¢ will come from cost and productivity initiatives that we have. And then we'll offset that with continued investments in growth. For us, we're very focused on SG&A investments to drive acceleration in sales performance. We did spend in the fourth quarter to start to set that up, we'll spend next year as well along with R&D. We think these are really crucial to the mid and long-term growth of the company. So we'll continue that. That's really the complexion of how we deliver on the EPS expansion next year. Alan: Jay. And then if I could just slip it Thank you. Operator: Our next question coming from the line of Larry Biegelsen with Wells Fargo. Larry Biegelsen: Hey, good morning. This is Vic in for Larry. Thanks for taking the questions. Two for me. I guess your organic growth guidance of 3% to 4% implies 3.5% at the midpoint, which is what you did in 2025. Jay, I think you've said before that you expect to grow faster in 2026. So maybe just talk about why the mid of the '26 guidance is in line with 2025? And then I had a follow-up. Jay Saccaro: Yeah. Big thanks. Okay. Thanks for the question. So on the last earnings call and at JPMorgan conference, we kind of highlighted we expect to grow sales in 2026 faster than 3%. Now we expect you to grow sales in 2025 at 3%, and we did better than that. So we were pleased with that performance. But, you know, this is very consistent with what we shared. And we feel good about the guidance to start the year. Remember, at the start of last year, we guided two to three and we ultimately did a little bit better than that based on commercial execution and some of the early success in our innovation cycles. As we start this year, you know, I'll point you back to, you know, the $2 billion increase in total backlog. I think that's a great setup to support our sales growth. And a lot of this revenue outlook is built on a strong secured backlog that we have in place. We feel very good about the backlog that we've been able to develop over the last several quarters. We feel very good about the orders funnel that we have in place. So all of that sets us up well as we approach 2026. And then, also, as I just commented, you know, we're taking a pragmatic view on China. We want you know, we're watching this market very carefully. We've taken a, you know, conservative approach here. Let's see how this plays out. So it's early in the year. I think, you know, there's a lot of good momentum that our business is building. And we'll and we'll watch things very carefully. Pete, I don't know if you wanna add anything. Peter Arduini: I think you covered it, Jay. But, I mean, the way we're set up here is, obviously, depending on when approvals come some of the new products, our ability to convert backlogs, the ability ultimately to be able to convert some of the acquisitions that we've had now that will start to roll into organic growth, all of those position us well here for the year. So I think, again, as Jay laid out, I think it's the right place to start for the year. And, you know, we're gonna be leaning in to be able to deliver. Larry Biegelsen: Thanks for that answer. A quick follow-up for me. Can you maybe talk about the timing of both orders in sales for photon counting and some of the other NPIs that you've highlighted? Thank you. Peter Arduini: Yeah. No. Thanks. You know, as we've made in my remarks here just a few minutes ago, our timelines for all of those significant launches are on track we introduced at the RSNA. And we expect those to have you know, the biggest meaningful contributions in '27, mainly because the order cycle typically is six to nine months when you get the order you know, you have many of these have to be installed within a site. That being said, you know, much of these will have an impact at some point later this year. Which we're very excited about. And, you know, as we're out with customers and stuff, there's just a lot of buzz about that pipeline that we have out there. And so, you know, things like the Alia Moveo, which is our vascular system, that now is fully approved both by the FDA and CEO. It's really our first interventional vascular system of a modern design in quite some time. We're excited about the growth that that's going to bring forward. The Omni Total Body Pet CE Mark with two installs within Australia, and then we also have a European installation. So great feedback that we're gaining. Our Starguide GX, which is the advanced system, for doing alpha as well as beta imaging is CE Mark and we're gonna be doing our first installs here quite soon. And then things such as MR with was the Sprint, Freelium, and the Bolt all of those are under review and making good progress. Christina making good progress. As well as CareStation. On Fotanova, all systems go. I mean, we're lined up. You know, we'll see how the approval timelines ultimately play out for us but we're in very good shape. Manufacturing teams getting everything ready to be able to advance that product. But I'm very proud of our engineering and manufacturing teams that have really come together. When we talk about our business, we talk about this SQDCI. And safety of our folks, safety for patients, quality of the products, getting the delivery commitments, the right cost, then gives you the right to bring innovations out to the marketplace. And that's really the philosophy that we put in place here. So feeling quite good about it. You know, this business is so much about innovation. And I think we've got the right seats in place here to set us up well, not only later this year, but ultimately into '27, '28 for our midterm targets. Operator: Our next question coming from the line of Ryan Zimmerman with BTIG. Ryan Zimmerman: Thank you, and congrats on the year. You know, on that point, Pete, on midterm targets, I guess I'll ask the question now, which is with the midterm targets being mid-single-digit rev growth, high teens to 20% up to EBITDA margin, etcetera. Just maybe you can kind of bridge us, I think, in terms of the twenty-sixth guide to those medium-term targets and kinda how you see that progressing over the next few years? Jay Saccaro: Wanna take a shot at it? Yeah. Sure. Look, we feel good about the midterm targets that we've put together. I think you know, one of the things that this year is a setup. But as we move to next year, you start to see the real benefit from many of the new products we launched at RSNA. We expect those products along with Orcato to help drive one to two points of additional sales growth. The medium term. And then, you know, from a margin expansion standpoint, you know, we're pleased to get back to reasonable margin expansion, 50 to 80 points. Is more reflective of what a normal year should look like. But with Heartbeat helping us to deliver higher margin NPIs, to improve productivity to optimize SG&A, you know, we expect to deliver on our high teens to 20% plus margin targets over the medium term. So all of this will flow down to EPS, and we'll continue to see this high single to low double-digit growth. So in short, we feel solid. Pete? Peter Arduini: Yeah. And then, Ryan, just to the point, I mean, we're committed to those midterm targets. Top and bottom, full stop. I think you know, we realized that the tariffs kind of moved us back a year or two just based on that's why we really started aggressively last year with moves, with changes, things of that nature that would make a significant difference. Because our goal ultimately is to neutralize as much of that as possible. To move us obviously into that 17 to 20% plus EPS range. And hopefully, you see from even the guide this year that we put out there we've made good progress from what we've done last year. And I think our focus on our all our NPIs having higher gross margins than their predicates with the right selling and lift to that, we'll see the benefit as well as the corresponding service revenue that comes with it. All of that together you know, is gonna be very important for us, not only for our top line, but also to be able to deliver on our medium-term profit goals as well. Ryan Zimmerman: And, Pete, it's like you're anticipating my next question here. The RPO and the, you know, specifically, service RPO was up really well. And, you know, I'm just wondering if you can kind of elaborate on kind of the composition of service revenue, you know, and how as that becomes more predictable, you know, we can see that start to flow through, you know, particularly in the guide. You know, if I think about the midterm, you know, the three and a half percent you know, this year or whatever it may be, I mean, you know, if your service revenue and your service IPO is just becoming that much more predictable with IntelliRed and other things, I mean, just help us understand kind of what that looks like as a percentage or a composition of your broader revenue and maybe moving away from, you know, lumpier capital sales? Jay Saccaro: Yeah. We've talked extensively about our goal to expand recurring revenue. And so we're definitely pleased to see service growth. And then to your point, the Intellirad deal is another example that starts to tilt us more to recurring revenue. Services was a bright spot for us. Have to say in the fourth quarter, and in 2025, we grew sales 6%. With growth driven by both price and volume. And, you know, the reality is as we continue to expand our enterprise agreements, they typically include a meaningful multiyear service elements. The other thing that's happening is, you know, we have a growing installed base. And because of the complexity and technology embedded in our products, and because of advancements that we're making in how our service offering is delivered. Things like AI remote fix, we're seeing improved capture rates on our service business, which is a really important metric for us. And so all of that is good. And then the other thing that's happening Ryan, is we're seeing utilization based on procedures of our equipment. And when that happens and departments are constrained, and equipment is used heavily, the need for service is there. So I think there's a whole set of dynamics that are supporting continued robust growth in our service business. And, you know, our team is ready to support that. Pete? Peter Arduini: Yeah. And, Ryan, I think you alluded to this just off the new products piece. There is a flywheel effect as you bring new products out. You bring new products out that are very sophisticated, AI-based, cloud, you know, the capture rate on the service contracts typically goes up. Mainly because they're such a sophisticated product. And a product like Total Body Pet or something like photon counting where the actual price of the product is higher than a lot of the predicate products. So is your service contract. With margins that would be at that same level. So that's some of the tailwind that we think ultimately will come along with it. It's a really important part of a sustainable revenue and profit story as well over the long run. Ryan Zimmerman: Appreciate it. Thank you. Operator: Thank you. And our next question coming from the line of Anthony Petrone with Mizuho Group. Your line is now open. Anthony Petrone: Thanks. And maybe I'll stick with some of the inputs into the top-line guide to 3% to 4%. Maybe one will be on just, you know, how much price is actually in there just considering you have a fair amount of new product introductions this year versus last year. So do you think about price in 2026? And Pete and Jay both brought up IntelliRed, it came up on the last question. You know, $270 million growing low double digits, 30% margin. Maybe just a little bit timing of that deal close. And just the drivers of that business, like how many sites outpatient are live on day one, is opening new sites or just new users sort of the growth KPI that we should be looking for? Thanks. Peter Arduini: Thanks, Anthony. Look. On price, I think from an order book standpoint with the new products, you know, some of it will show up in mix. But and for like-for-like products like for like product price, as well. But I think, you know, a lot of that will first be seen in the orders book as those new products come out. Relative to this year in revenue, we don't have any significant step-ups in price. We have price advancement this year. I think based on as the tariffs are settling out and we see how the global to plays, there could be an opportunity for more price later this year. That'll be something that we'll be taking a look at. But I think as we enter the year, we don't have any major step-ups in it from a like-for-like product. It is important, and I think you're alluding to this, all of the new products that are coming out you think about their category that they're in, we'll have quite a step up in many cases in price, I think our Vivid Pioneer, which has been quite successful, we launched earlier this year, has not only a better cost position, it also has a nice step up in price, hence then translation into better gross margin. So more to come, and we're gonna keep an eye on the marketplace make sure that, you know, we appropriately gather the right pricing for the products that we're bringing out. I guess the next question you had was on IntelliRed. Jay, maybe you wanna us off on IntelliRed. Jay Saccaro: Yeah. Sure. Maybe I'll share some elements, and then, Pete, you can add. We're very excited about the IntelliRed acquisition. We do expect that to close in the first half of the year as planned. There's some really nice elements. The combined company advances our cloud-enabled AI solutions in both radiology and cardiology. So really and then also extends our capabilities across the outpatient network. So we feel really nice about this, and we're on track to close it. Along the lines of our expectations. As we think about the financial components of the deal, we haven't incorporated that in our guidance. What we've said is it would be slightly dilutive, but we expect to offset that with cost efficiency. So what will happen when we do ultimately close the transaction is we will see an increase in interest expense, an increase in EBITDA attached to the company. There will be a revenue impact, but we'll be able to offset to make it neutral for the remainder of the year. So overall, that's really the status on the deal. Pete, anything else you'd like to highlight from strategy? Peter Arduini: I think just the standpoint of these are the type of deals that we think make a lot of sense for the company. Relative to a strategic fit for us. The enablement of artificial intelligence to be deployed at an enterprise level, both in patient and outpatient, we know the future of diagnosis is much more the integration of multimodalities and how they're read. And so having a critical platform such as this will be super important for us. And then I just think from a deal complexion standpoint, accretive to top line, accretive to bottom line, fit strategically. These are the type of tuck-in deals that we're obviously looking at. We're excited to have the Intellirad team a part of the family. It's a group of great individuals and we're excited to get this one here closed. And in the first half. Anthony Petrone: Thank you. Operator: And our next question coming from the line of Joanne Wuensch with Citi. Your line is now open. Joanne Wuensch: Good afternoon, and thanks for taking the question. I'm sort of asking this of everybody early in the season, which is can you sort of give a state of the union on medical technology and what you're seeing? And, specifically, if you could share some comments or thoughts on the hospital CapEx environment and any impacts you may be seeing or expect to see on changes to the Affordable Care Act. Thank you so much. Jay Saccaro: Great. So, you know, the capital backdrop in the US is solid. Every quarter, we conduct a study of our top 50 US customers to really get a pulse on investment sentiment. It gives us a reasonable picture of investment plans and priorities, and we found that it's a fairly reliable survey that we conduct. What we found after completing the recent study is the US market continues to be robust, driven by customer investment, in an aging installed base. So we're seeing continued momentum on the US CapEx side. Some of that is definitely driven by strong procedure trends that we're seeing. We just finished our latest survey, and many of those customers are anticipating investment increases versus what they previously assessed. As we go over the pond, the European market has continued to improve. Over the past couple of quarters, we've seen orders recover in many European geographies. So that's another robust market. And then emerging markets, you know, really solid trends there. So I think overall, the global backdrop is pretty good. I've commented already on China. But I think it's a decent setup as we look into 2026. Pete? Peter Arduini: Yeah, Joanne. To your question, I mean, the ACA, obviously, there's challenges for certain subsets of customers based on which patient mix is or the scenarios. But we haven't heard anything that is concerning relative to the capital environment. I think, Jay, as we survey customers, this is a critical part to it, how that's playing out. So we haven't seen anything that stood out on that. I think you'd mentioned about technologies in healthcare. I again, I do think this is one of the interesting dynamics about us and some of our other peer companies that plan this. Many cases, we are the enabler of so many breakthrough technologies, whether it be device or drug. And so with all of the new EP with all the new cardio oncology device and drugs, in many cases, we're either the early screening or planning tool or we are ultimately the helping executor of the therapy delivery. In the pharmaceutical space in particular, we play a bigger role in that, which is why in many cases, you see even as a capital environment might be tighter, our equipment typically rises to the top of the list priority because it is an enabler for profit growth within the institution. So all signs at this point look quite healthy, and we feel good about, you know, as we enter 2026 for sure. Joanne Wuensch: Terrific. Thank you so much. Peter Arduini: Thank you. Operator: Our next question coming from the line of David Roman with Goldman Sachs. Your line is now open. David Roman: Hey, PHA and Caroline. Maybe I'll just start with just trying to put some of the pieces together in Pete's comments around the order growth in potentially being impacted by the timing of new product announcements, but then why that wouldn't impact performance in 2026? Or another way, do you freeze the market in anticipation of some of these new product launches? And then I have one follow-up on China. Peter Arduini: Yeah, David. It's less about do you freeze the market. And we'll and able particularly in a premium area, for us, many of those products, you know, particularly just take photon counting. We haven't had a predicate product. So, yes, there are some higher-end premium ones of customers that may say, hey. I may wait till it's available. But a vast majority of those are new ones. But we don't see the order coming to the order book until it's, you know, approved. So, I mean, that's some of the basic dynamics. And I think, you know, Jay talked about trailing twelve months and the stack compare. Those are interesting ways to take a look at it because, you know, we could have multiple quarters where we're significantly higher, and then we could have multiple quarters where we're below. But what's really important is that backlog growth and then how the sales come out. And, again, I think, you know, that's an important part of this. And when you saw the sales performance particularly in imaging and some of the other businesses in the fourth quarter, a lot of that is actually the work that the teams have done relative to on-time delivery and executing that more effectively. David Roman: Okay. Very helpful. And maybe I'll switch gears from China and actually ask on Omnipaque and just the PDX business. We did see an acceleration in that franchise in 2020 in the fourth quarter, excuse me. It doesn't look like fourth Auto is probably big enough to be the contributor there. So how should we think about Omnipage? What are you seeing thus far from a competitive standpoint? On the ground? And what's kind of reflected in your guidance here? Peter Arduini: Yes. No, I would comment and then Jay maybe you can jump in. I think, you know, Visimel, some of our other molecules as well continue to do along. I think you're correct. Based on my comments with Mercado. Not a significant contributor from that standpoint. This is where we are. Obviously, now that we have higher CMO capabilities, that kit will continue to grow. But the largest part of that business is the contrast media business. You know, we have large customers that have many, many SKU contracts with us. You know, there has been rumored discussion of new entrants coming in the area. I haven't seen anything developing at this point in time. Supply is rather tight within the industry. Just based on the players that exist. And so it's been a pretty consistent play and usually is highly correlated to procedures growth. And we've seen a pretty healthy procedures growth coming from, again, many other types of procedures in cardiology and cardi and oncology continuing to exist. So solid trends across the board there. Operator: Thank you. Now last questioner will come from the line of Vijay Kumar with ISI. Your line is now open. Vijay Kumar: Hey, guys. Thanks for taking my question. My first question is on guidance here, Jay. What is fiscal 'twenty-six assuming for Flurcato? And you I know you mentioned China declines with China. Q4 was, I think, down teens. So maybe some noise around there on what is going on in China. Jay Saccaro: Yeah. So on the China story, we're anticipating so what I would say is the fourth quarter came in, broadly speaking, in line with our expectations. We knew if you look at the growth, the comparisons to prior year, we knew the fourth quarter was the most difficult comparison year over year. So we did anticipate a bit of a deterioration which was embedded when we said the second half was gonna be worse than the first half. And so, you know, to Pete's comments earlier, we're making some good commercial progress in China. But we're just gonna take a cautious approach here. We're budgeting China down. I'm not gonna get into specifics as to precise amounts, down. We're budgeting China down. That's included in our 3% to 4%. And maybe there's a scenario we do better than that. But we really wanted to take a cautious approach on China. As it relates to Floccato, you know, we shared the dose number in terms of what we performed in a week in January. I had previously said that was really a critical metric for us. How are we doing at that point? Now we have confidence, and we've started to open up the throttle. In terms of bringing on new customers and advancing those customers to higher states of maturity. So we're really excited about the product. We expect weekly dose numbers to grow. In the first year of launch, we'll periodically share information on doses. But again, given the number of products we have launching, the near term, we're not gonna give guidance on any specific product at this point. But we will share some information to help you model this over time. I can tell you, you know, based on the progress that we've made over the last couple of months, very pleased with the direction that we're going. Very pleased with the progress that our team is making. Vijay Kumar: That's helpful, Jack. And then maybe one clarification on my math, looks like backlog grew 10% in fiscal twenty-six. And your capital book-to-bill in Q4 was something north of 1.1. Is my math correct? Jay Saccaro: Vijay, we don't we share a book-to-bill that includes all the elements that we include with both service and PDX. So we don't comment, but I think you've done some good math. And then on the backlog, yeah, backlog was up very substantially in the fourth quarter. Really pleased with the growth there and how that sets us up for the multiyear view. Vijay Kumar: Understood. Thank you, guys. Operator: Thank you. And that concludes our question and answer session. Speakers, please proceed with any closing remarks. Peter Arduini: Thank you all for joining today. We look forward to connecting with you all here in the coming weeks at one of our one-on-ones or upcoming conferences. Thanks again. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. And you may now disconnect.
Operator: Good morning. Welcome to the conference call on the results of the First Quarter of Fiscal 2026 of Infineon Technologies AG. I'm Matilde. I'm your Chorus Call operator. [Operator Instructions] The conference call is being recorded. [Operator Instructions] The conference call may not be recorded for publication purposes. I would like to now hand the floor to Florian Martens. Florian Martens: Thank you very much. Good morning, ladies and gentlemen. I hope that you all got off to a wonderful start to the new year, and I would like to welcome you to our conference call on the results of the first quarter of fiscal 2026. Participating at this conference on behalf of the Board are Jochen Hanebeck, the CEO; and Dr. Sven Schneider, our CFO. Dear listeners, as usual, Mr. Hanebeck will start by giving you an overview of the business performance of Infineon. Afterwards, both members of the Board of Management will be available to answer any questions you may have. Our conference call will end on time at 8:45. Of course, our press team headed by Andre Tauber and me myself will be available for any follow-up questions. And I'd now like to hand the floor to Jochen Hanebeck. Jochen Hanebeck: Thank you, Florian. Hello, and welcome. Dear listeners, we're only 1 month into 2026 and yet a lot has already happened when you consider the numerous geopolitical developments of the past few weeks. The markets and Infineon as well have seen quite a few events in the few recent weeks, and our company has been successful. At our annual press conference call in November, we already noted that the highly dynamic conditions make it challenging to predict the breadth and the intensity of the recovery in the semiconductor markets, with the exception of the AI-related business. We are seeing initial positive trends in the short-term indicators, such as order intake and lead times, which means that visibility is slowly improving. Nevertheless, we still believe that our assessment, that the recovery will be gradual and uneven is correct. The automotive and industrial markets have passed through the cyclical trough, but demand has not yet really picked up. The markets for consumer communications and computing applications, with the exception of AI, are only slowly beginning to recover. In contrast, AI-related applications continue to experience rapid growth. This is driven by ongoing massive investments in data centers for AI and the associated infrastructure. To make the most of the highly attractive opportunities available to us as the market leader in powering AI, we will expand our manufacturing capacity in this area even faster and bring forward the corresponding investments. Let me start by commenting on our planned acquisition of the non-optical analog/mixed-signal sensor portfolio of ams-OSRAM, which we announced last night. The EUR 570 million acquisition is a perfect strategic fit. We are further expanding our leading position in sensors, and we'll be able to offer our customers even more comprehensive system solutions in the future. The additional portfolio includes advanced mixed-signal products and leading solutions for medical imaging. We are strengthening our leading position in sensors for automotive and industrial applications and expanding our product range in sensors for medical applications. The additional portfolio covers these 3 end-markets in equal parts. The acquired business is expected to generate revenue of around EUR 230 million in the 2026 calendar year and support Infineon's profitable growth. The transaction will have an immediate positive impact on earnings per share upon closing. Future synergies will enable additional substantial value creation. Part of the agreement is a multiyear supply agreement with ams-OSRAM. Now as part of the transaction, approximately 230 highly qualified and motivated employees with expertise in research and development, marketing and management will join Infineon from ams-OSRAM. They will strengthen our sensor unit and radio frequency business unit within the PSS division. We highly value the extensive experience and expertise of our future colleagues and are looking forward to welcoming them very soon. The transaction does not include any production facilities. It comprises sensor products, research and development expertise, intellectual property and test and lab equipment. The completion of the acquisition is subject to the customary conditions, including regulatory approvals. We expect to complete the process in the second quarter of the calendar year. We are convinced that ams-OSRAM's sensor portfolio is a perfect strategic fit for Infineon, not only technologically and financially, but also culturally. The acquisition opens up new opportunities to us in established as well as in emerging target markets, such as the market for humanoid robotics. Now as you can see, Infineon and the start of 2026 have one thing in common, momentum. Let's now take a look at the development in Q1 of fiscal 2026. Infineon generated revenue of EUR 3.662 billion, the decline of around 7% compared to the previous quarter and is in line with our expectations and usual seasonality effects. To put this development into context, compared to the same quarter last year, our revenue rose by 7%. Adjusted for currency effects, growth would have been almost 14% compared to the same quarter last year as the U.S. dollar has significantly weakened over the last 12 months. The segment profit has declined to EUR 655 million. The segment profit margin was at 17.9%, which was relatively stable compared to the previous quarter at 18.2%. Our order backlog rose by a good EUR 1 billion compared with the previous quarter. At the end of December, it amounts to around EUR 21 billion. We are encouraged by the fact that we have now seen a continuous increase for around 6 months. Free cash flow amounted to minus EUR 199 million in Q1 compared to minus EUR 1.276 billion in the previous quarters. The previous quarter's figure, however, was significantly impacted by the completion of the acquisition of Marvell's Ethernet business. When comparing the figures, the strong organic free cash flow of EUR 904 million in the September quarter must also be taken into account. Now this was offset in the December quarter by lower business volumes, less public funding, higher capital expenditures, the payment of most of the annual variable compensation and an overall negative impact on working capital, the latter, mainly due to higher inventories. Those have been deliberately built up in preparation for a broader market recovery. Now on to the results of our 4 business areas in Q1. The Automotive segment generated sales of EUR 1.821 billion. This represents a decline of 5% compared to the previous quarter. The main reason for this were the usual seasonal order patterns and as expected, our customers' pronounced inventory management at the end of the calendar year. Compared to the previous year, ATV grew by 4%. At constant exchange rates, growth would have been as high as 10%. Segment earnings amounted to EUR 403 million. The segment earnings margin remained virtually stable at 22.1% compared to 22.4% in the previous quarter. Lower sales volumes weighed on the margin. We were able to largely offset this effect through lower underutilization costs in our production and product mix effects. We shifted production capacities to AI-related products. Looking at the development of the automotive semiconductor market in 2026, we continue to assess the situation as cautiously as we did in November. Vehicle numbers are in line with expectations or slightly above. There are still some uncertainties regarding the dynamics in China and the effects of U.S. tariffs. As far as the development of the semiconductor value per vehicle is concerned, we see a mixed picture in the short term. In the field of electromobility, there are headwinds due to the less favorable regulatory environment and the withdrawal or reduction of purchase incentives. Recent announcements, such as the reintroduction of purchase premiums for electric cars in Germany, will only have a limited impact on the business development in the current year. In contrast, the transition to software-defined vehicles is gaining momentum as more and more models are launched worldwide. Progress is also being made in advanced driver assistance systems, more comfort features and the switch to 48-volt architectures. All of these trends are continuing unabated. With our leading range of automotive semiconductor solutions, we are ideally positioned to supply our customers in all of the above-mentioned areas of application. We are aware of the different developments and are aligning our portfolio accordingly. In the case of power semiconductors for electric vehicles, we are reducing our involvement in less differentiated silicon-based solutions for the powertrain. Instead, we are focusing more on silicon carbide solutions, supplemented by analog sensor and control and connectivity components. In the area of software-defined vehicles, our recently acquired automotive Ethernet expertise and portfolio are proving ideal for providing comprehensive support to our broad customer base. In addition, sales of our AURIX, microcontroller family, are growing faster than the market, and we expect several new vehicle platforms featuring our products to be launched this very year. Lenovo's decision to use our AURIX microcontrollers as the safety host in the company's most advanced zone controllers for autonomous driving is one of the latest examples. We are also seeing continued design win momentum with power semiconductors outside the powertrain and with analog semiconductors. These include the latest 48-volt-based control system from a major American automaker and a steer-by-wire system from a German premium manufacturer. Let's now move on to Green Industrial Power. This division posted sales of EUR 349 million. The December quarter is usually the weakest in the fiscal year, and all application areas recorded declines in sales with the exception of the grid infrastructure segment, where sales increased significantly. I would also like to point out at this point that we took the GIP gate driver business and transferred it to our Power & Sensor Systems division at the beginning of the current year. This business has an annual sales volume in the high double-digit million euro range. The historical figures have, of course, been adjusted accordingly. On a comparable basis, GIP's 21% decline in sales compared to the previous quarter is high. In addition to the seasonality mentioned above, it reflects the continuing difficult market environment for GIP. Accordingly, of course, segment earnings also declined significantly to EUR 31 million. The segment result margin fell to 8.9% after 16.3% in the previous quarter. Our sales in industrial applications are, of course, closely linked to the global economic situation. Now in view of the continuing macroeconomic uncertainties, we expect only a weak recovery for core industrial applications. There are also no clear signs of a recovery in demand for air conditioning systems or household appliances. In the renewable energy sector, we expect demand for solar and wind power systems to remain at a high level, but not to grow significantly compared to the record year of 2025. In contrast, demand for grid infrastructure looks more promising, steadily increasing investments in AI data centers and a higher share of renewable energies in the energy mix require the expansion, modernization and the stabilization of the power grid. This trend will support our growth in the midterm. With our product portfolio, in particular, our leading silicon carbide technology and power modules, we are excellently positioned to benefit from the grid expansion and conversion. Key elements include large energy storage systems, uninterruptible power supplies, electronic circuit breakers and semiconductor supported transformers. With regard to the latter, we are working on dozens of customer projects to drive forward medium-term business opportunities. Now on to the Power & Sensor Systems segment. Sales in Q1 amounted to EUR 1.171 billion, which represents a decline of 3% compared to the previous quarter. On the one hand, our power supply solutions for AI data centers continued to enjoy very high demand. But on the other hand, we saw the usual seasonal weakness in demand for smartphone components. In addition, as announced, we reduced sales of less profitable products compared to the previous quarter. The aforementioned revenue effects are also reflected in the segment results, which improved to EUR 204 million, and the segment result margin rose to 17.4%, up from 14.5% in the previous quarter. Now looking at market developments, we are seeing the first signs of a broader revival in demand for consumer, general computing and communications applications. However, given the overall economic volatility, customers continue to place orders on a short-term basis. The situation is quite different, however, for AI-related semiconductors. The power supply for AI data centers represents an unprecedented growth opportunity for Infineon, and we are the leader in this field. Our unmatched portfolio, our understanding of systems, our speed of innovation and our commitment to the highest quality and delivery reliability make us the partner of choice, both for leading manufacturers of AI chips and for large operators of high-performance data centers. Our sales of AI power supply solutions continue to grow rapidly. We are reaffirming our target of around EUR 1.5 billion for the current fiscal year, and this figure is limited solely by supply, which is by how quickly we and our manufacturing partners can actually increase capacity. Actual demand is, in fact, higher. I would also like to emphasize that unlike some competitors who do not distinguish between AI data centers and other data centers in their sales forecast, Infineon's EUR 1.5 billion is purely AI-related business. In addition, we expect further sales of around EUR 500 million with power supply solutions for traditional data centers. At the same time, forecast for the expansion of AI data centers and the associated infrastructure continue to rise. Artificial intelligence is demonstrating more and more tangible benefits and real-world applications. We are experiencing some of these in our own company. For example, the improvement and acceleration of chip design, software development and our customer support. Demand from our customers for our power supply solutions continues to rise from quarter-to-quarter. We are, therefore, bringing forward investments of EUR 500 million in the expansion of our AI-related manufacturing capacities to this fiscal year in order to drive growth beyond the current fiscal year. These investments, including the conversion of existing production capacities for IGBT power modules to AI products are capital efficient and will reinforce our market leadership position. We are using a large portion of the investments to accelerate the ramp-up of our new Smart Power Fab in Dresden, which we will open this summer, just at the right time. With the additional capacities, we expect to generate AI-related sales of around EUR 2.5 billion in fiscal 2027, which is an additional EUR 1 billion compared to the sales forecast for the current fiscal year. This would equal a tenfold increase in our AI sales within just 3 years. And very importantly, this is a margin-enhancing sales. Now to our Connected Secure Systems segment. In Q1, the division generated revenue of EUR 321 million. The 13% decline compared to the previous quarter is due in part to seasonality. In addition, however, we also had so-called capacity reservation agreements with our customers in the previous quarters, which we had fulfilled. Segment earnings declined to EUR 23 million. The segment earnings margin was at 7.2% compared to 12.2% in the previous quarter. The market for IoT solutions remains in a weak phase. Macroeconomic risks and low consumer confidence are weighing on expectations of a recovery. Over time, artificial intelligence in end devices will open up more and more opportunities for innovative industrial and consumer applications. Secure connected devices equipped with AI and lower power consumption will become more widespread. Market researchers expect their number to reach the threshold of 30 million devices. By further strengthening our hardware and software expertise in this area, we are positioning Infineon ideally to take advantage of structural growth opportunities. Connectivity is a good example. Infineon is launching the first Wi-Fi 7 20 megahertz tri-radio chip on the market. This new product integrates Wi-Fi 7 and Bluetooth Low Energy in a single device. Extremely low energy consumption, combined with high radio performance, the chip, which is optimized for the Internet of Things, enables our customers to achieve reliable performance in frequency congested environments. Dear listeners, this brings me to the outlook. It continues to be determined by our market assessment of a gradual and uneven recovery. The timing and momentum of the cyclical upturn vary greatly across different market segments. Despite ongoing geopolitical and macroeconomic uncertainties, visibility is improving as our customers place more and more orders for delivery in 2 or 3 quarters. In some cases, this appears to be due to concerns that strong demand in the AI sector could lead to capacity bottlenecks for similar products in non-AI areas. Inventories in the automotive supply chains have normalized, but our customers' confidence in the market still needs to increase before they replenish their semiconductor stocks. Against this backdrop, we are confirming our full year guidance today. Effects from the upcoming acquisition of the sensor portfolio as ams-OSRAM are not included in the guidance. For the current second quarter of our fiscal year, we expect sales of approximately EUR 3.8 billion. Our forecast is based on a U.S. dollar to euro exchange rate of $1.15. We expect the segment result margin to be in the mid- to high teens. We expect that volume growth will be partially offset by contractually agreed annual price adjustments as is customary in the first quarter of a calendar year. Now for the group, we expect price declines in the low to mid-single-digit percentage range, with significant differences between the individual business segments. For fiscal 2026, we continue to expect a moderate increase in revenue compared to fiscal 2025. The segment result margin should be in the high double-digit percentage range. The unfavorable currency development and the usual price decline will offset the positive effects of higher volumes and additional earnings contributions from our Step Up, structural improvement program. Now on to our investments. As previously mentioned, we are bringing forward investments of around EUR 500 million to accelerate the expansion of manufacturing capacity for power supplies for AI data centers and to support the expected strong growth in this area in the upcoming year. We are, therefore, now planning total investments of around EUR 2.7 billion in the current fiscal year. Our expectations for free cash flow are as follows: Reported free cash flow is expected to be around EUR 1 billion, slightly less than the EUR 1.1 billion previously expected. The reason for this is that part of the increased investments will be paid for in the current fiscal year. Free cash flow adjusted for major investments in front-end buildings and acquisitions is expected to be around EUR 1.4 billion, down from EUR 1.6 billion previously. This should be viewed in the context of the expected significant value creation from profitable AI growth. Dear listeners, this concludes my remarks. Before we now move on to the Q&A session, I would like to remind you of an important date. In just over 2 weeks, on February 19, our Annual Shareholder Meeting will take place. After several years, we are once again holding this as an in-person on-site event. We cordially invite you all to participate either on-site at the Munich, the trade fairground, or online via the live stream, which we will be, of course, offering on our website. And now together with Sven Schneider, I will be happy to answer your questions. Operator: [Operator Instructions] The first question comes from Sebastien Ash from Financial Times. Sebastien Ash: I wanted to know about the prices for raw materials. In recent weeks, they have changed substantially. They have fluctuated actually. Do you believe this will have ramifications on the business operations of Infineon during the course of the current fiscal year? Sven Schneider: Yes. Sven Schneider here. Thank you for your question. Indeed, you're right. We have witnessed price increases in a market that has been very volatile to a certain degree. Gold, palladium, silver have all demonstrated this dynamic. These increases have been calculated into our guidance. Of course, we have to brace ourselves for this situation continuing, but the price increases that we've seen so far have been considered. Operator: The next question comes from Joachim Hofer from Handelsblatt. Joachim Hofer: I have 2 questions. The first one is what volumes are you unable to handle when it comes to AI chips? Because you may be lacking capacity. What ballpark are we talking about here? That was the first question. The second question is you said that you are placing your bets on silicon carbide more than ever before. Can you tell us how these operations are actually faring? If I remember things correctly, ST last week had news that was not very encouraging. What is the situation at Infineon in this regard? Jochen Hanebeck: With respect to your 2 questions, what I have to say is that demand for AI chips is slightly above the EUR 1.5 billion mark, and we're working extremely hard also with our suppliers to remove the bottlenecks in the supply chain and in the value-added chain. On top of that, we have a ramp-up ahead of us. This is progressing quarter-to-quarter. Silicon carbide. Well, here at Infineon, the business is expanding this year as well. This has to do with the fact that from the very beginning, we placed our chips on a very broad basis, a number of applications, numerous customers, and all of that is paying off now. So we expect growth from one fiscal year to the next. Operator: The next question comes from Joachim Herr from Borsen-Zeitung. Joachim Herr: I have 3 questions with respect to the acquisition of ams-OSRAM or rather its subunit. Mr. Hanebeck, you said that from the beginning, it would be earnings accretive. Is it also margin accretive? The second question relates to a supply agreement that you have with ams-OSRAM. Are you talking about components that you will source from ams-OSRAM? Or will you also supply parts or products to ams-OSRAM? The third question is that in the Q1 report, you say that the acquisition was financed with equity and debt. How is the split? Jochen Hanebeck: I would like to answer the first 2 questions, and then Mr. Schneider will give you some information on the acquisition financing. The margin right after the acquisition, if you look at the segment result margin, right now is in line with Infineon's margin, and it will increase as a result of the transfer, which will be rolled out over a number of different years. A large share of the production volumes will then be shifted to our factories, in particular, Kulim. And this brings me to your second question. What you can see in the press release with respect to supply agreements, means that the products that we acquire now will initially over a certain period of time, be manufactured in Premstatten. And then a large portion of that production will be shifted to Kulim. This overall will lead to further significant synergies and will make the business extremely profitable for us. Sven Schneider: I will continue. I'm Sven Schneider. With respect to the margin, I have one further remark. The acquisition is, of course, in terms of scale, too small to have a huge impact on margins at the group level. We're only buying EUR 230 million in revenue, just to put that in perspective. The second question related to refinancing. No, no equity. I must be clear about that. This is a fully debt-financed acquisition, and we will embed this in our normal customary refinancing measures in terms of investments because we also have other maturities. So it's all debt, no equity. Operator: The next question comes from Christina Kyriasoglou from Bloomberg. Christina Kyriasoglou: You're increasing your investments, as you said, in particular in Dresden. Could you give us some more information on the other manufacturing capabilities that are going to be expanded? Jochen Hanebeck: This is Mr. Hanebeck speaking. The increase in the investment budget by EUR 500 million is purely related to AI, in other words, the AI chips, and it relates to capabilities in Dresden, in Module 4, for highly differentiating leading-edge MOSFET -- silicon MOSFET generations, the type of which are required in data centers in order to maximize efficiency. And we also have the analog/mixed-signal products that latch on to that. A small portion of that goes to Villach, where we have a similar product portfolio. What is wonderful, however, is that the market for AI chips and the strong demand for AI chips is a perfect match for our timing with Dresden. We'll be opening the fab in summer and actually can ramp up production right away as well. Operator: The next question comes from Christoph Meyer from DPA. Christoph Meyer: I would like to have some more information about the dollar exchange rate and your forecast, the $1.15 rate, is lower than we have seen in recent times. How danger for your forecast is the fluctuation in the dollar? Could you give us your assessment on this? Now for example, if average over the year, it were $1 to $1.20, what would that mean? Sven Schneider: Well, Mr. Meyer, this is Sven Schneider. Thank you for your question. First of all, the dollar indeed has weakened substantially in the last quarter. In the last fiscal year, we had an average ratio of $1.11. And now we're in Q1 and at $1.16, and now it's at $1.18. We can all see that it's extremely volatile and that it hinges on statements made by major market participants, they cause spikes and valleys. So we will remain at $1.15 for the time being. You asked for the effects. Well, we have a rule of thumb here. It's a formula. If you see a change by $0.01, it has an effect of EUR 25 million on revenue per quarter and EUR 10 million per quarter in the result. So if instead of $1.15, the dollar wound up at $1.20 over the year, we would be speaking about 5x25 over 3 quarters. So that is roughly the effect that we would feel as a result of the weakness of the dollars. And of course, the opposite is also true. Operator: [Operator Instructions] The next question comes from [ Samuel Reis ] from [indiscernible]. Unknown Analyst: Last month, there were reports about an Infineon transistor being used in a drone in the Ukraine. Do you know how this component found its way into the Russian drone. It's a Russian drone, not a Ukrainian drone. It was used on an attack on Ukraine. Do you know how it found its way there? And do you know who supplied that transistor to Russia? Sven Schneider: Thank you for your question. This is Sven Schneider. First of all, we take these events and incidents very seriously, and that is very displeasing, of course. But it is outside of our remit. We have no control over this. Since the beginning of the war on Ukraine, we have informed all partners, and we continue to do this time and again that we always comply with all statutory regulations because we're obliged to do so. We have certain customers and also countries that have been ruled out because of that. On the other hand, if you look at Infineon, globally, we sell 30 billion chips worldwide, and they go to partners who may sell them on. And this is exactly the link in the chain that we cannot control. But believe you me, we're doing everything we can through order tracing and monitoring to ensure that what we can influence complies with the law. Jochen Hanebeck: This is Mr. Hanebeck. I would like to add that this is very demoralizing, but only 50 nations have signed off on the sanctions list. That leaves us with a number of countries who have not agreed with the sanctions, including countries in which a lot of our products are purchased. And if these products are then sold on 3 or 4 times, we cannot track them anymore. We regret this, but unfortunately, that's a reality. Operator: [Operator Instructions] We have a follow-up question from Hakan Ersen from Thomson Reuters. Hakan Ersen: I have a question with respect to the AI chips. You spoke of bottlenecks, which you intend to remove. At the same time, however, you anticipate for 2027 a weakening of growth in this sector. Could you give us some more information on that? Jochen Hanebeck: This is Mr. Hanebeck speaking. I don't quite understand what you mean, weakening growth. We're talking about EUR 1.5 billion this year, going up to EUR 2.5 billion. So that means that we continue to grow. Now if you look at it in relative terms, we are talking about a doubling this year over last year, EUR 2.5 billion isn't quite a doubling, but quite a lot would have to happen for us to be able to implement this. On the one hand, we're talking about applications that are very sophisticated from a technical point of view, and we have very demanding customers as well. On top of that, we have to make sure that the capacities are available along a long value-added chain that Infineon has through to assembly. We have a series of bottlenecks along the way, which we have to remove. So this means we have a lot of on our plate. And of course, we want to leverage the maximum potential on the market, both this year and next year. Sven Schneider: And this is Mr. Schneider speaking now. With respect to the figures, I would like to offer you a commentary. We have said before that the biggest growth driver in our history is the AI server business, and this is just this year. The conventional server business also accounts for 10% of group revenue. If we go up to EUR 2.5 billion -- let us look at the consensus figures for 2027 in terms of revenue. We are trending towards 15%. For a company the size of Infineon, this is quite a substantial step. You can see how strongly this business is growing and how greatly it influences the company. Operator: Ladies and gentlemen, that was the last question. I would now like to hand the floor back to Mr. Hanebeck for his concluding remarks. Jochen Hanebeck: Thank you very much, ladies and gentlemen. Allow me to summarize. Infineon had a great start into 2026. The results of Q1 are at the top range of our expectations. The geopolitical and macroeconomic uncertainties continue to dampen economic momentum. This is in line with our base scenario of a gradual and uneven market recovery. We are reaffirming our forecast for the fiscal year. Fact is, of course, without electricity, without power, there is no AI, and we want to seize this historic opportunity for our company in this area. We confirm our revenue target of around EUR 1.5 billion for the current fiscal year and expect around EUR 2.5 billion in fiscal 2027. The acquisition of the automotive, industrial and medical sensor portfolio from ams-OSRAM strengthens our outstanding portfolio. In the future, we will be able to offer our customers even more comprehensive system solutions. This puts us in an ideal position to leverage structural trends for profitable growth. Thank you very much for your interest, and goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
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.
Operator: Hello, everyone, and welcome to the Johnson Controls International plc Q1 2026 Earnings Conference Call. My name is Nadia, and I will be coordinating the call today. I will now hand the call over to Mike Gates, Senior Director of Investor Relations, to begin. Mike, please go ahead. Mike Gates: Good morning, and thank you for joining our conference call to discuss Johnson Controls International plc's fiscal first quarter 2026 results. Joining me on the call today are Johnson Controls International plc's Chief Executive Officer, Joakim Weidemanis, and Marc Vandiepenbeeck, our Chief Financial Officer. Before we begin, let me remind you that during our presentation today, we will make forward-looking statements that reflect our current views about our future performance and financial results. These statements are based on certain assumptions and expectations of future events and are subject to risks and uncertainties. Please refer to our SEC filings for a list of these important risk factors that could cause actual results to differ from our predictions. We will also reference certain non-GAAP measures throughout today's presentation. Reconciliations of these non-GAAP measures are contained in the schedules attached to our press release and in the appendix to this presentation, both of which can be found on the Investor Relations section of Johnson Controls International plc's website. I will now turn the call over to Joakim. Joakim Weidemanis: Thanks, Mike. Good morning, everyone. Thank you for joining us on today's call. I'd like to begin by recognizing our 90,000 colleagues around the world for their commitment to our customers and for the contributions they've made to our strong start to the year. Let's begin with slide four. Johnson Controls International plc enters 2026 with a solid foundation and more disciplined execution across the portfolio. Our first quarter performance reflects the progress we've been making with strong revenue growth, meaningful margin expansion, and broad-based strength across the enterprise. We are still in the early stages of this work, but I'm encouraged by the progress we've seen to date. As we begin deploying our proprietary business system more broadly, leaders are displaying better candor and assessments regarding where we have opportunity and how we address those opportunities through our business system approaches. We're seeing this firsthand in Gemba Walks in our manufacturing plants, in our field offices, in operating areas across the business, and even in corporate. Turning to the results, the quarter delivered ahead of expectations. I'm proud to share that orders increased nearly 40%, building on a very strong 16% last year compare. Revenue grew 6%, adjusted EBIT margins expanded 190 basis points to 12.4%, and adjusted EPS was up nearly 40% and exceeded our guidance. Our record backlog gives us strong visibility and reinforces the demand environment we're seeing. These results reflect the strength of our leading technology portfolio, combined with more disciplined execution across the company. Given the strong start to the year and the momentum we're seeing across the business, we are raising our full-year guidance. Mark will walk through the details in just a few minutes. This quarter marked an important step as we continued to provide much greater clarity on our direction and introduced our evolving enterprise strategy and priorities to leaders across the company. We cascaded and aligned goals across the organization to a focused set of enterprise-wide metrics. This gives every team a clear line of sight of their priorities aligned with our definition of winning, one that is rooted in winning more customers and better enabling our colleagues, especially those on the front line. This alignment is essential to how we operationalize our strategy, where we focus our commercial resources, where we direct our R&D investment, and where we concentrate execution resources to create the most impact and win with customers. We are building a faster-growing, more profitable, and more disciplined company that is easier to run. We do that by focusing our efforts on parts of the market where our strengths in technology and field presence align with our passion to advance human society. You can see that impact clearly in the places where technology demonstrates its value today: energy efficiency and decarbonization. Where factories, large campuses, and buildings are some of the largest consumers of energy and amongst the biggest contributors to global emissions. In an increasingly energy-constrained world, where energy costs continue to rise, our customers are under pressure to manage energy more effectively, reduce their carbon footprint, but also need strong operational returns. Turning to the next slide, this couldn't be more evident than in the fast-growing, most technology-intensive environments such as data centers. As compute becomes more powerful, rack densities rise, hybrid architectures evolve, and control systems become more advanced, data centers now require increasingly energy-efficient and precise operating conditions. Across AI and high-density compute environments, architectures will continue to change, but they all share the same fundamental requirement: significantly greater thermal and energy management, supported by more sophisticated controls. Managing energy consumption while sustaining performance is essential, and that is exactly where our technologies remain critical. Against that backdrop, our data center momentum reflects not only strong demand from existing customers but also success in reaching new customers as our differentiated solutions gain traction. We continue to work closely with NVIDIA, applying our thermal management and controls expertise to support next-generation AI compute environments. Johnson Controls International plc recently released a new reference guide that maps the full thermal chain and outlines scalable high-performance cooling architectures for an emerging class of AI factories. The guide outlines an integrated solution that leverages technology to accelerate data center deployment and increase their overall performance. Going beyond just supplying equipment, we are architecting the thermal backbone for the next generation of AI computing. It also reinforces the strength of our innovation roadmap, reflected in the products we introduced earlier this week. We announced two new chiller platforms that extend our leadership in high-density data center cooling. The YDAM delivers up to 3.5 megawatts of cooling in a compact footprint, providing approximately 20% higher capacity density than competing options and enabling warm water cooling for advanced GPUs. The YKHT brings the industry's widest operating range and supports waterless heat reduction, which can eliminate up to 9 million gallons of cooling tower water annually in typical deployments. Complementing these data center platforms, we also expanded our digital service capabilities with the introduction of the Smart Ready Chiller, which provides 10 times the insights over a standard remote-connected chiller. This gives us and our customers deeper insights from day one, allowing us to shift more customers into proactive, recurring service relationships that improve reliability, reduce unplanned downtime, and lower life cycle costs. Together, these launches build on an already strong and comprehensive portfolio, making it even more capable and more differentiated for our customers. In addition to the data centers, we see similar demands for energy precision and reliability across other mission-critical sectors. Advanced manufacturing, where, for example, next-generation pharmaceutical manufacturing relies on precise environmental conditions, meaning strict control of temperature, humidity, pressurization, and air purity. And large complex research campuses and universities, where similar requirements exist as researchers discover new insights and translate science into real-world applications, where students are learning, exploring, and preparing to make their own impact. Our customers have real unmet needs for technology innovation and service-based solutions that help them manage energy more efficiently and deliver outcomes in their mission-critical operating conditions. This is where our strengths set us apart and where we concentrate our investment and innovation. And this is exactly what gives me the confidence and the opportunity we have here at Johnson Controls International plc and the ability to support our customers. When I went to Gemba, I saw breakthrough innovation happening at JADEC, our advanced development and engineering center in Pennsylvania. Work built on York's 150-year-old legacy of pushing the boundaries of HVAC and thermal technology for today's data centers. And after also spending time with our field professionals, it became clear how much potential we can unlock by making their daily work easier and better leveraging their expertise and proximity to our customers. Turning to slide six, this is where our proprietary business system will help us unlock that opportunity. As a reminder, our business system is built on three pillars: simplify, apply 80/20 principles to focus on what matters the most; accelerate, use lean methodologies to remove waste, to speed up execution, improving productivity, and reducing assets such as working capital tied up in the process; and amplify, leverage digital and AI approaches to amplify impact across the enterprise. I think of it as accelerate or lean helps us accomplish work in days and hours versus weeks and days. And amplify for digital and AI enables us to take that same work and accomplish the same in hours and minutes. And it's anchored in a global cross-functional language and methodology for how we communicate, collaborate, and drive strong continuous improvement momentum to win. We're already seeing evidence of the business system in the way teams operate: stronger alignment, clear ownership, and greater process and tool consistency. And our talent system also plays an incredibly powerful role in this. We've brought in select external talent with deep business system expertise while also teaching and equipping our internal colleagues to lead in this new way of working and beginning to embed across our end-to-end talent processes. To date, we have hosted growth summits with hundreds of leaders diving deep into our enterprise strategy and hands-on teaching. Leaders teaching leaders our business system. This includes a global summit with our most senior leaders, and we're now spending time in each region to ensure a full understanding, clear expectations, and accountability for this new way of working. All focused on enabling our frontline colleagues to deliver more for our customers. As part of this, we started the new year in APAC with all the regional leaders. I spent significant time in that region in my professional life and see great opportunity, particularly aligned with our strategy and where we have strengths. To further accelerate our progress and strengthen global execution, we recently appointed Susan Hughes as our APAC president. Susan brings more than 20 years of deep experience in the region, and I'm excited for the impact she'll have as we align our teams and sharpen our execution. Let's now turn to slide seven to show how our business system is taking hold and the progress we're making across the company. By working together across teams and leveraging 80/20 and Lean tools, we're seeing real measurable progress. Last quarter, I shared some examples that I'm proud to illustrate continued improvement. Our conventional HVAC sellers in one of our local markets went from 60% improvements in time spent with customers to a 100% improvement. And as we bring AI into these workflows, we see the potential for another meaningful step change, one that simply wouldn't be achievable without AI. In one of our key manufacturing facilities for chillers, our factory on-time delivery went from 95% to now sustaining 95 to 100% for the past couple of months. This level of performance combined with our now competitively advantaged lead times is driving higher win rates with our customers, especially in data centers, as we can reliably commit to help them meet their rapidly growing needs. These are just two examples where we go narrow and deep on an area of opportunity. Our teams are going deep and addressing other areas of opportunity, from cutting service repair time to improving quality and addressing billing disputes. The benefit only continues as we scale these learnings more broadly in the organization over time. I'm inspired by the energy, the urgency, and the enthusiasm with which our leaders and teams are embracing this new way of working. More than a thousand colleagues have actively engaged across several priority areas. Over 80 kaizens have been completed, and 350 senior leaders have been trained in the new ways of working. And while many of our early focus areas started in The US, as we teach and equip our leaders, we have now activated efforts in both EMEA and APAC. This way of working gives us confidence in our ability to execute and deliver on our commitments. With that, Mark will lead you through the details. Marc Vandiepenbeeck: Thanks, Joakim, and good morning, everyone. We delivered a strong start to the year, reflecting continued momentum in the business. Our teams converted sustained customer demand into record orders while delivering solid operating performance. We're also seeing early benefits from the operating discipline we've been embedding across the company, which is helping us execute faster, improve consistency, and strengthen profitability. With this foundation, we are well-positioned to deliver on our priorities and achieve our full-year commitments. Let's turn to slide eight to walk through the financial highlights for the quarter. Organic revenue grew 6% with broad-based contribution across the portfolio. And we delivered solid margin expansion. Segment margins increased 70 basis points to 15.7%, and EBIT margin expanded 190 basis points to 12.4%, reflecting continued benefits from productivity, price realization, and improvement in our cost structure. Adjusted EPS of $0.89 increased nearly 40% year over year and exceeded our guide. Our ongoing work to simplify priorities, strengthen alignment, and sharpen operational discipline is driving faster decisions, stronger pricing, and tighter cost control, supporting both growth and margins. Let's now discuss our segment results in more detail on slides nine and ten. Orders grew nearly 40% in the quarter, a strong performance on top of a tough 16% compare. Demand was led by data centers projects where customers are accelerating investment to support higher density workloads and AI-driven growth. Activity across our other key end markets remains stable, and customers continue to prioritize Johnson Controls International plc's mission-critical solutions. By region, this demand strength translated into solid orders across all three segments. The Americas delivered 56% growth led by large-scale data center projects that continue to scale across the region. EMEA grew 8% with balanced high single-digit growth in both service and systems. In APAC, orders increased 10% driven by double-digit growth in systems and high single-digit growth in service. At the enterprise level, organic sales growth was led by continued strength in service, which grew 9% year over year. In The Americas, sales were up 6% organically, with solid double-digit growth in service. EMEA grew 4% led by high single-digit growth in service, and APAC delivered 8% growth led by strong system performance and steady demand in service. These results reflect strong execution across the portfolio despite a challenging 10% year-over-year comparison. We delivered another quarter of steady margin expansion, disciplined execution across pricing, productivity, and project delivery. Our team strengthened operating leverage in both service and systems through higher throughput, tighter cost control, and more consistent execution. These actions reinforce the continuous strengthening of our operating model and our ability to sustain meaningful margin progress. By region, adjusted segment EBITDA margins in The Americas improved 20 basis points to 16.4% supported by productivity gains and improved mix. In EMEA, margins expanded 120 basis points to 15.3%, reflecting favorable pricing and productivity gains. In APAC, margins expanded 290 basis points to 16.9% as volumes increased and factory absorption improved. Our record backlog grew 20% to $18 billion, highlighting the continued strength of our pipeline as revenue conversion accelerated this quarter. Turning to our balance sheet and cash flow on Slide 11. On the balance sheet, we ended the quarter with approximately $600 million in available cash. Total liquidity remains strong, supported by our available credit facilities and disciplined working capital management. Net debt remained within our long-term target range, declining to 2.2 times. Our capital allocation priorities remain consistent: investing in the business, maintaining balance sheet strength, and returning capital to shareholders. Let's now discuss our fiscal second quarter and full-year guide on Slide 12. As we enter the second quarter, operational momentum remains solid, supported by disciplined execution and continued strength in our backlog. We anticipate organic sales growth of approximately 5%, operating leverage of approximately 45%, and adjusted EPS of approximately $1.11. For the full year, we are maintaining organic sales growth of mid-single digits supported by solid execution and the visibility provided by our backlog. We continue to expect operating leverage of approximately 50%, which is above our long-term algorithm as last year's stranded cost savings materialize in this year's performance. With the strong start to the year, we are raising our adjusted EPS guidance to approximately $4.70 per share, which is roughly 25% growth. With the increase in our EPS guidance, we continue to expect approximately 100% free cash flow conversion for the year, underscoring the quality of our earnings and the discipline of our working capital processes. Our guidance reflects the progress we're making across our operating priorities and provides a solid foundation for delivering strong results throughout the remainder of the year. Operator, we are now ready for questions. Operator: Thank you. We will now begin the question and answer session. When the participant asks your question, please ensure your phone is unmuted locally. We ask you to please limit yourselves to one question and one follow-up. The first question goes to Nigel Coe of Wolfe Research. Nigel, please go ahead. Nigel Coe: Thanks. Good morning, everyone. Thanks for the question. Yes. So I think a good place to start would be on the orders. I don't know if this is a record order quarter, but I'm sure it's pretty darn close. Anything that you'd call out? Because we've seen extraordinary strength in other places in data centers, but this is, like, another level higher. So just curious. Are we seeing more kind of longer-duration orders, multiyear orders? Anything to call out, you know, driving the strength in orders? Joakim Weidemanis: Hey, Nigel. We are seeing record orders, as you saw. We have a record backlog. We'll try and keep it like that going forward too, by the way. I'm super happy that it's not only data centers that's driving the strength of our order entry. We had a very healthy life science order entry during the quarter. And that's not the first quarter that we see that strength. And that's really a result of, you know, all the effort being put into the pipeline over the years as well as the field coverage for what we call our mission-critical verticals. You know, where thermal management and the indoor operating conditions really matter for our customers. Now data centers were very strong, and I'm very proud of the team and what they accomplished during the quarter. Pipelines remain healthy. And as a reminder, you know, we really play in three categories broadly: data centers, not just on the chiller side, but on the craws, the air handling units through our silent air franchise, which is the leading franchise in air handling. And as you know, a couple of quarters ago, we announced that we entered the CDU space, and we're making some good progress. So very pleased overall with the order entry, but data centers are definitely not the only vertical that's showing really, really good strength here. Nigel Coe: Great. Thanks, Joakim. And then my follow-up is I believe the backlog reflects orders that are shippable for the next twelve months. So, obviously, the backlog increased, I think 20% was the number, if I'm not mistaken, versus the unchanged mid-single digits for this year. Just wondering how to think about that inflection in backlog versus non-inflection in organic growth. I'm just wondering if we're starting to see a line of sight towards high single-digit organic growth. Joakim Weidemanis: I think the organic growth will continue to strengthen over time. You know, our guide currently reflects what we see for this year. Many of those larger orders that we're taking also in the life science field, but in data centers, are not necessarily shippable within the next nine months or so. But we'll keep you updated on the guide here as we see opportunities to do better here potentially. Operator: Thank you. The next question goes to Amit Mehrotra of UBS. Amit, please go ahead. Amit Mehrotra: Thanks. Good morning, everybody. Just wanted to follow up on the orders question, if I could. And just understand, you know, how much of this order strength is, you know, the market coming to you as opposed to maybe how you're evolving, how you go to market. And I know last time we chatted, there were maybe some initiatives underway to kind of go after what you guys call the belly of the market. Is that indicative of the orders? And then just related to that, Joakim, any numbers you can provide around the non-data center growth just so we can understand a little bit how broad-based this is? Joakim Weidemanis: Yeah. So I think the data center market is growing in many different parts of the world and different applications as well. So our growth is pretty broad-based. So like I said, you know, we play in three different application categories: the chillers, the craws, the air handling units, and now starting to grow nicely here on the CDU side as well. So historically, we had a good position with our hyperscalers as well as many of the large colos, in particular, in The United States. But, you know, over the last couple of quarters, we're very happy to see the growth in Europe and in Asia also start to become very meaningful for us. And like I said in my previous comment, you know, our order strength in the quarter here is, of course, helped by data centers, but we're also very happy about, in particular, life science-oriented growth that we're seeing. And just to put a little bit more color on that, you know, what's happening in the pharmaceutical industry is that with the rise of biologics-based therapies, you know, the manufacturing environments are materially different than the historical manufacturing environments, and that's why, you know, large pharmaceutical manufacturers are building new plants in many parts of the world. And the indoor operating conditions that they require to be able to effectively, you know, manufacture these biologics-based drugs, you know, really require very strong thermal management, which is not just HVAC, but also controls. And because these are large campuses with thousands and thousands of employees moving in and out every day, and the value of what they manufacture is very high, it also requires other solutions in our portfolio. So very encouraged by our continued progress in life science. Amit Mehrotra: That makes sense. Thank you. And then just one my follow-up, Mark. Wanted to ask about second half versus first half incremental margins. Obviously, you have a full year of 50% plus. You'll achieve or have achieved in the first quarter, second quarter, maybe about 40, 45%. It does imply kind of this nice step up in the second half above 50%. Can you just talk about that and maybe what are the drivers of that step up are in the second half? Marc Vandiepenbeeck: For sure. We can maintain the full year roughly 50% operating leverage outlook because the structural driver of our leverage build materially around the year and as reported by, of course, the backlog and the back margin, the visibility we have that and the margin expansion that come, but also the work associated with the stranded cost and it's all inflecting in the second half of the year and that leverage continues to improve. You know, that 50% is based on our mid-single-digit perspective on top-line growth. If we can accelerate that top-line growth, not all of that incremental growth will come at the operating leverage in the fifties. It will probably come closer to our long-term algorithm well above 30%, but maybe not at the 50% range. Operator: Thank you. The next question goes to Steve Tusa of JPMorgan. Steve, please go ahead. Steve Tusa: Hi, good morning. Operator: Thanks, Steve. Please proceed with your question. Hello? Steve Tusa: You hear me okay? Joakim Weidemanis: Yes. Yes. We can hear you, Steve. Hello? Can you hear me okay? Steve Tusa: Great. Thanks. Sorry. Just on the North America margin was just a little bit lighter. I hate to nitpick because they were really good results on special orders. The North America margin was a little bit lighter. There was a $15 million headwind from other. Maybe that was something we're missing from the comp from last year or something like that. Maybe just touch on how you see North America margin trending in the next couple of quarters? And anything there from the quarter? Marc Vandiepenbeeck: So if you look at the growth in North America, right, very strong system growth, strong service growth as well. That makes, you know, normally would be lifted by much better growth in the service thanks to the rate. And we saw some benefit associated with productivity. Overall, the opportunity in North America is accelerating our service growth and the margin rate that comes with that. You know that there was a few smaller headwinds in the quarter in North America about $15 million with TAG as other. And that more has to do with some periodic small adjustments we do on product liability. Those are reserves we adjust over time, not something material, not something recurring. We think North America margin potential continues to be strong and will probably come slightly better than what you saw in the quarter in the second half. Steve Tusa: Great. Thanks. And then just one on data center. Where do your what are your lead times to end today? Get you Scott Davis of Melius Research. Scott, please go ahead. Joakim Weidemanis: Scott, I Hey, guys. Steve Tusa: Is that Yeah. Is Steve Yeah. Hey. Joakim Weidemanis: Steve's still on there? Yeah. We are. Operator, we please ask you to take command here? Steve was asking his follow-up question. So let's allow Steve to do that. And then, Scott, we'll go to you right after. Steve Tusa: No worries, guys. Thank you. Joakim Weidemanis: Operator, can you please step in? Okay. Scott, if we have you on the line, please go please go ahead. I will as the interim operator. Scott Davis: I I I could call Steve and ask him what his question but Marc Vandiepenbeeck: Go ahead, Scott. Scott Davis: No. Sorry about that. But look. Hey. I'm kinda curious that the entrance into CDUs, is the goal here to kinda bundle this into a total solution that, you know, it I would imagine it's still a separate purchase order right now and perhaps even a separate process altogether, but where do you kinda see that market going for you guys? Joakim Weidemanis: Today, it's a mix, Scott. So there are certainly a lot of business that transacts, you know, CDUs only. But we do see plenty of opportunity for combined offers and obviously, we have a number of very important key accounts. And so, you know, we work on more than one application together with them. You know, over time, as the thermal architecture for data centers evolves, as is normal, I think, in a complicated system like that. You might see some slight changes in the overall architecture and so the roles that certain devices play today might evolve a little bit over time and I think that's, of course, why we chose to add CDUs to our portfolio to be able to lead in that and be able to be a player that helps our data center customers with the most optimal and highest performing thermal architecture not just for today, but in the future as well. Scott Davis: Okay. Fair enough. And then Joakim, you mentioned that you were just in Asia Pac. Not sure if it's a big broad region, so not exactly sure where you were. But perhaps since you were there recently, you could just tell us what you're seeing on the ground because clearly we're seeing a broad set of different results. You guys were a little better than most people this quarter. Joakim Weidemanis: Yep. Yeah. So I was I'm not gonna say I was all over the region, but I was in all the major markets and a number of countries. So in our case, we are seeing continued stabilization in China. And part in our business and part of that, of course, is that we have worked hard on shifting a little bit on what the mix of which verticals we focus on in China. And so I think we're in a better place now. Our commercial teams are more aligned with where there is still growth and, you know, our service business there. We have continued to invest in, and so we see that as a continued good opportunity. So we see stabilization in China, but unlikely that China is going to return to the kind of growth rates we saw in past years. But what's exciting is that, of course, it's no secret that there are some other major economies in the region that have continued to strengthen overall. And so I think we have, you know, a really strong, good team on the ground, and in a number of countries in Southeast Asia as well as India. And some of these countries, of course, they're all looking at data centers, and there are several emerging players in these markets. But in terms of, for example, you know, investments in health care hospitals and pharmaceutical manufacturing, that's also a growth driver for us in a number of those countries there. So I'm super excited about our prospects here in Asia. So stabilization in China and then growth opportunities in major economies elsewhere. Scott Davis: Okay. Helpful. Best of luck for the rest of your guys. Thank you. Yeah. Thank you. Operator: Thank you. Moving back to Steve Tusa of JPMorgan. Steve, please go ahead. Steve Tusa: Yeah. Thanks. That's a quality move. Thank you for letting me back in. I appreciate that. Just the data center lead times, where are you now? And then, Mark, if you could just give us a little bit of color on what BMS did in the quarter? We're trying to tease out kind of the like-for-like applied orders growth, you know, the BMS kind of orders would, I would think, be lower than what applied was, maybe not, but maybe those two follow-ups and thanks again for letting me back in. Joakim Weidemanis: Yep. Sure. Lead times, you know, I gave the example in the prepared remarks here. So we're making good progress on the on-time delivery, and that's on-time delivery as requested by Right? So by definition, that is then being predictable within the lead times that the customers are asking for. We continue to sustain, you I talked in previous calls about how we cut, you know, lead times in half. For one of our product lines in a factory. And that work is now being cascaded out to the other product lines in that factory and other factories. And we did hire a new VP of operations a couple of months ago. And, you know, he and his team are now ramping, you know, very, very nicely. And I'm actually and we were reviewing it just the other day. I'm really excited about what I'm seeing from our operations teams. Not just in terms of short-term results, but the aspirations and where we think we can get to, you know, not next year, but this year. And so, you know, more to come on that. And I think in a little bit of a, you know, an environment like we have in the data center market right now, the ability to be able to deliver not just predictably, but fast is part of, you know, one of many things that contributes to our competitive advantage. Marc Vandiepenbeeck: And then BMS. Yeah. BMS. Go ahead, Mark. So the BMS growth in the quarter was I would characterize very solid. In the high single-digit rate. We feel very strong about the backlog of that business because it's continued to improve. The pipeline of opportunity is also accelerating. Align a little bit with the strategy we laid out at the beginning of the opening comments around our mission-critical and how a strong BMS controls offering for those particular specific verticals is really resonating well with the customer, and we think we can continue to improve that business nicely over the next few quarters. Operator: Thank you. The next question goes to Jeff Sprague of Vertical Research. Jeff, please go ahead. Jeff Sprague: Hey, thank you. Good morning, everyone. I want to come back to the new products, Joakim. You know, it's just kind of an interesting house. Sensitive this market is. Right? You might argue your stock has been weak year to date because NVIDIA scared people about warm water cooling. You know, and here you are with, you know, an offering. Right? So you know, clearly, you're in the loop on product development. You mentioned reference designs. Maybe just for the benefit of all of us, just you know, a little bit of more detail on you know, where you sit sort of the technology path, the forward planning, understanding what's coming down the pike and, you know, how you're you know, we're not surprised by this, but in fact, we're prepared. Joakim Weidemanis: Yeah. So I can't hey. Good morning, Jeff. I won't comment on specific product launches in the future. But the reference design that and there are two documents. That we guides that we issued to the market. And these reference designs, for those of you who don't know, they're really for the benefit of data center designers and operators. As they're working on designing the next generation of data centers. And that kind of work, you know, we did a lot of work with NVIDIA and some of the guides that we published here is in collaboration with NVIDIA. Of course, beyond those documents that we publish, an element of how we work in this industry is we essentially, every other week, have large engineering teams from our largest customers, Colos and hyperscalers, who sit with us in our innovation center in JEDEC in Pennsylvania. To collaborate on, you know, what the next generation of designs should be based on the learnings so far. And that helps feed our innovation pipeline. And it's really an excellent way where we can combine our deep technological know-how and thermal management represented by our very talented people in that innovation center. With the people who are actually using the products from our customers and then apply the technologies that we have in more and more competitive solutions. And so you saw a couple of launches here earlier this week. At the big show that's ongoing as we speak here. And we have a significant roadmap behind that. And as you remember, we play in three categories in data centers when it comes to thermal management, chillers, air handling units, mainly through our silent air franchise, but beyond that as well. And then we entered CDUs, and then, of course, we're in the controls system as well. And so there's a lot more to come, Jeff, and we'll keep you posted as we launch these new products. Jeff Sprague: Great. Appreciate that. And then maybe just a different thread here. Just on the, kind of the portfolio review, Joakim, that I would assume that's still ongoing, but it also looks like the retail business did not close yet. I thought that was sort of pending and close to being done. Maybe the stuff that you've already publicly identified to go, where are we in those processes, and any other update would be appreciated. Joakim Weidemanis: Yeah. So we continue I think I've commented on that in the past, but we have undertaken a thorough strategic review of our entire portfolio. You know, we've worked with the board and calibrated and aligned on what we think is appropriate. And to do, and that includes both how we can execute better as well as potential alternative futures. And we've commented on a little bit, you know, how big part of the portfolio that might entail. And, you know, the main driver here is to create shareholder value and so we continue to work on both improving execution and on the portfolio moves that we flagged in the past, and we'll keep you posted as we make progress on that. And I'm not gonna comment on particular ongoing transactions. We have not announced anything particular on retail. We are very happy that we closed the disposition of one of our residential monitoring security systems, as we continue to walk away, if you'd like, from that particular sub-segment of the market. Operator: Next question goes to Chris Snyder of Morgan Stanley. Chris, please go ahead. Chris Snyder: Thank you. I wanted to talk about the longer-term margin for the company. You know, I think when we look at the model, you know, we can see the SG&A as a percentage of sales is quite high compared to competitors. So I think it's understandable the opportunity there. But can you talk about the opportunity on gross margin just because the company is already running above the industry, it seems like, on the gross margin line. So can you just kind of talk about entitlement there? What is the opportunity to kind of grow that into the coming years? Thank you. Joakim Weidemanis: Hey. How are you? Yeah. That's a topic we've discussed in the past. And our gross margins are running a little higher. That's some of our direct peers. I see opportunities there. I think we've discussed with at least with some of you and some of your events, the opportunity, for example, in footprint consolidation, in our manufacturing setup. And there's also an opportunity to continue to drive better productivity in our field on the service side of things. You know, you should think of the example that we've talked about in our the work we've done with the business system with our HVAC sellers where we've been able to more than double the amount of time they spend with customers and selling. And we have that kind of opportunity that we're already working on in a couple of our markets with our service team. So I still see a healthy runway to improve our gross margins. And then on SG&A, maybe, you know, on the A side of that, I mean, we are working away at just simply reducing our costs. You know, we are a smaller company than we were when we owned retail. And there continue to be cost reduction opportunities on the administrative cost of the SG&A. On the S side, and the R&D spend, within SG&A, you know, on the S side, I'll refer to the example with the HVAC sellers. We think we can decouple the future growth from top-line growth from the growth of the S cost by applying the business system, and exactly the way we outlined it in the example that we gave. You know? Basically, help our sellers help them do their job, double the amount of time they can spend with customers. And meanwhile, though, on the R&D cost, you know, our ambition is to significantly, and we have already this year in our plan, and it's embedded in the guide. Started to ramp up our spend in R&D, and that's going to continue to increase, at a very healthy rate. Here going forward, and we'll still be able to drive margin expansion because of the types of things that we're working on that I gave you examples of here. So still unchanged view versus what we've talked about in the past. I see no reason for us not being able to achieve the segment EBIT margins that our best-performing peers have. And I think over time, we should be able to even go beyond that. And, obviously, they are not sitting still. We recognize that, and they are extremely capable. We know that's a moving target. But our opportunities are plenty here. Chris Snyder: Thank you. I really appreciate that. And then if I could maybe follow up on labor availability. In the market and particularly how it impacts the service business. I mean, we're obviously, labor seems like it's still tight out there. When we see these orders and growth numbers, it feels like it will continue to get tight. You know, have you has there been any change from your perspective in the ability to kind of either recruit or retain service professionals? And is this becoming a growing competitive advantage for a company like Johnson Controls International plc who already has, you know, such a big technician base compared to some other smaller competitors or upstarts in the market? Thank you. Joakim Weidemanis: Sure. I think the availability of service labor has been a topic for the last fifteen years. So that's it's hardly a new phenomenon. And that's why, you know, so many companies, including ours, you know, have been working on for several years, but now we've accelerated. On looking at how we can make our teams that we already have in the field much more productive. And, again, you know, think the example of how we can double the amount of time the salespeople spend with customers. We can do the same thing and we're working on a similar thing with our service team. And that's process work, but it's also in a much better way leveraging, you know, the connected installed base that we have. And you reconfigure a little bit how work is done field versus the office. So there's plenty of opportunity lots to go out there. Now we do have, like you pointed out, a significantly larger field force than many of our peers. And that is an advantage we want to make sure that we make them more capable, more productive, but we're also wanting them to provide even more value to our customers. So over the next couple of quarters, you know, we're working on a number of service products offerings that we don't have today that we'll be launching to the market, and you'll hear more about that in the future. So we're happy to have that advantage to be able to leverage, but we have to leverage it in a much better way doing the kinds of things that I was talking about here. Operator: Thank you. The next question goes to Julian Mitchell of Barclays. Julian, please go ahead. Julian Mitchell: Hi, good morning. I just wanted to start off with Slide nine and ten. Just to try and understand, I guess, the tie-in of the systems orders to the systems revenue. Because, again, with that very high order growth and your lead times of you've made good progress bringing those down. I would have thought you'd get some translation of that into revenue this fiscal year. So is it the case that the customers are specifically placing orders that are very long-dated? And I also wanted to understand what you used to call products. Is that still not in the order numbers on Slide nine and anything to call out with what's happening with products? Marc Vandiepenbeeck: Yeah. Thanks, Julian. So yeah, the backlog strain is very encouraging. But the mix of that backlog and the timing of the broader portfolio dynamic today only supports the mid-single-digit guide we're providing. I would say we started the year on the lower range of that mid-single-digit range. And I think we are gonna print the second half on the higher half of that range, the better half of that range. And if you look at the content of that backlog, all of it could be shippable, right, in the next twelve months. But a lot of it depends on customer availability and customer ability to accept that orders. And the way the dynamic works with some of our larger relationships is it's an ongoing conversation with those customers. The quicker they can take it, the quicker we can turn revenue. There's obviously at a certain level of growth, a capacity constraint, but we don't believe we've reached that capacity constraint just yet. There's opportunity to improve there. But overall, we think that backlog continues to support a solid mid-single-digit revenue guide. What I would say is if you continue to unfold that backlog beyond the next twelve months, I think we'll be very comfortable to start talking about a slightly better growth than what we've seen maybe in the prior quarter. Operator: The next question goes to Andrew Obin of Bank of America. Andrew, please go ahead. Andrew Obin: Yes, good morning. Can you hear me? Joakim Weidemanis: Hi, Andrew. Yes. We can. Thank you for asking. Andrew Obin: Yeah. Good morning. Yeah. Of course. Just a question. I mean, clearly, improving throughput has been a key KPI for you. And, you know, I think I'm trying to figure out this order thing as well. Should we think that there is a relationship with freeing up more capacity and your ability to take more orders in the near term? Joakim Weidemanis: Yeah. Absolutely. So and on the capacity, you know, we made significant investments in physical plant and machinery before I joined the company. And so we more than tripled our physical capacity. And then with the lean work, the business system work, you know, there's an opportunity to keep expanding that capacity materially, very materially, without having to spend the same amount of capital. You know, we may need a little bit of capital here and there, but nowhere close to what we've spent in the past. When larger customers are negotiating or looking at placing larger orders for, you know, a number of data centers that they're planning over the next couple of years, one of the factors they do look at in vendors is their ability to deliver. And it's the reliability of proof points and the ability to turn things around quickly. That doesn't mean that they need things, you know, in six weeks from now. They're simply very super realistic about their own ability to plan ahead and manage all the construction work and so on. So they know that their plans may change as the project progresses, and then they need a partner who can react quickly and be flexible. On the factory side. So that's kind of where both the capacity, the lead times, and the reliability of the on-time delivery come in. So, yeah, it's definitely part of a competitive advantage in this game that we're playing. Andrew Obin: And just a follow-up question on slide six. I mean, clearly, you're highlighting this product introduction. I think a lot of us were in Vegas and saw specifically YKHT product. I think it's very important for you in leapfrogging the competition. Are you starting to are we seeing the impact of these product introductions on your orders this quarter, or is this still in the come? Joakim Weidemanis: I think there's it's very minor in the orders that we've taken so far. So it's more about what's to come. And by the way, those launches I did get a note from the team, so thanks for stopping by and spending time with our team there. All those new products, I mean, they are a result of the work that we do together with our customers. You know, I alluded to it earlier this morning. You know, we have large engineering teams coming in from our customers and that sit with us for a week, ten days, and so we're creating the new product roadmaps, you know, basically off of what they have learned by applying ours and other people's products. And so that's why we're so excited about the launches that we have because we know that these precise needs are there, and we will be able to see that in our order entry. I expect, you know, already here ramping in the quarter we're in already. Operator: The next question goes to Joe O'Dea of Wells Fargo. Joe, please go ahead. Joe O'Dea: Hi. Good morning. Just on the capacity expansion and the tripling of physical capacity, and is that specific to chillers or includes air handlers? Just any specificity around it in kind of global versus Americas? And then, you know, really just in terms of the fixed cost impact that that has today, any quantification of a burden today and sort of how you see that improving, you know, over the next twelve months or so? Joakim Weidemanis: The good question. The answer is that you know, we have had invested in capacity across the board. Meaning chillers, air handling units, and because of the investments in the air handling units capacity, we also made room for the CDU business that we launched into here a couple of quarters ago. The fixed cost aspects of those investments have already been in our run rate for more than a year. Joe O'Dea: And presumably, that's a tailwind kind of each quarter. In terms of utilization. Marc Vandiepenbeeck: It creates leverage opportunity as the volume comes in. Absolutely. Yeah. Joakim Weidemanis: Yeah. And as we continue to work on the lean work to eke out more capacity without adding fixed cost. Yeah. Operator: Thank you. The next question goes to Andy Kaplowitz of Citigroup. Andy, please go ahead. Andy Kaplowitz: Hey, good morning, everyone. Andy. I think good morning. I think Fire and Security markets, I think you said were up, like, low single digits in the quarter. As you know, a lot of those businesses are short cycle. So are you seeing an improvement in sort of more of your short cycle market these days given where the global economy is and specifically The U.S. Economy looking a little better? Joakim Weidemanis: Say there's no material change in the markets. I think the change, you know, that we are working on operationally is what you heard me talk about. I talked about the HVAC seller capacity time with customers and so on. That kind of work, you know, we've embarked on in the other parts of the company as well. And then for those the fire and security businesses, we're also looking over how are we where are we specifically pointing the effort, at what parts of the market, and trying to help that team, you know, just be more clear about, you know, our priorities and making sure that we're behaving in the way and pointing the effort at the most attractive parts of the market. So I like I mentioned before, when I got the portfolio question, we're regardless of what the outcome is on the portfolio, we're making sure that you know, we improve the execution, the operational performance of all parts of Johnson Controls International plc. Andy Kaplowitz: I think that's helpful. And then maybe I just wanna the sort of capacity question in a different way. Like, obviously, you're getting larger orders now. To become a bigger part of the portfolio. I assume they're competitive on pricing, but what's your ability to scale these projects themselves? I mean, maybe you have 50 chillers or a 100 chillers in each of these orders. Can you get better margin on these individual projects? Moving forward? Joakim Weidemanis: In terms of our ability to scale, there are no we have no major bottlenecks at this point in time, at least. And to some extent, you know, larger orders have always been part of if we talk about data centers, but by the way, on the pharma side that I commented on in some of the prepared remarks here too. Some of those factory build-outs are also significant, you know, projects. So that's not a new phenomenon. And the capacity build that I talked about, it isn't just the physical facilities. It's also, you know, the resources around that. Project engineering teams, project management teams, and, you know, capabilities like that. So we have made those investments as well and are working on improving our ability to get more out of those teams, and it's the same lean principles we're applying in those teams as we're applying in the factories. On the margins, I mean, these are of course, discussions where, obviously, their customers ask for multiple bids. But then also, you know, there's an ongoing discussion as you heard of they send their engineering teams. They sit with our engineering teams, and we're trying to come up with solutions that really offer real tangible value, cost less energy consumption, more cost savings, and things like that. And as we do that work, we, of course, look at opportunities for us to also be very, very cost competitive. So there's no particular margin headwind coming out as if that's the question. We don't see that at this point in time. Operator: Thank you. The next question goes to Joe Ritchie of Goldman Sachs. Joe, please go ahead. Joe Ritchie: Thank you. Good morning, and thanks for fitting me in. So Joakim, you sounded know, obviously, very happy about the record order quarter. Sounds like you're pretty sanguine on the pipeline as well. If you could maybe just characterize what the pipeline of orders looks like today versus maybe three to six months ago, and then also, as you kind of think about your data center customers, has there been any real discernible shift in, like, colos versus hyperscalers and where you're seeing demand growth today? Joakim Weidemanis: Pipeline continues to remain very healthy. And healthier. We are also doing I should and it's not that things are just falling in our laps. You know, we're working with our sales teams around the world. So in addition to the example I gave you about the double mean the amount of time that our HVAC sellers in one region are spending with customers. You know, we are also in the process of rolling out a very pragmatic pipeline management approach, which basically aims to help and teach our sales leaders and our sales individual sales contributors on how to more effectively plan and spend their time. My experience, having done that a number of times with what tends to happen is that, you know, you just get better pipeline growth. And over time, you're positioning yourself for even better order growth. So that's on the pipeline. And, of course, the result of and I alluded to in my prepared comments here, being much, much more deliberate with our teams about which parts of the market we wanna go after versus maybe not as important that has that has an impact as well. So as you shift your effort more to parts of the market that have healthier growth rates, your mix of your pipeline and order entry, of course, changes as well. Marc Vandiepenbeeck: And then colos versus hyper. Joakim Weidemanis: Yeah. I mean, there are incremental changes in how certain hyperscalers or colos approach how they do business and how they buy and who they partner with and so on. But there look. There are no real material changes in how the big players are behaving. I think as a result of our growth in the future, it started to, but more in the future, we'll come from also from Asia Pac and Europe. And the mix there of hyperscalers versus, let's call them local players, local colos, is a little different than in The United States, not materially different. So I think if anything, you know, our data center business is gonna broaden. And I think that's a good thing. Operator: Thank you. This concludes our Q&A session. I will hand the call back over to Joakim Weidemanis for any closing comments. Joakim Weidemanis: Thank you, and thank you for all your questions today. And thank you for those of you who visited our booth at AHR. We certainly kept our team on their toes there. So but great to have you and host you there. This quarter's results reflect the momentum that's building across Johnson Controls International plc. As our teams operate with greater clarity, discipline, and consistency. And we're seeing those improvements show up in how we serve customers and in the strength of our results. As you can see. I want to thank our 90,000 colleagues for their commitment and energy, your focus, and ownership are what give me such confidence in our opportunities ahead. Thank you for joining us today. But I look forward to continuing my conversations with all of our stakeholders. Operator: This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: Greetings. And welcome to Azenta, Inc. Q1 2026 Financial Results. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the star followed by one. As a reminder, this conference is being recorded Wednesday, 02/04/2026. I will now turn the conference over to Yvonne Perron, Vice President FP&A and Investor Relations. Yvonne Perron: Thank you, operator, and good morning to everyone on the line today. We would like to welcome you to our earnings conference call for the 2026. Our first quarter earnings press release was issued before the open of the market today and is available on our Investor Relations website located at investors.azenta.com in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. Please note that effective 2025, the results of B Medical Systems are treated as discontinued operations. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the Safe Harbor Slide on the aforementioned PowerPoint presentation on our website, and on our various filings with the SEC, including our annual reports on Form 10-K, and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures which are used in addition to and in conjunction with results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance but when considered with GAAP financial results, and the reconciliation of GAAP measures, they provide an even more complete understanding of the Azenta business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, John Marotta, and Executive Vice President and Chief Financial Officer, Laurence Flynn. We will open the call with remarks from John, then Laurence will provide a detailed look into our financial results and our outlook for fiscal year 2026. We will then take your questions at the end of the prepared remarks. With that, I would like to turn the call over to our CEO, John Marotta. John Marotta: Thank you, Yvonne. Good morning, everyone, and thank you for joining us today for our first quarter earnings call. As we start fiscal 2026, I want to acknowledge the focus, discipline, and execution our teams continue to demonstrate across Azenta. Their commitment to serving our customers and continuously improving how we operate is central to our momentum and is driving meaningful progress across the business. Because of their efforts, we are entering the year well-positioned for continued success. Together, we are building a stronger, more agile, and high-performing Azenta. As I've said before, our turnaround continues, and it will not be a straight line. No turnaround is. After establishing a stronger organization and structural foundation last year, we are accelerating efforts to streamline processes and elevate performance. While macro conditions remain mixed, we enter the year with a much stronger foundation, clearer accountability, and a sharper strategic focus. This is the playbook for a successful turnaround, and I am confident in the path we are taking. Our priorities for 2026 are clear: embed operational excellence throughout the organization, accelerate growth, expand margins, and strategic and disciplined capital deployment. These are the pillars that will drive Azenta to outperform the market and deliver long-term value creation for our customers, employees, and our shareholders. In the first quarter, organic revenue declined in line with our expectations, down approximately 1%. As we discussed last quarter, our outlook incorporated continued uncertainty in the macro environment, particularly around capital spending, and academia and government funding. And those dynamics largely played out as anticipated. From a market perspective, conditions remain uneven. Capital spending decisions continue to be cautious across parts of the life sciences ecosystem. We see positive momentum across Europe, and while the US is still slow, we are cautiously optimistic with improvement in the capital markets as well as renewed M&A activity. Bookings during the quarter were impacted by weak capital spending and the government shutdown at the end of the calendar year. While this is causing timing shifts, we expect these orders to be recognized in future quarters and do not anticipate it to impact the full-year results. Over the coming months, we expect greater clarity around government academic funding, which we believe will offer greater stability across end markets broadly. 2026 is shaping up to be a transitional year for the life sciences sector. With macro conditions and sentiment being mixed, yet the underlying industry tailwinds remain consistent. Last year, we demonstrated Azenta's ability to deliver on our commitments even in a challenging environment, proving that we can execute with discipline and precision. These strengths provide a solid foundation as we advance our turnaround initiatives this year. We anticipate acceleration in 2026 as delayed approvals are processed, capital investment ramps, and our growth investments begin to take hold. Importantly, the current environment highlights why Azenta is the partner of choice for life sciences customers navigating complexity and change. Our differentiated solutions and deep expertise uniquely position Azenta to help our customers optimize operations, accelerate innovation, and manage resources more effectively. We are the trusted partner for organizations seeking scale, reliability, and differentiation with an expert team that knows the science, understands the workflows, and delivers results for our customers. The combination of expertise, technology, and operational discipline enables Azenta to turn challenges into opportunities. Operational excellence is the engine behind everything we do. The Azenta business system continues to guide how we operate, driving measurable improvements in on-time delivery, quality, and productivity across operations, commercial, and support functions. During the quarter, we advanced ABS deployment through Kaizen's daily management routines and problem-solving that are taking root. Teams across the organization are embracing a continuous improvement mindset, proactively identifying opportunities and shaping solutions that enhance efficiency and execution company-wide. ABS is not just a set of processes; it's a differentiator for Azenta, enabling sustainable, scalable, operational excellence that supports both growth and margin expansion and reinforces our ability to deliver for our customers and our shareholders alike. We also continue to benefit from the simplified and decentralized operating model implemented last year. Clearer accountability at the operating company levels supports faster decision-making and more disciplined execution. Productivity gains are being reinvested in line with our priorities, including commercial excellence, innovation, and customer-facing capabilities. Our core growth investments in scaling biorepositories, regionalizing gene synthesis, and investing in technology and automation are gaining traction. During the quarter, we announced the definitive agreement for the sale of B Medical, which is expected to close on or before March 31. This transaction further sharpens our focus on our core portfolio of differentiated solutions and enhances our financial flexibility, supporting our strategic approach to future capital allocation. Combined with the $250 million share repurchase authorization announced at Investor Day, these actions reflect our ongoing commitment to delivering value to our shareholders while strategically deploying capital. Let me cover a bit more in the first quarter performance and our full-year outlook. As expected, on a year-over-year basis, organic revenue declined approximately 1%. Within Multiomics, next-generation sequencing and gene synthesis showed growth, reflecting continued customer demand for advanced workflows and the value of our differentiated solutions. In sample management solutions, we saw solid growth in biorepositories, demonstrating strong execution and sustained customer adoption. While our automated solutions line remained under pressure, particularly in stores, due to ongoing budget constraints. As I've said, turnarounds are never linear and may be lumpy. In the quarter, we faced higher costs in automated stores on late-stage projects related to quality issues that remained from last year. We're working closely with our customers to make it right and expect to lapse these issues post the second quarter. In Multiomics, we experienced regional mix dynamics with softness in North America leading to lab inefficiency. We are taking decisive actions to address these pressures. We expect margins to improve as we progress through the second half of the year and execute on the transformation of our company. Laurence will go into more detail on our quarterly financial performance. Lastly, as you know, we do not guide quarterly. Our operating rhythm in the business is to drive performance monthly. Yes, our job just got harder. And looking ahead, we are committed to our full-year 2026 guidance of 3% to 5% organic revenue growth and adjusted EBITDA margin expansion of approximately 300 basis points. While macro conditions remain mixed, we view 2026 as a transitional year for the sector and we are confident that our initiatives, including the revamped commercial engine, strong leadership, and disciplined execution, will gain traction as the year progresses. With that, I'll turn it over to Laurence to walk through the financials in more detail. Laurence Flynn: Thank you, John, and good morning. I'll begin with our Q1 2026 fiscal results and the key financial drivers, then cover segment performance, our balance sheet, and fiscal 2026 guidance. Today's results exclude B Medical Systems, which is classified in discontinued operations unless stated otherwise. During the quarter, we recorded an additional $10 million non-cash loss related to assets held for sale. As communicated in December, we expect the sale to close on or before 03/31/2026. To supplement my remarks today, I will refer to the slide deck available on our website. Turning to Slide three, Total revenue was $149 million, up 1% reported and down 1% organically with a 2% headwind from foreign exchange. Results reflect mixed performance across the portfolio with strong growth in biorepositories and next-generation sequencing, partially offset by softness in our capital-intensive businesses. Overall, these trends are consistent with our initial expectations for the quarter and reflect the impact of the continued uncertainty in the macro environment. Non-GAAP EPS for the first quarter was $0.09. Adjusted EBITDA margins were 8.5%, down approximately 230 basis points year over year, impacted by pressures in gross margin. Despite this, we remain confident in the opportunity for margin expansion in 2026 and beyond. We are focused on leveraging disciplined cost management while optimizing operations as we continue transforming the company. Free cash flow, including B Medical, was $15 million for the quarter, driven by increased customer deposits and deferred revenue, partially offset by usage in working capital. We ended the quarter in a strong financial position with $571 million in cash, cash equivalents, and marketable securities, an increase of $25 million quarter to quarter. This provides us with the flexibility to deploy capital and return value to our shareholders as we progress through 2026. In December 2025, our Board approved a $250 million share repurchase authorization. We remain committed to maintaining financial flexibility to support disciplined, strategic capital deployment that drives long-term value creation. Now let's turn to slide four to take a deeper look at our results in the quarter. Total revenue was $149 million, up 1% reported and down 1% organically, with a 2% headwind from foreign exchange. Multiomics was supported by next-generation sequencing, which contributed to year-over-year growth, as well as gains in gene synthesis, which was partially offset by continued softness in Sanger sequencing. Within Sample Management Solutions, growth in biorepositories and consumables and instruments was offset by a decline in automated stores and cryo. Overall, these trends are consistent with our expectations reflecting macro uncertainty. Turning to gross margin, we delivered 44.1% for the quarter, down 360 basis points versus the prior year. The decline was primarily due to underutilized lab capacity driven by lower North America volumes, coupled with additional costs related to rework on several automated storage projects. Despite these headwinds, we continue to make meaningful progress on our ABS efficiency initiatives that position us well for margin expansion over time. Adjusted EBITDA was $13 million, representing an 8.5% margin, a contraction of approximately 230 basis points driven by the gross margin pressures I just described. Our operational transformation and disciplined cost management journey continues, as evidenced in the $5 million decline in SG&A year over year, and more importantly in G&A. Again, non-GAAP EPS for the first quarter was $0.09 per share. With that, let's turn to Slide five for a review of our segment quarterly results starting with Sample Management Solutions, or SMS. Sample Management Solutions delivered revenue of $81 million for the quarter, flat on a reported basis and down 2% organically. Growth in biorepositories demonstrated strong momentum with early wins in our commercial growth initiatives. This growth was partially offset by expected softness in automated stores and cryo, due to slower bookings from macro-driven budget constraints. Consumables and instruments delivered modest year-over-year growth reflecting steady demand and the ongoing contribution of these products to the overall portfolio. Turning to gross margin for Sample Management Solutions, we delivered 45.4% for the quarter, down 370 basis points versus the prior year. The decline was primarily driven by higher rework costs incurred on automated stores projects and the negative impact of a nonrecurring item. The incremental automated stores cost stems from quality issues that we have been addressing through targeted efforts with our customers. We expect our remediation efforts to be completed by the end of the second quarter and to incur a full-year estimated impact between $3 million to $5 million. Turning next to the Multiomics segment. Multiomics revenue for the quarter was $67 million, up 1% on a reported basis and flat organically. Next-generation sequencing continues to benefit from strong customer demand. Gene synthesis growth was supported by strong oligo demand in China. These gains were offset by continued weakness in Sanger sequencing, which declined meaningfully compared to last year. Geographically, Europe and Asia performed strongly, supported by our commercial initiatives and improved execution, with China continuing to perform well with 26% organic growth. North America was softer, reflecting macro-driven budget constraints and the temporary disruption from the government shutdown, which impacted customer activity during the quarter. Multiomics non-GAAP gross margin was 42.6%, down 350 basis points year over year, driven by regional mix and loss leverage from lower North America sales volume. Next, let's turn to Slide six for a review of the balance sheet. As I mentioned, we ended the quarter with $571 million in cash, cash equivalents, and marketable securities. We had no debt outstanding. Capital expenditures for the quarter were approximately $6 million, reflecting continued investment in automation, capacity expansion, and technology to support scalable growth. Turning to guidance on Slide eight. We are reaffirming our guidance for fiscal 2026 with organic revenue growth expected in the range of 3% to 5%. Multiomics is projected to deliver low single-digit growth, while Sample Management Solutions is anticipated to contribute mid-single-digit growth. We continue to expect the second half of the year to accelerate as our commercial investments and growth initiatives gain traction. On the profitability front, we are also reaffirming our target of approximately 300 basis points of year-over-year adjusted EBITDA margin expansion, driven by continued operational efficiencies, disciplined cost management, and scalable operating leverage, as well as over 30% year-over-year improvement in free cash flow generation. Overall, we remain optimistic about the year's progression and committed to the full-year outlook. In closing, we remain encouraged by the progress of our growth initiatives and operational improvements. As we move through fiscal 2026, we remain confident that the strategic priorities outlined at Investor Day provide a clear roadmap to drive sustainable, profitable growth, and long-term value creation for our shareholders. This concludes our prepared remarks. And I will now turn the call over to the operator for questions. Operator: Thank you, sir. Ladies and gentlemen, if you do have any questions, you will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. If you're using a speakerphone, you will need to lift the handset first before pressing any keys. And out of consideration to other callers and time allotted today, we ask that you please limit yourself to one question and one follow-up. Thank you. And your first question will be from David Saxon at Needham. Please go ahead, David. David Saxon: Great. Good morning, John and Laurence. Thanks for taking my questions. So I wanted to start on the gross margin. So maybe can you talk about just your level of confidence in getting the SMS margins back to where you want them to be, you know, what's in your control versus, you know, impacted by maybe customer dynamics. And then just on the growth, sorry, EBITDA margin, you reiterated that 300 basis points of margin expansion here. I guess, what's your level of confidence that the GMOM mix is gonna be two hundred and one hundred basis points. OpEx looks like it was below what we were modeling. So does OpEx drive more of the 300 basis points this year? Laurence Flynn: Yes, David. Good morning. John Marotta: Good to be with you. Thanks for the question. So let me just pull us back for a second. Around, you know, what's happened since our Investor Day and just kinda talk through that. This will kind of lead into some of the answers to your question. So 18 stores that we had some quality issues. We're starting to lap some of those. We've got only a few more that we've gotta continue to go and solve for. A lot of this has been more noticeable this year due to what we've been flagging with the investor community around softness on the first half. So less of those tailwinds there. And then lastly, Azenta-specific developments is kind of this North America reboot commercially. Both in Multiomics and SMS. We had been we're way ahead on our reboot in Europe, in The Middle East, in parts of APAC, North America lags in certain areas. That's really kind of an update there. And market-wise, listen, slower than expected in North America. Government shutdown impact, that was pretty it's pretty well understood right now. Sanger continues to slide from an end market perspective, and you've got some geopolitical instability. I think in terms of our confidence, we're continuing to reiterate our guidance for the full year. What I can tell you is, yes, our job just got harder on the margin line. But that's our job. We're pulling some hard levers here. We're gonna continue to do that. We've been very clear that we're not managing this business on the quarter. We're not going to do that within the three years of our turnaround that we've signaled very strongly at our Investor Day, so we're confident. And I'll let Laurence get into those particulars of that, David, but thanks for the question. Laurence Flynn: Yeah, David. This is Laurence. Maybe let's just talk a little bit about Q1 and give you a bit of a breakdown. So as you know, adjusted EBITDA was 12.7 in the first quarter, or about 8.5%, which was down $3.3 million versus prior year. So, broadly, the decline of the components of the decline were $2 million related to the store's quality issues that John talked about. Really, we anticipate these quality issues to be fixed by the '2. Secondly, there's about a million dollars related to some of the lab inefficiencies that we saw, particularly in North America. As you saw from a top-line perspective, we met kinda what we expected, but certainly the mix was leaning towards Asia than North America. So, certainly, that impacted some of our lab inefficiency in the region. And then lastly, there was about $700,000 in nonrecurring charges related to inventory adjustments. So when you look at that, those are kind of the broad strokes of the Q1 decline. One you know, what I'd say is particularly around your question on the myths on the overall profitability in the model, we still hold firm that gross profit would be around this 200 basis points in the GP side and a 100 basis points. And when you think about that, that's going to generally stem from half related to sales volume. As we talked about on Investor Day, there's a second-half ramp. We've always tried to telegraph that you know, we are fully aware that the first half would be softer than kind of our traditional phasing. Just because we are kind of putting all this growth investments in place. So, again, we're still holding to the 200 on gross profit, 100. Because of volume. ABS, lean productivity really kind of taking hold. And then price. David Saxon: That was super helpful. So thanks to both of you. And then my follow-up was just on capital spending in that academic and government group, I guess, can you characterize the conversations you've had with customers in those segments during the quarter and just level of confidence that that will improve and, you know, how that will drive North America demand and growth? So much. John Marotta: Sure, David. Yeah. Listen. Great conversations with those that end market in terms of customers. I think we so from a European perspective, really, really a lot of momentum in Europe and The Middle East. In the US, I will tell you there's a lot of green shoots. I mean, I think the back half, we still feel bullish on that. And the conversations we're having with our academic and government customers are confirmatory at this point. So good momentum there in North America specifically. Operator: Your next question will be from Matt Stanton at Jefferies. Please go ahead, Matt. Matt Stanton: Hey, thanks. Maybe just to go back to the second half ramp you guys talked about. I think you talked about for the acceleration in the back half, improvement in the approval process, capital spending ramp, and then growth investments. Could you just talk about level of comfort or visibility into some of those key drivers? And then on the gross margin side, I think you said of 2Q. So $3 million to $5 million was tied to some of these quality issues that will largely be done at the end that implied the absence of that headwind in the back half is kind of a 100 basis point plus step up alone to gross margins. Just wanna make sure I have that clear. Thanks. John Marotta: Sure. Let me just give you some context around capital spending. Again, we're feeling pretty confident that North America is coming back. We do think this is a back half story. You know, when we talk to our customers and more importantly, our sales team, we are driving a lot of conversations with our sales team at a high frequency. They're feeling pretty bullish right now. And a lot of the programs we're working on specifically in C&I instruments and stores, we continue to gain some momentum there. In terms of growth investments, as you know, our growth investments are specifically in feet on the street, innovation, some productivity gains, and just driving performance in those areas. We continue to ring-fence those investments. We are not coming off of those. We think that, as a part of our, you know, the transformation in the next few years, getting these growth investments now is gonna be pretty meaningful. Specifically, in R&D and innovation. I'm pleased with where the teams are in terms of where these investments have been made. Our hiring around that, and more importantly, to the roadmaps that the teams have on the product side. So pleased around that. Let Laurence talk about the second half ramp and give you some of the specifics there. Laurence Flynn: Yeah. Hi, Matt. So when we look at overall EBITDA for the year and the 300 the road to the 300 basis points, it's $22 million incremental year on year. And particularly, you know, we talked a bit about with Dave about this kind of 200 basis points, 100 basis points 200 basis points in gross margin, a 100 basis points in OpEx. When you look at the gross margin mix, it's driven by the sales volume. Half of it's gonna be sales volume, what John just talked about. Right? As our sales reps, particularly in North America, start to ramp, in the second half of the year, usually, you know, we brought in north of 25 reps. And usually, they take about three to six months to ramp. So that's kind of in our calculus. The other component in there is around ABS and productivity. Some of these topics we covered at Investor Day. Right? You know, we are having Kaizen events in our labs as well as our shop floors and manufacturing. And that's about 35% of the overall GM improvement. So volume's fifty. ABS is about 35. And then, certainly, we talked a bit about last earnings call is about our price initiatives. That makes up the rest of because gross margin improvement. And that price improvement is particularly focused around SRS, and our C&I businesses. We've put those in place really at the start of the calendar year, and that really starts a ramp in the second half of the year. Operator: Thank you. Next question will be from Mackie Tok at Stephens. Please go ahead, Mack. Mackie Tok: Hello, good morning. I appreciate you taking my question. Maybe just follow-up. I appreciate color on the back half ramp. But just given the performance in 1Q, you give us a sense of your expectations for top-line performance in 2Q? And then maybe your expectations around the cadence from 2Q to 3Q? Laurence Flynn: Yeah. Hey, Mack. So when we look at the second quarter, I you know, certainly, we've talked we first, let me step back and say, look. We're really not guiding quarterly. But when we look at overall revenue wrap, right, you know, again, it's weighted in the second half of the year. And those are really the components there. So you'll probably see an uplift in versus the first quarter but certainly, a lot of what we're gonna see in terms of growth is in the second half. John Marotta: Yeah, Mack. I mean, we can be helpful and give you some detail, but, again, I just wanna continue to reiterate this the fact that we're just not gonna manage this business quarterly. We are taking a longer-term view on it. And our growth investments continue around sales, marketing, and R&D. That's gonna continue to ramp nicely. Gonna drive that gross margin improvement over time. Gotta get some more volume in here. And then I think once North America comes online, we're gonna be clicking on all cylinders. We're not right now. But that's the journey. I mean, that's part of a turnaround. So we'll be helpful there when we connect here later. Operator: Did you have a follow-up, Mack? Mackie Tok: I appreciate it. I'll leave it there for now. I appreciate you taking my questions. Operator: Thank you. Next question will be from Vijay Kumar at Evercore. Please go ahead, Vijay. Mackenzie (for Vijay Kumar): Guys, this is Mackenzie on for Vijay. Thanks for taking the questions. First one, I know you called out the government shutdown impact in the quarter, but I was just wondering if you could speak to US academic a little bit more broadly specifically, how are you thinking about performance in this end market given that it seems like NIH budgets will be flat in 2026? John Marotta: Yeah. So in general, I think what we're seeing is a shift in some of the where the dollars are moving to in terms of universities based on larger projects. I mean, we're seeing a little bit of that. The customer base we have right now with the government shutdown, we saw some of the larger programs just frankly just standing still, and so there was no movement around that. That's been freed up. And so we're now supporting some of those programs. I think in general, things are settling down. There's a clear shift in where that NIH funding is going right now, and we're just continuing to support those programs. On balance, the team is really highly focused on pharma and biotech. I mean, we've always been highly focused on that. I think we continue to do that. Over time. We're always supporting our academic customers and the universities. We think that there's an opportunity specifically with the pressure on Core Labs. And driving productivity on Core Labs, we think that our multiomics business is well-positioned to continue support the Core Lab is in the pressure on getting more research out, getting more data out, and so we're doing that right now. We feel pretty good about that. I think that's gonna continue on, Mackenzie, but thank you for the question. Mackenzie (for Vijay Kumar): Thanks. That's super helpful. And just to follow-up on that, you talked a little bit about your pharma and biotech customers. What are you seeing from these end markets right now? Is pharma continuing to accelerate? And your peers have talked a little bit more about seeing some positive sentiment from biotech customers. Are you also seeing something similar? Or what should we expect in the latter half of the year? John Marotta: We are. What I would characterize that end market is there's more clarity there than last year. What do I mean by that? So a lot of restructuring, a lot of there was uncertainty around what programs were gonna continue and what programs were gonna they were gonna double down on and invest behind. I think we've got, you know, our team and the conversations we're having from those customers is clarity. Here's what we're doing. We're moving forward in this direction. And we're clearly seeing that in most of the segments of the in our business. Operator: Thank you. Ladies and gentlemen, once again, a reminder to please press star followed by one if you have any questions. Thank you. Next question will be from Andrew Cooper at Raymond James. Please go ahead, Andrew. Andrew Cooper: Maybe just one more kinda nitty gritty on some of the extra cost here on gross margin. So you call out the $3 to $5 million. 50 to 80 basis points or so. Where do you think you can find some of the offset there to achieve the 300 basis point expansion? I know you talked about the job being harder, but where are some of those places that you're looking to find that little bit extra room, or pull it a little bit forward from fiscal '27, and how do we think about kinda what that looks like? Laurence Flynn: Yeah, Andrew. Thanks for the question. So you know, a couple of things that we have in our favor. And John's right. You know, our job got a little bit harder but we're certainly pulling additional levers. And let me be more helpful on that. Certainly, as we see the second half increase in volumes, particularly around North America, generally, we'll get a better mix. That's number one. Secondly, around ABS and productivity, certainly areas like Kaizen events, in the labs and manufacturing we've actually seen some really good results preliminary that we expect to read through. Other areas such as automation in our biorepositories are being accelerated to help us look at some recoveries. The one thing I would say in a step back is that one of the things we did in fiscal 2025 was to put managers, general managers in place of these businesses. And that's really helped us get laser-focused on operations and optimizing processes. One more two more items I think, you know, we're addressing more acutely is around our fixed cost in our Sanger business. And then finally, in really accelerating opportunities around indirect cost savings. Some of the workshops we run in the last couple of weeks have actually been yielding meaningful opportunities for us to attack it. So, certainly, these have always been in our portfolio of levers to optimize our margin but with some of the particularly the quality issue, we've really started to accelerate these initiatives. Andrew Cooper: Great. And then maybe just a little bit kinda higher level one. You know, in the past and at the Investor Day, you've talked about the notion of leveraging bundling a little bit more and kind of cross-selling within segments as opposed to necessarily across. Just would love a little bit of an update there. I know it's a noisy end market environment. Kind of across the board right now, but how have those conversations gone as you talk about trying to drive kinda more of that breadth of portfolio at an individual customer level? John Marotta: Sure, Andrew. So what I would say from a customer perspective, a lot of that bundling is basically within the segments. Okay? So let me be more helpful. Specifically around kind of let's go from a multiomics perspective. The one-stop shop is really important to customers where they can we can read and write genes for them specifically. That bundling is going very well. I mean, from a customer perspective, it's ease of use. We're working on more. We've made more investments, specifically around UX and UI to make that journey a little easier for customers to bundle, using our e-commerce platform. So those investments are in flight. Where we continue to see a lot of strength is in our C&I business, continue to bundle. Instruments and consumables there. We're also seeing bundling with our stores. I mean, if you look at these stores, some of them are 2 to 10 million sample opportunities. Our customers are using our consumables with those. We see high attachment rates in service. I think the teams have done a really nice job in bundling within the segments. That is where our focus is because there's so much there. We don't wanna confuse the organization and bundle up really across the segments right now. There is an opportunity in academic and medical there, but it's an opportunity that we think will solve in different ways. But right now, commercially, we're focused in the segments similar with SRS, our biorepository business. That team has done an excellent job of bundling more product solutions for our existing customers. As you know, we do a real we've got high market share in active clinical trials. And we're doing a lot in manufactured product and some other areas right now. So I'm very pleased with this. I mean, our breadth and our ability to continue to solve some of these issues for our customers where they wanna do business with what's clear to me is pharma and biotech, they're consolidating suppliers. But they wanna do business with partners that are high quality, give them a fair price, but give them a broader reach of products and solutions and we're clearly meeting those needs right now. So hope that helps, Andrew. Operator: Next is a follow-up from Matt Stanton at Jefferies. Please go ahead, Matt. Matt Stanton: Hey. Thanks. One on capital deployment. Think the message prior was likely you're unlikely to do deals before B Medical was completed. Now that that's set to hopefully close here shortly, the agreement is in hand. Maybe, John, just talk a little bit about actionability, the funnel, any more color on size of deals. And I know historically, share repurchase have been kind of down the pecking order for capital deployment. But with the $250 million authorization out there, you know, post the Analyst Day, any shift in appetite around repurchases? Thanks. John Marotta: Yes, Matt. So a couple things to think about. We are constantly comparing our you know, we talked about before is our four levers for capital deployment around gross margin productivity. Growth, specifically M&A and share repurchase. All of our three levers we always compare to buybacks. And we're gonna be pulling all these all four of these levers throughout this journey in the next few years. I can tell you that. And in terms of actionability, we are very busy around M&A right now, and we're very excited about what is in our hands right now. We're gonna continue to put our capital to work in this area. But, again, I think you're gonna see us pull all four of these levels levers. I've mentioned this before. But it's worth repeating. We want our investors to come away and say, hey, listen. These guys are good operators. They've got a grip on the business. Yes. There's not a lot of linearity to turnarounds. But we understand it. They're calling balls and strikes, and they're very straightforward about the journey we're on on the operating side. On the capital allocating side, we also want our investors to come away and say, hey. They're very thoughtful capital allocators. They understand how this works, and we're always looking at those returns versus share repurchase. You know, last point on is I think you're gonna see us pull all four of those levers. Operator: Next question will be from Paul Knight at KeyBanc. Please go ahead, Paul. Paul Knight: Hi, John. As you remediated these automatic stores, QC issues, and I think it's what two left out of 18. Or, these permanent fixes, was there a commonality of what you saw in so you know, is this kinda behind us now? John Marotta: Yeah. Paul, good to hear from you. A thoughtful question. So couple things to think about. I mean, we have been we have been really dealing with this issue since we started. Okay? When we started getting the business, we weren't meeting our customers' needs. 18 stores issues. So that's the last few years of sales we've had these problems in. And, you know, bluntly, you're not delighting your customers, what are we here to do? So we attack this head-on. All 18 of the stores understanding what were our offsets, what do we have to countermeasure, and how do we go out and delight our customers. We've been spending a lot of money around that. I've been personally meeting with our customers all of them, around these stores. So that was the first thing. Is what was the specific issue? How do we go solve that real-time for our customers and get them operational? The second is what is the permanent fix in which we're doing this from a design perspective? I can tell you we've got great R&D teams. Okay? So what was the issue ultimately? We had too much demand. The teams were being stretched, and we weren't structurally aligned around serving our customers. What do you have to do there? First thing is structurally align yourself to go win for the customer. One, is around new product development. Two is around POC. That business is a POC business. Percentage of completion. And three around sustaining engineering. We have restructured that R&D team. We have teams that wake up every day around MPD, MPI, POC separately, and sustaining engineering. Okay? That was the big step that we've made. There's some tweaks on the design side. All of that has been implemented. And I'm pleased to say that moving forward here, ADS has really helped us specifically around getting line of sight on this POC, getting us more in control, and going out and delighting our customers and putting our best foot forward. So we've done that. We are lapping that. Listen. There's always a cost of poor quality. Whether that is you delay your NPI projects, whether you are not meeting the customer's needs from a brand perspective, but we have gone in and we're meeting those customers where they are today. I've personally met with them. And it just is part of the turnaround journey, Paul. But I'm very, very pleased that how the team has responded. I mean, that's the mark of a good organization is how do you respond. This adversity. How are the customers understanding this? And are you making it right? The bottom line is we're doing that right now. So we're lapping it. Some of these have taken more time than we expected. But we've got a grip on that right now, and there's clear line of sight there. So hopefully that helps, Paul. Paul Knight: Yeah. Last question would be Sanger is down, but what was the growth of NexGen? And is the increasing accuracy of NexGen really one of the reasons why Sanger finally is, maybe shrinking as a part of market? John Marotta: Yeah. You know, this Sanger we've been we've been talking about Sanger for a while here. I'd rather not, but let's address it. So the next-gen plasma EZ, I mean, that is a mid-single-digit grower for us. We worked doubling that size of that business. We told the team and we invested heavily behind it, said this shouldn't be a hobby for us. We have a broad footprint 4,000 we've got 4,000 drop boxes globally. We should have been investing in this earlier. We are now very heavily, and we're growing it nicely. So we're doubling our growth there. That's one part of it. Sanger, as you know, I mean, I have to tell you, Paul. I've been out, talked to a lot of customers. I've talked to a lot of our sales reps. We're triangulating in on this. It's not going away. There's a clear need from an end market perspective and a customer perspective with Sanger. Then the question is, where's the bottom and how do you right-size your cost structure? The bottom line is we don't know where the bottom is yet in Sanger, but we are rightsizing our cost structure around that. So I would tell you that's more on the come. But in general, we're well aware of what's going on in Sanger, and more importantly, we're more focused around growth in terms of that plasma EZ to offset that. I'll tell you the team's done a nice job there. You know, it was an area bluntly where when we came into the business, last year, said, what's going on here? You know? We need to be investing heavily here, and we've done that. Operator: Thank you. Next question will be from Brendan Smith at TD Cowen. Please go ahead, Brendan. Brendan Smith: Maybe just first, actually, on the regionalization of multiomics and NGS services. How should we maybe think about impact to margins there relative to kind of what you're doing in biorepositories and automated stores just over the next couple of quarters? Especially in the context of your commentary on margin expansion this year, really just trying to kind of understand the relative pushes and pulls, I guess, across segments as you're restructuring. And then I have a follow-up. John Marotta: Sure, Brendan. Always good to hear from you. So Laurence can get into the particulars around this, but all of that's forecasted good line of sight into what we wanna do there. From a regionalization perspective, specifically around synthesis. I mean, we're very pleased with how we are moving into that strategy right now and executing on that strategy. I think you're gonna be hearing more about that in the coming months. You know, our gross margin, we make we do well. I mean, that's a 65 plus gross margin product category for us. You know, we're seeing some North America share loss in synthesis, but we're also seeing some traction in certain areas right now in North America. So there's a bit of an offset right now. Specifically. I think you're gonna see gross margin improving in certain areas because of our automation investments, but some of the technology side that we've got in our hands as well. So more to come on that. Specifically. Laurence Flynn: Yeah. Brendan, I you know, certainly, really pleased with what the China team is doing. But when you look at kind of the dynamic of Asia and North America there, lower margins in total for multiomics. As we talked about, certainly, we've got a North America sales team reboot here. Certainly will read through in the second half of year. So you're gonna see a significant ramp in North America, which really does translate to a higher gross margin profile overall. Brendan Smith: Great. Thanks, guys. And, actually, you just took question out of my mouth. Just on the NGS strength in China, I think you noted 26% of organic growth there, if I'm not mistaken. So can you just quickly maybe give us a sense of what you're seeing that's kind of underpinning that? And if you expect kind of growth at that rate to continue over '26? Thanks, guys. John Marotta: You bet. Biotech and pharma are I mean, they're really we're seeing a lot of momentum in that segment. We've always been well-positioned because of our China for China brands, go to market, very regional. We show up. I mean, our China team is fantastic. If you look at kind of the framework that we look at, in our business in general, it's people structure, process, performance. That team is hitting on all cylinders. And so you're seeing that read through on the results right now, of course. In other regions, it's a mixed bag right now because we're in the turnaround. But our China team shows up really well with our customers in pharma and biotech. A lot of investment going into those end markets right now. As you know, geopolitically, I think and we've shared this with you all separately, but I think it merits a broader comment here publicly. You know, where I think geopolitically, there's a lot of focus around kind of 5G, 6G quantum AI, and semi biotech and life sciences. We're also seeing that read through. And China is very much investing behind that life sciences and biotech sector, and that's where our team shows up really, really well. Operator: Thank you. Ladies and gentlemen, at this time, we have no other questions registered. So I would like to turn the call back over to CEO, John Marotta. John Marotta: Very good. Thank you all. And first off, I want to thank the team as always. I mean, nothing gets done without our team showing up every single day, and we're really proud of the direction we're going in in our leaders here. As well as our individual team members. I wanna thank you for joining our earnings call today. In summary, we're continuing the work we're doing in the company-wide turnaround and transformation. This is an important journey we're on, and we're very excited about creating long-term shareholder value over the next few years. Thank you again. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.
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.
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.
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.
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.
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.
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.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fubo First Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ameet Padte, SVP of Financial Planning and Analysis, Corporate Development, Investor Relations. Ameet, please go ahead. Ameet Padte: Thank you for joining us to discuss Fubo's First Quarter Fiscal 2026 Results. With me today is David Gandler, Co-Founder and CEO of Fubo; and John Janedis, CFO of Fubo. Full details of our results and additional management commentary are available in our earnings release and letter to shareholders, which can be found on the Investor Relations section of our website at ir.fubo.tv. Before we begin, let me quickly review the format of today's call. David will start with some brief remarks on the quarter and our business, and John will cover the financials. Then we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws. These include statements regarding our financial condition, anticipated financial performance, expected synergies and benefits from our recent business combination, business strategy and plans, including our products, subscription packages and commercial agreements, market, industry and consumer trends and expectations regarding growth and profitability. These forward-looking statements are subject to certain risks, uncertainties and assumptions, which could cause actual results to differ materially from our current expectations. For further information, refer to the earnings release we issued today, our letter to shareholders and our SEC filings, all of which are available on our website at ir.fubo.tv. During the quarter, we closed our business combination with Hulu + Live TV. As a result, our reported results for the current period reflect the results of the Hulu Live business prepared on a carve-out basis for the period from September 28, 2025, to October 28, 2025, and excludes Fubo's results for this period. For the period from October 29, 2025, through December 31, 2025, the results include the combined Fubo and Hulu Live businesses. The reported prior year period fiscal Q1 2025 also reflects Hulu Live financials prepared on a carve-out basis and excludes the results of the historical Fubo business. To facilitate comparability between periods, we will discuss certain results on a pro forma basis, giving effect to the transaction as if it had been completed at the beginning of the first period presented. We will also refer to certain non-GAAP measures during the call. Please refer to our Q1 fiscal 2026 letter to shareholders available on our website at ir.fbo.tv for a further description of the pro forma presentation and reconciliations of these non-GAAP measures to the most directly comparable GAAP measure. With that, I will turn the call over to David. David Gandler: Thank you, Ameet, and good morning, everyone. Q1 marked our first as the owner of Hulu Live, and it validated the strategic rationale behind the combination, offering greater scale, broader distribution and improved economics. On a pro forma basis, over the past 12 months, the Fubo and Hulu Live businesses generated $6.2 billion of revenue and ended the period with 6.2 million subscribers in North America. This firmly establishes us as a scaled and relevant player in the Pay TV market and one focused on growing. On a trailing 12-month pro forma basis, adjusted EBITDA was $77.9 million. As a combined company, we believe there are meaningful opportunities ahead to unlock synergies and efficiencies that will support sustained growth and improved profitability. Since closing the Hulu Live combination in late October, our priority has been execution to expand reach, scale and monetization across all of our services. And just a few months in, we are converting strategy into action. We are nearing completion of Stage 1 of our integration plan, migrating Fubo's ad tech into the Disney ad server. Once live later this month, Fubo inventory will be sold alongside Disney+, ESPN+ and Hulu. We expect this integration to drive a meaningful uplift in both CPM and fill rates. Stage 2 of our plan is focused on the consumer. We've experienced strong market traction for our well-priced Fubo sports service. It resonates with value-oriented consumers and complements our broader content offering. Fubo Sports includes major networks such as ESPN, ABC, CBS and Fox, among others. Building on this momentum, we are pleased to announce that we are working with ESPN to include Fubo Sports in ESPN's commerce flow. Customers will be able to purchase Fubo Sports alongside offerings such as ESPN Unlimited and the ESPN, Disney+, Hulu bundle and then watch directly on the Fubo app. This opportunity is particularly exciting given ESPN's scale. Per comScore, ESPN's digital and social properties reached 4 out of every 5 U.S. adults in November of 2025, representing hundreds of millions of unique fans. It allows us to market Fubo Sports directly to a sports-centric audience and drive subscriber growth more efficiently with meaningfully lower customer acquisition costs. We continue to focus on our Spanish-speaking audience. And in fiscal 1Q '26, we delivered record high subscribers on Fubo's Latino product. In January, Hulu Live launched the Spanish language bundle, meaning that Spanish-speaking customers now have 2 plan options within the Fubo and Hulu Live ecosystem. Stage 3 of our plan focuses on achieving content cost efficiencies commensurate with our increased scale and applying greater portfolio discipline as we evaluate which content best supports flexible pricing and affordability. As major distribution agreements for the Fubo services and the Hulu Live service come up for renewal, our objective is to move towards market-based pricing and penetration that reflects our combined increased scale. In the near term, I want to address NBCUniversal as we've received questions from investors and subscribers. Through November, our teams were engaged in renewal discussions with NBCU. Following the confirmation of the Versant spin-off, we paused discussions to allow the separation process to proceed. Beginning in early January, Comcast ceased engagement in renewal discussions despite multiple outreach attempts. Comcast indicated that they are satisfied with their existing Hulu Live arrangement and do not intend to engage in renewal discussions on the Fubo side at this time, preferring to reengage closer to the Hulu Live expiration. Given that most commercial terms have been largely aligned prior to the Versant spin-off, this position is very difficult to reconcile. Importantly, the subscriber impact to date has been modest since the removal of NBC content and better than our expectations. We believe this reflects the resilience of our sports-focused value proposition, the actions we took to preserve consumer value, including our decision to lower prices and customers' ability to supplement Fubo with Peacock. While we remain open to constructive engagement, we will review the role of the NBCU and Versant portfolios as we continue to evaluate content alignment for our 6 million-plus subscriber base. Looking ahead, our 2026 North Star is simple: growth. We are focused on expanding our subscriber base through differentiated sports offerings, scale distribution partnerships and improved monetization, driving long-term value for consumers and shareholders. I will now turn the call over to John Janedis, CFO, to discuss our financial results in greater detail. John? John Janedis: Thank you, David, and good morning, everyone. Fiscal Q1 2026 marked our first quarter reporting as a combined company following the completion of our business combination with Hulu Live in late October. As a reminder, because the transaction closed mid-quarter, to aid an analysis of the combined business, we will also discuss our results on a pro forma basis, giving effect to the combination as if it had been completed at the first period presented. Turning to the financial results for the quarter. In North America, reported revenue was $1.54 billion compared to $1.11 billion in the prior year period. On a pro forma basis, North America revenue was $1.68 billion, compared to $1.58 billion in the prior year, representing growth of 6%. This reflects the scale of the combined platform and continued demand for live TV streaming across both the Fubo and Hulu Live brands. On a combined basis, we ended the quarter with approximately 6.2 million North America subscribers compared to 6.3 million in the prior year. Turning to our profitability metrics. Our reported net loss for the quarter was $19.1 million, a meaningful improvement from a $38.6 million loss in the prior year period. On a pro forma basis, net loss improved to $46.4 million compared to $130.4 million last year. Importantly, we delivered positive pro forma adjusted EBITDA of $41.4 million, nearly doubling from $22 million in the prior year period. From a cash and liquidity perspective, we ended the quarter with $458.6 million in cash, cash equivalents and restricted cash. Note that operating cash flow in the quarter was impacted by working capital timing, particularly a build in accounts receivable following the close of the transaction, which we expect to normalize over subsequent quarters. Earnings per share for the quarter reflected a loss of $0.02 based on 351.9 million Class A shares outstanding with an additional 947.9 million Class B shares outstanding on a vote-only basis. We also announced today a planned reverse stock split of our common stock. The reverse split is intended to make the stock more accessible to a broader base of investors and will reduce the number of outstanding shares of common stock to a level better aligned with the company's size and scope. We aim to execute the reverse split by the end of fiscal 2Q '26. In summary, fiscal Q1 represented a strong start to the year and an important first quarter as a combined company. Our results demonstrate healthy top line growth and significant year-over-year expansion in profitability metrics, including positive pro forma adjusted EBITDA. As we move forward, we remain focused on disciplined execution, driving further efficiencies across the combined business and continuing to improve our profitability metrics and cash generation over time. With that, I'll turn the call back to the operator for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of David Joyce with Seaport Research Partners. David Joyce: Two questions, please. First, to kind of drill down a little further on the issue with NBCUniversal . With more streamers getting more access to sports rights and industry consolidation out of the way, what's your view to being able to retain or regain sports rights, to keep that focus going forward? And do you think that Comcast is not reengaging because they're driving the Peacock service in the near term because of the Olympics? Can you return to the table with TelevisaUnivision for soccer? When does the Peacock -- or when does the Comcast NBC deal with Hulu Live come up for renewal? Any further thoughts on that, please? David Gandler: Yes. Why don't I take that, John? So David, thank you. This is David. I mean there was a bunch of questions in there. So let me start with, if I remember, with the NBC question. First, I want to say that, obviously, going forward, we're not going to separate out the numbers for Hulu Live and Fubo. But just to be very clear, we were up 3% year-over-year versus the prior year in subscribers despite the fact that we were down with NBC for, I believe, over 4 weeks. So it speaks to the quality of the team, our ability to market on platform and to really understand the type of consumers we have. We also were able to drive some traffic to Hulu Live TV. As it relates to the programming, look, we have strong relationships with the leagues. We have an excellent relationship with Major League Baseball. We've been working with them closely as teams begin to migrate to the MLB platform. But for the most part, I think the major content deals and partnerships that we have with -- obviously, with Disney, Fox, CBS, those are still active. And let's not forget, NBC is still on Hulu Live, and we're working with Disney and the Hulu team to ensure that we can drive traffic to NBC on Hulu Live. As it relates to Univision, again, just want to be very clear here, we've exceeded our own expectations. We've reached an all-time high on our Latino package. And in the same vein, Hulu Live now has its own skinny package, which does include Univision. And so going forward, we should be thinking about our sub base in totality. So we're north of 6 million subscribers, which is the second largest VMVPD in the United States, and we think that we'll be very focused on continuing to provide flexibility, optionality and affordable packaging. Operator: Your next question comes from the line of Clark Lampen with BTIG. William Lampen: John, I know you guys aren't providing guidance for the year, but maybe with regard to sort of '26 and if we refer back to the old forecast that you provided as part of the proxy, can you remind us whether those targets included any revenue and expense synergies? You guys have laid out a couple of things that seem potentially interesting with ad server integration and consumer packaging flows that could be accretive. Was that a part of the old guidance? And then maybe second question, for your fiscal Q2, the March quarter, should we expect that assuming nothing changes with NBC, do you anticipate positive year-on-year growth with subscribers? Or is there any context that you could provide directionally for how we should think about the impact maybe for fiscal Q2 or fiscal Q3? John Janedis: Yes. Sure, Clark. So let me handle the first question, and then I'll go on to the one about the March quarter. So on synergies, when we put the deck out last January, what was in there, what we stated was that we expected and assumed $120 million plus in synergies. In that deck, we also stated that the assumption was those took place on day 1 in terms of when the deal closed. That was more or less a simplifying assumption. In terms of the time line around that, maybe just give a little bit more color. In the short term, to David's point around the Disney ad server, that will come first in terms of the synergies. That's a combination of fill and CPM. And maybe a little more color on that. If you think about our ad numbers at Fubo stand-alone historically, call it, there around, say, $100 million-ish. And so I would say that the CPM and the fill opportunity is both in the double digits. The second piece was the content/programming synergies, those are, I call more medium to long term because those take place as contracts renew. There's a third piece that we didn't speak to a year ago, which was, I'd say, call it, procurement. We're in the very early stages of that now, and I would say I'm optimistic that, that could be a needle mover. And so those are the 3. But again, none of those assume day 1 -- sorry, they all assume day 1, but they will clearly flow in over time. David Gandler: Sorry, John, just one more thing. Clark, this is David. Just around NBC, I understand that it's a concern. But as I mentioned before, we believe that it's very important for us to be able to provide various packaging across a spectrum where we're able to offer consumers enough flexibility. And it's very important to note that the Fubo Sports service which is a linear version of our legacy Fubo package, which includes NBC, is actually performing very well. We haven't been marketing it very hard. It continues to grow. Trial conversion rates are very high. And more importantly, when you look at -- I think that package is now in the third or fourth month. When you look at it from a retention perspective, retention is actually about 30% above what the legacy plan is. And so when I think about a future in the short term that might or may not include NBC, I think this package has a significant opportunity to grow. It fits very nicely into the overall ecosystem with YouTube TV sitting in that sort of $80-plus range. And then you have the ESPN, FOX One bundle, which, if I'm not mistaken, is in that sort of high 30s range. And with our promotional pricing of $45.99 or $44.99, this is a very attractive entry point to get access to local NFL games, college football and a very strong portfolio of programming. So again, basically, what we're seeing now is just strong KPIs across that package. And as I mentioned before, with ESPN, if we can -- I mean if we can figure out very quickly, which as you've heard we're doing, we should be able to drive a tremendous amount of traffic at some point when we go live with them. There are 2 different opportunities that we've been focused on. The first really is around marketing. Think of what YouTube is able to do for YouTube TV from a top of the funnel perspective. ESPN engages with 4 out of 5 adults in the United States. So if we can just leverage that, that should have a significant impact on our blended SAC numbers. And frankly, we could be a lot more measured and disciplined around how we market. So that's just one angle. And the second one in the commerce flow, again, this is another area where not only it would open up the funnel, but at the same time, I think it would have a pretty significant retention metrics around it, just given the fact that this would be part of an ESPN umbrella or ID. So all of these things, I think, are positive. And I think this gives us a chance to continue to grow. We've demonstrated our ability to grow, losing partners in the past. And our goal is to continue to grow this product and reach new highs. John Janedis: And Clark, maybe one last thing or an exclamation point on David's comment. As it relates to growth going forward, whether it's the March quarter, June quarter or beyond, let me just add a couple more things. One is, again, we've been pleased to date with the results. But clearly, we'll know more following the Super Bowl and then the Olympics. And just as a reminder, traditionally, we don't spend much against the Olympics because those subs don't retain well. But our goal is to grow and to grow profitably. Operator: Your next question comes from the line of Brent Penter with Raymond James. Brent Penter: First one for me, David, you talked about your North Star being growth. And with the merger closed and now you have more scale and a bigger balance sheet, how do you think about your priorities in terms of investing for subscriber growth versus as a stand-alone company, I think you're a little more focused on just generating free cash flow now. How can you -- how does the merger increase your ability to invest? And then second, just any quantification for the benefits you might have seen from the Disney YouTube TV blackout in the quarter? David Gandler: Yes, sure. So first, on the profitability front, I think -- we have now seen 3 consecutive quarters of profitability. I think this was a major concern dating back 3 or 4 years. So I think we've resolved that. The balance sheet, as John will likely talk about shortly, is very strong. And we are very well positioned to be able to take advantage of various tailwinds. You did mention the fact that we're in a much stronger position. I think the beautiful thing about where we sit right now and the potential of the flywheel within the Disney ecosystem is that they reach hundreds of millions of people every year. And so if we can figure out, which we're in the process of doing, what are the most efficient and effective marketing channels, it really shouldn't impact our cost structure very much. And so I think that flexibility does give us the chance to invest more into growth. But I will say, if you look at our -- again, on a stand-alone basis, we spent less on marketing in the fourth quarter despite losing NBC and still been able to sort of maintain solid numbers on the Fubo side. So from that perspective, we'll be working closely with the various teams within Disney. I want to say that the relationships have been great. Let's not forget, this deal closed on October 29, right before the holiday season. And we're just getting to know the various folks who run different teams and everyone has been very supportive. So we look forward to building those relationships and driving value for the overall subscriber base. And then last question, I think, was around YouTube TV? John Janedis: Yes. So I'll take that one. I'd just say the impact from the YouTube TV going dark with Disney was immaterial to the overall platform. And then, Brent, maybe just circling back again, just going back to the balance sheet and priorities, like I think it's important, again, to look at the balance sheet evolution. And so David spoke to the priorities. But just as a reminder, if you look at where we were 2 years ago, call it, the end of '23, we had about $400 million of debt outstanding with a maturity of February '26. Now we have, call it, $320 million outstanding with virtually all of it maturing in '29 and '31. And then our adjusted EBITDA for '24 was a loss of $86 million. And now on a pro forma basis, we just reported that $78 million for calendar '25. So some pretty major improvements. And so to the investment priorities, I would just say that the free cash flow generation should be an output of those investments. Operator: Your next question comes from the line of Patrick Sholl with Barrington Research. Patrick Sholl: Just on the advertising front, is there any sort of ramp period after you merge the tech stack with Disney for the ad sales relationship until you get that, I think you said double-digit improvement in fill rates and CPMs. And then just on the variety of service offerings that you guys have in market now, could you maybe talk about the different seasonality trends and how to think about those as we model out growth over the course of the year? David Gandler: Yes. Pat, why don't I start on the ad ramp? Look, this is a very straightforward business. The beautiful thing about the advertising integration is that essentially, Disney is selling ads. They've been selling ads for a very long time. They've been selling against live networks that they own themselves. They've been selling against Hulu Live. This is basically the same service with just more inventory. Our ad inventory will roll right into that ad server and will sit alongside these other channels and programs. And so our sense is that we should see an impact as soon as it's integrated towards the end of the quarter or maybe slightly thereafter. John Janedis: And Patrick, maybe I'll just quickly hit on the seasonality. Just as a reminder, to David's earlier report, we're not really going to break out the various services, but I can give you maybe a couple of high-level comments. One is that I think you know that the Hulu Live service tends to be and has historically been far less seasonal than the Fubo service. Within the Fubo service, as you know, it's been highly seasonal around fall sporting season. And so the one thing we don't know yet is how seasonal the skinny sports service will be. But then again, as it relates to that as a percentage of total subs, I don't think there'll be any visible incremental seasonality as it relates to those smaller services for the foreseeable future. Operator: Your next question comes from the line of Doug Arthur with Huber Research. Douglas Arthur: Just a couple of geeky financial questions. John, the difference between sort of reported revenues and pro forma revenues is around $134 million, give or take. Is that the impact of closing Hulu Live late in October? That's question one. John Janedis: Yes. Yes, sure. Doug, that's correct. And so it's a little bit quirky there in the sense that because Hulu Live was the accounting acquirer, it actually -- we reported the 3 months of Hulu Live and then call it the 2 months and a couple of days of Fubo. And so the delta there is just you have that Fubo revenue more or less for the 28 days of October. Douglas Arthur: Okay. So when I look at the 8-K on Page 6, where you kind of break down not the pro forma, but the actual reported revenue breakdown between subscription related party advertising, et cetera, the Fubo live numbers are sort of a stub period there. I'm trying to just back out in terms of how Fubo did ex Hulu Live. John Janedis: Yes. Doug, let me say a couple things. One, I don't have the 8-K in front of me, so we can talk about that offline. What I can tell you, though, broadly speaking, is that if we want to isolate the Fubo business, what I can tell you to the points we made is, number one, that we had a better subscriber outcome than we expected, and that flowed through the P&L. So I'd say we're pretty pleased with the outcome on the Fubo business. Douglas Arthur: Okay. We'll disaggregate that later. Operator: Your next question comes from the line of Laura Martin with Needham & Company. Laura Martin: My first one is breaking news. After this call started, Disney did announce that it is confirming the appointment of Josh D'Amaro, the next CEO to succeed Bob Iger. So this is the second time the Board of the Walt Disney Company is telling us that Disney is a parks company and not an entertainment company. So my first question to you, David, is, how does that affect your world if Disney going forward is going to be really focusing on the real world, which is its parks assets and not its, let's call it, traditional TV and streaming assets. David Gandler: Yes. Well, first of all, congratulations to Josh. We didn't know about that. So thank you for letting us know. As it relates to, I think, the business, Disney is a very large company. It takes a lot of time. for them to decide on what their priorities are going to be. And I think from what I heard on the last earnings call, Bob was very focused on highlighting the fact that they are still working on their technology stack, unifying their platform into one app. So I don't know what the impact will really be on us. We're having conversations with the various teams, as I mentioned, strong conversations with ESPN. We have announced some of the things that we plan to do with ESPN. We've spoken to Dana and others, the Hulu team. And our Board has been very focused on trying to make sure that we're talking to the right people to really grow the business. So from my perspective, I don't really see any changes in the short term, but obviously, that's yet to be determined. Laura Martin: Okay. And then my second one is, I was really intrigued in your shareholder letter that you said you are investing in the next generation of consumer-centric innovation. And it sounded like your goal is to close the gap with YouTube Live TV, which has about 10 million subs as your biggest competitor now that you guys are 6.2 million subs. What kinds of things are on that road map for the next generation of consumer-centric innovations that would help you close that subscriber gap? David Gandler: Yes. So look, there's lots of things that we're focused on. We think that there's a huge opportunity around mobile. We see a significant number of subscribers, trial users that enter our ecosystem through the mobile app. And so we'll be relaunching that experience shortly. And again, we're continuing to review some of the amazing capabilities that Disney and ESPN have. And when you look at their fantasy business, which has over 10 million users, you think about their betting capabilities. And when you sort of look at all of the ways in which that we can engage a very large funnel, we start thinking about ways in which we can really sort of develop our technology, our consumer apps and features around that. So there'll be more to come on that front. But yes, we're very focused on product. Laura Martin: Okay. And I'm going to violate the rule, and I'm going to drill down on the betting. One of the things you did early on, David, is really -- you really wanted to go into betting and then we couldn't afford the cost. Could you get back into the betting business through ESPN? David Gandler: So again, I don't think anything is off the table. It's still early. Like I said, we've only been talking with Disney and ESPN for a couple of months. So we're trying to navigate the different teams. But I do think that we have a very strong engineering team. We have a strong product DNA at Fubo, and we'll be looking to bring ideas that we can deliver to Disney across the Fubo platform. But as I think about Disney, generally speaking, I would say it's akin to being a kid in a candy store. We're a sports platform. And when you look at the size, the reach that they have, the different elements and touch points that they use to drive engagement, I think that we can really develop a strong business there. And just some of the things that you and I already talked about, I believe, were highlight generation, which that we've been really focused on as well. I think there's an area to improve as well. And then the DVR experience related to sports, I think, is another area where we continue to innovate given the number of events that we carry and the level of personalization that we afford consumers. So I'm very excited, generally speaking. It's just a matter of meeting with the right teams and focusing on delivering value for our consumers. Operator: Your next question comes from the line of David Joyce with Seaport Research Partners. David Joyce: I appreciate the follow-ups. There's a lot to digest here with the new Fubo. Two things. One, people were concerned when they saw Disney shelf filing for Fubo shares, but could you please confirm that, that 2-year standstill is there and why the filing came out? And then secondly, what's your philosophy on guidance metrics from here? Normally, that's something you did Fubo stand-alone, but any sort of projections or guardrails you would put up for us? John Janedis: Yes. Sure, David. Thanks for the question. So on the first one, look, the short answer is that's correct. So the 2-year lockup remains in place. Look, the shelf, it was a routine housekeeping item following the Hulu Live closing that required us to just put up a new shelf, including registering Disney shares. But Disney remains subject to the 24-month lockup period and the filing does not change that restriction in any way. On the guidance, I would say no guardrails yet. Look, the comment in the letter around guidance suggests like there are just some factors that we're in the process of refining in terms of timing and sizing, and that's going to impact our subs and therefore, our subscription and therefore, the ad revenue. Just as an example, today's agreement with ESPN, the timing on that, for example -- or the NBC programming. But look, we're only 98 days into this combination. So it's just going to take us a little bit more time. David Gandler: Yes. And just to add one more point on the reverse split. Again, I think we've been very transparent from the onset. People, of course, get nervous around hearing reverse splits. But the reality is it was important for us to align with our operational scale. We wanted to reduce volatility and also attract institutional investment. These are natural things that have to take place, and it really is part of the corporate hygiene that we're trying to put in place, particularly after we've dealt with the convert. So again, all of this is sort of trying to prepare Fubo for a very bright future, and this is just one of those steps. Operator: That concludes our question-and-answer session. Ladies and gentlemen, this concludes the Fubo First Quarter 2026 Earnings Call. Thank you all for joining. You may now disconnect.
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.]