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Massimo Reynaudo: Hello, everyone. Welcome to UPM's Quarter 4 Results Webcast. I am Massimo Reynaudo, I'm the CEO of UPM. Here with me is Tapio Korpeinen, the CFO of UPM. The year 2025 has been characterized by escalating geopolitical and trade tensions with multiple impacts and also on our business environment. During the year and in response to the situation, we intensified our actions to both sharpen our competitiveness and to execute our portfolio strategy. This resulted in the fourth quarter in a visible improvement of our performance in most of our businesses. Compared to the previous quarter, our cash flow resulted very strong, too. Our quarter 4 EBIT was EUR 355 million compared to EUR 418 million 1 year ago or 1 year earlier. The quarter 4 EBIT margin was nearly unchanged at 15.3% versus 15.9% in the previous year. The operating cash flow in quarter 4, as I said, was strong at EUR 720 million. And our net debt decreased while we also paid out the second installment of the dividends. During 2025, we launched a significant strategic initiatives that continue to transform the company. In February, we acquired Metamark to accelerate the growth in Adhesive Materials. In May, we sharpened the focus in our Biofuel business and discontinued the Rotterdam biorefinery development. When it comes to biofuels, during the year, we made good progress with our turnaround plan and the business go back to profitability in the second part of the year. In September, we started the strategic review of our Plywood business. And in December, we announced the plan to establish a graphic paper joint venture that would encompass the UPM Communication Paper business and Sappi graphic and paper operations in Europe. While doing all of this, we took decisive actions to improve performance and competitiveness across all our businesses. Just as an example, in the fiber business, we mitigated the pulp and wood market challenges in Finland with production curtailments in the fall. And we entered into a long-term strategic partnership with Versowood that strengthened our position in the wood market. I'll tell you some more about this later. In the Adhesive Materials business, we restructured our production footprint globally and we reduced capacity in Europe and in the Communication Papers business. Measures were taken also in all other businesses and functions. Finally, we intensified our actions to improve the working capital efficiency, which resulted in the cash flow I talked about earlier. I will go now into some more detail for each of the business segments. Let's start with the Decarbonization Solutions. Here, the various end markets developed positively during the 2025. In Energy, the electricity demand in Finland grew by 3% during the year -- during the 2025. The growth was driven particularly by the electrification of [ heating ]. But in the coming years, this growth is expected to be complemented by growth in data centers currently under construction and by the green transition. Over the 5 coming years, we see the annual market growth rate to accelerate in a range between 4% and 7% in line with several other predictions on the same matter. We are in a strong position to capture the value this situation creates. In fact, there is a strong demand for 3 things. Sites with easy access to high voltage grid connections were to establish new operations. There is a demand for CO2-free energy -- electricity and there is demand for baseload power, and we have the 3 of them. In the meantime, we are well set to maximize the value creation in the current volatile and weather-dependent market. For example, in 2025, we achieved EUR 10 per megawatt hour higher sales prices compared to the average market prices. In quarter 4, the Energy business achieved a comparable EBIT of EUR 54 million, marking the best quarter in 2025. But if we move to biofuels, there as well, market prices for advanced renewable fuels increased during the second part of 2025. Our business improved its performance each quarter throughout the year and is back in profit. Going forward, the implementation of the RED III regulation, renewable energy directive regulation will support a positive market outlook. In Biochemicals, the business has now initiated the commercial phase with the first customer deliveries of industrial sugars taking place in quarter 4. We will continue to introduce further products to the market during the first half of this year, the next step being the renewable functional fillers. We reconfirm that the demand and interest for our biochemical products is robust. You may also have seen from the release this morning that we plan to start reporting UPM next-generation renewables, which consists of Biofuels and Biochemicals as a separate reporting segment starting from January 2027. With this, there will be the opportunity to have enhanced visibility into the performance as well as the potential of this high-growth segment. We turn the page and look now into the Advanced Materials. Well, here, the label materials market development in 2025 was relatively stable with growth rates remaining modest. To put it in numbers, in Europe, the demand grew by 2% compared to 2024. In North America, the growth was on a similar, which means about 2% level in the first 3 quarters of the year, but it slowed down and ended up with a minus 1% in quarter 4. In this context, 2025 has been quite a transformational year for our Adhesive Materials business. Here, we took significant actions to sharpen competitiveness and to secure the future growth. The business streamlined its organization and closed 3 production lines in Germany, France and in the U.S., relocating production to lower cost sites in Europe and in the U.S. This will improve its fixed and variable costs and competitiveness in general going forward. In parallel, it started focused growth investments in the U.S., in Malaysia, in Vietnam and in India to accelerate the growth in high potential or high-margin areas. Finally, it acquired Metamark in the U.K. and then work to integrate it with the previously acquired sites in the graphics space to build a platform for the development of this higher-margin segment. As a result of all of this, the business was able to grow clearly faster than the market, and it is in a good position entering 2026. However, the slow growth environment due to that, we were not able to simultaneously improve margins. Significant part of the profitability improvement actions and the benefits from the acquisitions is still to materialize and will be more visible in 2026. The Specialty Materials business delivered robust results in terms of profits and margin despite all the market turbulences. Gradually, the demand for label, release and packaging materials normalized in quarter 4. This, combined with our efficiency measures and declining variable costs resulted in a good quarter 4 EBIT improvement, up EUR 20 million year-on-year.The Specialty Materials business entered 2026 in a good position to supply a growing market demand and with low investment needs. Moving ahead to Fibers. Fibers experienced a volatile 2025, impacted by trade uncertainties, currency fluctuations and low prices. However, to put things in the right perspective, if we look at the whole year 2025 and despite the fluctuations, the pulp demand was robust. Global shipments continue to grow at a healthy rate at around 3%. Hardwood pulp shipments grew significantly more than that, whereas softwood pulp shipments decreased moderately. Fibers South, our platform in Uruguay continued to strengthen its position as a world-class low-cost business platform. Our cost during 2025 decreased by about USD 25 per ton, in line with our plans and what we communicated earlier. And the cost decrease is expected to continue still into this year and into the next year as optimizations continue. To give you some examples of these optimizations, our plantations are increasingly reaching harvesting maturity that improved wood sourcing costs. Besides that or linked to that, we will improve our inbound logistics costs further. On top of this all, we're working to identify debottlenecking opportunities both in Paso de los Toros and Fray Bentos. Or in general, during the second part of 2025, the hardwood pulp market prices in China increased gradually, but they are -- but significantly from the very low levels that they touched during quarter 2. The Fibers South performance in quarter 4 reached an EBIT of EUR 78 million or 21% of sales, an improvement versus quarter 3 despite the maintenance shut in Fray Bentos in quarter 4. On the other hand, when we talk about Fibers North or our platform in Finland, it continued to experience low softwood pulp prices and high wood cost. Its EBIT remained at EUR 11 million negative in quarter 4, albeit EBITDA positive. On the positive side, the pulpwood market prices in Finland have decreased significantly and roughly 30% from the peak and at the end of the year. But due to the length of the supply chain, the benefits of this cost reduction come typically and progressively with a delay, and therefore, they will be visible in 2026. Another relevant fact is here that we have entered a strategic partnership with Versowood, the largest private sawmill in Finland, and that will help to structurally improve our position in the Finnish wood market. Before we move ahead, I just want to recall your attention to the fact that the UPM Forest business will be included in the Fibers North business from January 2026 onward. We will then start to provide additional financial information on the 2 parts of the UPM Fibers reporting segment, meaning Fibers South and Fibers North starting from quarter 1, 2026. Now when it comes to Communication Papers and Plywood, both had a solid end of the year in terms of EBIT performance. The graphic paper markets were challenging in 2025, impacted by tariffs and the related uncertainty. The European graphic paper demand decreased by 8%, although the decrease moderated slightly in quarter 4 at 5%. The North American demand development was weaker and demand decline increased slightly in quarter 4. In markets that are oversupplied, we closed production at the Kaukas and Ettringen paper mills in quarter 4 reducing our capacity by 13% and our fixed cost by EUR 70 million annually. In quarter 4, we also sold the earlier closed Plattling paper mill in Germany. Communication Papers quarter 4 performance has been relatively strong with EBIT totaling EUR 110 million and boosted by the annual energy refunds. Once again, the business generated a very strong free cash flow that was up to EUR 362 million in 2025, despite the challenging market conditions I've just described. When it comes to Plywood, the dynamics were different in the different markets it serves. In the LNG shipping segment, demand continued to be strong. In the industrial end segments, it continued to improve. And in the Construction segment, it was stable, albeit on a relatively low level. In this environment, Plywood reported a robust quarter 4 EBIT of EUR 16 million or 15% of sales, which made quarter 4 the best quarter of the year. When talking about plywood, as you may remember, we announced the strategic review of the UPM Plywood business in September. We see plywood as a very good business with strong positions in the mid- to high-end market segments in Europe and globally in the LNG segment. The business has strong customer partnerships, operational and commercial excellence and a diversified portfolio of distinctive products. It has shown over time that it is able to provide good profitability and cash flow in different economic cycles. On the other hand, despite it has the scale of a midsized company in Finland, so relevant per se, absolutely relevant per se, it is the smallest of the UPM businesses. With this strategic review, we want to assess whether acting as a separate entity or as a part of a different entity, it could create even further value. The strategic review contemplates different possible future outcomes, including maintaining the status quo, a divestment, a partial demerger or an initial public offering. At this point in time, all options are in play and the review is expected to be concluded by the end of 2026. We closed 2025 with an announcement in December, an announcement about the fact we signed a letter of intent with Sappi that shall lead to the creation of a joint venture in the graphic paper market. As a reminder, we are planning an independent graphic paper company owned 50% for each of the 2 parts, UPM and Sappi, 50-50, which would include what is within the perimeter of the UPM Communication Papers business in Europe and in the U.S. and Sappi's graphic paper business in Europe. The transaction would create a more efficient, adaptable and sustainable graphic paper business. It will also create structurally competitive cost base and ensure supply security for the European and global customers. For UPM, the transaction would have a positive impact on profit margins, balance sheet and leverage. The numbers are here -- the key numbers are here represented in this slide. With the successful execution of this initiative, UPM would no longer have direct sales exposure to the declining European and North American graphic paper markets. The definitive agreement is expected to be signed during H1 during this first part of 2026, and the closing of the deal is expected to take place by the end of 2026. So by closing with this part, with this portfolio initiatives, the ones that I mentioned now about Plywood and Communication Papers, but also the other activities and investment, Decarbonization Solutions, Advanced Materials and then the Fiber business, we aim to change the profile of the company, increasing its focus on growth and improved margins and leverage. The future UPM would have an attractive portfolio made by Decarbonization Solutions, Advanced Materials and Renewable Fibers. In fact, all these businesses operate in growing markets and UPM has shown a strong track record of realized growth already above GDP in the past years in this perimeter. Focused innovation and investments targeted to combine sustainable renewable feedstock and CO2-free energy into high-margin products for customers all around the world will be the catalyst for an accelerated profitable growth ahead. But I'll pause here, and I'll hand it over to Tapio for some further analysis on our quarter 4 results. Tapio Korpeinen: All right. Thank you, Massimo. So here, you can see our EBIT and cash flow by the quarter for last year and '24. And from this, you can see that our fourth quarter EBIT increased significantly from the previous quarter, third quarter in '25, but decreased 15% from the last quarter of the previous year. And as Massimo already mentioned, the EBIT margin as such for the fourth quarter was at the same level as it was 1 year ago. Most of our businesses improved their performance from the previous quarter. As we have guided earlier, we booked the annual energy refunds in Communication Papers in the fourth quarter. And then also in the fourth quarter, we booked the increase in the fair value of our Forest in Finland, which was EUR 72 million. We had the same items benefiting the fourth quarter result in '24 as well. Only this year this year in the fourth quarter, they were slightly smaller. Operating cash flow was very strong in the fourth quarter, totaling EUR 720 million. This includes a working capital release of EUR 460 million for the quarter. Part of that release is seasonal by nature, which you can sort of see if you look at the previous years, but a large share is structural, thanks to our intensified efforts and measures that we have taken during the year to improve working capital efficiency permanently. Net debt then continued to decrease from the previous quarter. Net debt to EBITDA was 2.29x at the end of the year. And we will continue our efforts to increase cash flow and strengthen the balance sheet during this year. And here on the left-hand side, you can see our fourth quarter EBIT as it developed compared with the fourth quarter last year. Sales prices continue to be the biggest negative driver impacting particularly Fibers, but also Communication Papers and Specialty Materials. Variable costs decreased significantly year-on-year as well, but their positive impact was still smaller at the UPM level than the negative impact from lower sales prices. Perhaps worth mentioning is that for the yearly comparison in Finland, wood cost still was on the increase, so year-on-year, still increasing. Delivery volumes were slightly lower and fixed cost broadly stable in the fourth quarter. Changes in the exchange rates had a EUR 20 million negative impact on the fourth quarter EBIT as compared to last year's fourth quarter after hedging results. On the right-hand side, you can see the sequential comparison to the third quarter of '25. Sales prices decreased also in this comparison, but variable cost decreased then more. In this slide, this bar showing the lower variable cost includes also the benefit of energy refunds in the Communication Papers that were booked in the fourth quarter. However, if you exclude them, variable costs in other areas -- in other inputs decreased more than sales prices. Delivery volumes were broadly stable, while fixed costs were up seasonally. In this quarter, by the way, we had also the maintenance shutdown in Fray Bentos, which went according to plan and somewhat lower cost than what we had guided earlier, about EUR 22 million impact on the quarter. Then the other bar on the right-hand side, that includes the fair value increase of Forest assets, which was EUR 75 million higher in the comparison to the third quarter. This page summarizes UPM's currency exposures. As many of you know, most important currency in terms of our exposure is the U.S. dollar. We look at the impact on the 2025 result as compared to the previous year. Changes in currencies reduced UPM's comparable EBIT by about EUR 50 million after the impact of hedges. And here is the outlook for the first half of 2026. We expect our comparable EBIT in the first half of the year to be approximately in the range of EUR 325 million to EUR 525 million. In the first half of 2025, by comparison, our EBIT totaled EUR 413 million and the second half EBIT in '25 was EUR 508 million. In the first half of this year, '26 compared to the second half of '25, UPM's performance is expected to benefit from moderately higher sales prices and delivery volumes and moderately lower fixed costs. Performance is expected to be held back by continued weak Communication Papers markets and also by increased costs during the early phase of the production ramp-up at the UPM Leuna refinery. Currencies started the year at similar levels compared to the second half of 2025. In the second half of 2025, comparable EBIT benefited from the timing of energy refunds and increased fair value of Forest assets. So as I mentioned earlier, those were booked during the second half of last year, and these items are not expected to take place during the first half of 2026 in similar quantities. Then looking year-on-year in the first half '26 compared to first half '25, UPM's performance is expected to benefit from lower variable costs and moderately higher delivery volumes. Maintenance activity is expected to be lower than in the comparison period. Performance is expected to be held back by continued weak Communication Paper markets and also the increased costs during the production ramp-up of UPM Leuna biochemicals refinery. In the beginning of the year, currencies are negative in terms of their impact on comparable EBIT when comparing to the first half of 2025. Then the fourth quarter now was the second quarter that we were able to decrease net debt and that while we also paid out the second dividend installment during the fourth quarter -- second dividend installment for the 2024 dividend. And as I said, we aim to lower our leverage and bring the net debt to EBITDA back to below 2x in a timely manner. Our CapEx estimate for this year is EUR 300 million. the cycle of large investments in Paso de los Toros and Leuna is behind us and our maintenance investment needs are consistently below EUR 200 million per annum looking forward. And finally, the Board of Directors has today proposed an unchanged dividend of EUR 1.50 per share for the year 2025. The dividend represents 113% of UPM's comparable earnings per share for '25 and is equaling a dividend yield of about 6%. And now I'll hand it back over to Massimo for the summary and some final remarks. Massimo Reynaudo: Thank you, Tapio, and this is just going to be a brief recap of the main aspects we have seen so far. So we ended a complex year 2025 with improving performance in most businesses, strong cash flow and decreasing net debt. 2025 has been a transformational year. Across all our businesses, we launched a number of important initiatives aimed to ensure competitiveness and continued performance in the short term, while preparing to change the company profile for continued success in the long run. The future UPM will have a portfolio of innovative and sustainable materials and solutions. It will be focused on growth, improved margins, robust balance sheet and disciplined capital allocation. All of this as a base to support solid returns. Our Board is confident on the UPM's ability to create value and has proposed an unchanged dividend of EUR 1.5 per share for the year 2025. And this ends the prepared part of our presentation. And I think with Tapio, we are ready to take your questions. Operator: [Operator Instructions] The next question comes from Linus Larsson from SEB. Linus Larsson: I'd like to start off, if I may, with Fibres South. You did give some comment, but if you could provide some additional comment on your EBITDA performance as it is right now and where we are in terms of cost per tonne. You said there is still some improvement ahead in 2026 and 2027, but how much, please? Massimo Reynaudo: Yes. When it comes to the, let's say, the cost improvement potential, we have indicated earlier on, I believe it was in October, we estimate that potential across the next couple of years in the scale of EUR 15 per tonne. And that's -- yes, that's about that metric. Then when it comes to the EBITDA performance in quarter 4, I'll leave to Tapio to provide some more color. Tapio Korpeinen: Well, let's say, we give the EBIT at this point, as said, we will give some further lines on the performance then when we start reporting during this year. But I would sort of remind you of the fact that we had the maintenance shutdown in Fray Bentos during the quarter. So that had that sort of EUR 22 million impact. And even with that, we had an EBIT of EUR 78 million or 21% of sales. So if you look at the EBITDA margin, which we will get some more transparency on then later on, that obviously is at a healthy level as it is. And as I said, then we will work on the cost side more. Linus Larsson: Sure. And the cost improvement that you're seeing, is that a linear, gradual improvement over a 2-year period? Or is it more of a step change on an earlier time horizon? Massimo Reynaudo: Well, as I've commented earlier on, this comes from improvement, for example, in maturity of the plantation, wood supply, wood cost, logistic improvement. So we are talking more of a gradual and progressive improvement, no big step change. Those have been realized, implemented and materialized already in 2025 or before. Linus Larsson: Great. And then if I may shoot a second question, please, regarding energy in these volatile markets, if you could please update us on your hedging. How much of your volume in your Energy division is hedged in the first quarter and for the full year 2026, please? Massimo Reynaudo: Well, look, I will leverage the fact that Tapio leads also the Energy business and he is the most knowledgeable person in this room to talk about energy and transfer the question to him. Tapio Korpeinen: Yes. So well, like we have said before, we don't sort of disclose the hedging rate directly or percentage to our business. But maybe what I'll sort of rather point out to you is that if you look at our result, which is in Massimo's notes already that he told you, we achieved EUR 10 better average sales price during last year for the full year than what the average spot was. So that is coming from 2 sources. One, us being able to create value on the output that we can regulate primarily then, meaning hydro and then also from the hedging results. So we have been able to sort of create value on both ends. And let's say, coming into this year, we are looking to sort of perform in a similar manner. The sort of volatility in the market continues and the year has started with a real winter, which obviously you can see in the spot prices at the moment and in the fact that the hydro balance is dropping quite quickly now in the Nordic area. So in that sense, weather, obviously difficult to forecast any longer term, but the year has started in that manner. Linus Larsson: Right. But are you then suggesting that the premium that you just mentioned, is that what you expect to achieve in the first quarter as well? Tapio Korpeinen: That we will see. Operator: The next question comes from Charlie Muir-Sands from BNP Paribas. Charlie Muir-Sands: Just in terms of the evolution into the first half of 2026, I know you qualitatively called out a number of the moving parts. But just in terms of the -- a few of the discrete components, am I correct to read that your energy rebate was around EUR 100 million in the fourth quarter? Can you give us any indication on what losses you would expect from Leuna? Should we expect those to be even greater than they were in the second half of '25? And any kind of indication on the path to profitability of that operation? And I think you talked about fixed cost savings of about EUR 70 million from some of your communication paper closures. I just wanted to confirm, should we be thinking about that as a run rate immediately for Q1 versus Q4? Tapio Korpeinen: Yes, if I'll take that. So in round figures, it was -- the rebate impact was similar to last year. And well, this EUR 100 million that you mentioned is in the sort of right ballpark. Then in terms of the impact of the Leuna refinery, if we now had EUR 49 million negative EBIT in the second half of last year, we still -- as the production is ramping up, kind of in advance of significant sales will have additional costs, so a headwind from the sort of operating cost side, plus then we will have also depreciation kicking in now during the first half of the year. So in that sense, there will be a kind of larger negative impact still during the first half compared to the second half of last year. I would say, for the whole year, this kind of additional headwind will be, let's say, in the scale of some ten millions -- tens of millions. And then maybe on the fixed cost comment, yes, we -- as announced then towards the end of the year, production stopped both at -- or had stopped both at Ettringen mill and Kaukas. So this EUR 70 million fixed cost as a run rate will then benefit us during the first half of the year in the Communication Papers. Charlie Muir-Sands: If I could just ask a follow-up on Communication Papers. Regarding the joint venture, can you give us an update on the status with the major antitrust authorities? Have you filed with them yet? Have you received any feedback from them yet at all? Massimo Reynaudo: Yes. All what we can say at this point in time is that we have engaged with them in a dialogue, in a constructive dialogue and work is ongoing on building the necessary, let's say, information and so on, but there is not more than this to share at this point in time. Operator: The next question comes from Robin Santavirta from DNB Carnegie. Robin Santavirta: First question I have is related to the H1 EBIT guidance you provide. Now we started the year with higher hardwood pulp prices compared to last year. And I guess you expect somewhat higher volumes in H1 and also lower input costs, plus we have quite significantly less mill maintenance cost in H1 this year versus last year. Still the midpoint of the guidance range is close to last year's outcome. What are the key negatives we should expect in H1? Tapio Korpeinen: Well, if I comment, of course, one thing you have to remember that last year, we started with the U.S. exchange rate of 1.04. And obviously, that sort of exchange rate impact is mostly felt by -- in the Fibres business. So that obviously is a headwind in that sort of year-on-year comparison. Then we have, as pointed out in the forecast or in the outlook commentary Communication Papers where, let's say, despite our measures to cut and save on fixed cost, then reality is that we have a sort of a declining paper market to work in. We had also -- even if we have said earlier that the direct impact of tariffs has been still small in the sort of low tens of millions of euros for the full year last year. That, in a sense, impact we did not have in the beginning of the year last year. And then perhaps also as a significant sort of point that we just discussed a minute ago that we have the additional headwind even if we do see improvement on the biofuel side, we have additional headwind in the biochemicals. So those are the factors that are then included in the range that we have given. Robin Santavirta: That is very clear. Second and last question I have is related to the wood cost in Finland. We have seen quite significant declines. I can also see from data that the Finnish forest industry's procurement of wood raw material has been very low since last summer, many months, almost 50% lower procurement of wood compared to historical averages. How should we now look when we go into the high season of wood procurement in spring? Is the expectation now that pulpwood and even log prices could start to come up towards or to higher levels in the spring and early summer? Or how do you sort of -- what do you bake in, in your assumptions related to Finnish wood cost? And also added to that, the Finnish pulp mills, your former Chairman expects a big pulp mill to close in Finland. You now generate EBIT losses, not EBITDA losses, but still EBIT losses. Are you looking at sort of even terminal closures of any of your pulp mills in Finland? Massimo Reynaudo: Yes. Let me pick the second question. I'll leave the first one to Tapio. But well, when you assess the profitability of an asset, you don't do it on a base of a quarter. You do it on a long-term perspective. And if we look for a longer-term perspective, and our assets have been profit positive. Our assets in Finland have been profit positive. And they are well maintained. They are of a scale to grant sufficient competitiveness. And we are continuing to work to enhance that competitiveness, the deal with Versowood, what we are operating to in terms of internal improvement and so on. Last but not least, your first question was about declining wood cost. So first, a decision about closing an asset is not something you speculate about or you forecast for. And second, this is not part of our current considerations. Tapio Korpeinen: Maybe if I comment on the, let's say, questions that you had on cost and harvest and so on. So obviously, why the harvest levels have been low in Finland is that like we have said already, a while ago, a good while ago that the wood prices in Finland have been on unsustainable levels. So that's why wood has not been purchased. That's why also we have seen some moderation on the wood market prices in Finland. Having said that, good to remember that the wood prices more or less doubled in Finland. So if they have come down by 30%, it doesn't mean that they are low. And I would expect that, that will also, in a sense, be something that kind of will calibrate any sort of kind of market dynamics then going forward as well. Operator: The next question comes from Ioannis Masvoulas from Morgan Stanley. Ioannis Masvoulas: Just 2 questions from my side. The first, when we look at the EBIT bridge '24 to '25, what sort of fibre cost increase have you seen in your business? Because you talked about pulpwood prices doubling, but you didn't necessarily bought at the peak. So some clarity on that would be very useful. And then the second point, I think in October, you were talking about a $25 to $30 per tonne improvement in Fibres South. Today, I think you're talking about a EUR 15 per tonne improvement. Could you just reconcile the 2 figures? And what shall we be baking in on a 2-year view? Massimo Reynaudo: Yes. Well, let's put the currency apart. If I mentioned euros, that was, let's say, a mistake. We always talk dollars over there. And then, yes, let me correct it. I think we talked at the time I'm checking in $25 to $30 in 2 years. So I restated that, not $15, but $25 to $30 in 2 years, dollars. And then there was the other question about... Tapio Korpeinen: So wood cost. So basically, again, point being that when it comes to Finland and wood cost during last year, as we do have a delay of, let's say, at least 6 months from when we buy wood to when we actually consume it at our mills, then we did still see during the last year '25, as said, even in the fourth quarter, a negative impact from wood cost compared to the previous year. Then any kind of benefit from the fact that from summer on, we have seen a movement downwards in the wood market price in Finland, that benefit then will start coming into the bottom line only during this year. And I would say, let's say, more meaningfully from the second quarter on. Ioannis Masvoulas: Okay. That's very helpful. But if I were to push you a bit, could you perhaps provide a quantum of cost tailwind you've seen realized through your P&L in 2025? Tapio Korpeinen: No, we don't disclose that. Operator: The next question comes from Andres Castanos from Berenberg. Andres Castanos-Mollor: Two questions on the Versowood deal, please. Can you please describe the efficiencies that you will unlock by partnering with Versowood? Meaning why and how partnering with them will make the cost of the pulpwood you need cheaper versus spot prices? And I guess also the complement to this question is, how much of your wood needs in the Northern platform are now covered either by the Versowood agreement and by the forest that you own in Finland? Massimo Reynaudo: Okay. Let me cover the question about the deal and the logic behind the deal. Basically, Versowood being, as I said, the biggest sawmill in Finland and was in, let's say, -- had an interest for locks to feed is capacity and for a sawmill that is what we could put in this deal and what we did put in this deal. On the other hand, what we are getting through this deal is availability of pulpwood and chips, which is what is important for us, for our pulp production. So this is the, call it, industrial logic behind the deal. I do not have at hand numbers to share when it comes to, let's say, percentages of wood needs covered either way. Let me see, Tapio, do you have anything? Tapio Korpeinen: Well, let's say one can say in terms of our own forest, obviously, that varies in a sense a little bit depending on the market situation, but round figures, one can say that from our forest we can get -- which is about 0.5 million hectares in Finland, we can get around 10% of what we need. So still majority has to come from -- vast majority from sort of outside sources and don't have a number to disclose in a sense how much this Versowood deal will impact that, but obviously, will be a sort of meaningful increase in our sort of secured wood supply from the synergies that this partnership will give us. Andres Castanos-Mollor: Okay. Another question, please, if I may, would be on the biodiesel market, good improvement this quarter. And I was wondering if this outcome was sustainable or we are seeing one-off effects because of maybe from buying ahead of the implementation of the new RED III regulations. Do you think this performance is sustainable going forward? And yes, what dynamics are you seeing there in the biodiesel market? Massimo Reynaudo: Yes. I would say that to answer your question, we need to do -- to go behind what is -- sorry to go and talk about what's behind this performance or this performance improvement. So some elements are linked to, I would say, improved market dynamics and improved prices on the market. But there is also a part which is meaningful that is down to own actions in terms of improved operational efficiency and output out of the Lappeenranta refinery and improved sourcing of crude tall oil and improved cost of crude tall oil, which is the feedstock that we are utilizing for this business. So if we look -- so the market considerations, we leave it to everybody because we can guess about that the same that everybody else can guess, if not acknowledging the improvement that has been visible in the last couple of quarters. But then when it comes to our actions, they are there and they will be continuing to yield results. Now also if we -- in this area, I want to take the opportunity of this question to broader the angle a bit beyond one or a couple of quarters. And because there have been some significant changes in this space with the issuing of the so-called RED, Renewable Energy Directive #3 in Europe. And on the base of that directive, if and when implemented and implementation is going to be driven by the different countries, that is going to be increasing according to a number of sources, the demand for biofuels and sustainable aviation fuels from 6 million to 20 million tonnes in Europe by 2030. So it is a significant step up. And this is going to be coming from elements like increased minimum targets, minimum greenhouse gas reduction targets in transportation. A minimum target needs to be achieved of 14.5% for all transformation modes. Then when it comes to aviation, there is a target to increase the use of sustainable aviation fuel from 2% in 2025 to 6% in 2030. Besides that, by 2030 as well, let's say, first-generation biofuels made, for example, out of palm oil or palm oil waste will have to be phased out. And Germany, for example, talking about implementation of the directive in the different countries, Germany has made the decision to phase it out latest by 2027. So basically, and without going into further detail, there are the implementation of this directive is going to be changing and changing in a very positive way the general market situation in this space. Okay. With this, I'm mindful of time and that we have used the time that was available. So thank you all for your participation and for the questions that we are being able to answer. Thank you very much. Have a nice day. Bye. Bye-bye.
Operator: Good day, and thank you for standing by. Welcome to the Sappi First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Binnie, CEO. Please go ahead. Stephen Binnie: Thank you very much, and good day to everybody. Thank you for joining us. I will move through our investor presentation and as always, call out the page numbers as I go. And just starting on Page 2, I draw attention to the disclosure on forward-looking statements for you. Moving to Slide 3 and looking at the overall numbers for our Q1, it's fair to say that these were challenging market conditions with a number of headwinds, which had an adverse impact on our earnings. And just highlighting a few of these, which have the most material impact. Firstly, dissolving pulp prices down $160 compared to a year ago, a very material impact. And then we've seen this shift in exchange rates linked to a stronger dollar -- sorry, a stronger rand or maybe even more relevant is a weaker dollar, which once again has a major impact on our earnings. On top of that, we've seen -- as we've gone live with our Somerset Mill PM2 project, we have come to market at a time when paperboard markets are weak in North America, which has meant that our ramp-up has been a bit slower than anticipated. We did have some production issues in North America. These were once-off events, mainly linked to our utilities and they caused the mills -- the 2 mills to go down at different points in time during the quarter. We did have the scheduled maintenance shut in Somerset. That, as guided, was about $17 million. That went very well, and we were pleased with the outcome. Offsetting these significant headwinds, we continue to focus on what we can control, and there were a number of cost-saving initiatives across the group. And on top of that, we did get some energy refunds in Europe, which offset the higher energy costs that you do occur during the year. Moving to Slide 4, which is the earnings bridge, comparing last year quarter 1 to this year, obviously, this year, we had $90 million EBITDA, which is lower than we would like it to be as a result of the headwinds that I mentioned. And if you reflect on this page overall, you can see that pricing is the main story. It's across all segments, but in particular, DWP. It's had a major impact. The volumes actually held up pretty well, and we'll talk about that in a little bit more detail. We did get savings on costs, variable costs. And that's in spite of the -- what's included in that is the exchange rate impact on higher costs coming through. A number of our costs, as you know, are denominated in euros and rand. And when you convert that to dollars, it does have a negative impact. We had -- under fixed costs, we did have the Somerset shut in the quarter coming through. And then you have your annual increases as well on labor. So all in all, a substantially lower level than last year due to the headwinds that I described. Moving to Slide 5, specifically on the major variable costs, the main categories. I'm not going to talk to all quarters, but in more recent times, you can see that energy and wood costs have been rising. Chemical relatively stable and low and pulp prices, as you know, low. So that has helped us a little bit. But unfortunately, because of the translation of these costs from foreign currencies into dollars, it does have an adverse impact on the overall cost of the group, and that's reflected inside these numbers. Turning to Slide 6, our net debt to adjusted EBITDA development. Because of the lower earnings and the impact of the currencies on our euro debt, it has meant that our ratio has increased to 5x, in absolute terms, our net debt is at $1,951 million. You can see in spite of the difficult quarters that we're currently experiencing, you can see that we have managed to keep our net debt levels relatively stable over the last 2 quarters. Moving to Slide 7, the maturity profile of our debt. And just to call out a few key elements. Firstly, under short-term debt, you can see we've got EUR 183 million reflected there in euro. And I'm very pleased to say that after quarter end, we did finalize and sign and ultimately, the cash has flowed a new EUR 200 million 5-year term loan to replace that. We're very pleased with that, and we got the support of the banks. We did swap that to dollars. And obviously, with the dollar weakness at the moment, we felt it was appropriate to swap that into dollars. So we've done that. And another milestone at the same time has been the renegotiation of our RCF facility. Our drawings on that is reflected here under the 2027 box, the EUR 117 million. As I say, pleased to say that, that has -- we signed a new facility increased from EUR 515 million to EUR 550, we've got 2 additional banks part of our syndicate, very pleased with that. And I think it reflects strong support from our banking partners as we move forward. We did negotiate higher covenants with that, and that maintains our flexibility as we move through these challenging times. Moving to Slide 8. The cash flow and CapEx. Well, firstly, on the cash flow, and it's really reiterating the point that I made earlier that in spite of all the challenges, our net cash utilization was only $3 million despite what we've faced. And then on CapEx, we've taken a very close look at all our CapEx expenditure as part of our Back to Basics initiative, we've removed any expansionary CapEx and fully focused on what is required for maintenance and regulatory purposes, and we brought our estimate down for 2026 to $260 million. Moving to Slide 9, and I've touched on a number of these themes. But just to reiterate a few points. as you know, we have a covenant linked to our leverage ratio. It's -- the math on that is slightly different to the published balance sheet numbers that you have. So overall, the ratio came in at 4.9x for the quarter. As I say, that's within the revised covenants that we've negotiated. From a liquidity perspective, very pleased to say that we do have $143 million on hand. We've got RCF facilities that are undrawn of $680 million (sic) [ $608 million]. So we believe that gives us adequate liquidity. And as always, and I think that's emphasized by our achievement to negotiate with the banks. We have very good relationships with our banks. They are long-standing. They understand our business. They know the cyclicality. They know where we are with the current macro challenges. And we stay close to them. We ensure that we've got maximum flexibility during this difficult period. The middle block here is what I've already talked about. So I don't intend repeating that. On the right-hand side, you see a strong focus on Back to Basics, evidenced by a reduction in CapEx that I've talked about, substantially lower than it was last year, obviously and we've removed any nonessential CapEx. At the same time, we've got a number of cost-saving initiatives across the group, and we're targeting $120 million for the year. A lot of that's in Europe, but it is across each of the regions. Moving to Slide 10. I don't intend going through this is our 5 strategy. The pillars are still relevant, and we continue to work across all of them, but it's fair to say that at this point in time, we're laser-focused on Back to Basics and getting through these difficult market conditions and ultimately resuming our reduction in debt, and there's a strong focus to reducing debt in the years ahead. Slide 11 is a slide that we did include last quarter, just some of the strategic initiatives in Europe to rationalize the business and cut costs. Those initiatives are on track. Specifically, the consultation processes are now complete where labor has been impacted. At Alfeld, we have completed PM1 and PM4 closure and similarly at Kirkniemi PM2. Those have been completed now, and the benefits from those will start flowing from Q2 onwards. Slide 12 has the joint venture with UPM. Back in December, we did announce this. I don't intend repeating everything I said on the results call that we had for this other than just to reemphasize that we're very excited by this transaction. We think it represents a tremendous opportunity and ultimately will lead to reducing our exposure to graphic paper in Europe. We think there are substantial synergy opportunities, and it will help reduce debt. So things are on track, and that probably leads into Slide 13. Things are ongoing. And ultimately, we're working through finalizing agreement, definitive agreements. We're targeting to do that in the first half of '26, secure and finalize the financing. And thereafter, we will take that to shareholders. There will be a circular and we'll vote on that. But generally, everything on track. The transaction is obviously subject to a number of suspensive conditions, the biggest one being the approval from competition authorities. We've been engaging with them. It's progressing as expected so far. It's early days, but we have teams working on that, and we'll update you when we do have progress. We are targeting completing the transaction by the end of 2026. Moving to the segmental. And firstly, on pulp, underlying volumes and demand for Sappi's Verve DWP continued to be good and solid. I'm pleased to say that stability in South Africa's production has been good. Production at Saiccor has been -- since we completed that expansion project a number of years ago. Operations are stable, and we're very pleased with that as all the work that's been done there. Similarly, North America volumes up. The big challenge, and I'm repeating what I've said earlier, it's the lower DP prices, which is driven by overall pulp markets globally being at relatively low levels. You can see it's $160 lower than it was a year ago DWP and then the exchange rates coming through. So those had a major impact, which impacted on the volumes. Packaging on Slide 16. Volumes generally okay, albeit that North America, the ramp-up on PM2 is a little bit slower than we would like it to be. But generally, volumes is not the issue. Global packaging markets are under pressure, which has affected selling prices in each of our businesses. And that's the main issue at the moment. Specifically in North America, we had the shut so that would impact on profitability in the quarter. And as I said earlier, there was a couple of once-off utility power-related incidents in -- at the 2 mills in the U.S., which impacted on our efficiencies and our usage of raw materials in the mills. Moving to Slide 17, Graphics. I don't think there was any surprises in terms of the market declines in graphics. It was about 8% in both Europe and North America, and that was expected. Specifically to our North American business, we obviously converted PM2, so that took our capacity out, and we had some production issues that I referred to earlier. So that meant that overall, it did have an impact on margins in the North American region. The Europe volumes as expected, but pricing in that market has been under pressure linked to the excess capacity. I should have mentioned earlier that pricing in North America has been healthy with the tight market conditions following our conversion. And moving to Slide 18. I don't -- there's a lot of numbers on this page, just very briefly just talking about each of the regions. Europe, as I said earlier, volumes holding up reasonably okay. It's a pricing issue linked to the excess capacity across both Graphics and Packaging. In North America, we had the shut in the quarter, which impacted on volumes coming out of and those once-off events referred to coming through which overall impacted profitability. Selling prices down, that's not a Graphics, that's both in pulp and the packaging grade. And then in South Africa, very good volumes, but DWP selling prices towards performance. And you can see that selling prices overall 12% down on a year ago. On Slide 19, just some of our ESG issues. A few to call out. Firstly, on the CDP, very pleased with our scores. We've seen an improvement on climate change, an improvement on forest. We're very proud of that. And also very proud of the awards that we -- or the recognition that we received from Forbes in terms of being one of the -- globally one of the world's best employers and top companies to work for women. The annual report and the sustainability reports have all been completed, and they're all online for you to have a look at. Moving to the outlook on Page 11. Just to repeat, DWP volumes are okay and robust. So demand is good, but it's a pricing challenge that we currently face. We're doing a lot of work on costs to take costs out of the business to help mitigate some of that impact. And then moving across to Slide 22, strong focus on efficiencies in our Back to Basics and optimizing working capital and with a longer-term focus, obviously, of reducing debt. So taking everything into account, our guidance for 2026, with the exchange rates where they're at, at the moment and the DWP prices, one thing I should have called out, DWP prices have increased in the last couple of weeks a little bit, but it is moving in the right direction. I do think exchange rates is playing a major role in that because obviously, DWP prices are priced in dollars. So I think the fact that the dollar is weaker should help us as well. But taking all of that into account, we anticipate that the adjusted EBITDA for the second quarter will be lower than what we just reported for the first quarter. So operator, I've gone through the presentation. I'm going to now hand it back to you for questions. Operator: [Operator Instructions] And now we're going to take our first question, and it comes from the line of Sean Ungerer from Chronux Research. Sean Ungerer: Steve, just in terms of a couple of points around guidance, if you don't mind. So obviously, there's a $120 million cost savings program flagged, I think, with $60 million in Europe roughly. Can you just give a little bit of color on the split for the balance? And then I guess, just in terms of cadence across the regions, how we should think about that for the rest of the year? I'll start off with that. Stephen Binnie: Sorry, your second question, what across the regions? Sean Ungerer: So $120 million cost saving programs at a group level. I think you flagged $60 million for Europe specifically already. I'm just trying to get a bit more color on the balance sort of how maybe across North America and SA. I know, for example, headcount was down in SA in Q4, fixed cost down about 4%, and then just obviously, in addition to the split, just to understand like the rollout of those fixed cost savings, how we should sort of think about it maybe quarter-by-quarter for the rest of the year? Stephen Binnie: Yes. Thanks, Sean. I'll let Glen give you the split approximately across the regions. In terms of the split across the year, there was about $30 million in Q1, Glen, right? And the balance for the rest of the year is roughly even. Even over the remaining 3 quarters. Yes. But maybe the first question, you can talk about the regional split. Glen Pearce: In terms of the regional so as you rightly pointed out, Sean, the bulk of that is in Europe. It's about a 60-40 split, 60%, 40% split as far as fixed to variable. And as I say, the bulk of that is coming out of Europe. There are variable cost usage variances or improvements in both North America and in South Africa, but that would be the split. Stephen Binnie: Yes. But the split between -- it's more -- more of it is North America than South Africa. Glen Pearce: So it's about the balance. Sean Ungerer: And then just to bring you on to the next question. just to understand sort of the defensiveness of the SA business if the bulk of those cost savings are sort of more Europe and North America. I'm just trying to get a better feel of how SA business, I think around 60% of volumes or capacity is dissolving wood pulp, right? And sort of we're sitting at $805 for DP, $16 for the rand. I understand you obviously had quite a bit of volume ramp-up in Q1. I think volumes are up about 37,000 tonnes year-on-year, which is great. I mean, you've obviously got some maintenance still coming up for 2 more quarters for the rest of the year. Is the volume -- incremental volume going to be enough to offset that? I mean, how should we be thinking about that? Stephen Binnie: Yes. Look, Sean, I guess I'm repeating what I said earlier. Clearly, at these exchange rates and these dissolving pulp prices, our South African profits are under pressure. We are targeting savings and costs, and Glen has quoted the numbers. On top of that, we do have initiatives underway, which are not in those numbers to look for further opportunities, which may help us further. So in summary, yes, the pressure will be on our South African business, our margins at these levels. That's fair to say. Graeme, I don't know if there's anything you want to add. Graeme Wild: Yes. Obviously, proportionately, we have a very big exposure on both exchange rate and the DP price. The combination puts it under enormous pressure. I think the biggest opportunity for us is in the operational efficiencies side. We have had -- we have been steadily improving our productivity, but I think there's still more that can be done there. And that doesn't only give us additional volumes to sell, but I think can substantially reduce our variable cost per tonne. And that's what we're working on, and that has the most significant leverage. But in the short term, very hard to offset that big move in the rand. Sean Ungerer: And then I've got quite a few more, but I'll just ask one relating to, I guess, Europe and the JV. Face value, I mean we've seen that the industry is going to sort of sits and waits until hopefully the JV closes out, which I'm assuming means there's sort of limited pricing pressure on maybe a 6- to 12-month view. I don't know if you sort of agree with that. And then I guess, secondly, linked to that, I mean, obviously, best case scenario is that the deal does go ahead. But if it doesn't go ahead, I guess the question is what sort of gearing levels is -- are you happy to have on the balance sheet? And I guess, what would be the solution around reducing gearing if the JV doesn't go ahead? Stephen Binnie: Yes. Yes. Look, on pricing in Europe, as you know, the selling prices have come under pressure in recent quarters. Yes, I mean, our focus is obviously to protect those prices and ultimately look for price increases as we move forward. And that's something we are trying to evaluate on an ongoing basis. Marco, anything you want to add on that? Marco Eikelenboom: No. This is now a period of time that has been last for 18 months. So I think what we're trying to do is besides the cost reduction Steve spoke about, the capacity reduction or readjustment towards growing areas is to maintain our margins. You're right, Steve. And whether that's through further reduction of variable cost and pressure on some of our cost categories or price improvement through bottom slicing, plain price increases or optimization of our portfolio, that is all part of the game. But it's certainly currently not to be expected that it comes from a dramatically better market situation than what we're seeing right now and for the coming quarter. Stephen Binnie: Thanks, Marco. To your second question, if Europe doesn't happen -- sorry, if our project with UPM doesn't happen, we need to look at all options. There's 2 aspects to your question. Firstly, on Europe itself, we would need to look at options to reduce our exposure to graphics in time, and we would need to look at our asset base. We would need to see if there was other alternatives for exiting some of that capacity. More specifically to your question on gearing, yes, again, once again, those options that I'm referring to, we would -- we'd have to consider ones where we could monetize and try to look at alternatives that can generate cash for us to reduce our debt. So that would be our focus. What I would say is you're assuming it wouldn't happen at all. Clearly, there are scenarios in the middle that you want an outright approval, but there could be scenarios where there's approval with conditions. And those would be more likely than an outright rejection, and we would need to evaluate that at that point in time. Operator: And now we're going to take our next question. And the question comes from the line of Brian Morgan from RMB Morgan Stanley. Brian Morgan: If I can just ask a question about balance sheet and stress testing and all of that sort of stuff. If we're in a scenario where in 12 months' time, the rand is still at $16 and DWP still at $805, how does your liquidity situation look? Maybe, Glen, would we need a capital raise at that stage? Stephen Binnie: Yes. I'll start, and then I'll let Glen come in. Once again, I'll point you towards the increased covenant levels that we've negotiated with the banks and the flexibility around that and the strong relationships that we have. So that gives us significant flexibility as we move through this. Specifically to the capital raising. So Brian, we've got long-term relationships with our banks. And we -- you've highlighted an issue there in terms of how volatile it is at the moment. And what we're doing is we've got an open dialogue with them. We're keeping them abreast of what our forecasts are, and we're discussing with them how -- what the progress is. So it's just an ongoing dialogue, and we're constantly updating it. Glen Pearce: Yes. So Brian, what we're really saying is that we're not contemplating any capital raising at this point in time. Brian Morgan: Okay. And asset sales, are they possible? I mean you've spoken about the JV, but any additional asset sales outside of that? Stephen Binnie: Yes, it's not something we're looking at immediately. But I guess you're talking worst-case scenarios. Obviously, we would have options there, but it's not something that we are looking at the moment. We're focused on improving what we can control internally and working closely with our banks to ensure we've got maximum flexibility as we move through these challenging times. Brian Morgan: Last question, if I may. About $1.9 billion of gross debt. I'm trying to unpack from the numbers, but I'm struggling to do so, just how much of that is subject to covenants. Could you give us a ballpark? Glen Pearce: Brian, our RCF is pari passu with our bonds. So it's all linked to the covenants. Brian Morgan: Sorry, what does that do? Glen Pearce: It's -- our RCF is pari passu with our bonds and our bonds are all linked to the long-term loans you referred to. So the covenants are linked to the full amount. Stephen Binnie: So the RCF is with the banks -- the banks are pari passu with the bonds, we're hopeful, Brian. But that's normal. That's standard stuff. Operator: And the question comes from the line of James Twyman from Prescient. James Twyman: So I've got 2 follow-ups and then one of my own. In terms of the covenants that we've got here, could you just talk around what the new covenant levels are with the banks and how long they are before the covenants go back to maybe the 4x net debt to EBITDA that you're originally on? And then on the cost savings, so you've talked quite a bit about the $60 million of cost savings that you're getting from these big 5 projects you're doing in Europe. But I think it's a big positive surprise that there's another $60 million that you're now talking about that's coming from elsewhere. It would be great to get some more color on what projects these are because it's another very, very big number. And then the third question, if I may, is these energy credits you're getting in Europe are becoming increasingly important. How much visibility do you have on where this goes in future years? I mean is there a clear method that the EU uses to calculate them? And -- yes, how much confidence do we have that this is something that is sustainable because it's obviously risen quite substantially. Stephen Binnie: Yes. On the covenant level, we don't give the specific number. But in terms of the levels, it's -- there is quite a bit of headroom above where our current debt levels are at. And we've negotiated in terms of the new covenant -- once again, we don't give the specific levels, but we've elevated it for a significant period of time. It's not just a couple of quarters. It's for a significant period of time. Glen, do you want to take the cost savings in the other two regions for the remaining 60%? Glen Pearce: Yes. Sorry, in terms of the 60% on... Stephen Binnie: The $60 million other savings on cost savings that are part of the $120 million. Glen Pearce: It's all linked to your variable cost on your fixed costs. So as I said, I'll split that between the 60% variable costs and 40% -- 60% fixed costs and 40% variable costs. The bulk of that is in Europe. And then going into the bulk of that 60% on the fixed cost comes out of the capacity reductions that we have in Europe. Stephen Binnie: The portion that's not Europe is -- there are fixed cost savings there. So there are headcount reductions and there's operational efficiency improvement. We've had some negative usage variances. And then on the procurement side, we've been able to target some new initiatives to save on raw material costs. And that's -- when Glen talks about the 60-40, the fixed cost is obviously predominantly headcount and the variable cost is on the usage and the raw material costs. And your third question, the energy credit, look, it's a good question. It's not just Sappi, a number of industry players have been getting these credits. And really what they're for is you incur higher energy costs during the year and the various countries in Europe recognize that and they give you refunds. It's been ongoing for some time and by all accounts, is expected to increase -- sorry, to continue. So we believe it will be there in the years ahead. And there's no signal otherwise, James. Operator: [Operator Instructions] And now we're going to take our next question, and it comes from the line of Brent Madel from ABSA. Brent Madel: If I could maybe just ask a question around the UPM or the proposed UPM transaction. Are you able to give us an update as to where we are in the process with regards to the JV sourcing funding to complete the transaction? Are you able to give us an update on that? Stephen Binnie: There's nothing new to say other than it's an ongoing process. It's working in parallel. Ultimately, we've appointed lead banks, and we've got strong commitment letter -- we've got strong letters of support from them. And we're busy finalizing the agreements with UPM. And as part of that, sharing our numbers with them and they're doing their assessment. So it's progressing as planned, and it's something that we expect to finalize at the time of signing the agreements with UPM. Operator: And the question comes from the line of Detlef Winckelmann from JPMorgan. Detlef Winckelmann: Just a very quick one on Consumer Board. Obviously, you're trying to ramp up Somerset into what is quite a weak and oversupplied market right now. And I did pick up that you're looking to -- or that you ramped up a bit slower than what you expected. Seemingly, it doesn't look like the oversupply is correcting in any way. So I'm just trying to work out, I suppose, one, how you envisage that ramp-up going in the next, say, I don't know, 1 year, 1.5 years while this oversupply persists? And then secondly, we have seen some price cuts more recently on SBS. I understand that SBS pricing is a little bit more closer to some of the other substitutable grades. But are we seeing any price pressure in those substitutable grades yet that kind of erodes that benefit for SBS? Stephen Binnie: Thanks. Yes, in terms of the ramp-up on PM2, there's a number of dimensions, which we can talk about. And I'll hand over to Mike just now. But just firstly, we are ramping upwards. Interestingly, we did have a couple of existing customers that had their own challenges. And they actually had less volumes in the quarter. In terms of signing up new customers, we are seeing positive progress, not quite at the levels that we originally anticipated, but it's better than the underlying overall volumes appear because those other 2 existing customers had some challenges. As we look forward to the -- for the year, there's a lot of good positive news coming out in terms of signing up customers and the volumes increasing. It's not at the levels that we originally anticipated, but we are anticipating substantial improvement. Mike? Michael Haws: The only thing that I'd kind of add to that is some of the new products have taken a bit longer with qualifications at the customers' plants. And that's specifically when it's some of the smaller customers. We are not seeing erosion in some of the competitive products as of yet. You asked that question. The other thing that we have been doing is expanding geographies, and that has been working pretty well for us. So there's a number of new opportunities. And it's been a qualification along with the kind of bit of a challenging demand. We also are making graphic grades on PM1 is that, that machine can swing. So as that market can absorb volume, we're also using that tool. Detlef Winckelmann: And then if I can do one more follow-up. I mean, obviously, with your ramp-up still ongoing, you mentioned maybe some qualification delays, but not necessarily bad demand for your products. I'm curious as to whether the pricing discipline has been maintained or whether you managed to get these new contracts just by undercutting the market. Just curious on that. Michael Haws: I'll offer what I can. You're asking me a specific pricing question, but that's not something we typically get into the detail on. The price decline in the market happened before PM2 even became at a commercial product to offer. And that has been a bit of a challenge. So the other thing that I'd offer is that there has been some dynamics around imports as imports make up about 500,000 tonnes in the SBS or board grades into the U.S. And that's been kind of a bit of an on again, off again kind of thing based on tariffs and other things that are happening. So there's been other price pressures. And I think that's the best I can offer you there. Operator: And the next question comes from the line of Andrew Jones from UBS. Andrew Jones: I think that last -- beat me to that question, but I'd just like to just dig on that a little bit more. Can you just give us some numbers around like your utilization on the mill and how it evolves through the 2025 period at Somerset? And can you give us some numbers around your expectations for the speed of ramp going forward? And also just a bit of a follow-up. I mean the sort of customers that you're selling into, I mean, I guess, are they buying from European suppliers? Have you seen any impact from tariffs, currency move, et cetera, in terms of those suppliers being pushed out or any change in the import there that you could talk to? Stephen Binnie: Yes. I think let me take the second part of your question first. There's no doubt that the tariffs that have been placed on the European importers into the U.S. has helped. So although overall market conditions are generally difficult, the fact that those have been introduced is creating opportunity with potential customers for us. That is a support for us. In terms of the ramp-up, as you know, we talked earlier -- on earlier calls like this that by the time we got to the end of Q4 next year, we will be close to full on the machine. It's fair to say because of what we've described, we're tracking behind those levels. I can't give you a specific number, but the machine is still -- by the time we get to Q4 is going to be significantly fuller than it is currently. It might not be 100, but it will be at substantially higher levels than current levels. Glen Pearce: Steve, the only thing I'd add to that is when you're starting up a new machine, there's an expected ramp rate that's less than full capacity. And the ramp in our CapEx was expected to take over 3 years. The OMEs of the machine are moving forward really well and the quality of the machine is moving forward really well. Part of our offering into the market is more of a long game with relationships and product attributes that because of the equipment we have, we can bring consistency and other attributes that aren't necessarily engineered into the other competitors' assets. So lots of work going on. I'd say that tariffs at time have opened doors for us. That was the other question that you asked. Operator: Now we're going to take our next question, and it comes from the line of Shubham Agrawal from BlackRock. Shubham Agrawal: Yes. So I have a couple of questions. So to start with first on RCF, can you help us remind, is the RCF availability full? Or do you have some leverage covenant on that? Stephen Binnie: Sorry, was that the RCF? Shubham Agrawal: Yes. Stephen Binnie: Yes. I think you're asking how much have we utilized? I think it was about $100 million... Glen Pearce: That's right. It's just over $130 million... Stephen Binnie: Yes. And we have available $608 million at the end of the quarter. I think that's what you... Shubham Agrawal: Is the RCF fully available? Or do you have any leverage going? Glen Pearce: It's fully available. Shubham Agrawal: Do you have any restriction. Glen Pearce: It's fully available. Shubham Agrawal: Okay. And the second question that I have on the unplanned disruption that you have seen in the quarter. Can you give us some additional detail on that? I understand you have already said on that, but yes, any additional color would be really helpful. Stephen Binnie: I'm sorry. Disruptions in -- more color. Okay. I'll let Mike -- we don't want to go into too much detail, but we had 2 specific once-off incidents, which impacted on our utilities. As I said, we -- they're behind us. But Mike, do you want to share a little bit more on that? Michael Haws: Certainly. So the 2 big mills, Somerset and Cloquet, each of the mills ended up with the utilities event. In Somerset, it was a steam supply issue that ended up running close to 2 weeks that impacted machine performance and costs while we were repairing that. In Cloquet, we had a disruption of the power supply into the mill, right at the Christmas time, where we ended up with over a week of downtime there as we were bringing the utilities back online and getting everything back up and running. That whole event was exacerbated by really cold temperatures. Everything is back up now, and we put corrective actions in place to prevent reoccurrence. Operator: Now we're going to take our next question. And the question comes from the line of Saul Casadio from M&G plc. Saul Casadio: I just have a couple of really brief ones. Can you give us the spot price of GWP? I don't have the price data anymore. So I was wondering whether you can provide that. Stephen Binnie: Yes. Today, as we speak, it's $805 a tonne. Saul Casadio: Okay. And the other question is just a clarification because you said the RCF is pursue with the bonds, which is normally, it is seniors versus the bonds. So I was wondering whether there's something specific in the structure whereby the RCF is part with the bond. So try to better understand this, if you can clarify this point. Glen Pearce: Just to clarify that, there are actually cross-default provisions on that. So the covenants themselves only apply to the RCF and OB loan. But in the event that there is a default, then the bonds then share in pursue on any default, if that clarifies it. Saul Casadio: And why is that the case? Because normally banks would try and get a super senior position with the RCF. Why not in this case? Stephen Binnie: Sorry, is that -- could you just repeat that, please? Saul Casadio: I mean what I'm saying is that it is a bit unusual. Normally, the RCF is senior has a priority in case of, let's say, default that gets repaid first. but this doesn't seem to be the case in your capital structure. I wasn't aware of this. And yes, I'm just trying to clarify. Normally, the banks can take security ahead of the bonds that they normally do that. Glen Pearce: No, as I described it. Stephen Binnie: Yes. And I guess if there's more clarification, we can take that offline. Operator: Now we are going to take our next question, and the next question comes from the line of [ Andre Pettus ] from... Unknown Analyst: Just a few. First one, you've had a bit of working capital releases the last 2 quarters. Just your expectations for the rest of the year in terms of absorbing or releasing from here? And then just secondly, in terms of those once-off events in the U.S., you quantified the hit in terms of the, call it, the maintenance closure you had. Can you maybe take just the order of magnitude step in terms of what the potential once-off hit was there in EBITDA terms? Glen Pearce: All right. In terms of the working capital, you're right, there was a release in the current quarter. And for the year, we anticipate a release as well for the full year. Stephen Binnie: Yes. On the second one, a lot of the impact, as I mentioned when I was going through the deck is aside from the lost production, you have inefficiencies and negative usage on the mills. The approximate impact of these is about $10 million. Operator: And now we're going to take our final question for today. And it comes from the line of [indiscernible] Unknown Analyst: So a couple of questions from me. The first one, I just want to understand, so you lowered your CapEx guidance from $290 million to $260 million for the full year 2026. I wanted to know to what extent it could be lowered to -- what are your main CapEx and what is like the level you could not go lower for this year? And the second question is for the DWP prices. It seems that for a certain time in 2023, I think that the prices were also around the $700, $800 and then rebounded. I wanted to know if we should see the $700, $800 prices for DWP as a low level that can only maybe go up. And the last one is I want to understand what changed because you -- so basically, your guidance was for Q1 for the plantation fair value adjustment to be positive. In the end, it was negative. So I think that it means that there was a much higher decline in wood prices in South Africa than what you expected and just maybe what you're seeing about that? Stephen Binnie: Yes. All right. Firstly, on CapEx, yes, we've taken a very close look at our CapEx levels. And as I say, we've eliminated anything that we regard as nonessential. You're asking, can it go down further? I don't think so. I think that's our best estimate of what the CapEx will be for the year, the $260 million. The DWP, you are right. Back a couple of years ago, the dissolving pulp price was at those lower levels, but there's very different other macro factors. The dollar was worth a lot more than it is today. And a lot of the producers with the currency shifts, it put them under more pressure. So all of us have a desire to increase selling prices. And I think that's what's given a little bit of traction in the last couple of weeks. The conversations, and I'll let Marco and Mohamed chat a little bit about it. But all the pricing discussions are around currencies and its impact on currencies. And that's the focus of attention in China at the moment. Mohamed, maybe you want to elaborate further. Mohamed Mansoor: Steve, just on the currencies, you mentioned that supply side currencies in terms of the Riyal, the Chilean peso and of course, the rand has all strengthened. So there's a desire across the board to get the dollar price up. But on the buying side as well, we've seen a strong appreciation in the renminbi. So that makes affordability by the buyers for higher U.S. dollar prices easier. And if you just look at where the renminbi price of dissolving wood pulp has moved over the last year, it's gone from about RMB 7,500 early last year to today around RMB 5,500 just purely because of exchange rates. So that is definitely, I think, providing support and incentive for higher U.S. dollar price. Stephen Binnie: Yes. And then I think your last question, you were asking about the plantation fair value adjustment. There was a further negative impact in the quarter. And as we move forward for the rest of the year... Glen Pearce: We're anticipating for the rest of the year, it's going to be -- there's going to be further negative adjustments, and that's because we have -- it's a rolling 4-quarter valuation, and you still got the lower pricing coming through in our fair value adjustment. So you should see further adjustments -- negative adjustments coming through. Operator: There are no further questions for today. I would now like to hand the conference over to your speaker, Steve Binnie, for any closing remarks. Stephen Binnie: Once again, I'd just like to say thank you to everybody for joining us, and we look forward to discussing our results with you in 3 months' time. Thank you very much. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Ladies and gentlemen, a warm welcome to the GSK Full Year 2025 Results Call. I'm delighted to be joined today by Luke Miels, Nina Mojas, Deborah Waterhouse, Tony Wood and Julie Brown. And in our Q&A session, we will be joined by David Redfone. Today's call will last approximately 1 hour with the presentation taking around 30 minutes and the remaining time for your questions. Please ask only 1 to 2 questions so that everyone has a chance to participate. Before we start, please turn to Slide 3. This is the usual safe harbor statement. We will comment on our performance using constant exchange rates, or CER, unless otherwise stated. I will now hand over to Luke. Luke Miels: Thank you, and welcome, everyone. My introduction today will have 2 parts: Headline results for 2025 and our key focus areas in 2026 to drive value. Starting with 2025 results were strong. Sales were up 7% to more than GBP 32 billion. Growth was driven by Specialty Medicines, which were up 17% with vaccines also contributing. Core operating profit grew 11% and EPS was up 12%. Cash generation was strong at GBP 8.9 billion, supporting future investment and returns to shareholders, enabling the dividend upgrade of 2p to 66p declared today. R&D output remained very positive with 5 FDA approvals and 7 new pivotal trial starts, and we maintained our high standards for being a responsible business. Looking forward, we expect another year of profitable growth reflected in the guidance given today. Next slide, please. In 2026, we expect momentum to continue, and we'll get there by focusing on execution and operational delivery. There are 3 areas where we're focused. The first is driving top line growth by maximizing launch products like Blenrep and Exdensur and ensuring success in overall operational execution. Second, accelerating key assets in our late-stage portfolio like B7-H3, B7-H4 and Velzatinib in oncology and Effi in MASH and in our earlier portfolio like the ultra-long-acting TSLP for respiratory diseases and regimen selection for our 6-monthly treatment for HIV. And third, continue to execute business development where we see a clear pathway to value creation and our recent addition of the food allergy IgE antibody, Ozekibart is consistent with this. Underpinning this will be a drive to simplify how we work with greater pace, accountability and focus. And this starts by matching our best people and resources to the best opportunities to create value. Linked to this, changes have already been made to the executive team, bringing on commercial leaders with deep industry experience to increase our focus on products and execution. And this includes Nina Moz, our new Head of Global Product Strategy, who I worked with for a number of years at AstraZeneca and Roche, who will present the commercial update. And importantly, we'll have an increased focus on leveraging practical use of AI and technology. And I'll now hand over to Nina. Nina Mojas: Thanks, Luke. Please turn to the next slide. Overall sales for the year were up 7%, with strong growth driven by specialty, up 17% and another year of growth in all regions. Next slide, please. Respiratory Immunology and Inflammation full year sales were up 18%, driven by strong Benlysta and Nucala performance. In the year, Benlysta grew 22%, driven by higher demand and supported by all major guidelines. 82% of U.S. bio-naive patients are now starting on Benlysta due to its differentiated profile with organ damage prevention and more than 14 years of safety and experience. Nucala grew 15% and delivered $2 billion for the year. This is the 10th consecutive year of double-digit growth for Nucala. Moving to oncology. Sales were up 43% -- in the year, Jemperli sales were up 89%, reflecting our differentiated profile in endometrial cancer. Ojjaara grew 60%, driven by growth in all markets following the new data at EHA, emphasizing the importance of early intervention. And based on these data, NCCN included Ojjaara as Category 1 for patients with anemia. We expect this to drive uptake in first line, although growth will be slower than what we have seen with second line. ZEJULA sales decreased, reflecting FDA labeling restrictions, and we remain focused on the potential we have for BLENREP now approved in 15 markets globally. Deborah will cover HIV shortly. Given the continued strong performance and momentum across the specialty portfolio, we are expecting sales to grow low double digit for 2026. Next slide, please. The strong performance of Nucala in '25 was driven by our successful launch in COPD. This launch also had a halo effect on all of Nucala's indications, resulting in higher market share in asthma and nasal polyps, also fueling brand growth in '26. We are applying the lessons from the severe asthma market with Nucala to the launch of Exdensur, which is now approved in the U.S., U.K. and Japan. We know that there is a significant opportunity in the bio-naive population as only 27% of U.S. eligible patients are on a biologic. And market research shows that 97% of patients would prefer or like to switch to a biologic with 6 monthly dosing. And Exdensur has demonstrated a 72% reduction in exacerbations leading to hospitalizations in an indication where we know lack of therapy adherence leads to worse clinical outcomes. The second key launch this year is for BLENREP, our off-the-shelf BCMA agent for multiple myeloma available in the community setting where 70% of patients are treated. We've made fast progress on our launch in the U.K. and are applying lessons learned in the U.S., particularly around Eye Care networks. We've now engaged around 18,000 eye care professionals in the U.S., enabling smooth collaboration between treating physicians and Eye Care professionals and have had positive feedback on the simplification of our REMS. We continue to expect this to be a slow ramp-up as we support prescribers and patients to ensure a positive first experience and robust adoption. I will now hand over to Deborah to cover HIV. Deborah Waterhouse: Thank you, Nina. We entered 2026 confident in our unique position to lead the next transformation in HIV care. Sales growth was 11% in the year, powered by accelerated patient demand for our long-acting injectables and our foundational oral 2-drug regimen, Dovato. Demand continued to increase across all regions, most notably in the U.S., which grew 14% in 2025, continuing to outpace competition in market share gain. With the only commercially established long-acting HIV treatment regimen backed by over 4 years of real-world data, we're delivering long-acting innovation at scale and are delighted with our ongoing portfolio transition to long-acting regimens. In 2025, over 75% of our growth came from long-acting injectables, which now represent around 1/3 of U.S. sales. With treatment accounting for 90% of the total $22 billion HIV market, we are pleased that Cabenuva grew 42% in 2025, fueled by patient demand and accelerated switches from competitor products, reaching more than 75% in the U.S. this quarter. In long-acting prevention, Aplitude grew 62% in 2025, withstanding any impact from a competitor launch. In 2026, we expect continued growth momentum. And so today, we are guiding mid- to high single-digit growth. This quarter, we also announced Pfizer will exit ViiV and Sinogi's shareholding will increase, simplifying Vii shareholder structure. GSK will maintain the same position. We look forward to continuing our highly successful collaboration to advance our pipeline and portfolio of long-acting HIV medicines. Moving on to our industry-led long-acting pipeline. Powered by unmatched patient insight, we are set to deliver transformative launches over the next decade, enabling us to navigate the dolutegravir loss of exclusivity and accelerate long-term growth. We believe twice yearly treatment presents our most significant commercial opportunity and through a combination of novel assets, presents the potential to change the HIV treatment paradigm once again. At CROI, we will share data that will help inform our regimen selection for twice yearly HIV treatment. Starting with VH184, a potential first-in-class third-generation entity with IP protection through to at least 2040. We'll present key data on its unique resistance profile versus the competitor and findings from an ongoing first time in-human trial exploring its significant potential for up to twice yearly dosing. We strongly believe this asset has the power to redefine the long-acting landscape, and we remain extremely confident in its potential to become the backbone of our long-acting treatment regimens. To pair with that entity once selected, we are evaluating 2 partners, VH499 and our BNAbN6LS. Data at CROI for VH499 will show potential dosing durations. For N6LS, one of the broadest and most potent bNAbs in development, we'll share more data focused on Q4M dosing with Q6M dosing data expected this year. This year, we'll also begin QUATRO, our Phase III registrational study for 4 monthly HIV treatment. This critical step builds on our Q2M success, and we are on track to file in 2027 and launch in 2028. At launch, we still expect to have the only long-acting treatment options on the market for years to come. Our strategy is clear and our execution is strong. We are fully confident and well positioned to drive sustained long-term performance, and we'll continue to update you on our Q6M regimen selection. We look forward to introducing you to our new Head of R&D, Charlotte Allison, who will succeed Kim Smith upon her retirement at the end of Q1. I'll now hand back to Nina. Nina Mojas: Thanks, Deborah. Turning to vaccines. Sales were GBP 9.2 billion in the year, up 2%, driven by European and international region sales of Shingrix and Bexero. Shingrix sales were GBP 3.6 billion, up 8%, driven by Europe and international region, offset by the U.S. In Europe, sales were supported by our focus on comorbid patients. And in international region, Japan continued to grow following expanded public funding. And in China, we saw similar sales to 2024. In '26, we expect market performance outside of the U.S. and China to benefit Shingrix sales, offset by slowing U.S. immunization rates and our partner in China managing inventory. In meningitis, sales were up 12% with strong continuous growth across Europe and international, driven primarily by Bexero, up 16% for the year. Bexero demand increased in Europe, partly due to MenB outbreaks. Ex U.S. represents 69% of Bexero's global full year sales, demonstrating continued growth from national immunization programs and geographic expansion. In the U.S., we retained MenB market leadership with 74% market share and have seen positive signs for MenB with initial stock building. Turning to Arexvy. Sales were up 2% for the year, also driven by ex-U.S. growth. We continue to monitor the evolving pediatric vaccine landscape in the U.S. At this time, insurance coverage remains as before, and we expect the recent HHS changes to be manageable given GSK's broad portfolio of vaccines. For '26, we expect sales growth to be in the range of low single-digit decline to stable. Next slide, please. Turning to GenMed. Sales were slightly down for the year. Strong growth of TRELEGY was offset by other respiratory and established products. Globally, TRELEGY continues to be the top-selling brand for asthma and COPD. And in the U.S., the C class is growing with TRELEGY leading in share driven by gold guidelines and strong execution. In anti-infectives, we are taking a targeted approach to align access to BLUJEPA in uncomplicated UTIs with positive initial insights. And for complicated UTIs, we now have a PDUFA date of 18th of June for tebipenem in the U.S. Looking forward, we expect sales growth to be in the range of low single-digit decline to stable, reflecting pricing pressures and generic competition of our established portfolio. And in the U.S., across the broader portfolio, we navigated the impact of the Medicare redesign from the Inflation Reduction Act near the upper end of our $400 million to $500 million range. I will now hand over to Tony to talk to you about our progress in R&D. Tony Wood: Thank you, Nina. Next slide, please. Starting with the pipeline. There's greater focus and opportunity here than ever before. Our top priority is to accelerate development to deliver new products to patients faster. In 2025, we secured 5 FDA regulatory approvals and started 7 new pivotal trials, 3 for Exdensur in COPD, 2 for efimisfermin in NASH, for Velzatinib in second-line GIST and RRS, our B7-H3 ADC in extensive stage small cell lung cancer. I'm delighted with the progress we're making to deliver the pipeline, shorten development time lines and access world-leading innovation through BD. Next slide, please. In respiratory, we've extended our leadership through a focus on exacerbation prevention with long-acting treatments and now have approval for Exdensur, the world's first and only 6-monthly biologic to treat patients with severe eosinophilic asthma. Also in respiratory, COPD is a growing area of significant unmet need. A patient hospitalized with an exacerbation has less than a 50% chance of survival over a 5-year period, alongside a cost to U.S. health care of around $7 billion per year. Our work to understand the role that inflammation plays in chronic airway disease has led to an emerging and differentiated pipeline of long-acting options for COPD patients. Starting with Exdensur, the Phase III ENDURA trial to recruit patients at moderate risk of exacerbations, while vigilant is the first ever study of an antibody for patients at an early stage of disease who are at risk of rapid progression. Our Phase II trial investigating the ultra-long-acting TS monoclonal antibody GSK283 in asthma patients is on track to generate data by the end of this year and will further guide development of a 6-monthly option for patients with a low T2 phenotype. The portfolio also includes a PDE3/4 inhibitor with potential for DPI use in Phase I development in China, complementing our leadership position with TRELEGY. Looking now to refractory chronic cough. I'm pleased to confirm that we achieved last patient first visit for the KALM-2 study in December. And we're now on track to report Phase III data from the total program around mid-2026, in line with our prior guidance. We believe Camlipixant will provide an effective treatment in RCC, where there are no approved therapies in the U.S. and approximately 10 million patients diagnosed globally who could benefit from this medicine. Next slide, please. A focus on inflammatory pathways of disease and how this leads to fibrosis, particularly in the lung, liver and kidney, underpins our development programs in fibro-inflammatory mechanisms. We are pleased with the progress of Efimosfermin, our potential best-in-class once-monthly FGF21 analog, which started Phase III trials for MASH last year. As a reminder, in Phase II, Effi demonstrated sustained improvement in fibrosis and resolution of NASH in patients with F2, F3 stage disease. These data supported the start of our AZENIT-1 and 2 pivotal studies. We plan to start the Nebula Phase III studies, which will recruit a more advanced F4 patient population later this year. Also in our hepatology pipeline is GSK-990, an siRNA therapeutic targeting HST17B13. Consistent with human genetics of this target, preliminary data from the Phase II STARLIGHT study in alcoholic liver disease demonstrates favorable trends in reduced liver enzymes despite ongoing alcohol consumption and this with no emerging safety concerns. These assets have the potential to reverse cirrhosis where 20% to 50% of patients with associated complications die within 1 year. Next slide, please. Last month, we were pleased to announce positive results from the B-WELL 1 and B-WELL 2 studies, our Phase III trials of Bepirovirsen for the treatment of patients with chronic hepatitis B, a disease which affects more than 250 million people worldwide, causing over 1 million deaths each year. We believe that bepi has the potential to transform chronic hepatitis B treatment and become the first ever fixed course of therapy with functional cure at a significantly higher rate than today's standard of care. This is important because chronic hepatitis B accounts for around 56% of liver cancer cases and real-world evidence shows that functional cure reduces this risk by around 90%. We look forward to sharing these data with regulators during the first half of the year and at an upcoming scientific congress. Next slide, please. Our oncology pipeline is a critical part of the portfolio. Starting with BLENREP. We anticipate mature OS data from DREAM-7 in early 2028 to support second-line registration in the U.S. In the first-line transplant ineligible setting, DREAM-10 is recruiting well, and we recently expanded the number of U.S sites to increase U.S. patient participation. DREAM-10 uses a lower dose when compared to second-line studies and evaluate dual endpoints of MRD and PFS. Interim MRD and safety data are expected in early 2028. Also in the first-line setting, we'll start a study looking at BLENREP cord regimen in a younger fitter population later this year. Moving now to Ojjaara, we continue to generate data to support decision-making for myelofibrosis patients with anemia and a Phase II study in myelodysplastic syndrome is currently recruiting. We also continue to develop life cycle indications for Jemperli. Later this year, we anticipate results from a pivotal ASO-1 trial for Jemperli in DMMR locally advanced rectal cancer. ASO-1 was designed following the publication of transformative data, which showed 100% complete clinical response rate in a single center monotherapy study. We're excited about Jemperli's potential for patients with this disease. Velzatinib, our KIT inhibitor, which targets all clinically relevant enzyme mutations has started Phase III in second-line GIST with first line to start later this year. Velzatinib has the potential to replace current standard of care and is designed to offer a well-tolerated schedule with greater efficacy against resistant mutations. Moving now to our other ADCs. Our B7-H3 targeting molecule, which I will now call Ris-Rez, recently received its fifth regulatory designation with orphan drug status in SCLC. With this transformative potential in mind, we've initiated a global program encompassing multiple solid tumor trials for RisRes called EMBOLD. The first of these studies, EMBOLD SCLC-301 has started ex U.S. recruitment in second and third line. U.S. recruitment will start later this year and include tarlatamab exposed patients. We have extensive plans for additional Ris-Rez Phase III starts in the next 12 to 18 months. In the first half of this year, we also plan to start recruitment for pivotal Phase III trials for MORES, our B7-H4 ADC in platinum-resistant ovarian cancer and in patients with recurrent endometrial cancer. We're targeting a conference this year to present interim data from our early phase BEHOLD-1 study for patients with ovarian and endometrial cancers, and we anticipate further pivotal study starts for this molecule during 2026. Next slide, please. Business development is a core part of how we're accelerating our pipeline and accessing innovation. Two weeks ago, we announced an agreement to acquire Rapp Therapeutics, whose lead asset is Ozureprubart, a potential best-in-class long-acting anti-IgE monoclonal for food allergy, which is currently in Phase II. Food allergy is a chronic inflammatory condition with severe reactions leading to anaphylaxis, emergency care and persistent lifestyle disruption. In the U.S., severe food allergies impact over 17 million patients with an estimated $33 billion cost of economic burden, underscoring the need for more effective treatment options. We expect the deal to close this quarter and look forward to progressing this important asset into Phase III development. Next slide, please. In conclusion, 2025 saw further strong momentum in the pipeline, which continues into 2026. We have critical data readouts to come for bepi, Camli, Jemperli, Q4M Prep and ensure for EGPA. We also have 10 pivotal starts planned for this year, including more than 5 from our ADCs, 2 for advanced MASH and Quattro, our Q4M treatment Phase III trial for HIV, all of which are supporting our growth in specialty medicines. I'm excited about our progress and our prospects. I'll now hand over to Julie. Julie Brown: Thank you, Tony, and good afternoon, everyone. Next slide, please. Starting with the income statement for the full year with growth rates stated at CER. As highlighted, sales grew 7%, whilst core operating profit grew 11% -- this leverage was primarily driven by a 3% increase in SG&A as investment in product launches was balanced with productivity improvements. Additionally, royalty income benefited from the RSV IP settlement, the new mRNA royalty streams and Kesimpta performance. And R&D growth of 11% reflects our acceleration of investment across multiple key specialty assets. Core EPS grew 12%, supported by the share buyback and lower interest expense due to strong operating cash flows. And finally, turning to total results. Growth primarily reflects the impact of the Zantac charge taken in 2024. Next slide, please. The operating margin increased 110 basis points in 2025, bringing total accretion at CER to 470 bps over the last 4 years. This increase was primarily driven by SG&A margin improvement of 90 bps, whilst gross margin continued to benefit from the portfolio transition towards specialty, growing 40 basis points. R&D expenditure increased as we reinvested the additional royalty income into our pipeline to support the initiation of the Phase III Efimosfermin trials and prepared pivotal trials for the ADCs in multiple indications. Incorporated within this margin improvement were core charges of GBP 300 million taken in Q4, split evenly across supply chain and SG&A to drive productivity benefits. And currency was a headwind to margin, lowering the reported margin to 29.9% for the year. Next slide, please. Turning to the cash flow. Cash generated from operations was GBP 8.9 billion or more than GBP 10 billion, excluding Zantac payments, up GBP 1.6 billion year-on-year, driven by higher operating profit, favorable RAR movements and the CureVac settlement, partially offset by increased trade receivables. Free cash flow increased to GBP 4 billion or more than GBP 5 billion, excluding Zantac, driven by strong CFO. Zantac payments in 2025 were GBP 1.2 billion, and the settlement process is now materially complete with GBP 1.9 billion paid in total, drawing a line under this matter. Next slide, please. Turning to capital allocation. Underlying free cash generation was strong at over GBP 8 billion before investment decisions. GBP 4.5 billion was deployed in CapEx and BD as we added 3 potentially best-in-class clinical stage specialty assets to the pipeline and completed multiple early-stage and platform deals. Shareholder distributions totaled GBP 4 billion through the dividend and the share buyback with 93 million shares repurchased at an average price of 1473 and the remaining GBP 0.6 billion will be completed in half 1. Overall, our balance sheet remains strong with net debt to EBITDA relatively stable year-on-year at 1.3x, including the absorption of Zantac and the buyback. Next slide, please. Now turning to the guidance for 2026 with growth rates stated at CER. Starting with our headline guidance, we expect sales growth of 3% to 5%, core operating profit and core EPS to both grow at 7% to 9% and to pay a dividend of 70p, a 6% increase. Product area growth is once again led by specialty at a low double-digit percentage growth, including mid- to high single-digit growth for HIV. Vaccines and GenMed are both expected to be a low single-digit decline to stable, and we expect sales growth to be evenly phased through the year. Turning to the P&L. Gross margin is expected to continue to benefit from supply chain efficiencies and the portfolio transition towards specialty. SG&A will grow at a low single-digit percentage, benefiting from the acceleration of productivity initiatives. And R&D will continue to grow ahead of sales as we invest to advance the pipeline. Interest charges and the tax rate are expected to increase year-on-year. However, these will be offset by the benefits of the share buyback to EPS. Importantly, the phasing of operating profit growth will be heavily weighted towards the second half, reflecting the GBP 300 million of charges taken in Q4 '25 and impacted by the annualization of the RSV settlement in the second quarter. Additionally, currency could be a headwind. If rates hold at the closing rates on the 28th of January, we would expect an impact of minus 3% on sales and minus 6% on operating profit. Next slide, please. Before I finish, I wanted to take a moment to share the continued performance of the business. In 2021, we provided outlooks on 4 financial KPIs for the 5-year period to 2026. We have delivered consistent revenue growth and improvements in operational efficiency. We are on track to deliver against all the 4 KPIs. Taking the midpoint of our 2026 guidance ranges would lead to delivery of 8% sales and 13% operating profit CAGR over this period. Additionally, cash generation has been significantly enhanced, and we're on track to reach more than GBP 10 billion in 2026. This, together with shareholder returns and a strengthened balance sheet, lay strong foundations for the next phase of growth. Our usual IR road map is shown in the appendix, signaling the major value inflections in 2026 and '27. Thank you. And with that, I'm pleased to hand back to Luke. Luke Miels: Thanks, Julie. Looking forward, I see 2 clear things we need to do to create value for shareholders. The first one is top line. This means delivering on our ambition for 2031 and addressing the loss of Dolutegravir exclusivity. The second is the pipeline. We need to accelerate what we have and add to it via Smart BD, and we also need our labs to produce more competitive products. So to do these 2 things, we need to evolve as a company. Products are the key in this business, and we need to be more product-centric. And to accelerate the pipeline, we need to have more scientific courage and be more agile to capitalize on opportunities when we see them. Each quarter, you'll hear more detail about how we're going to make this happen. Next slide, please. To conclude, 2025 was a strong year for GSK. For 2026, we're guiding for another year of top line growth and operating leverage. And for the long term, we know what we need to do to create value for shareholders and patients. And the focus is now on evolving the company to do it. Thank you, and we'll now move to Q&A. Operator: And the first question comes from James Gordon from Barclays. James Gordon: James Gordon from Barclays. First one, respiratory. Can you elaborate on R&D and commercial strategy in COPD and asthma? Because you've now got Nucala, Exdensur and then IL-33 and TSP all in development, but some overlapping products. I don't want to double count. And so how do we think about segmenting this given you've got products going for the same disease and also quite a lot of these mechanisms also have multiple competitors also looking at them for the same diseases. The second question was HIV, and I heard the comments on long-acting strong uptake and exciting next-generation data at CORI. So when could we see the 6 monthly treatment and PrEP Phase III trial start now? And commercially, what is the implications of the 4 month and 6 monthly in terms of your TAM? Because I've seen before you talked about the majority of sales in HIV being long-acting in 2031, but then that might partly just because the orals are going to go away by then. So what's the TAM increase if these work? And maybe if I could just squeeze in a clarification, the $40 billion plus revenue target, which has been reiterated, just is that the original assets? Or is that also including some of the recent acquisitions you were talking about and the BD you're talking about, please? Luke Miels: Great. Thanks, James, and I appreciate the question. So Tony, should we go into COPD and then I might add a little bit of color at the end of that in terms of how we position the assets and what our thinking is. It's obviously always dynamic. And then, Deborah, do you want to cover HIV? I think we're in very healthy shape there, some more color there. And then Julie, did you want to cover the assumptions around the 40. Again, I'll just take this opportunity just in case we get any other questions to reiterate the commitment to the 40. And again, I think we have a clear pathway for that. So Tony, over to you. Tony Wood: Yes. Let me start. Thanks for the question, James. First of all, I'm really pleased with the progress we're making in respiratory. Obviously, just a mark last year, the Nucala approval in COPD in the middle of the year and then at the end of the year, Exdensur in severe eosinophilic asthma as the first ultra-long-acting entry in our pipeline. I think what's important to understand about COPD, James, obviously, huge opportunity there, 300 million individuals globally and significant cost to the U.S. health care system, as I outlined in the presentation. But it's a complex disease. It's a heterogeneous disease. And that's why we're placing ourselves across a range of different long-acting mechanisms. The way you can think about it is there is a high EO population. This is where IL-5 and Exdensur and Nucala are positioned. And again, let me just emphasize there that we have a label which covers both the bronchitic and the emphysemic and mixed population is important when one considers the reality of the hospital admission for a COPD patient. You can then think about the intermediate T2 population, which is the 150 to 300. We were delighted to see the Nucala label there, but that's where we see, for example, our long-acting TSLP starting to play increasingly in the future. And then the low 2 population, and that's where we're positioning IL-33. So what we have, of course, is already starting in that high T2 population, the EUA 1 and 2 studies, that's the GE population that we're looking at. And the Vigilance study, which, as I mentioned in the script, looks as a brand-new approach, looking at rapid progressors in that high eosinophil population. We also have ongoing Phase I and Phase II studies for the long-acting TSLPs and IL-33 mechanisms in the context of the stratification that I described. And then just to finish off, we'll be expecting in both of those to be starting pivotal studies over the next 2 to 3 years once we have been informed by ongoing Phase I and Phase II work and competitor insights. And then lastly, just to finish off, important to emphasize, we also have the HRS9821 molecule, which is the first nominated candidate from our ongoing collaboration that's focused on dyspnea, which is associated to pain associated with breathing and fits nicely into our cell portfolio given that, that molecule has an opportunity to be a DPI administered agent. And then lastly, in the low group, we have the recent deal we did with Empirico012, and that's now called GSK821. That's a long-acting oligo, which is aimed at a broad spectrum, as I indicated. We haven't disclosed the mechanism yet, but we will in the future as we gather more data. And James, what I will say is we get a REIT... Luke Miels: Yes. And James, what I will say is we're going to resist the temptation as a company to construct a lovely PowerPoint slide that shows how we'll carefully capture this bit and have trade-offs amongst our products. I mean, there is a strategic intent here, but we also recognize there's a [indiscernible] Dimension here, in terms of the data that these targets generate, but also the competition gets a vote as well. I mean, ultimately, the long-acting institution. The launch for Nucala COPD in the U.S. is going very well and it was just there on Monday, we have around well, depending on which data set, 43% to 46% of new patient starts already. The market research and the messaging is really resonating. But we have transferred all of our new Catareps to Exdensur and Nucala OPD is being promoted by the Trelegy legacy team. because, again, we need to place our bets on the future and the ultimate future with 5 and higher EOR is going to be long-acting Exdensur for COPD. So thanks, James. I appreciate that question. Deborah, do you want to give an update? Deborah Waterhouse: Thanks, Lee. So the key thing that I want to reemphasize is that we're on track to select our Q6M treatment regimen in the middle of the year. And as I said, we're going to do a meet the management event midyear where I'll lay out a lot more detail about the pipeline. But let me just give you a top line view now. So let's start with treatment. The treatment market is $20 billion in value, 90% of the value of the total HIV market. as I said in my presentation, Q6M is clearly our biggest opportunity in treatment. We're very confident in the assets that we've got to choose from and the COI data that we'll present will show just how strong those assets are, particularly VH184, which is unique, third generation, really potent integrated inhibitor. And we believe that to have a really potent regimen, you need to have an integrated inhibitor at the core. So in terms of what kind of studies will start Q6M treatment, you'll see us move into Phase II this year. That puts us on track for our commitment, which is the 28 to 30 launch for our Q6M in treatment. In terms of PrEP, it's a different pathway because with the medicine that we're developing for Q6M PrEP, it's a prodrug of cabotegravir, which we've talked about before. And that means that we'll be able to go from Phase I to Phase III relatively rapidly and the Phase I will be starting this year where we'll then progress the dose selection and then we'll do a bridging study from the data that we already have from Q2M. So our Q6M pathway is clear, and we're very confident in our ability to deliver against our milestones but don't underestimate Q4. There is a huge desire for Q4M treatment and in prep. And we know that many clinicians are really looking forward to opening up their clinic capacity, which will double from what they've got today with Q2M for Q4M. And I think what you're going to see is a rapid cannibalization to Q2M to Q4. And then actually, you will see a rapid cannibalization from Q4 to Q6. And as I've said before, particularly in treatment, you see the market really open up as we progress through longer and longer durations between administration. So the addressable market for Q2M is about 15% of patients. When we get to 4%, we get to 30% of patients. And then you've got with Q6M in treatment, 50% of patients who would be very willing to take a long-acting injectable. That is a big chunk of the market, which is why we are so excited about the offering that Q6M in treatment and in PrEP, but particularly in treatment will offer. Luke Miels: Thanks, Deborah. Julie, quick answer on the other GBP 40 billion. I think everyone knows, but let's confirm it. Julie Brown: Yes, sure. Thanks, James, for the question. So in terms of what we've included of the recent deals, IDRx has included Efimosfermin, together with the earlier stage Hengrui license, PDE34. Rapp obviously has just been announced, so it's not included at all in the LRF. And clearly, we continue, as Luke mentioned, to support our BD to build and continue to build the pipeline. Luke Miels: Great. Thanks, Julie. Next question please. Operator: Next question comes from Simon Baker from Redburn. Simon Baker: Two, if I may, please. Firstly, on Blenrep. In light of the early feedback that you've had, you talked about the response to the REMS program. Can you just update us on how we should be thinking about the launch trajectory for Blenrep? And then secondly, a slightly bigger picture question for you, Luke. You did mention some of the facets of your strategy. I just wonder if you could give us a bit more detail on how and in what form we're going to learn more about that strategy over the course of the year. Is this something where there will be additional disclosure as we go through the quarterly calls? Or are you envisaging having Capital Markets Day or similar events to lay out the strategy in that sort of for... Luke Miels: Thanks, Simon. I'll come to Nina in a second. I mean I think, as I said earlier, and thanks for your questions. Look, what you'll get from us is a very clear communication. If it's on track, you'll hear about it. If it's not, we'll call it out. And I really want to use these forums to regular update on our progress and where we're going to. So I think these are a very effective forum to do it, and we'll see how that evolves over time. Nina, I mean, again, as I said in my intro, I mean, Nina and I have worked together a long time. She has huge experience in oncology and is now responsible for the whole portfolio in partnership with Tony. And also, we've had a number of other members join the team that have been in their roles during this commercial transformation. And there's a lot of history with those individuals at Aventus and Roche and AstraZeneca. So they are people that many of you will know, and they've got a very strong record. And the aim of bringing them into the team again is just to rebalance and increase the focus on the portfolio, the pipeline and product execution. So with that intro, Nina, over to you on BLENREP in terms of launch uptake and initial feedback. Nina Mojas: Yes. Thank you. Just checking, you can hear me. Yes. Great. Yes, Simon. So you remember, BLENREP was launched in the U.S. just at the end of November. So there are not many -- we can't really share a significant update based on the sales numbers. But what we do know, we launched in the U.K. middle of the year. And the dynamic is opening the accounts is systematic. It's happening, but it is definitely slower because of the coordination of care with Eye Care professionals. By now, we have about 70% of patients covered in the accounts that are open in the U.K. And based on the uptake there, we are actually extremely satisfied. Two things. There is huge interest to try Blenrep. And then we know that we have done good homework in guiding physicians how to use the drug. Physicians are very much aware of the need of extended dosing intervals to reduce or to avoid eye-related side effects. Now translating that to the U.S., we expect similar dynamic. So the timing of opening the accounts is going to take a bit of time, longer probably than what you would see with an asset that doesn't need that coordination of care. But what we did learn from the first launch, as an example, I think I mentioned we are actively educating 18,000 eye care professionals. As an illustration, comparing to the first launch of BLENREP we had only about 5,000 to 6,000 eye care professionals engaged in our program, helping teachers to treat the patients. REMS has been a big factor. I think you know that. It has been received very positively. Currently, REMS is not an issue. Physicians are very much used to REMS programs and BLENREP is very similar. Eye care professionals scale, as we said, we are going to reach a significantly higher number. And then communicating to the physicians how to use the drug that extended dosing is very relevant to enable early positive experience. And I would say that's what we see so far. To your question, what can we expect? -- what we said before, it is not going to be a quick ramp-up. It's going to be a slow ramp-up, but the positive initial experience is more relevant than starting a high number of patients very early and then having a negative experience. Luke Miels: Thanks, Nina. And I would just add one other interesting data point is if we look at usage right now for BLENREP, it's about 50-50 between academic and community, which our strategy is to focus on the community. And with the product that is being relaunched and not a lot of experience in the community, I think this is an encouraging trajectory because at this point, you'd expect volume to be dominated by the academic centers who tend to move on newer things earlier. But we can see, to Nina's point, the strategy of focusing on the community, building confidence, supporting them to dose the first 5 patients appears to be showing promise. And we will give you a lot more granularity at the Q1 update, including on Exdensur. Operator: Next question comes from Michael Leuchten from Jefferies. Michael Leuchten: Two, please. On for Luke. It's been reported that there is a reduction in R&D staff, I think about 350 people in the U.S. and also in the U.K. Just wondering, is that part of a broader program, normal attrition? Just wonder if you could put that into context. And then back to Nina on Exdensur. -- there's a few ways one could launch a product like this, especially early on to go into treatment experienced patients where, I guess, it'd be easier to make an argument to get patients on drug more quickly or into a naive population to broaden up the market. Can you talk about a little bit of the launch curve for 2026? So how should we think about this as the year progresses? Luke Miels: Thanks, Michael. So I'll cover the first one. I mean we're going to manage the business -- and where we say success, we'll reinforce it. If we have programs that are less promising or Tony and Nina in managing the portfolio decide to cull something, then we're going to be very dynamic and shift resources behind to where we can get the best return, generate assets that are most compelling. And ultimately, in doing this, we will have happy shareholders at the end of the process. So this is very much this element of accelerating R&D and simplifying how we work. And you'll see more of that. What we can assure you is that we will run the business with great discipline. And where we can see an opportunity, we will rapidly move resources, people, headcount, capital to support that. Nina? Nina Mojas: Yes. I can take that. Thank you, Michael. Just as a reminder, Michael, and I think this information basically guides the strategy. we have about mid-20s biopenetration in severe asthma. So about 25% of eligible patients now receive biologics any. And of those who start on biologics, 65% will discontinue in the first 12 months. And that tells you if we would go for switch, active switch, that business wouldn't last very long because patients are dropping anyway. And I think we need to look at it in that context. Our main objective, I think Luke mentioned that when we talk about our sales force is going for bio-naive patients. It's very legitimate to expect there will be some switching, and there will be switching very likely from Nucala, hopefully also from other agents in severe asthma as well. What is more relevant is can Exdensur gain share from patients who would have otherwise started on other agents. And 6 monthly dosing, I think you have seen everything that we have seen from both physicians and patients is that there is a huge level of enthusiasm for long-acting 6 monthly dosing, and that will hopefully translate into preferential use of Exdensur over other agents to initiate patients, but then also to start patients who otherwise wouldn't start on biologic yet. Luke Miels: Great. Thanks, Nina. And I think the positioning is the first and only biologic that delivers ultra-long protection in 2 doses that's landing extremely well when we look at market research and perception. Thanks, Michael. Operator: Next question comes from Sachin Jain from Bank of America. Sachin Jain: Perfect. A couple of questions, please. Just firstly for Nina and congrats on the new role. Perhaps a bit more detail on Blenrep. How many physicians have you had through the REMS certification process? And any cadence of how you think that will go through the year as a rate limiting factor? Second one for Deborah on the HIV event midyear. Clearly, we're looking to Q6M start. But I wonder if you will be disclosing how you think about the financials of that business through the LOE. And I guess 2 questions. One, how do you think about the rate of decline of this business relative to where consensus sits? And I guess Q6M isn't in the midterm guide. So do you plan on including it at that point if you start the Phase III? And then a quick one for you, Luke, just on your Slide 5 and high-level objectives. You've mentioned 2 things. One, simplification, do you intend to have any official cost savings program? And then secondly, R&D acceleration, are there any specific programs that you can target for earlier readouts or filing? Luke Miels: Thanks, Sachin. So I'll answer your last question, then we'll go to Deborah and then finish with Nina. I mean we are always looking to save money because I think it's always an opportunity cost, right? So if we can move resources behind particular assets where we think there is a higher payoff and return and they have the clinical profile to justify it, then we will do that. And we will continue that in a dynamic and disciplined fashion. Areas for acceleration, again, I think naturally, the scale of B7-H3 RR is quite interesting. I think 584,7H4 -- it is a very competitive and dynamic area. But I think we're starting to see some color around the tox profile that could give us an edge. FGF21, we looked at all 3 of those companies. We think we have bought the best. Again, you'd expect me to say that, but I think we can back that up in time with the profile of the frequency of the dosing and some of the profile of the product that will emerge in time. So they're probably the key ones, TCliP as well, long-acting TLP. Again, the target is being actively derisked by AstraZeneca. And I think that we have a plan to move that asset forward and rapidly because it is a very attractive area. We think long-acting can really reframe to Nina's earlier point about how respiratory diseases are treated. Deborah, over to you on HIV. Deborah Waterhouse: Okay. Thank you, Sachin, for the question. So -- if we think about Q6M first, so we are intending to set out our HIV story in the middle of the year. And at that point, once we've done a regimen selection and we then commence with Phase II, we will put that into our long-range forecast, which is how we always operate when products get to that Phase II phase. So you'll see that happen midyear. You then asked about the evolution of the kind of the portfolio over time. So let me just give you a top line view, and we will come back and talk more about this when we set out the HIV evolution in the middle of the year. So we've seen a relatively rapid decline of Triumeq as the guidelines have moved away from Triumeq. And what's happened is over the last 12 months, it's created dynamism in the market and Dovato has benefited significantly as has Cabenuva. So the amount that's sitting in Triumeq and Tpic, as you can see, is going down quite significantly in advance of the loss of exclusivity of dolutegravir, which is, to remind you, a glide path, not a cliff starting in April 28 in the U.S. and then July 2 in Europe with obviously Dovato and Juluca in the U.S. having intellectual property coverage now until end of '29 for Dovato and July 2030 for Juluca. So the glide path is coming down. We're already seeing a move away from the old dolutegravir regimens into our newer regimens, and that is going to continue. And then what's going to happen is we will continue to power forward with Cabenuva Q2M. It's doing incredibly well, growing fast. Apretude has not been dented by the launch of yes2Go. So that will also continue to grow '26 and beyond. And then what we will see is Q4M, both treatment and PrEP coming in and powering longer acting forward again until we reach the point at which we launch Q6M. And then we've got 2 brand-new molecules with intellectual property coverage, composition of matter patents through into the 2040s. And so you see a dip in '29 and '30 for the franchise as we face into the largest erosion through the exclusivity loss. And then we come back out into growth in 2031 and beyond. And that growth in that decade is going to be a significant contributor to GSK's success in the 2030s because we are incredibly confident in the value to patients that the Q6M will bring. So if that hopefully gives you a sort of a view as to how it's going to evolve, we will share more detail in the middle of the year. But I just want everybody to understand that HIV will be a big contributor to GSK's success this decade and into the future. Luke Miels: Right. Thanks, Deborah. Nina, quick answer and then we'll try to squeeze one more question ... Nina Mojas: Yes, definitely. Sachin, thank you, first of all, trying to avoid the situation where you will chase me next quarter for the same number, REMS hundreds -- hundreds. And obviously, that's just a start. Luke Miels: Yes. I mean we feel happy about where we're at. One more question and we have time for that. Operator: Next question comes from Steve Scala, TD Colin. Steve Scala: Two questions. First on Camlipixant. If GSK needs 2 positive trials to file, which is what the company has said previously, then what's the purpose of the pooled analysis? And/or has FDA confirmed it will accept filing based on pooled data even if one trial is negative? And secondly, on Shingrix, what were sales to GEFA in Q4? And what is your level of confidence in '26 on this drug? Luke Miels: Sure. Tony, do you want to cover? Tony Wood: Yes. Steve, I'm not going to get into details of regulatory strategy. But as you define, what it's giving us is the option to take the approach, both as independent and ultimately pooled studies. However it's worth saying that we remain confident in the outcomes for both KALM-1 & KALM-2... Luke Miels: Yes. And Steve, there was a shipment in December. We can give you that number offline. I don't have the top of my head. What I will say is that the underlying demand is improving in China. So it's up 6x since the start of 2025. Now it's a low base. And we've grown the market share versus gunway. So now we have 93% market share in that population, which is an operational improvement. And what is driving this? We've shifted the strategy to the one that we launched in Australia and also drove in Germany, and now we're employing in the U.S., which is also helping us get some traction there. Julie has told me it's $100 million we did at the end of last year. So there's still some stock in the pipe. But again, we'll give you more color on Q1, but it's heading in the right direction along with Shingrix in aggregate. So I think we'll stop there because I know a lot of you need to join another call, and I want to respect that. Thank you again for investing the time to construct such thoughtful questions and joining the call and your interest in the company, and we look forward to updating you further next quarter. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Sappi First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Steve Binnie, CEO. Please go ahead. Stephen Binnie: Thank you very much, and good day to everybody. Thank you for joining us. I will move through our investor presentation and as always, call out the page numbers as I go. And just starting on Page 2, I draw attention to the disclosure on forward-looking statements for you. Moving to Slide 3 and looking at the overall numbers for our Q1, it's fair to say that these were challenging market conditions with a number of headwinds, which had an adverse impact on our earnings. And just highlighting a few of these, which have the most material impact. Firstly, dissolving pulp prices down $160 compared to a year ago, a very material impact. And then we've seen this shift in exchange rates linked to a stronger dollar -- sorry, a stronger rand or maybe even more relevant is a weaker dollar, which once again has a major impact on our earnings. On top of that, we've seen -- as we've gone live with our Somerset Mill PM2 project, we have come to market at a time when paperboard markets are weak in North America, which has meant that our ramp-up has been a bit slower than anticipated. We did have some production issues in North America. These were once-off events, mainly linked to our utilities and they caused the mills -- the 2 mills to go down at different points in time during the quarter. We did have the scheduled maintenance shut in Somerset. That, as guided, was about $17 million. That went very well, and we were pleased with the outcome. Offsetting these significant headwinds, we continue to focus on what we can control, and there were a number of cost-saving initiatives across the group. And on top of that, we did get some energy refunds in Europe, which offset the higher energy costs that you do occur during the year. Moving to Slide 4, which is the earnings bridge, comparing last year quarter 1 to this year, obviously, this year, we had $90 million EBITDA, which is lower than we would like it to be as a result of the headwinds that I mentioned. And if you reflect on this page overall, you can see that pricing is the main story. It's across all segments, but in particular, DWP. It's had a major impact. The volumes actually held up pretty well, and we'll talk about that in a little bit more detail. We did get savings on costs, variable costs. And that's in spite of the -- what's included in that is the exchange rate impact on higher costs coming through. A number of our costs, as you know, are denominated in euros and rand. And when you convert that to dollars, it does have a negative impact. We had -- under fixed costs, we did have the Somerset shut in the quarter coming through. And then you have your annual increases as well on labor. So all in all, a substantially lower level than last year due to the headwinds that I described. Moving to Slide 5, specifically on the major variable costs, the main categories. I'm not going to talk to all quarters, but in more recent times, you can see that energy and wood costs have been rising. Chemical relatively stable and low and pulp prices, as you know, low. So that has helped us a little bit. But unfortunately, because of the translation of these costs from foreign currencies into dollars, it does have an adverse impact on the overall cost of the group, and that's reflected inside these numbers. Turning to Slide 6, our net debt to adjusted EBITDA development. Because of the lower earnings and the impact of the currencies on our euro debt, it has meant that our ratio has increased to 5x, in absolute terms, our net debt is at $1,951 million. You can see in spite of the difficult quarters that we're currently experiencing, you can see that we have managed to keep our net debt levels relatively stable over the last 2 quarters. Moving to Slide 7, the maturity profile of our debt. And just to call out a few key elements. Firstly, under short-term debt, you can see we've got EUR 183 million reflected there in euro. And I'm very pleased to say that after quarter end, we did finalize and sign and ultimately, the cash has flowed a new EUR 200 million 5-year term loan to replace that. We're very pleased with that, and we got the support of the banks. We did swap that to dollars. And obviously, with the dollar weakness at the moment, we felt it was appropriate to swap that into dollars. So we've done that. And another milestone at the same time has been the renegotiation of our RCF facility. Our drawings on that is reflected here under the 2027 box, the EUR 117 million. As I say, pleased to say that, that has -- we signed a new facility increased from EUR 515 million to EUR 550, we've got 2 additional banks part of our syndicate, very pleased with that. And I think it reflects strong support from our banking partners as we move forward. We did negotiate higher covenants with that, and that maintains our flexibility as we move through these challenging times. Moving to Slide 8. The cash flow and CapEx. Well, firstly, on the cash flow, and it's really reiterating the point that I made earlier that in spite of all the challenges, our net cash utilization was only $3 million despite what we've faced. And then on CapEx, we've taken a very close look at all our CapEx expenditure as part of our Back to Basics initiative, we've removed any expansionary CapEx and fully focused on what is required for maintenance and regulatory purposes, and we brought our estimate down for 2026 to $260 million. Moving to Slide 9, and I've touched on a number of these themes. But just to reiterate a few points. as you know, we have a covenant linked to our leverage ratio. It's -- the math on that is slightly different to the published balance sheet numbers that you have. So overall, the ratio came in at 4.9x for the quarter. As I say, that's within the revised covenants that we've negotiated. From a liquidity perspective, very pleased to say that we do have $143 million on hand. We've got RCF facilities that are undrawn of $680 million (sic) [ $608 million]. So we believe that gives us adequate liquidity. And as always, and I think that's emphasized by our achievement to negotiate with the banks. We have very good relationships with our banks. They are long-standing. They understand our business. They know the cyclicality. They know where we are with the current macro challenges. And we stay close to them. We ensure that we've got maximum flexibility during this difficult period. The middle block here is what I've already talked about. So I don't intend repeating that. On the right-hand side, you see a strong focus on Back to Basics, evidenced by a reduction in CapEx that I've talked about, substantially lower than it was last year, obviously and we've removed any nonessential CapEx. At the same time, we've got a number of cost-saving initiatives across the group, and we're targeting $120 million for the year. A lot of that's in Europe, but it is across each of the regions. Moving to Slide 10. I don't intend going through this is our 5 strategy. The pillars are still relevant, and we continue to work across all of them, but it's fair to say that at this point in time, we're laser-focused on Back to Basics and getting through these difficult market conditions and ultimately resuming our reduction in debt, and there's a strong focus to reducing debt in the years ahead. Slide 11 is a slide that we did include last quarter, just some of the strategic initiatives in Europe to rationalize the business and cut costs. Those initiatives are on track. Specifically, the consultation processes are now complete where labor has been impacted. At Alfeld, we have completed PM1 and PM4 closure and similarly at Kirkniemi PM2. Those have been completed now, and the benefits from those will start flowing from Q2 onwards. Slide 12 has the joint venture with UPM. Back in December, we did announce this. I don't intend repeating everything I said on the results call that we had for this other than just to reemphasize that we're very excited by this transaction. We think it represents a tremendous opportunity and ultimately will lead to reducing our exposure to graphic paper in Europe. We think there are substantial synergy opportunities, and it will help reduce debt. So things are on track, and that probably leads into Slide 13. Things are ongoing. And ultimately, we're working through finalizing agreement, definitive agreements. We're targeting to do that in the first half of '26, secure and finalize the financing. And thereafter, we will take that to shareholders. There will be a circular and we'll vote on that. But generally, everything on track. The transaction is obviously subject to a number of suspensive conditions, the biggest one being the approval from competition authorities. We've been engaging with them. It's progressing as expected so far. It's early days, but we have teams working on that, and we'll update you when we do have progress. We are targeting completing the transaction by the end of 2026. Moving to the segmental. And firstly, on pulp, underlying volumes and demand for Sappi's Verve DWP continued to be good and solid. I'm pleased to say that stability in South Africa's production has been good. Production at Saiccor has been -- since we completed that expansion project a number of years ago. Operations are stable, and we're very pleased with that as all the work that's been done there. Similarly, North America volumes up. The big challenge, and I'm repeating what I've said earlier, it's the lower DP prices, which is driven by overall pulp markets globally being at relatively low levels. You can see it's $160 lower than it was a year ago DWP and then the exchange rates coming through. So those had a major impact, which impacted on the volumes. Packaging on Slide 16. Volumes generally okay, albeit that North America, the ramp-up on PM2 is a little bit slower than we would like it to be. But generally, volumes is not the issue. Global packaging markets are under pressure, which has affected selling prices in each of our businesses. And that's the main issue at the moment. Specifically in North America, we had the shut so that would impact on profitability in the quarter. And as I said earlier, there was a couple of once-off utility power-related incidents in -- at the 2 mills in the U.S., which impacted on our efficiencies and our usage of raw materials in the mills. Moving to Slide 17, Graphics. I don't think there was any surprises in terms of the market declines in graphics. It was about 8% in both Europe and North America, and that was expected. Specifically to our North American business, we obviously converted PM2, so that took our capacity out, and we had some production issues that I referred to earlier. So that meant that overall, it did have an impact on margins in the North American region. The Europe volumes as expected, but pricing in that market has been under pressure linked to the excess capacity. I should have mentioned earlier that pricing in North America has been healthy with the tight market conditions following our conversion. And moving to Slide 18. I don't -- there's a lot of numbers on this page, just very briefly just talking about each of the regions. Europe, as I said earlier, volumes holding up reasonably okay. It's a pricing issue linked to the excess capacity across both Graphics and Packaging. In North America, we had the shut in the quarter, which impacted on volumes coming out of and those once-off events referred to coming through which overall impacted profitability. Selling prices down, that's not a Graphics, that's both in pulp and the packaging grade. And then in South Africa, very good volumes, but DWP selling prices towards performance. And you can see that selling prices overall 12% down on a year ago. On Slide 19, just some of our ESG issues. A few to call out. Firstly, on the CDP, very pleased with our scores. We've seen an improvement on climate change, an improvement on forest. We're very proud of that. And also very proud of the awards that we -- or the recognition that we received from Forbes in terms of being one of the -- globally one of the world's best employers and top companies to work for women. The annual report and the sustainability reports have all been completed, and they're all online for you to have a look at. Moving to the outlook on Page 11. Just to repeat, DWP volumes are okay and robust. So demand is good, but it's a pricing challenge that we currently face. We're doing a lot of work on costs to take costs out of the business to help mitigate some of that impact. And then moving across to Slide 22, strong focus on efficiencies in our Back to Basics and optimizing working capital and with a longer-term focus, obviously, of reducing debt. So taking everything into account, our guidance for 2026, with the exchange rates where they're at, at the moment and the DWP prices, one thing I should have called out, DWP prices have increased in the last couple of weeks a little bit, but it is moving in the right direction. I do think exchange rates is playing a major role in that because obviously, DWP prices are priced in dollars. So I think the fact that the dollar is weaker should help us as well. But taking all of that into account, we anticipate that the adjusted EBITDA for the second quarter will be lower than what we just reported for the first quarter. So operator, I've gone through the presentation. I'm going to now hand it back to you for questions. Operator: [Operator Instructions] And now we're going to take our first question, and it comes from the line of Sean Ungerer from Chronux Research. Sean Ungerer: Steve, just in terms of a couple of points around guidance, if you don't mind. So obviously, there's a $120 million cost savings program flagged, I think, with $60 million in Europe roughly. Can you just give a little bit of color on the split for the balance? And then I guess, just in terms of cadence across the regions, how we should think about that for the rest of the year? I'll start off with that. Stephen Binnie: Sorry, your second question, what across the regions? Sean Ungerer: So $120 million cost saving programs at a group level. I think you flagged $60 million for Europe specifically already. I'm just trying to get a bit more color on the balance sort of how maybe across North America and SA. I know, for example, headcount was down in SA in Q4, fixed cost down about 4%, and then just obviously, in addition to the split, just to understand like the rollout of those fixed cost savings, how we should sort of think about it maybe quarter-by-quarter for the rest of the year? Stephen Binnie: Yes. Thanks, Sean. I'll let Glen give you the split approximately across the regions. In terms of the split across the year, there was about $30 million in Q1, Glen, right? And the balance for the rest of the year is roughly even. Even over the remaining 3 quarters. Yes. But maybe the first question, you can talk about the regional split. Glen Pearce: In terms of the regional so as you rightly pointed out, Sean, the bulk of that is in Europe. It's about a 60-40 split, 60%, 40% split as far as fixed to variable. And as I say, the bulk of that is coming out of Europe. There are variable cost usage variances or improvements in both North America and in South Africa, but that would be the split. Stephen Binnie: Yes. But the split between -- it's more -- more of it is North America than South Africa. Glen Pearce: So it's about the balance. Sean Ungerer: And then just to bring you on to the next question. just to understand sort of the defensiveness of the SA business if the bulk of those cost savings are sort of more Europe and North America. I'm just trying to get a better feel of how SA business, I think around 60% of volumes or capacity is dissolving wood pulp, right? And sort of we're sitting at $805 for DP, $16 for the rand. I understand you obviously had quite a bit of volume ramp-up in Q1. I think volumes are up about 37,000 tonnes year-on-year, which is great. I mean, you've obviously got some maintenance still coming up for 2 more quarters for the rest of the year. Is the volume -- incremental volume going to be enough to offset that? I mean, how should we be thinking about that? Stephen Binnie: Yes. Look, Sean, I guess I'm repeating what I said earlier. Clearly, at these exchange rates and these dissolving pulp prices, our South African profits are under pressure. We are targeting savings and costs, and Glen has quoted the numbers. On top of that, we do have initiatives underway, which are not in those numbers to look for further opportunities, which may help us further. So in summary, yes, the pressure will be on our South African business, our margins at these levels. That's fair to say. Graeme, I don't know if there's anything you want to add. Graeme Wild: Yes. Obviously, proportionately, we have a very big exposure on both exchange rate and the DP price. The combination puts it under enormous pressure. I think the biggest opportunity for us is in the operational efficiencies side. We have had -- we have been steadily improving our productivity, but I think there's still more that can be done there. And that doesn't only give us additional volumes to sell, but I think can substantially reduce our variable cost per tonne. And that's what we're working on, and that has the most significant leverage. But in the short term, very hard to offset that big move in the rand. Sean Ungerer: And then I've got quite a few more, but I'll just ask one relating to, I guess, Europe and the JV. Face value, I mean we've seen that the industry is going to sort of sits and waits until hopefully the JV closes out, which I'm assuming means there's sort of limited pricing pressure on maybe a 6- to 12-month view. I don't know if you sort of agree with that. And then I guess, secondly, linked to that, I mean, obviously, best case scenario is that the deal does go ahead. But if it doesn't go ahead, I guess the question is what sort of gearing levels is -- are you happy to have on the balance sheet? And I guess, what would be the solution around reducing gearing if the JV doesn't go ahead? Stephen Binnie: Yes. Yes. Look, on pricing in Europe, as you know, the selling prices have come under pressure in recent quarters. Yes, I mean, our focus is obviously to protect those prices and ultimately look for price increases as we move forward. And that's something we are trying to evaluate on an ongoing basis. Marco, anything you want to add on that? Marco Eikelenboom: No. This is now a period of time that has been last for 18 months. So I think what we're trying to do is besides the cost reduction Steve spoke about, the capacity reduction or readjustment towards growing areas is to maintain our margins. You're right, Steve. And whether that's through further reduction of variable cost and pressure on some of our cost categories or price improvement through bottom slicing, plain price increases or optimization of our portfolio, that is all part of the game. But it's certainly currently not to be expected that it comes from a dramatically better market situation than what we're seeing right now and for the coming quarter. Stephen Binnie: Thanks, Marco. To your second question, if Europe doesn't happen -- sorry, if our project with UPM doesn't happen, we need to look at all options. There's 2 aspects to your question. Firstly, on Europe itself, we would need to look at options to reduce our exposure to graphics in time, and we would need to look at our asset base. We would need to see if there was other alternatives for exiting some of that capacity. More specifically to your question on gearing, yes, again, once again, those options that I'm referring to, we would -- we'd have to consider ones where we could monetize and try to look at alternatives that can generate cash for us to reduce our debt. So that would be our focus. What I would say is you're assuming it wouldn't happen at all. Clearly, there are scenarios in the middle that you want an outright approval, but there could be scenarios where there's approval with conditions. And those would be more likely than an outright rejection, and we would need to evaluate that at that point in time. Operator: And now we're going to take our next question. And the question comes from the line of Brian Morgan from RMB Morgan Stanley. Brian Morgan: If I can just ask a question about balance sheet and stress testing and all of that sort of stuff. If we're in a scenario where in 12 months' time, the rand is still at $16 and DWP still at $805, how does your liquidity situation look? Maybe, Glen, would we need a capital raise at that stage? Stephen Binnie: Yes. I'll start, and then I'll let Glen come in. Once again, I'll point you towards the increased covenant levels that we've negotiated with the banks and the flexibility around that and the strong relationships that we have. So that gives us significant flexibility as we move through this. Specifically to the capital raising. So Brian, we've got long-term relationships with our banks. And we -- you've highlighted an issue there in terms of how volatile it is at the moment. And what we're doing is we've got an open dialogue with them. We're keeping them abreast of what our forecasts are, and we're discussing with them how -- what the progress is. So it's just an ongoing dialogue, and we're constantly updating it. Glen Pearce: Yes. So Brian, what we're really saying is that we're not contemplating any capital raising at this point in time. Brian Morgan: Okay. And asset sales, are they possible? I mean you've spoken about the JV, but any additional asset sales outside of that? Stephen Binnie: Yes, it's not something we're looking at immediately. But I guess you're talking worst-case scenarios. Obviously, we would have options there, but it's not something that we are looking at the moment. We're focused on improving what we can control internally and working closely with our banks to ensure we've got maximum flexibility as we move through these challenging times. Brian Morgan: Last question, if I may. About $1.9 billion of gross debt. I'm trying to unpack from the numbers, but I'm struggling to do so, just how much of that is subject to covenants. Could you give us a ballpark? Glen Pearce: Brian, our RCF is pari passu with our bonds. So it's all linked to the covenants. Brian Morgan: Sorry, what does that do? Glen Pearce: It's -- our RCF is pari passu with our bonds and our bonds are all linked to the long-term loans you referred to. So the covenants are linked to the full amount. Stephen Binnie: So the RCF is with the banks -- the banks are pari passu with the bonds, we're hopeful, Brian. But that's normal. That's standard stuff. Operator: And the question comes from the line of James Twyman from Prescient. James Twyman: So I've got 2 follow-ups and then one of my own. In terms of the covenants that we've got here, could you just talk around what the new covenant levels are with the banks and how long they are before the covenants go back to maybe the 4x net debt to EBITDA that you're originally on? And then on the cost savings, so you've talked quite a bit about the $60 million of cost savings that you're getting from these big 5 projects you're doing in Europe. But I think it's a big positive surprise that there's another $60 million that you're now talking about that's coming from elsewhere. It would be great to get some more color on what projects these are because it's another very, very big number. And then the third question, if I may, is these energy credits you're getting in Europe are becoming increasingly important. How much visibility do you have on where this goes in future years? I mean is there a clear method that the EU uses to calculate them? And -- yes, how much confidence do we have that this is something that is sustainable because it's obviously risen quite substantially. Stephen Binnie: Yes. On the covenant level, we don't give the specific number. But in terms of the levels, it's -- there is quite a bit of headroom above where our current debt levels are at. And we've negotiated in terms of the new covenant -- once again, we don't give the specific levels, but we've elevated it for a significant period of time. It's not just a couple of quarters. It's for a significant period of time. Glen, do you want to take the cost savings in the other two regions for the remaining 60%? Glen Pearce: Yes. Sorry, in terms of the 60% on... Stephen Binnie: The $60 million other savings on cost savings that are part of the $120 million. Glen Pearce: It's all linked to your variable cost on your fixed costs. So as I said, I'll split that between the 60% variable costs and 40% -- 60% fixed costs and 40% variable costs. The bulk of that is in Europe. And then going into the bulk of that 60% on the fixed cost comes out of the capacity reductions that we have in Europe. Stephen Binnie: The portion that's not Europe is -- there are fixed cost savings there. So there are headcount reductions and there's operational efficiency improvement. We've had some negative usage variances. And then on the procurement side, we've been able to target some new initiatives to save on raw material costs. And that's -- when Glen talks about the 60-40, the fixed cost is obviously predominantly headcount and the variable cost is on the usage and the raw material costs. And your third question, the energy credit, look, it's a good question. It's not just Sappi, a number of industry players have been getting these credits. And really what they're for is you incur higher energy costs during the year and the various countries in Europe recognize that and they give you refunds. It's been ongoing for some time and by all accounts, is expected to increase -- sorry, to continue. So we believe it will be there in the years ahead. And there's no signal otherwise, James. Operator: [Operator Instructions] And now we're going to take our next question, and it comes from the line of Brent Madel from ABSA. Brent Madel: If I could maybe just ask a question around the UPM or the proposed UPM transaction. Are you able to give us an update as to where we are in the process with regards to the JV sourcing funding to complete the transaction? Are you able to give us an update on that? Stephen Binnie: There's nothing new to say other than it's an ongoing process. It's working in parallel. Ultimately, we've appointed lead banks, and we've got strong commitment letter -- we've got strong letters of support from them. And we're busy finalizing the agreements with UPM. And as part of that, sharing our numbers with them and they're doing their assessment. So it's progressing as planned, and it's something that we expect to finalize at the time of signing the agreements with UPM. Operator: And the question comes from the line of Detlef Winckelmann from JPMorgan. Detlef Winckelmann: Just a very quick one on Consumer Board. Obviously, you're trying to ramp up Somerset into what is quite a weak and oversupplied market right now. And I did pick up that you're looking to -- or that you ramped up a bit slower than what you expected. Seemingly, it doesn't look like the oversupply is correcting in any way. So I'm just trying to work out, I suppose, one, how you envisage that ramp-up going in the next, say, I don't know, 1 year, 1.5 years while this oversupply persists? And then secondly, we have seen some price cuts more recently on SBS. I understand that SBS pricing is a little bit more closer to some of the other substitutable grades. But are we seeing any price pressure in those substitutable grades yet that kind of erodes that benefit for SBS? Stephen Binnie: Thanks. Yes, in terms of the ramp-up on PM2, there's a number of dimensions, which we can talk about. And I'll hand over to Mike just now. But just firstly, we are ramping upwards. Interestingly, we did have a couple of existing customers that had their own challenges. And they actually had less volumes in the quarter. In terms of signing up new customers, we are seeing positive progress, not quite at the levels that we originally anticipated, but it's better than the underlying overall volumes appear because those other 2 existing customers had some challenges. As we look forward to the -- for the year, there's a lot of good positive news coming out in terms of signing up customers and the volumes increasing. It's not at the levels that we originally anticipated, but we are anticipating substantial improvement. Mike? Michael Haws: The only thing that I'd kind of add to that is some of the new products have taken a bit longer with qualifications at the customers' plants. And that's specifically when it's some of the smaller customers. We are not seeing erosion in some of the competitive products as of yet. You asked that question. The other thing that we have been doing is expanding geographies, and that has been working pretty well for us. So there's a number of new opportunities. And it's been a qualification along with the kind of bit of a challenging demand. We also are making graphic grades on PM1 is that, that machine can swing. So as that market can absorb volume, we're also using that tool. Detlef Winckelmann: And then if I can do one more follow-up. I mean, obviously, with your ramp-up still ongoing, you mentioned maybe some qualification delays, but not necessarily bad demand for your products. I'm curious as to whether the pricing discipline has been maintained or whether you managed to get these new contracts just by undercutting the market. Just curious on that. Michael Haws: I'll offer what I can. You're asking me a specific pricing question, but that's not something we typically get into the detail on. The price decline in the market happened before PM2 even became at a commercial product to offer. And that has been a bit of a challenge. So the other thing that I'd offer is that there has been some dynamics around imports as imports make up about 500,000 tonnes in the SBS or board grades into the U.S. And that's been kind of a bit of an on again, off again kind of thing based on tariffs and other things that are happening. So there's been other price pressures. And I think that's the best I can offer you there. Operator: And the next question comes from the line of Andrew Jones from UBS. Andrew Jones: I think that last -- beat me to that question, but I'd just like to just dig on that a little bit more. Can you just give us some numbers around like your utilization on the mill and how it evolves through the 2025 period at Somerset? And can you give us some numbers around your expectations for the speed of ramp going forward? And also just a bit of a follow-up. I mean the sort of customers that you're selling into, I mean, I guess, are they buying from European suppliers? Have you seen any impact from tariffs, currency move, et cetera, in terms of those suppliers being pushed out or any change in the import there that you could talk to? Stephen Binnie: Yes. I think let me take the second part of your question first. There's no doubt that the tariffs that have been placed on the European importers into the U.S. has helped. So although overall market conditions are generally difficult, the fact that those have been introduced is creating opportunity with potential customers for us. That is a support for us. In terms of the ramp-up, as you know, we talked earlier -- on earlier calls like this that by the time we got to the end of Q4 next year, we will be close to full on the machine. It's fair to say because of what we've described, we're tracking behind those levels. I can't give you a specific number, but the machine is still -- by the time we get to Q4 is going to be significantly fuller than it is currently. It might not be 100, but it will be at substantially higher levels than current levels. Glen Pearce: Steve, the only thing I'd add to that is when you're starting up a new machine, there's an expected ramp rate that's less than full capacity. And the ramp in our CapEx was expected to take over 3 years. The OMEs of the machine are moving forward really well and the quality of the machine is moving forward really well. Part of our offering into the market is more of a long game with relationships and product attributes that because of the equipment we have, we can bring consistency and other attributes that aren't necessarily engineered into the other competitors' assets. So lots of work going on. I'd say that tariffs at time have opened doors for us. That was the other question that you asked. Operator: Now we're going to take our next question, and it comes from the line of Shubham Agrawal from BlackRock. Shubham Agrawal: Yes. So I have a couple of questions. So to start with first on RCF, can you help us remind, is the RCF availability full? Or do you have some leverage covenant on that? Stephen Binnie: Sorry, was that the RCF? Shubham Agrawal: Yes. Stephen Binnie: Yes. I think you're asking how much have we utilized? I think it was about $100 million... Glen Pearce: That's right. It's just over $130 million... Stephen Binnie: Yes. And we have available $608 million at the end of the quarter. I think that's what you... Shubham Agrawal: Is the RCF fully available? Or do you have any leverage going? Glen Pearce: It's fully available. Shubham Agrawal: Do you have any restriction. Glen Pearce: It's fully available. Shubham Agrawal: Okay. And the second question that I have on the unplanned disruption that you have seen in the quarter. Can you give us some additional detail on that? I understand you have already said on that, but yes, any additional color would be really helpful. Stephen Binnie: I'm sorry. Disruptions in -- more color. Okay. I'll let Mike -- we don't want to go into too much detail, but we had 2 specific once-off incidents, which impacted on our utilities. As I said, we -- they're behind us. But Mike, do you want to share a little bit more on that? Michael Haws: Certainly. So the 2 big mills, Somerset and Cloquet, each of the mills ended up with the utilities event. In Somerset, it was a steam supply issue that ended up running close to 2 weeks that impacted machine performance and costs while we were repairing that. In Cloquet, we had a disruption of the power supply into the mill, right at the Christmas time, where we ended up with over a week of downtime there as we were bringing the utilities back online and getting everything back up and running. That whole event was exacerbated by really cold temperatures. Everything is back up now, and we put corrective actions in place to prevent reoccurrence. Operator: Now we're going to take our next question. And the question comes from the line of Saul Casadio from M&G plc. Saul Casadio: I just have a couple of really brief ones. Can you give us the spot price of GWP? I don't have the price data anymore. So I was wondering whether you can provide that. Stephen Binnie: Yes. Today, as we speak, it's $805 a tonne. Saul Casadio: Okay. And the other question is just a clarification because you said the RCF is pursue with the bonds, which is normally, it is seniors versus the bonds. So I was wondering whether there's something specific in the structure whereby the RCF is part with the bond. So try to better understand this, if you can clarify this point. Glen Pearce: Just to clarify that, there are actually cross-default provisions on that. So the covenants themselves only apply to the RCF and OB loan. But in the event that there is a default, then the bonds then share in pursue on any default, if that clarifies it. Saul Casadio: And why is that the case? Because normally banks would try and get a super senior position with the RCF. Why not in this case? Stephen Binnie: Sorry, is that -- could you just repeat that, please? Saul Casadio: I mean what I'm saying is that it is a bit unusual. Normally, the RCF is senior has a priority in case of, let's say, default that gets repaid first. but this doesn't seem to be the case in your capital structure. I wasn't aware of this. And yes, I'm just trying to clarify. Normally, the banks can take security ahead of the bonds that they normally do that. Glen Pearce: No, as I described it. Stephen Binnie: Yes. And I guess if there's more clarification, we can take that offline. Operator: Now we are going to take our next question, and the next question comes from the line of [ Andre Pettus ] from... Unknown Analyst: Just a few. First one, you've had a bit of working capital releases the last 2 quarters. Just your expectations for the rest of the year in terms of absorbing or releasing from here? And then just secondly, in terms of those once-off events in the U.S., you quantified the hit in terms of the, call it, the maintenance closure you had. Can you maybe take just the order of magnitude step in terms of what the potential once-off hit was there in EBITDA terms? Glen Pearce: All right. In terms of the working capital, you're right, there was a release in the current quarter. And for the year, we anticipate a release as well for the full year. Stephen Binnie: Yes. On the second one, a lot of the impact, as I mentioned when I was going through the deck is aside from the lost production, you have inefficiencies and negative usage on the mills. The approximate impact of these is about $10 million. Operator: And now we're going to take our final question for today. And it comes from the line of [indiscernible] Unknown Analyst: So a couple of questions from me. The first one, I just want to understand, so you lowered your CapEx guidance from $290 million to $260 million for the full year 2026. I wanted to know to what extent it could be lowered to -- what are your main CapEx and what is like the level you could not go lower for this year? And the second question is for the DWP prices. It seems that for a certain time in 2023, I think that the prices were also around the $700, $800 and then rebounded. I wanted to know if we should see the $700, $800 prices for DWP as a low level that can only maybe go up. And the last one is I want to understand what changed because you -- so basically, your guidance was for Q1 for the plantation fair value adjustment to be positive. In the end, it was negative. So I think that it means that there was a much higher decline in wood prices in South Africa than what you expected and just maybe what you're seeing about that? Stephen Binnie: Yes. All right. Firstly, on CapEx, yes, we've taken a very close look at our CapEx levels. And as I say, we've eliminated anything that we regard as nonessential. You're asking, can it go down further? I don't think so. I think that's our best estimate of what the CapEx will be for the year, the $260 million. The DWP, you are right. Back a couple of years ago, the dissolving pulp price was at those lower levels, but there's very different other macro factors. The dollar was worth a lot more than it is today. And a lot of the producers with the currency shifts, it put them under more pressure. So all of us have a desire to increase selling prices. And I think that's what's given a little bit of traction in the last couple of weeks. The conversations, and I'll let Marco and Mohamed chat a little bit about it. But all the pricing discussions are around currencies and its impact on currencies. And that's the focus of attention in China at the moment. Mohamed, maybe you want to elaborate further. Mohamed Mansoor: Steve, just on the currencies, you mentioned that supply side currencies in terms of the Riyal, the Chilean peso and of course, the rand has all strengthened. So there's a desire across the board to get the dollar price up. But on the buying side as well, we've seen a strong appreciation in the renminbi. So that makes affordability by the buyers for higher U.S. dollar prices easier. And if you just look at where the renminbi price of dissolving wood pulp has moved over the last year, it's gone from about RMB 7,500 early last year to today around RMB 5,500 just purely because of exchange rates. So that is definitely, I think, providing support and incentive for higher U.S. dollar price. Stephen Binnie: Yes. And then I think your last question, you were asking about the plantation fair value adjustment. There was a further negative impact in the quarter. And as we move forward for the rest of the year... Glen Pearce: We're anticipating for the rest of the year, it's going to be -- there's going to be further negative adjustments, and that's because we have -- it's a rolling 4-quarter valuation, and you still got the lower pricing coming through in our fair value adjustment. So you should see further adjustments -- negative adjustments coming through. Operator: There are no further questions for today. I would now like to hand the conference over to your speaker, Steve Binnie, for any closing remarks. Stephen Binnie: Once again, I'd just like to say thank you to everybody for joining us, and we look forward to discussing our results with you in 3 months' time. Thank you very much. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good day, and welcome to the Weatherford Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please also note today's event is being recorded. I would now like to turn the conference over to Luke Lemoine, Senior Vice President, Corporate Development. Please go ahead. Luke Lemoine: Welcome, everyone, to the Weatherford International Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO; and Anuj Dhruv, Executive Vice President and CFO. We'll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to today's call from our website's Investor Relations section. I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website. As a reminder, today's call is being webcast and a recorded version will be available on our website's Investor Relations section following the conclusion of this call. With that, I'd like to turn the call over to Girish. Girish Saligram: Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our financial and operational performance, followed by our outlook on the markets. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance and I will wrap up with some thoughts on Weatherford's strategic plans for 2026 and beyond before opening for Q&A. I want to start by summarizing our Q4 2025 performance. We had sequential revenue growth operating income that was higher sequentially and year-on-year, adjusted EBITDA margins well above 22% and free cash flow conversion of 76%. Overall, I am very pleased with our team's execution, and I would like to thank everyone on our One Weatherford team for clearly demonstrating our ability to perform well even in a soft and challenging market environment. This performance builds on our confidence in the long-term prospects of the company, which is reflected in the significant increase of 10% to the dividend. As illustrated on Slide 3, we delivered 5% sequential revenue growth, driven by higher activity in Latin America, which grew 16% sequentially, led primarily by Mexico and Brazil. North America grew modestly supported by higher Canadian activity and U.S. offshore that was partially offset by a decline in U.S. land activity. The Europe Sub-Sahara Africa and Russia region declined 2% sequentially, and this region continues to exhibit softness. I'm also very pleased with the continued strong performance in the Middle East. The Middle East, North Africa and Asia region delivered 4% sequential growth, led by Kuwait, Oman, the UAE and Indonesia. Activity in Saudi Arabia remained muted, although we are hopeful of a healthy recovery in the back half of 2026. As we have been discussing for a while, 2025 was notably characterized by the significant activity decline in Mexico. For the full year, Mexico revenues declined a little over 50% compared to the prior year. We believe the worst in Mexico is behind us, and the situation has stabilized as evidenced by steady activity levels and the resumption of payments in the second half of 2025. From a segment perspective, WCC and PRI were the largest contributors to top line growth, driven by strong performance in completions and artificial lift, respectively. These product lines are a great example of the opportunity and execution in Weatherford. Completions, a low capital intensity business has grown significantly on a year-on-year and quarter-on-quarter basis and over the past few years, has become our largest product line, fueled by technology advancements and manufacturing capabilities. Artificial lift is the outcome of a very strong installed base, great customer relationships and leveraging our international footprint to take our North America expertise and scale it. Despite macro headwinds, our fourth quarter EBITDA margins came in at 22.6%, representing a sequential improvement of 74 basis points, showcasing our intense focus on operations and execution. Our adjusted free cash flow for the quarter came in at $222 million, which was significantly enhanced by collections from a key customer in Mexico. We received payments for 2025 operations as well as some older receivables, and we are more confident on payment streams with the new mechanisms in place. As a result, our full year 2025 adjusted free cash flow totaled $466 million, representing a 43.7% conversion ratio as seen on Slide 4. This is a 576 basis points improvement over 2024, well over our initial view of an increase of 100 to 200 basis points coming into the year. While we are cautiously optimistic about the visibility and cadence of payments, our 2026 outlook on free cash flow will continue to remain dependent on this important variable. In addition to strong operational performance throughout the year, we also significantly fortified the balance sheet with improvements in leverage, interest costs, credit ratings and total liquidity with a net leverage that now stands at 0.42x. This gives us a greater degree of financial flexibility to pursue long-term strategic objectives. As shown on Slide 7, 2025 was also our first full year of shareholder returns, and we returned $173 million between dividends and share repurchases. Our conviction in the long-term prospects of the company is underpinned by our announcement last week to increase the dividend by 10%. Slides 9 through 12 lay out key highlights of our segments. During the quarter, we continued to build momentum with new contract wins across our portfolio and key regions. These wins are a clear testament to our operational and technical capabilities to deliver a diverse range of differentiated technology and cost-effective solutions for our customers. I am especially encouraged by the wins in product lines like wireline in Romania, completions in Kuwait and operational milestones, such as more than 25 installations of plug-and-play liner systems in Norway. These highlights underscore the meaningful progress we are making in product lines that were not historically ranked #1 or #2, reflecting the impact of sustained investment and focus over the past several years. Now turning to our outlook. Overall, customer spending is expected to increase over the course of the year. And while we are encouraged about second half 2026 and beyond, legacy pricing variability will need to be mitigated with productivity and cost control in the first half of 2026. North America spending is expected to decline this year as operators continue to maintain tight budgets resulting in mid- to high single-digit declines in activity levels throughout the year. At the same time, the international outlook is a tale of 2 halves. We expect the first half to experience slightly greater than normal seasonal declines due to geopolitical conflicts, trade policy impacts, commodity price volatility and the market restraint deriving from a concern of global oil demand supply imbalance. As we enter the second half, we are encouraged by a number of contract awards and project start-ups that should lead to noticeable second half growth over the first half, similar to what we saw in second half 2025 versus first half 2025. These include Saudi, Argentina, UAE, Brazil, Australia, Indonesia and Egypt. Accounting for all these moving parts, we expect 2026 international activity levels to be flat to slightly down compared to the prior year. However, we are encouraged that second half 2026 international revenues could possibly be up year-on-year and lead to growth in 2027. Furthermore, we are seeing early signs of improvement in offshore deepwater activity underpinned by rising service-related demands in core basins such as Gulf of America, Brazil, the Caribbean and the Caspian Sea. Speaking of potential opportunities, I'd like to briefly address the Venezuelan one. At its peak, Venezuela represented over $500 million of revenues for Weatherford, and recent developments may begin to reopen a market that was once meaningful to us. Assuming a stable governance and regulatory environment, operational stability and the approval of brownfield redevelopment with a strong payment plan, we see substantial potential for our intervention, well services and artificial lift portfolios over the mid- to long term. We are closely monitoring the situation. And as we have done in the past, we will act swiftly and decisively as the opportunity materializes. We remain optimistic about a stronger 2027 outlook, where we expect activity levels to show year-on-year growth. We remain well positioned to benefit from stable or improving activity. And at the same time, we are taking proactive measures to strengthen margins should the market move sideways. With that, I'd like to turn the call over to Anuj. Anuj Dhruv: Thank you, Girish. Good morning, and thank you, everyone, for joining us on the call. Girish has already shared an overview of our fourth quarter and full year performance. For a more detailed breakdown of the results please refer to our press release and accompanying slide deck presentation. My comments today will center around cash flow, working capital, balance sheet, liquidity, capital allocation and guidance. Turning to Slide 27 for cash flows and liquidity. In the fourth quarter, we generated $222 million of adjusted free cash flow representing a 76.3% adjusted free cash flow conversion, significantly boosted by collections from a key customer in Mexico that we originally expected to receive in 2026. Although sizable collections remain outstanding, recent payment trends have become more consistent, improving our confidence to project continued strong free cash flow into 2026. For full year 2025, our outstanding collections in Mexico significantly impacted our net working capital efficiency. Our net working capital as a percentage of revenue was 28.9% in 2025 versus 24.5% in 2024, an increase of approximately 450 basis points. However, this number is expected to improve as the pending collections materialize. For context, on a sequential basis, the working capital efficiency improved by around 70 basis points. All things considered, we remain fully committed to our internal initiatives aimed at achieving the goal of 25% or better. As we stay agile and adapt to evolving market conditions, we continue to execute a series of cost improvement actions across the company. In this context, we took an additional restructuring and severance charge of $7 million in Q4, bringing the total charge to $58 million for full year 2025. Our cost optimization efforts are guided by 2 objectives. First, we are rightsizing elements of our cost structure including headcount, real estate and supply chain footprint to better align with activity levels with a clear focus on ensuring each incremental dollar invested supports profitability. Second, we are maximizing the productivity of the current cost base by leveraging shared services, digital platforms and artificial intelligence to enhance efficiency and margin performance. We have seen the impact of these cost actions over the course of the year, and they have helped partially offset the impact of margin decrementals, tariff-driven dilution and the divestiture impact. During the fourth quarter, CapEx was $51 million versus $44 million in the third quarter. For the full year, CapEx was $226 million, or 4.6% of revenues. As we align our budgets with the current market conditions, 2026 CapEx is expected to be $190 million to $230 million with the midpoint expected to decline relative to 2025. Given our investment in our infrastructure programs, it is worth noting that the mix of our CapEx spend in 2026 will be noticeably different. Our CapEx on service tools will decline commensurate with market activity, but we will see an increase in IT-related spend on our ERP systems. However, we continue to remain very much in the 3% to 5% range that we have laid out and will make the appropriate and prudent trade-offs through the cycle. For the full year 2025, shareholder returns totaled $173 million, comprising $72 million in dividends and $101 million in share repurchases. This payout represents roughly 37% of our annual adjusted free cash flow. Since the inception of the shareholder return program about 1.5 years ago, we have returned roughly 38% of the corresponding adjusted free cash flow base to shareholders via share repurchases and dividends. And we remain fully committed to returning approximately 50% of adjusted free cash flow over the course of the cycle. During the year, we successfully executed our debt restructuring plan including reducing gross debt by $161 million, upsizing our revolving credit facility to $1 billion and pursuing a refinancing exercise at attractive interest rates. As a result of these actions, our net leverage ratio stands at approximately 0.42x with roughly $1 billion of cash and restricted cash and total liquidity of $1.6 billion. To put our multiyear progress in context, the new Weatherford has sustainably brought down our net leverage from 3.3x in the beginning of 2021 to today's 0.42x. This outcome reflects our resilience in opportunistically strengthening the capital structure over time. Our stronger-than-ever balance sheet provides a solid foundation to not just navigate business operations in a tough cycle, but also pursue strategic opportunities. For 2025, when combining shareholder remuneration of $173 million and paying down higher interest burden debt of $161 million, 72% of our full year adjusted free cash flow was directed to these capital allocation initiatives. Turning to the first quarter 2026 guidance on Slide 28, we expect revenues to be in the range of $1.125 billion to $1.165 billion and adjusted EBITDA to be between $230 million to $240 million. The sequential decline is primarily a function of typical seasonality factors, along with some work that was pulled into Q4. As a reminder, the year-on-year comparisons are also impacted by the Argentina divestiture, which has a full quarter of contribution in Q1 2025. We expect adjusted free cash flow in the first quarter to be slightly positive on account of a typical working capital build. For full year 2026, revenues are expected to be in the range of $4.6 billion to $5.05 billion, consistent with the overall market outlook Girish laid out. Adjusted EBITDA is expected to be in the range of $980 million to $1.12 billion. For full year 2026, we expect adjusted free cash flow conversion to be in the low to mid-40% range, and this would have been higher had substantial collections not been pulled into Q4. Importantly, it demonstrates our progress towards our 50% target. Our effective tax rate is expected to be in the low to mid-20% range for 2026. Overall, we expect 2026 to have slight revenue declines, but improving margins and strong free cash flow generation. As Girish said, it will be a tale of 2 halves and the 5.2% revenue increase in the second half of 2025 over the first half of 2025 coupled with a commensurate 10% increase in adjusted EBITDA is a good precedent for confidence in the second half of our 2026 ramp. Thank you for your time today. I will now pass the call back to Girish for his closing comments. Girish Saligram: Thanks, Anuj. I remain highly optimistic about Weatherford's future over the next several years. While 2025 was a challenging year, marked by rapidly changing market conditions, it also represented a year to refine our operating model and demonstrated efficacy on a through-cycle basis. Our margins proved resilient, and the expansion in the second half is a tangible proof point of our operating thesis. Most importantly, our cash flow generation not only remained strong, but conversion improved versus 2024. As we move forward, our internal initiatives will build on the successes of the past, but will also incorporate fresh thinking and new ideas to drive our North Star of generating greater free cash flow. For 2026, we are laser focused on driving cost and CapEx to be at optimal levels for the activity mix we have in front of us. We drove over $150 million of personnel expense reduction in 2025 and believe we have additional opportunities without impacting safety or performance. Concurrently, we have a heightened sense of focus on the performance of each business unit, which we consider to be the intersection of product line and country. We are willing to make revenue trade-offs to ensure a higher quality mix of margin and cash performance. At the same time, we are driving transformational changes to set up the future of the company, and I am very excited about these. We look at this as our 4 Ps of people, portfolio, partnerships and performance. I won't belabor each of these, but we'll share a couple of highlights. Our infrastructure program overhaul is well underway with promising benefits and this will allow us to scale the company through cycles very efficiently and effectively. Product innovations like MARS or Mature Asset Rejuvenation to Surveillance. A fiber optic-enabled solution is providing real-time insights to create a significant opportunity in the production enhancement space with over 1 million wells in over 100 countries that could benefit from this. We rolled out our performance tier MPD solution, Modus. And in the first full year of commercial availability in 2025, we completed over 70 jobs in almost every geography we operate in. Recognizing that we cannot do everything ourselves. We have signed partnership agreements with leaders in this space on technology development, infrastructure provision, customer collaboration and new energy platforms. We have seen over the past few years that Weatherford can deliver top-tier profitability and cash margins in different phases of the OFS cycle. As we look towards the next few years, we see a significant uptick in activity starting in 2027 and believe that our operating model, initiatives and people will propel the company forward to deliver stronger results than ever before. With that, operator, please open the call for questions. Operator: [Operator Instructions] And today's first question comes from David Anderson of Barclays. John Anderson: I was wondering if you could give us a little bit more detail on how you see Saudi playing out this year. Something like 40 rigs or so have been tendered to come back to work. How does that play in Weatherford's outlook for the year and in 2027 and secondarily, what are you seeing in terms of pricing in salary? Are there any product lines seeing increases or conversely under pressure? Girish Saligram: Sure. Look, Saudi continues to be our most significant country internationally. It's our largest one internationally. So an incredibly important one. As I pointed out in our prepared remarks, we are very hopeful of a very healthy recovery going into the second half as these rigs come online. It will take a little bit of time. So it's not going to be immediate, which is why I think we'll see the impact really more in the second half and then going into 2027. I've always maintained that we have a very strong opportunity in Saudi because we are still very underrepresented. Our team has done an outstanding job with just phenomenal support from Aramco, but it's still -- the onus is on us to continue to develop technology. And I'm very excited about what we have in the pipeline, what we are working with Aramco on to drive that. So I'm hopeful that we can continue to have performance that exceeds the market and especially as the volume and activity levels increase, I think there's huge opportunity with some of the things that we are working on. Regarding pricing, I think that is something that is always present and especially in an environment like this, there's a lot more competition, and there's a lot more focus around it. Cost inefficiency is one of the critical parameters for Aramco. So we are looking at every which way to really support and drive that while continuing to maintain margins. So I'm very confident in our ability to deliver a sort of total cost of ownership solution derived value versus just a straight-up discount. So it's been a very collaborative approach and I look forward to this year because I think it will set us up really well going into '27. Operator: And our next question today comes from Scott Gruber at Citigroup. Scott Gruber: Following Dave's question, I want to ask about the broader Middle East and North Africa region. There seems to be more tailwinds than headwinds across the region. But Girish, maybe if you can provide some more details on what you're seeing across the broader Middle East and North African market. Girish Saligram: Sure, Scott. The Middle East, North Africa region has historically been a very strong one for us. It is our largest region. It is one where we have historically had the largest share relative to some of the other regions and have done really well and really have the entire portfolio of the company that comes to bear. So as I look at the region, over the last few years, our team has done an outstanding job. Clearly, there's been a lot of market support and activity levels that supported that. But we have had exaggerated performance. We've been able to go in and drive share through technology advancements and just outstanding operational execution. As I look at the rest of this year, I think there's a bit of variability in some of the countries, and that's very natural. We see continued strong momentum in places like the UAE, to some extent, Kuwait, et cetera, but we will probably see a bit of a decline in countries like Qatar and that's just a natural function of the life cycle of their development campaigns that they're going through as it relates to our products and services. We have had tremendous growth in Oman over the last several years. I'm very excited about the opportunity set that we have in front of us in Oman, but we also have our large integrated service contract that is going to come to an end. So we will likely see a little bit of variability based on that with plenty of other stuff that comes in to offset that. But that's a great example of just outstanding execution where we've been able to finish that well, well, well ahead of schedule. That's been a huge factor in driving customer satisfaction. I'm very encouraged by places like Egypt. I think in the second half, we're going to see a lot more activity and opportunity there. So I've addressed Saudi already. So I think, look, broadly speaking, this is the region that we continue to see as providing sort of the foundational baseload for driving activity levels and growth in the coming years. Operator: And our next question today comes from James West at Melius Research. James West: I wanted to touch on Mexico in particular. And a few items there. One, 2025, how did the business trend? It seems like you continue to build on activity in fourth quarter, probably your best quarter. Secondarily, collections obviously picked up pretty significantly. How do you kind of feel about that going forward here? And then lastly, for '26, how do you see activity levels trending in one of that kind of key market for you? Girish Saligram: Yes. Look, so maybe I'll start with the market a bit and ask Anuj to talk about payments and collections. We've seen 3 consecutive quarters now of sequential improvements in Mexico. So Q1 into Q2 into Q3 into Q4, so as we said earlier, we think the worst is certainly behind us, and we think we've reached a point of stability. That stability is likely going to result in a slight degree of growth year-on-year as we look at the total year. And really, I think, sort of a rough order of magnitude, sort of a second half amalgamated view is sort of what we expect. We don't expect there to be a dramatic increase this year, but I think that stability is really important, and that now allows us to have an operating cadence that is solid. We're also continuing to do a lot more in Mexico outside of just one large customer. We announced some of the other awards, especially on the Trion deepwater development. So we're excited about that. Again, it's a country that has been very important for us. We are very glad that activity levels have stabilized and we look to build on from here. So Anuj, payments? Anuj Dhruv: Yes. So on the payments front, we did collect multiple payments throughout the course of 2025 and in Q4 of '25, we had multiple tranches that came in. And we had 1 tranche that came in, I believe, on the last day or the second to last day of December. And so some ambiguity there around timing of when within the quarter and the month we'll get the collections. However, we did get ample collections, if you will, in 2025. And as we look through 2026, we're optimistic given the cadence that recently has been in place. Once there are the mechanisms and structure in place to make the payments, there's been clear communication. It's been transparent. Generally, we get about a 2-week heads up before we get the payments in our account, and it's been like clockwork. And so the mechanisms have been working well. And as we take a step back and we combine the recent collection activity with the overall structural reforms we're seeing with the government of Mexico supporting the capitalization thereof, we are even more confident in the ability or the continuation, if you will, of these collections into 2026. Operator: And our next question comes from Saurabh Pant with Bank of America. Saurabh Pant: Girish, maybe let's touch on Venezuela a little bit, if you don't mind. You gave some color in your prepared remarks. I think you said at the peak, Venezuela was north of $500 million for you. Now that's 10% of your 2025 revenue. I don't want anybody to get ahead of their skis, right? So maybe Girish, just talk to us a little bit about -- what needs to happen on the ground for Weatherford for your customers to really start to move forward over there? And then how quickly can you move operationally, what product lines benefit? Maybe just a little walk through on what to expect? Girish Saligram: Sure. So yes, look, it's certainly not going to be overnight and to be very explicit and clear, we have not assumed any Venezuela uptick in the guidance that we have given. So that on top. I think the other thing that's important to just sort of note, Saurabh is, yes, at the peak, it was $500 million. There will be a natural question. The company was very different back then. But a lot of the technologies, a lot of the product lines that operate in Venezuela are things that we still have and are very central to the company. So it's something that I think will actually fit in well with the portfolio. And as we pointed out, things like interventions, well services, artificial lift, et cetera, is where especially initially will be the biggest impact. So look, what we need to see is pretty much what a lot of other people have been talking about and it's no different, right? It's a really clear view on governance, what are the laws, the rules that are going to be followed. How are we going to ensure the safety and security of our teams. What is really the regulatory environment, especially from a licensing standpoint, et cetera, how do we work with customers around that. And we've got to have a line of sight to payment. So I think, look, this is stuff that is moving very rapidly. It's evolving in multiple different dimensions. We are staying very close to what is happening, trying to understand and making sure we have plans in place so that as we see the right opening and the right framework, we're ready to move on it. But again, I don't expect it to be overnight. Operator: And our next question today comes from Doug Becker at Capital One. Doug Becker: Girish, you've always been careful not to provide specific numbers for Weatherford's offshore-related revenue, but you did mention early signs of improvement in offshore deepwater activity and some of your larger product lines like TRS, MPD and completions have significant offshore applications. So with offshore activity looking to be ramping later this year and into 2027, just expand on your offshore outlook for Weatherford. Girish Saligram: Yes. Doug, the MPD and TRS businesses are very natural, and I think that's an obvious thing. I'm especially excited about MPD from a standpoint of getting more rigs that are MPD enabled to actually have MPD packages on them. I think we've got multiple different opportunities. So that's something that we continue to focus on. On TRS, for us, it's really about how do we continue to drive margins up, get more efficiency, more automation that's something that we're driving. In addition to that, though, look, I'm really excited about some of the other product lines. We've made tremendous improvements and advancements in completions, for example. So having a much broader portfolio now. A few quarters ago, we announced part of the award with Petrobras and some of their cycle 10 works. So that's something that's well underway. Things like that, that I think we will continue to see in basins across the world. We've got the full gamut, everything from drilling to completions then, of course, MPD and TRS. Interventions is another really big focus area for us on the offshore space. So there's a lot of different things. And I think as the market really sort of fully rebounds and gets back into high gear, I think we're going to be very well positioned. Operator: And our next question comes from Jim Rollyson with Raymond James. James Rollyson: Girish, maybe circling back around on North America, I think you said the activity outlook you guys have, which kind of fits, I think, with most is down mid- to high single digits in '26. Maybe just talk about how Weatherford is kind of positioned and how that has evolved over time. Your business model has evolved over time to maybe do better than a down mid- to high single digits revenues relative [indiscernible]. Girish Saligram: Yes. Jim, look, we have talked about our North America business, especially U.S. land being far more production-oriented, so that is something that actually helps us. Artificial lift is a very big product line for us in U.S. land. That's something we'll continue to exploit. Obviously, we do get impacted with rig count and well count on products like cementing products, our liners and completions business, et cetera. What we are really trying to do is a couple of things. First is to make sure that our footprint is optimized for the current environment, and we can be more efficient serving customers with the responsiveness that the North America market expects. The second is really making sure that we are driving differentiation and innovation. That has always been our go-to for how do we combat market pressure. So I think, look, we will continue to see some of the decline, but our focus is on making sure that we keep our margins intact in the business. And we have had several examples of where we've been able to drive growth through innovation. Some of our well construction products is a great example. Our digital business is another really good example. Production optimization, for example, that really gets enabled through our digital business. That's something that's a huge focus for us, and we think will become even more important in this North America landscape, but we are not immune at all to the decline in activity, but our focus is how do we offset that by making sure we get higher quality revenue with better EBITDA contribution and cash contribution. Operator: And our next question today comes from Derek Podhaizer at Piper Sandler. Derek Podhaizer: Hoping you could just maybe dig into the first morning -- maybe dig into the first quarter guidance a bit more, implies the top line decline of about 11% quarter-over-quarter, 200 basis point margin contraction. I know you've been hearing a lot about more pronounced seasonality from your peers, but could you maybe elaborate on some of the puts and takes, the different moving pieces that's impacting your guide? Anuj Dhruv: Yes, yes, happy to. So I'll maybe break this down into a few parts. First, I'll answer your question around Q4 to Q1. And then I'll talk a bit about Q1 '25 versus Q1 '26 because I think that context is important. And so from Q4 to Q1, you alluded to the typical seasonality we see that regardless of where we are in the cycle. We're seeing that now from Q4 to Q1. The other piece though, however, that we're seeing is we had in Q4, a few of our orders from our customers pulled in from Q1 into Q4, particularly or specifically one in Brazil and the second in the Gulf of America. And so that combination of seasonality plus orders being pulled in is really some of the key drivers of the difference you're seeing. And then lastly, there has been some weather impact here in Texas. Production has been down for a few days because of that. And so that does have a slight impact in our Q1 numbers. And now taking a step back and looking at the sequential year-over-year from a Q1 '25 to Q1 2026. In Q1 2025, we did have the benefit of having our Argentina divestiture fully baked into our numbers. And in Q1 of 2026, we have a slight impact of tariffs, which we did not have in Q1 2025. We do think our team has done an excellent job in managing the impact of the tariffs and has protected margin very well. However, if you combine those 2 and really focus on the divestiture and you normalize for that, you look at top line, Q1 '25 to top line Q1 '26 are generally flat. And the reason I bring this up is, if you look at the trend in Q1 through Q4 2025, we had a significant ramp-up in the second half of 2025. And this is our expectation for 2026 is as you start seeing some of these areas that Girish and I alluded to in our prepared remarks, hitting, if you will, in the second half of 2026, you'll see that sequential ramp-up in our view and really create that solid foundation leading into 2027 and beyond. Operator: And our next question today comes from Phillip Jungwirth with BMO. Phillip Jungwirth: You pointed to lower CapEx year-on-year despite the increased ERP spend. I was just hoping you could talk more about what product lines you're taking a harder look at and where CapEx will be focused now versus the past? And is business mix also helping like how you called outgrowth in lower capital-intensive businesses like completions and also divested higher capital-intensive businesses in Argentina last year. Anuj Dhruv: Sure, I'll start with that. So we will continue to have CapEx within the 3% to 5% range. This is -- this will be true in 2026 as well. But we are taking a very hard look at where we are spending. For us, in order for us to deploy that capital, there has to be tangible line of sight versus speculating. And so we'll continue to evaluate our CapEx in that light. To that end, we are, as you alluded to, doubling, if you will, to spend in 2026 versus 2025 on our ERP. Very excited as to the efficiencies we can gain from the ERP, it is a multiyear journey for us. However, we have teams deployed and are confident and looking at driving further efficiencies kind of later in '27, 2028 as we fully implement this and it goes live. On our current asset base, we are looking at where we can improve our asset utilization and so how do we do more without spending more is absolutely key. And then lastly, we're looking for areas where we can trade CapEx to OpEx or specifically leveraging our CapEx that we've spent to drive incremental business without the capital outlay. An example of this would be recently here in '24, 25-ish, we had some capital outlay with Petrobras for a large contract with them. And here, we have incremental business that we will drive without that incremental capital outlay. And so the key for us is to look to see how we can optimize cash and margin on the capital we deploy and we are heavily focused on the return on invested capital as we seek to deploy more CapEx. Operator: And our next question today comes from Josh Silverstein with UBS. Joshua Silverstein: It was a really nice year for cost cuts for you guys. I think it totaled around $150 million and showed a really nice margin improvement. And then even for the outlook for 2026, you're showing still slight margin improvement despite some revenue headwinds. Can you just talk about what the initiatives are that were driving this and then where you think margins could start to go longer term? Anuj Dhruv: Sure. Sure. Happy to take this one. So yes, we did right-size the ship, if you will, here in 2025. I tell the folks on the team, the hardest thing to do is to have a workforce reduction. And we -- in our business, given the cyclicality of the -- the cyclicality nature of the business, this is a necessity and something we need to do, and we did. We reduced around 2,000-plus of our workforce here in 2025. This resulted in about $150 million of run rate if you will, purely on the margin standpoint. And so we moved fast to avoid margin degradation. And I do believe that we were early to diagnose the environment and the market in 2025. We were the first ones to initially lower guidance in early 2025, and that enabled us internally to move with speed. And those actions are reflected in our full 2025 full year margins where we were able to protect here and landed at the 21-plus percent EBITDA margin for the full year. And so we will continue evaluating and rightsizing and matching activity with our footprint throughout the world, and we'll make those changes as we -- as we see. And then second, on the structural side. And so on the structural side, I've alluded to this before, but we are a continuous improvement organization. There is no finish line. The finish line keeps getting pushed forward and forward. And so for us, it's evaluating how are we structured organizationally as a company. What materials or what processes and people do we -- and tasks do we tackle in-house? versus what do we outsource and potentially move to a lower-cost jurisdiction. And so these organizational evaluations are constantly going on. I alluded to our ERP. Again, this is a multiyear journey that we have embarked on over the last year, and this will likely go into 2027, 2028. But we are very excited at what this can do for us. This is not just a technology upgrade, where you come in, you click a button and you have a different version of a tool. This will change the way that we're looking at our supply chain, procurement, at how we go to market, managing our working capital, how much inventory we need, how easily it is for us to move our inventory around the world. And so very excited about what the efficiencies that we can gain from all this will be. As I take an even further step back, I do think in '25, we were able to show the market what Weatherford as a company can do when the seas are choppy and you have a large headwind. And we've managed the boat, if you will, fairly well. And on top of that, we're making structural changes so that when we do get the tailwind, structural changes kick in and complement the tailwind, I am excited to see how fast this new boat can go when all those confluences come to fruition. Operator: And our next question today comes from Ati Modak with Goldman Sachs Company. Ati Modak: Girish, you talked about transformational changes, gave some highlights also, but would love to hear more on the nature of the new initiatives? Is this something that could drive changes in revenue mix, portfolio mix over time as well, if you can give any more color? Girish Saligram: Yes, sure, Ati. Look, I think transformation is almost sort of a consistent and constant theme for us, but the nature of what we are doing has changed. So as Anuj just talked about, look, one of the most significant changes is our new ERP system, and this is going to give us a degree of automation in our processes, AI enablement truly seamless integration that we have never had before in the company to data transparency, et cetera. So I think that's going to allow us to navigate cycles dramatically differently and leverage best practices from around the world, share resources are a lot better. In addition, the portfolio changes that we have been making, the first few years or the last few years, if you will, our portfolio focus was really on, hey, what we have, how do we do better with it, where do we get more penetration. Now it's all about the new products that we are developing, the new technologies that are coming at and those have been very specifically targeted towards where we think we have significant market opportunity, lower capital intensity businesses, things of that nature. So I think, look, as we bring all of this together, what has also remained constant in the company is a focus on the operating model how do we just consistently get better on an everyday basis, kind of the basic blocking and tackling. We're not going to let go of that. So I look at it and look, our philosophy of saying, we will always plan for a flat market. And in that flat market, we want to get 25 to 75 basis points of margin improvement. And when we have activity increases, that actually just increases the amplitude. When we have activity decreases that allows us to be more resilient on the margins. I think that's going to remain very true for us, and I think that will serve us really well as we get into the next few years. Operator: And our final question today comes from Josh Jayne at Daniel Energy Partners. Joshua Jayne: I just wanted to follow up on your Modus Managed Pressure Wells Solution. I think at the end of your prepared remarks, you highlighted 70 jobs in almost every geography. Maybe if you could talk about why you had the success you did in 2025 and how you're thinking about growth, not only in 2026, but beyond? Girish Saligram: Yes. Josh, look, this is a technology. I continue to be very, very excited about our team listening on the call probably Chuck will speak is I'm constantly internally saying we need to do even more, but I think it's a tremendous breakthrough for us for a couple of reasons. One is that it allows us to hit a tier of the market that we really didn't have access to before in that performance tier, where our high-end systems are too complex and potentially cost prohibitive for the kinds of wells. It gives us foray into shallow water markets. So there is a huge swath of opportunities. And then as we extend the concept of our Managed Pressure Regime from just Managed Pressure Drilling to this concept of Managed Pressure Wells, different applications like cementing, like setting liner hangers, a lot of other things that you can do using this technology I think the growth is going to be even greater. So now we've got a full complement of packages out there so we have the tools in place in the different geographies. The customer interest has been very significant and very, very encouraging. So I'm really looking forward to a year where this becomes another very significant part of the overall product line. Operator: That concludes the question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks. Girish Saligram: Thank you all again for joining our call. Again, I remain very excited about the prospects of the company. Thank you all for listening, and we'll be back in April to share our first quarter results. Operator, you may close the call. Thank you. Operator: Thank you, sir. Everyone, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Ladies and gentlemen, a warm welcome to the GSK Full Year 2025 Results Call. I'm delighted to be joined today by Luke Miels, Nina Mojas, Deborah Waterhouse, Tony Wood and Julie Brown. And in our Q&A session, we will be joined by David Redfone. Today's call will last approximately 1 hour with the presentation taking around 30 minutes and the remaining time for your questions. Please ask only 1 to 2 questions so that everyone has a chance to participate. Before we start, please turn to Slide 3. This is the usual safe harbor statement. We will comment on our performance using constant exchange rates, or CER, unless otherwise stated. I will now hand over to Luke. Luke Miels: Thank you, and welcome, everyone. My introduction today will have 2 parts: Headline results for 2025 and our key focus areas in 2026 to drive value. Starting with 2025 results were strong. Sales were up 7% to more than GBP 32 billion. Growth was driven by Specialty Medicines, which were up 17% with vaccines also contributing. Core operating profit grew 11% and EPS was up 12%. Cash generation was strong at GBP 8.9 billion, supporting future investment and returns to shareholders, enabling the dividend upgrade of 2p to 66p declared today. R&D output remained very positive with 5 FDA approvals and 7 new pivotal trial starts, and we maintained our high standards for being a responsible business. Looking forward, we expect another year of profitable growth reflected in the guidance given today. Next slide, please. In 2026, we expect momentum to continue, and we'll get there by focusing on execution and operational delivery. There are 3 areas where we're focused. The first is driving top line growth by maximizing launch products like Blenrep and Exdensur and ensuring success in overall operational execution. Second, accelerating key assets in our late-stage portfolio like B7-H3, B7-H4 and Velzatinib in oncology and Effi in MASH and in our earlier portfolio like the ultra-long-acting TSLP for respiratory diseases and regimen selection for our 6-monthly treatment for HIV. And third, continue to execute business development where we see a clear pathway to value creation and our recent addition of the food allergy IgE antibody, Ozekibart is consistent with this. Underpinning this will be a drive to simplify how we work with greater pace, accountability and focus. And this starts by matching our best people and resources to the best opportunities to create value. Linked to this, changes have already been made to the executive team, bringing on commercial leaders with deep industry experience to increase our focus on products and execution. And this includes Nina Moz, our new Head of Global Product Strategy, who I worked with for a number of years at AstraZeneca and Roche, who will present the commercial update. And importantly, we'll have an increased focus on leveraging practical use of AI and technology. And I'll now hand over to Nina. Nina Mojas: Thanks, Luke. Please turn to the next slide. Overall sales for the year were up 7%, with strong growth driven by specialty, up 17% and another year of growth in all regions. Next slide, please. Respiratory Immunology and Inflammation full year sales were up 18%, driven by strong Benlysta and Nucala performance. In the year, Benlysta grew 22%, driven by higher demand and supported by all major guidelines. 82% of U.S. bio-naive patients are now starting on Benlysta due to its differentiated profile with organ damage prevention and more than 14 years of safety and experience. Nucala grew 15% and delivered $2 billion for the year. This is the 10th consecutive year of double-digit growth for Nucala. Moving to oncology. Sales were up 43% -- in the year, Jemperli sales were up 89%, reflecting our differentiated profile in endometrial cancer. Ojjaara grew 60%, driven by growth in all markets following the new data at EHA, emphasizing the importance of early intervention. And based on these data, NCCN included Ojjaara as Category 1 for patients with anemia. We expect this to drive uptake in first line, although growth will be slower than what we have seen with second line. ZEJULA sales decreased, reflecting FDA labeling restrictions, and we remain focused on the potential we have for BLENREP now approved in 15 markets globally. Deborah will cover HIV shortly. Given the continued strong performance and momentum across the specialty portfolio, we are expecting sales to grow low double digit for 2026. Next slide, please. The strong performance of Nucala in '25 was driven by our successful launch in COPD. This launch also had a halo effect on all of Nucala's indications, resulting in higher market share in asthma and nasal polyps, also fueling brand growth in '26. We are applying the lessons from the severe asthma market with Nucala to the launch of Exdensur, which is now approved in the U.S., U.K. and Japan. We know that there is a significant opportunity in the bio-naive population as only 27% of U.S. eligible patients are on a biologic. And market research shows that 97% of patients would prefer or like to switch to a biologic with 6 monthly dosing. And Exdensur has demonstrated a 72% reduction in exacerbations leading to hospitalizations in an indication where we know lack of therapy adherence leads to worse clinical outcomes. The second key launch this year is for BLENREP, our off-the-shelf BCMA agent for multiple myeloma available in the community setting where 70% of patients are treated. We've made fast progress on our launch in the U.K. and are applying lessons learned in the U.S., particularly around Eye Care networks. We've now engaged around 18,000 eye care professionals in the U.S., enabling smooth collaboration between treating physicians and Eye Care professionals and have had positive feedback on the simplification of our REMS. We continue to expect this to be a slow ramp-up as we support prescribers and patients to ensure a positive first experience and robust adoption. I will now hand over to Deborah to cover HIV. Deborah Waterhouse: Thank you, Nina. We entered 2026 confident in our unique position to lead the next transformation in HIV care. Sales growth was 11% in the year, powered by accelerated patient demand for our long-acting injectables and our foundational oral 2-drug regimen, Dovato. Demand continued to increase across all regions, most notably in the U.S., which grew 14% in 2025, continuing to outpace competition in market share gain. With the only commercially established long-acting HIV treatment regimen backed by over 4 years of real-world data, we're delivering long-acting innovation at scale and are delighted with our ongoing portfolio transition to long-acting regimens. In 2025, over 75% of our growth came from long-acting injectables, which now represent around 1/3 of U.S. sales. With treatment accounting for 90% of the total $22 billion HIV market, we are pleased that Cabenuva grew 42% in 2025, fueled by patient demand and accelerated switches from competitor products, reaching more than 75% in the U.S. this quarter. In long-acting prevention, Aplitude grew 62% in 2025, withstanding any impact from a competitor launch. In 2026, we expect continued growth momentum. And so today, we are guiding mid- to high single-digit growth. This quarter, we also announced Pfizer will exit ViiV and Sinogi's shareholding will increase, simplifying Vii shareholder structure. GSK will maintain the same position. We look forward to continuing our highly successful collaboration to advance our pipeline and portfolio of long-acting HIV medicines. Moving on to our industry-led long-acting pipeline. Powered by unmatched patient insight, we are set to deliver transformative launches over the next decade, enabling us to navigate the dolutegravir loss of exclusivity and accelerate long-term growth. We believe twice yearly treatment presents our most significant commercial opportunity and through a combination of novel assets, presents the potential to change the HIV treatment paradigm once again. At CROI, we will share data that will help inform our regimen selection for twice yearly HIV treatment. Starting with VH184, a potential first-in-class third-generation entity with IP protection through to at least 2040. We'll present key data on its unique resistance profile versus the competitor and findings from an ongoing first time in-human trial exploring its significant potential for up to twice yearly dosing. We strongly believe this asset has the power to redefine the long-acting landscape, and we remain extremely confident in its potential to become the backbone of our long-acting treatment regimens. To pair with that entity once selected, we are evaluating 2 partners, VH499 and our BNAbN6LS. Data at CROI for VH499 will show potential dosing durations. For N6LS, one of the broadest and most potent bNAbs in development, we'll share more data focused on Q4M dosing with Q6M dosing data expected this year. This year, we'll also begin QUATRO, our Phase III registrational study for 4 monthly HIV treatment. This critical step builds on our Q2M success, and we are on track to file in 2027 and launch in 2028. At launch, we still expect to have the only long-acting treatment options on the market for years to come. Our strategy is clear and our execution is strong. We are fully confident and well positioned to drive sustained long-term performance, and we'll continue to update you on our Q6M regimen selection. We look forward to introducing you to our new Head of R&D, Charlotte Allison, who will succeed Kim Smith upon her retirement at the end of Q1. I'll now hand back to Nina. Nina Mojas: Thanks, Deborah. Turning to vaccines. Sales were GBP 9.2 billion in the year, up 2%, driven by European and international region sales of Shingrix and Bexero. Shingrix sales were GBP 3.6 billion, up 8%, driven by Europe and international region, offset by the U.S. In Europe, sales were supported by our focus on comorbid patients. And in international region, Japan continued to grow following expanded public funding. And in China, we saw similar sales to 2024. In '26, we expect market performance outside of the U.S. and China to benefit Shingrix sales, offset by slowing U.S. immunization rates and our partner in China managing inventory. In meningitis, sales were up 12% with strong continuous growth across Europe and international, driven primarily by Bexero, up 16% for the year. Bexero demand increased in Europe, partly due to MenB outbreaks. Ex U.S. represents 69% of Bexero's global full year sales, demonstrating continued growth from national immunization programs and geographic expansion. In the U.S., we retained MenB market leadership with 74% market share and have seen positive signs for MenB with initial stock building. Turning to Arexvy. Sales were up 2% for the year, also driven by ex-U.S. growth. We continue to monitor the evolving pediatric vaccine landscape in the U.S. At this time, insurance coverage remains as before, and we expect the recent HHS changes to be manageable given GSK's broad portfolio of vaccines. For '26, we expect sales growth to be in the range of low single-digit decline to stable. Next slide, please. Turning to GenMed. Sales were slightly down for the year. Strong growth of TRELEGY was offset by other respiratory and established products. Globally, TRELEGY continues to be the top-selling brand for asthma and COPD. And in the U.S., the C class is growing with TRELEGY leading in share driven by gold guidelines and strong execution. In anti-infectives, we are taking a targeted approach to align access to BLUJEPA in uncomplicated UTIs with positive initial insights. And for complicated UTIs, we now have a PDUFA date of 18th of June for tebipenem in the U.S. Looking forward, we expect sales growth to be in the range of low single-digit decline to stable, reflecting pricing pressures and generic competition of our established portfolio. And in the U.S., across the broader portfolio, we navigated the impact of the Medicare redesign from the Inflation Reduction Act near the upper end of our $400 million to $500 million range. I will now hand over to Tony to talk to you about our progress in R&D. Tony Wood: Thank you, Nina. Next slide, please. Starting with the pipeline. There's greater focus and opportunity here than ever before. Our top priority is to accelerate development to deliver new products to patients faster. In 2025, we secured 5 FDA regulatory approvals and started 7 new pivotal trials, 3 for Exdensur in COPD, 2 for efimisfermin in NASH, for Velzatinib in second-line GIST and RRS, our B7-H3 ADC in extensive stage small cell lung cancer. I'm delighted with the progress we're making to deliver the pipeline, shorten development time lines and access world-leading innovation through BD. Next slide, please. In respiratory, we've extended our leadership through a focus on exacerbation prevention with long-acting treatments and now have approval for Exdensur, the world's first and only 6-monthly biologic to treat patients with severe eosinophilic asthma. Also in respiratory, COPD is a growing area of significant unmet need. A patient hospitalized with an exacerbation has less than a 50% chance of survival over a 5-year period, alongside a cost to U.S. health care of around $7 billion per year. Our work to understand the role that inflammation plays in chronic airway disease has led to an emerging and differentiated pipeline of long-acting options for COPD patients. Starting with Exdensur, the Phase III ENDURA trial to recruit patients at moderate risk of exacerbations, while vigilant is the first ever study of an antibody for patients at an early stage of disease who are at risk of rapid progression. Our Phase II trial investigating the ultra-long-acting TS monoclonal antibody GSK283 in asthma patients is on track to generate data by the end of this year and will further guide development of a 6-monthly option for patients with a low T2 phenotype. The portfolio also includes a PDE3/4 inhibitor with potential for DPI use in Phase I development in China, complementing our leadership position with TRELEGY. Looking now to refractory chronic cough. I'm pleased to confirm that we achieved last patient first visit for the KALM-2 study in December. And we're now on track to report Phase III data from the total program around mid-2026, in line with our prior guidance. We believe Camlipixant will provide an effective treatment in RCC, where there are no approved therapies in the U.S. and approximately 10 million patients diagnosed globally who could benefit from this medicine. Next slide, please. A focus on inflammatory pathways of disease and how this leads to fibrosis, particularly in the lung, liver and kidney, underpins our development programs in fibro-inflammatory mechanisms. We are pleased with the progress of Efimosfermin, our potential best-in-class once-monthly FGF21 analog, which started Phase III trials for MASH last year. As a reminder, in Phase II, Effi demonstrated sustained improvement in fibrosis and resolution of NASH in patients with F2, F3 stage disease. These data supported the start of our AZENIT-1 and 2 pivotal studies. We plan to start the Nebula Phase III studies, which will recruit a more advanced F4 patient population later this year. Also in our hepatology pipeline is GSK-990, an siRNA therapeutic targeting HST17B13. Consistent with human genetics of this target, preliminary data from the Phase II STARLIGHT study in alcoholic liver disease demonstrates favorable trends in reduced liver enzymes despite ongoing alcohol consumption and this with no emerging safety concerns. These assets have the potential to reverse cirrhosis where 20% to 50% of patients with associated complications die within 1 year. Next slide, please. Last month, we were pleased to announce positive results from the B-WELL 1 and B-WELL 2 studies, our Phase III trials of Bepirovirsen for the treatment of patients with chronic hepatitis B, a disease which affects more than 250 million people worldwide, causing over 1 million deaths each year. We believe that bepi has the potential to transform chronic hepatitis B treatment and become the first ever fixed course of therapy with functional cure at a significantly higher rate than today's standard of care. This is important because chronic hepatitis B accounts for around 56% of liver cancer cases and real-world evidence shows that functional cure reduces this risk by around 90%. We look forward to sharing these data with regulators during the first half of the year and at an upcoming scientific congress. Next slide, please. Our oncology pipeline is a critical part of the portfolio. Starting with BLENREP. We anticipate mature OS data from DREAM-7 in early 2028 to support second-line registration in the U.S. In the first-line transplant ineligible setting, DREAM-10 is recruiting well, and we recently expanded the number of U.S sites to increase U.S. patient participation. DREAM-10 uses a lower dose when compared to second-line studies and evaluate dual endpoints of MRD and PFS. Interim MRD and safety data are expected in early 2028. Also in the first-line setting, we'll start a study looking at BLENREP cord regimen in a younger fitter population later this year. Moving now to Ojjaara, we continue to generate data to support decision-making for myelofibrosis patients with anemia and a Phase II study in myelodysplastic syndrome is currently recruiting. We also continue to develop life cycle indications for Jemperli. Later this year, we anticipate results from a pivotal ASO-1 trial for Jemperli in DMMR locally advanced rectal cancer. ASO-1 was designed following the publication of transformative data, which showed 100% complete clinical response rate in a single center monotherapy study. We're excited about Jemperli's potential for patients with this disease. Velzatinib, our KIT inhibitor, which targets all clinically relevant enzyme mutations has started Phase III in second-line GIST with first line to start later this year. Velzatinib has the potential to replace current standard of care and is designed to offer a well-tolerated schedule with greater efficacy against resistant mutations. Moving now to our other ADCs. Our B7-H3 targeting molecule, which I will now call Ris-Rez, recently received its fifth regulatory designation with orphan drug status in SCLC. With this transformative potential in mind, we've initiated a global program encompassing multiple solid tumor trials for RisRes called EMBOLD. The first of these studies, EMBOLD SCLC-301 has started ex U.S. recruitment in second and third line. U.S. recruitment will start later this year and include tarlatamab exposed patients. We have extensive plans for additional Ris-Rez Phase III starts in the next 12 to 18 months. In the first half of this year, we also plan to start recruitment for pivotal Phase III trials for MORES, our B7-H4 ADC in platinum-resistant ovarian cancer and in patients with recurrent endometrial cancer. We're targeting a conference this year to present interim data from our early phase BEHOLD-1 study for patients with ovarian and endometrial cancers, and we anticipate further pivotal study starts for this molecule during 2026. Next slide, please. Business development is a core part of how we're accelerating our pipeline and accessing innovation. Two weeks ago, we announced an agreement to acquire Rapp Therapeutics, whose lead asset is Ozureprubart, a potential best-in-class long-acting anti-IgE monoclonal for food allergy, which is currently in Phase II. Food allergy is a chronic inflammatory condition with severe reactions leading to anaphylaxis, emergency care and persistent lifestyle disruption. In the U.S., severe food allergies impact over 17 million patients with an estimated $33 billion cost of economic burden, underscoring the need for more effective treatment options. We expect the deal to close this quarter and look forward to progressing this important asset into Phase III development. Next slide, please. In conclusion, 2025 saw further strong momentum in the pipeline, which continues into 2026. We have critical data readouts to come for bepi, Camli, Jemperli, Q4M Prep and ensure for EGPA. We also have 10 pivotal starts planned for this year, including more than 5 from our ADCs, 2 for advanced MASH and Quattro, our Q4M treatment Phase III trial for HIV, all of which are supporting our growth in specialty medicines. I'm excited about our progress and our prospects. I'll now hand over to Julie. Julie Brown: Thank you, Tony, and good afternoon, everyone. Next slide, please. Starting with the income statement for the full year with growth rates stated at CER. As highlighted, sales grew 7%, whilst core operating profit grew 11% -- this leverage was primarily driven by a 3% increase in SG&A as investment in product launches was balanced with productivity improvements. Additionally, royalty income benefited from the RSV IP settlement, the new mRNA royalty streams and Kesimpta performance. And R&D growth of 11% reflects our acceleration of investment across multiple key specialty assets. Core EPS grew 12%, supported by the share buyback and lower interest expense due to strong operating cash flows. And finally, turning to total results. Growth primarily reflects the impact of the Zantac charge taken in 2024. Next slide, please. The operating margin increased 110 basis points in 2025, bringing total accretion at CER to 470 bps over the last 4 years. This increase was primarily driven by SG&A margin improvement of 90 bps, whilst gross margin continued to benefit from the portfolio transition towards specialty, growing 40 basis points. R&D expenditure increased as we reinvested the additional royalty income into our pipeline to support the initiation of the Phase III Efimosfermin trials and prepared pivotal trials for the ADCs in multiple indications. Incorporated within this margin improvement were core charges of GBP 300 million taken in Q4, split evenly across supply chain and SG&A to drive productivity benefits. And currency was a headwind to margin, lowering the reported margin to 29.9% for the year. Next slide, please. Turning to the cash flow. Cash generated from operations was GBP 8.9 billion or more than GBP 10 billion, excluding Zantac payments, up GBP 1.6 billion year-on-year, driven by higher operating profit, favorable RAR movements and the CureVac settlement, partially offset by increased trade receivables. Free cash flow increased to GBP 4 billion or more than GBP 5 billion, excluding Zantac, driven by strong CFO. Zantac payments in 2025 were GBP 1.2 billion, and the settlement process is now materially complete with GBP 1.9 billion paid in total, drawing a line under this matter. Next slide, please. Turning to capital allocation. Underlying free cash generation was strong at over GBP 8 billion before investment decisions. GBP 4.5 billion was deployed in CapEx and BD as we added 3 potentially best-in-class clinical stage specialty assets to the pipeline and completed multiple early-stage and platform deals. Shareholder distributions totaled GBP 4 billion through the dividend and the share buyback with 93 million shares repurchased at an average price of 1473 and the remaining GBP 0.6 billion will be completed in half 1. Overall, our balance sheet remains strong with net debt to EBITDA relatively stable year-on-year at 1.3x, including the absorption of Zantac and the buyback. Next slide, please. Now turning to the guidance for 2026 with growth rates stated at CER. Starting with our headline guidance, we expect sales growth of 3% to 5%, core operating profit and core EPS to both grow at 7% to 9% and to pay a dividend of 70p, a 6% increase. Product area growth is once again led by specialty at a low double-digit percentage growth, including mid- to high single-digit growth for HIV. Vaccines and GenMed are both expected to be a low single-digit decline to stable, and we expect sales growth to be evenly phased through the year. Turning to the P&L. Gross margin is expected to continue to benefit from supply chain efficiencies and the portfolio transition towards specialty. SG&A will grow at a low single-digit percentage, benefiting from the acceleration of productivity initiatives. And R&D will continue to grow ahead of sales as we invest to advance the pipeline. Interest charges and the tax rate are expected to increase year-on-year. However, these will be offset by the benefits of the share buyback to EPS. Importantly, the phasing of operating profit growth will be heavily weighted towards the second half, reflecting the GBP 300 million of charges taken in Q4 '25 and impacted by the annualization of the RSV settlement in the second quarter. Additionally, currency could be a headwind. If rates hold at the closing rates on the 28th of January, we would expect an impact of minus 3% on sales and minus 6% on operating profit. Next slide, please. Before I finish, I wanted to take a moment to share the continued performance of the business. In 2021, we provided outlooks on 4 financial KPIs for the 5-year period to 2026. We have delivered consistent revenue growth and improvements in operational efficiency. We are on track to deliver against all the 4 KPIs. Taking the midpoint of our 2026 guidance ranges would lead to delivery of 8% sales and 13% operating profit CAGR over this period. Additionally, cash generation has been significantly enhanced, and we're on track to reach more than GBP 10 billion in 2026. This, together with shareholder returns and a strengthened balance sheet, lay strong foundations for the next phase of growth. Our usual IR road map is shown in the appendix, signaling the major value inflections in 2026 and '27. Thank you. And with that, I'm pleased to hand back to Luke. Luke Miels: Thanks, Julie. Looking forward, I see 2 clear things we need to do to create value for shareholders. The first one is top line. This means delivering on our ambition for 2031 and addressing the loss of Dolutegravir exclusivity. The second is the pipeline. We need to accelerate what we have and add to it via Smart BD, and we also need our labs to produce more competitive products. So to do these 2 things, we need to evolve as a company. Products are the key in this business, and we need to be more product-centric. And to accelerate the pipeline, we need to have more scientific courage and be more agile to capitalize on opportunities when we see them. Each quarter, you'll hear more detail about how we're going to make this happen. Next slide, please. To conclude, 2025 was a strong year for GSK. For 2026, we're guiding for another year of top line growth and operating leverage. And for the long term, we know what we need to do to create value for shareholders and patients. And the focus is now on evolving the company to do it. Thank you, and we'll now move to Q&A. Operator: And the first question comes from James Gordon from Barclays. James Gordon: James Gordon from Barclays. First one, respiratory. Can you elaborate on R&D and commercial strategy in COPD and asthma? Because you've now got Nucala, Exdensur and then IL-33 and TSP all in development, but some overlapping products. I don't want to double count. And so how do we think about segmenting this given you've got products going for the same disease and also quite a lot of these mechanisms also have multiple competitors also looking at them for the same diseases. The second question was HIV, and I heard the comments on long-acting strong uptake and exciting next-generation data at CORI. So when could we see the 6 monthly treatment and PrEP Phase III trial start now? And commercially, what is the implications of the 4 month and 6 monthly in terms of your TAM? Because I've seen before you talked about the majority of sales in HIV being long-acting in 2031, but then that might partly just because the orals are going to go away by then. So what's the TAM increase if these work? And maybe if I could just squeeze in a clarification, the $40 billion plus revenue target, which has been reiterated, just is that the original assets? Or is that also including some of the recent acquisitions you were talking about and the BD you're talking about, please? Luke Miels: Great. Thanks, James, and I appreciate the question. So Tony, should we go into COPD and then I might add a little bit of color at the end of that in terms of how we position the assets and what our thinking is. It's obviously always dynamic. And then, Deborah, do you want to cover HIV? I think we're in very healthy shape there, some more color there. And then Julie, did you want to cover the assumptions around the 40. Again, I'll just take this opportunity just in case we get any other questions to reiterate the commitment to the 40. And again, I think we have a clear pathway for that. So Tony, over to you. Tony Wood: Yes. Let me start. Thanks for the question, James. First of all, I'm really pleased with the progress we're making in respiratory. Obviously, just a mark last year, the Nucala approval in COPD in the middle of the year and then at the end of the year, Exdensur in severe eosinophilic asthma as the first ultra-long-acting entry in our pipeline. I think what's important to understand about COPD, James, obviously, huge opportunity there, 300 million individuals globally and significant cost to the U.S. health care system, as I outlined in the presentation. But it's a complex disease. It's a heterogeneous disease. And that's why we're placing ourselves across a range of different long-acting mechanisms. The way you can think about it is there is a high EO population. This is where IL-5 and Exdensur and Nucala are positioned. And again, let me just emphasize there that we have a label which covers both the bronchitic and the emphysemic and mixed population is important when one considers the reality of the hospital admission for a COPD patient. You can then think about the intermediate T2 population, which is the 150 to 300. We were delighted to see the Nucala label there, but that's where we see, for example, our long-acting TSLP starting to play increasingly in the future. And then the low 2 population, and that's where we're positioning IL-33. So what we have, of course, is already starting in that high T2 population, the EUA 1 and 2 studies, that's the GE population that we're looking at. And the Vigilance study, which, as I mentioned in the script, looks as a brand-new approach, looking at rapid progressors in that high eosinophil population. We also have ongoing Phase I and Phase II studies for the long-acting TSLPs and IL-33 mechanisms in the context of the stratification that I described. And then just to finish off, we'll be expecting in both of those to be starting pivotal studies over the next 2 to 3 years once we have been informed by ongoing Phase I and Phase II work and competitor insights. And then lastly, just to finish off, important to emphasize, we also have the HRS9821 molecule, which is the first nominated candidate from our ongoing collaboration that's focused on dyspnea, which is associated to pain associated with breathing and fits nicely into our cell portfolio given that, that molecule has an opportunity to be a DPI administered agent. And then lastly, in the low group, we have the recent deal we did with Empirico012, and that's now called GSK821. That's a long-acting oligo, which is aimed at a broad spectrum, as I indicated. We haven't disclosed the mechanism yet, but we will in the future as we gather more data. And James, what I will say is we get a REIT... Luke Miels: Yes. And James, what I will say is we're going to resist the temptation as a company to construct a lovely PowerPoint slide that shows how we'll carefully capture this bit and have trade-offs amongst our products. I mean, there is a strategic intent here, but we also recognize there's a [indiscernible] Dimension here, in terms of the data that these targets generate, but also the competition gets a vote as well. I mean, ultimately, the long-acting institution. The launch for Nucala COPD in the U.S. is going very well and it was just there on Monday, we have around well, depending on which data set, 43% to 46% of new patient starts already. The market research and the messaging is really resonating. But we have transferred all of our new Catareps to Exdensur and Nucala OPD is being promoted by the Trelegy legacy team. because, again, we need to place our bets on the future and the ultimate future with 5 and higher EOR is going to be long-acting Exdensur for COPD. So thanks, James. I appreciate that question. Deborah, do you want to give an update? Deborah Waterhouse: Thanks, Lee. So the key thing that I want to reemphasize is that we're on track to select our Q6M treatment regimen in the middle of the year. And as I said, we're going to do a meet the management event midyear where I'll lay out a lot more detail about the pipeline. But let me just give you a top line view now. So let's start with treatment. The treatment market is $20 billion in value, 90% of the value of the total HIV market. as I said in my presentation, Q6M is clearly our biggest opportunity in treatment. We're very confident in the assets that we've got to choose from and the COI data that we'll present will show just how strong those assets are, particularly VH184, which is unique, third generation, really potent integrated inhibitor. And we believe that to have a really potent regimen, you need to have an integrated inhibitor at the core. So in terms of what kind of studies will start Q6M treatment, you'll see us move into Phase II this year. That puts us on track for our commitment, which is the 28 to 30 launch for our Q6M in treatment. In terms of PrEP, it's a different pathway because with the medicine that we're developing for Q6M PrEP, it's a prodrug of cabotegravir, which we've talked about before. And that means that we'll be able to go from Phase I to Phase III relatively rapidly and the Phase I will be starting this year where we'll then progress the dose selection and then we'll do a bridging study from the data that we already have from Q2M. So our Q6M pathway is clear, and we're very confident in our ability to deliver against our milestones but don't underestimate Q4. There is a huge desire for Q4M treatment and in prep. And we know that many clinicians are really looking forward to opening up their clinic capacity, which will double from what they've got today with Q2M for Q4M. And I think what you're going to see is a rapid cannibalization to Q2M to Q4. And then actually, you will see a rapid cannibalization from Q4 to Q6. And as I've said before, particularly in treatment, you see the market really open up as we progress through longer and longer durations between administration. So the addressable market for Q2M is about 15% of patients. When we get to 4%, we get to 30% of patients. And then you've got with Q6M in treatment, 50% of patients who would be very willing to take a long-acting injectable. That is a big chunk of the market, which is why we are so excited about the offering that Q6M in treatment and in PrEP, but particularly in treatment will offer. Luke Miels: Thanks, Deborah. Julie, quick answer on the other GBP 40 billion. I think everyone knows, but let's confirm it. Julie Brown: Yes, sure. Thanks, James, for the question. So in terms of what we've included of the recent deals, IDRx has included Efimosfermin, together with the earlier stage Hengrui license, PDE34. Rapp obviously has just been announced, so it's not included at all in the LRF. And clearly, we continue, as Luke mentioned, to support our BD to build and continue to build the pipeline. Luke Miels: Great. Thanks, Julie. Next question please. Operator: Next question comes from Simon Baker from Redburn. Simon Baker: Two, if I may, please. Firstly, on Blenrep. In light of the early feedback that you've had, you talked about the response to the REMS program. Can you just update us on how we should be thinking about the launch trajectory for Blenrep? And then secondly, a slightly bigger picture question for you, Luke. You did mention some of the facets of your strategy. I just wonder if you could give us a bit more detail on how and in what form we're going to learn more about that strategy over the course of the year. Is this something where there will be additional disclosure as we go through the quarterly calls? Or are you envisaging having Capital Markets Day or similar events to lay out the strategy in that sort of for... Luke Miels: Thanks, Simon. I'll come to Nina in a second. I mean I think, as I said earlier, and thanks for your questions. Look, what you'll get from us is a very clear communication. If it's on track, you'll hear about it. If it's not, we'll call it out. And I really want to use these forums to regular update on our progress and where we're going to. So I think these are a very effective forum to do it, and we'll see how that evolves over time. Nina, I mean, again, as I said in my intro, I mean, Nina and I have worked together a long time. She has huge experience in oncology and is now responsible for the whole portfolio in partnership with Tony. And also, we've had a number of other members join the team that have been in their roles during this commercial transformation. And there's a lot of history with those individuals at Aventus and Roche and AstraZeneca. So they are people that many of you will know, and they've got a very strong record. And the aim of bringing them into the team again is just to rebalance and increase the focus on the portfolio, the pipeline and product execution. So with that intro, Nina, over to you on BLENREP in terms of launch uptake and initial feedback. Nina Mojas: Yes. Thank you. Just checking, you can hear me. Yes. Great. Yes, Simon. So you remember, BLENREP was launched in the U.S. just at the end of November. So there are not many -- we can't really share a significant update based on the sales numbers. But what we do know, we launched in the U.K. middle of the year. And the dynamic is opening the accounts is systematic. It's happening, but it is definitely slower because of the coordination of care with Eye Care professionals. By now, we have about 70% of patients covered in the accounts that are open in the U.K. And based on the uptake there, we are actually extremely satisfied. Two things. There is huge interest to try Blenrep. And then we know that we have done good homework in guiding physicians how to use the drug. Physicians are very much aware of the need of extended dosing intervals to reduce or to avoid eye-related side effects. Now translating that to the U.S., we expect similar dynamic. So the timing of opening the accounts is going to take a bit of time, longer probably than what you would see with an asset that doesn't need that coordination of care. But what we did learn from the first launch, as an example, I think I mentioned we are actively educating 18,000 eye care professionals. As an illustration, comparing to the first launch of BLENREP we had only about 5,000 to 6,000 eye care professionals engaged in our program, helping teachers to treat the patients. REMS has been a big factor. I think you know that. It has been received very positively. Currently, REMS is not an issue. Physicians are very much used to REMS programs and BLENREP is very similar. Eye care professionals scale, as we said, we are going to reach a significantly higher number. And then communicating to the physicians how to use the drug that extended dosing is very relevant to enable early positive experience. And I would say that's what we see so far. To your question, what can we expect? -- what we said before, it is not going to be a quick ramp-up. It's going to be a slow ramp-up, but the positive initial experience is more relevant than starting a high number of patients very early and then having a negative experience. Luke Miels: Thanks, Nina. And I would just add one other interesting data point is if we look at usage right now for BLENREP, it's about 50-50 between academic and community, which our strategy is to focus on the community. And with the product that is being relaunched and not a lot of experience in the community, I think this is an encouraging trajectory because at this point, you'd expect volume to be dominated by the academic centers who tend to move on newer things earlier. But we can see, to Nina's point, the strategy of focusing on the community, building confidence, supporting them to dose the first 5 patients appears to be showing promise. And we will give you a lot more granularity at the Q1 update, including on Exdensur. Operator: Next question comes from Michael Leuchten from Jefferies. Michael Leuchten: Two, please. On for Luke. It's been reported that there is a reduction in R&D staff, I think about 350 people in the U.S. and also in the U.K. Just wondering, is that part of a broader program, normal attrition? Just wonder if you could put that into context. And then back to Nina on Exdensur. -- there's a few ways one could launch a product like this, especially early on to go into treatment experienced patients where, I guess, it'd be easier to make an argument to get patients on drug more quickly or into a naive population to broaden up the market. Can you talk about a little bit of the launch curve for 2026? So how should we think about this as the year progresses? Luke Miels: Thanks, Michael. So I'll cover the first one. I mean we're going to manage the business -- and where we say success, we'll reinforce it. If we have programs that are less promising or Tony and Nina in managing the portfolio decide to cull something, then we're going to be very dynamic and shift resources behind to where we can get the best return, generate assets that are most compelling. And ultimately, in doing this, we will have happy shareholders at the end of the process. So this is very much this element of accelerating R&D and simplifying how we work. And you'll see more of that. What we can assure you is that we will run the business with great discipline. And where we can see an opportunity, we will rapidly move resources, people, headcount, capital to support that. Nina? Nina Mojas: Yes. I can take that. Thank you, Michael. Just as a reminder, Michael, and I think this information basically guides the strategy. we have about mid-20s biopenetration in severe asthma. So about 25% of eligible patients now receive biologics any. And of those who start on biologics, 65% will discontinue in the first 12 months. And that tells you if we would go for switch, active switch, that business wouldn't last very long because patients are dropping anyway. And I think we need to look at it in that context. Our main objective, I think Luke mentioned that when we talk about our sales force is going for bio-naive patients. It's very legitimate to expect there will be some switching, and there will be switching very likely from Nucala, hopefully also from other agents in severe asthma as well. What is more relevant is can Exdensur gain share from patients who would have otherwise started on other agents. And 6 monthly dosing, I think you have seen everything that we have seen from both physicians and patients is that there is a huge level of enthusiasm for long-acting 6 monthly dosing, and that will hopefully translate into preferential use of Exdensur over other agents to initiate patients, but then also to start patients who otherwise wouldn't start on biologic yet. Luke Miels: Great. Thanks, Nina. And I think the positioning is the first and only biologic that delivers ultra-long protection in 2 doses that's landing extremely well when we look at market research and perception. Thanks, Michael. Operator: Next question comes from Sachin Jain from Bank of America. Sachin Jain: Perfect. A couple of questions, please. Just firstly for Nina and congrats on the new role. Perhaps a bit more detail on Blenrep. How many physicians have you had through the REMS certification process? And any cadence of how you think that will go through the year as a rate limiting factor? Second one for Deborah on the HIV event midyear. Clearly, we're looking to Q6M start. But I wonder if you will be disclosing how you think about the financials of that business through the LOE. And I guess 2 questions. One, how do you think about the rate of decline of this business relative to where consensus sits? And I guess Q6M isn't in the midterm guide. So do you plan on including it at that point if you start the Phase III? And then a quick one for you, Luke, just on your Slide 5 and high-level objectives. You've mentioned 2 things. One, simplification, do you intend to have any official cost savings program? And then secondly, R&D acceleration, are there any specific programs that you can target for earlier readouts or filing? Luke Miels: Thanks, Sachin. So I'll answer your last question, then we'll go to Deborah and then finish with Nina. I mean we are always looking to save money because I think it's always an opportunity cost, right? So if we can move resources behind particular assets where we think there is a higher payoff and return and they have the clinical profile to justify it, then we will do that. And we will continue that in a dynamic and disciplined fashion. Areas for acceleration, again, I think naturally, the scale of B7-H3 RR is quite interesting. I think 584,7H4 -- it is a very competitive and dynamic area. But I think we're starting to see some color around the tox profile that could give us an edge. FGF21, we looked at all 3 of those companies. We think we have bought the best. Again, you'd expect me to say that, but I think we can back that up in time with the profile of the frequency of the dosing and some of the profile of the product that will emerge in time. So they're probably the key ones, TCliP as well, long-acting TLP. Again, the target is being actively derisked by AstraZeneca. And I think that we have a plan to move that asset forward and rapidly because it is a very attractive area. We think long-acting can really reframe to Nina's earlier point about how respiratory diseases are treated. Deborah, over to you on HIV. Deborah Waterhouse: Okay. Thank you, Sachin, for the question. So -- if we think about Q6M first, so we are intending to set out our HIV story in the middle of the year. And at that point, once we've done a regimen selection and we then commence with Phase II, we will put that into our long-range forecast, which is how we always operate when products get to that Phase II phase. So you'll see that happen midyear. You then asked about the evolution of the kind of the portfolio over time. So let me just give you a top line view, and we will come back and talk more about this when we set out the HIV evolution in the middle of the year. So we've seen a relatively rapid decline of Triumeq as the guidelines have moved away from Triumeq. And what's happened is over the last 12 months, it's created dynamism in the market and Dovato has benefited significantly as has Cabenuva. So the amount that's sitting in Triumeq and Tpic, as you can see, is going down quite significantly in advance of the loss of exclusivity of dolutegravir, which is, to remind you, a glide path, not a cliff starting in April 28 in the U.S. and then July 2 in Europe with obviously Dovato and Juluca in the U.S. having intellectual property coverage now until end of '29 for Dovato and July 2030 for Juluca. So the glide path is coming down. We're already seeing a move away from the old dolutegravir regimens into our newer regimens, and that is going to continue. And then what's going to happen is we will continue to power forward with Cabenuva Q2M. It's doing incredibly well, growing fast. Apretude has not been dented by the launch of yes2Go. So that will also continue to grow '26 and beyond. And then what we will see is Q4M, both treatment and PrEP coming in and powering longer acting forward again until we reach the point at which we launch Q6M. And then we've got 2 brand-new molecules with intellectual property coverage, composition of matter patents through into the 2040s. And so you see a dip in '29 and '30 for the franchise as we face into the largest erosion through the exclusivity loss. And then we come back out into growth in 2031 and beyond. And that growth in that decade is going to be a significant contributor to GSK's success in the 2030s because we are incredibly confident in the value to patients that the Q6M will bring. So if that hopefully gives you a sort of a view as to how it's going to evolve, we will share more detail in the middle of the year. But I just want everybody to understand that HIV will be a big contributor to GSK's success this decade and into the future. Luke Miels: Right. Thanks, Deborah. Nina, quick answer and then we'll try to squeeze one more question ... Nina Mojas: Yes, definitely. Sachin, thank you, first of all, trying to avoid the situation where you will chase me next quarter for the same number, REMS hundreds -- hundreds. And obviously, that's just a start. Luke Miels: Yes. I mean we feel happy about where we're at. One more question and we have time for that. Operator: Next question comes from Steve Scala, TD Colin. Steve Scala: Two questions. First on Camlipixant. If GSK needs 2 positive trials to file, which is what the company has said previously, then what's the purpose of the pooled analysis? And/or has FDA confirmed it will accept filing based on pooled data even if one trial is negative? And secondly, on Shingrix, what were sales to GEFA in Q4? And what is your level of confidence in '26 on this drug? Luke Miels: Sure. Tony, do you want to cover? Tony Wood: Yes. Steve, I'm not going to get into details of regulatory strategy. But as you define, what it's giving us is the option to take the approach, both as independent and ultimately pooled studies. However it's worth saying that we remain confident in the outcomes for both KALM-1 & KALM-2... Luke Miels: Yes. And Steve, there was a shipment in December. We can give you that number offline. I don't have the top of my head. What I will say is that the underlying demand is improving in China. So it's up 6x since the start of 2025. Now it's a low base. And we've grown the market share versus gunway. So now we have 93% market share in that population, which is an operational improvement. And what is driving this? We've shifted the strategy to the one that we launched in Australia and also drove in Germany, and now we're employing in the U.S., which is also helping us get some traction there. Julie has told me it's $100 million we did at the end of last year. So there's still some stock in the pipe. But again, we'll give you more color on Q1, but it's heading in the right direction along with Shingrix in aggregate. So I think we'll stop there because I know a lot of you need to join another call, and I want to respect that. Thank you again for investing the time to construct such thoughtful questions and joining the call and your interest in the company, and we look forward to updating you further next quarter. Thank you.
Massimo Reynaudo: Hello, everyone. Welcome to UPM's Quarter 4 Results Webcast. I am Massimo Reynaudo, I'm the CEO of UPM. Here with me is Tapio Korpeinen, the CFO of UPM. The year 2025 has been characterized by escalating geopolitical and trade tensions with multiple impacts and also on our business environment. During the year and in response to the situation, we intensified our actions to both sharpen our competitiveness and to execute our portfolio strategy. This resulted in the fourth quarter in a visible improvement of our performance in most of our businesses. Compared to the previous quarter, our cash flow resulted very strong, too. Our quarter 4 EBIT was EUR 355 million compared to EUR 418 million 1 year ago or 1 year earlier. The quarter 4 EBIT margin was nearly unchanged at 15.3% versus 15.9% in the previous year. The operating cash flow in quarter 4, as I said, was strong at EUR 720 million. And our net debt decreased while we also paid out the second installment of the dividends. During 2025, we launched a significant strategic initiatives that continue to transform the company. In February, we acquired Metamark to accelerate the growth in Adhesive Materials. In May, we sharpened the focus in our Biofuel business and discontinued the Rotterdam biorefinery development. When it comes to biofuels, during the year, we made good progress with our turnaround plan and the business go back to profitability in the second part of the year. In September, we started the strategic review of our Plywood business. And in December, we announced the plan to establish a graphic paper joint venture that would encompass the UPM Communication Paper business and Sappi graphic and paper operations in Europe. While doing all of this, we took decisive actions to improve performance and competitiveness across all our businesses. Just as an example, in the fiber business, we mitigated the pulp and wood market challenges in Finland with production curtailments in the fall. And we entered into a long-term strategic partnership with Versowood that strengthened our position in the wood market. I'll tell you some more about this later. In the Adhesive Materials business, we restructured our production footprint globally and we reduced capacity in Europe and in the Communication Papers business. Measures were taken also in all other businesses and functions. Finally, we intensified our actions to improve the working capital efficiency, which resulted in the cash flow I talked about earlier. I will go now into some more detail for each of the business segments. Let's start with the Decarbonization Solutions. Here, the various end markets developed positively during the 2025. In Energy, the electricity demand in Finland grew by 3% during the year -- during the 2025. The growth was driven particularly by the electrification of [ heating ]. But in the coming years, this growth is expected to be complemented by growth in data centers currently under construction and by the green transition. Over the 5 coming years, we see the annual market growth rate to accelerate in a range between 4% and 7% in line with several other predictions on the same matter. We are in a strong position to capture the value this situation creates. In fact, there is a strong demand for 3 things. Sites with easy access to high voltage grid connections were to establish new operations. There is a demand for CO2-free energy -- electricity and there is demand for baseload power, and we have the 3 of them. In the meantime, we are well set to maximize the value creation in the current volatile and weather-dependent market. For example, in 2025, we achieved EUR 10 per megawatt hour higher sales prices compared to the average market prices. In quarter 4, the Energy business achieved a comparable EBIT of EUR 54 million, marking the best quarter in 2025. But if we move to biofuels, there as well, market prices for advanced renewable fuels increased during the second part of 2025. Our business improved its performance each quarter throughout the year and is back in profit. Going forward, the implementation of the RED III regulation, renewable energy directive regulation will support a positive market outlook. In Biochemicals, the business has now initiated the commercial phase with the first customer deliveries of industrial sugars taking place in quarter 4. We will continue to introduce further products to the market during the first half of this year, the next step being the renewable functional fillers. We reconfirm that the demand and interest for our biochemical products is robust. You may also have seen from the release this morning that we plan to start reporting UPM next-generation renewables, which consists of Biofuels and Biochemicals as a separate reporting segment starting from January 2027. With this, there will be the opportunity to have enhanced visibility into the performance as well as the potential of this high-growth segment. We turn the page and look now into the Advanced Materials. Well, here, the label materials market development in 2025 was relatively stable with growth rates remaining modest. To put it in numbers, in Europe, the demand grew by 2% compared to 2024. In North America, the growth was on a similar, which means about 2% level in the first 3 quarters of the year, but it slowed down and ended up with a minus 1% in quarter 4. In this context, 2025 has been quite a transformational year for our Adhesive Materials business. Here, we took significant actions to sharpen competitiveness and to secure the future growth. The business streamlined its organization and closed 3 production lines in Germany, France and in the U.S., relocating production to lower cost sites in Europe and in the U.S. This will improve its fixed and variable costs and competitiveness in general going forward. In parallel, it started focused growth investments in the U.S., in Malaysia, in Vietnam and in India to accelerate the growth in high potential or high-margin areas. Finally, it acquired Metamark in the U.K. and then work to integrate it with the previously acquired sites in the graphics space to build a platform for the development of this higher-margin segment. As a result of all of this, the business was able to grow clearly faster than the market, and it is in a good position entering 2026. However, the slow growth environment due to that, we were not able to simultaneously improve margins. Significant part of the profitability improvement actions and the benefits from the acquisitions is still to materialize and will be more visible in 2026. The Specialty Materials business delivered robust results in terms of profits and margin despite all the market turbulences. Gradually, the demand for label, release and packaging materials normalized in quarter 4. This, combined with our efficiency measures and declining variable costs resulted in a good quarter 4 EBIT improvement, up EUR 20 million year-on-year.The Specialty Materials business entered 2026 in a good position to supply a growing market demand and with low investment needs. Moving ahead to Fibers. Fibers experienced a volatile 2025, impacted by trade uncertainties, currency fluctuations and low prices. However, to put things in the right perspective, if we look at the whole year 2025 and despite the fluctuations, the pulp demand was robust. Global shipments continue to grow at a healthy rate at around 3%. Hardwood pulp shipments grew significantly more than that, whereas softwood pulp shipments decreased moderately. Fibers South, our platform in Uruguay continued to strengthen its position as a world-class low-cost business platform. Our cost during 2025 decreased by about USD 25 per ton, in line with our plans and what we communicated earlier. And the cost decrease is expected to continue still into this year and into the next year as optimizations continue. To give you some examples of these optimizations, our plantations are increasingly reaching harvesting maturity that improved wood sourcing costs. Besides that or linked to that, we will improve our inbound logistics costs further. On top of this all, we're working to identify debottlenecking opportunities both in Paso de los Toros and Fray Bentos. Or in general, during the second part of 2025, the hardwood pulp market prices in China increased gradually, but they are -- but significantly from the very low levels that they touched during quarter 2. The Fibers South performance in quarter 4 reached an EBIT of EUR 78 million or 21% of sales, an improvement versus quarter 3 despite the maintenance shut in Fray Bentos in quarter 4. On the other hand, when we talk about Fibers North or our platform in Finland, it continued to experience low softwood pulp prices and high wood cost. Its EBIT remained at EUR 11 million negative in quarter 4, albeit EBITDA positive. On the positive side, the pulpwood market prices in Finland have decreased significantly and roughly 30% from the peak and at the end of the year. But due to the length of the supply chain, the benefits of this cost reduction come typically and progressively with a delay, and therefore, they will be visible in 2026. Another relevant fact is here that we have entered a strategic partnership with Versowood, the largest private sawmill in Finland, and that will help to structurally improve our position in the Finnish wood market. Before we move ahead, I just want to recall your attention to the fact that the UPM Forest business will be included in the Fibers North business from January 2026 onward. We will then start to provide additional financial information on the 2 parts of the UPM Fibers reporting segment, meaning Fibers South and Fibers North starting from quarter 1, 2026. Now when it comes to Communication Papers and Plywood, both had a solid end of the year in terms of EBIT performance. The graphic paper markets were challenging in 2025, impacted by tariffs and the related uncertainty. The European graphic paper demand decreased by 8%, although the decrease moderated slightly in quarter 4 at 5%. The North American demand development was weaker and demand decline increased slightly in quarter 4. In markets that are oversupplied, we closed production at the Kaukas and Ettringen paper mills in quarter 4 reducing our capacity by 13% and our fixed cost by EUR 70 million annually. In quarter 4, we also sold the earlier closed Plattling paper mill in Germany. Communication Papers quarter 4 performance has been relatively strong with EBIT totaling EUR 110 million and boosted by the annual energy refunds. Once again, the business generated a very strong free cash flow that was up to EUR 362 million in 2025, despite the challenging market conditions I've just described. When it comes to Plywood, the dynamics were different in the different markets it serves. In the LNG shipping segment, demand continued to be strong. In the industrial end segments, it continued to improve. And in the Construction segment, it was stable, albeit on a relatively low level. In this environment, Plywood reported a robust quarter 4 EBIT of EUR 16 million or 15% of sales, which made quarter 4 the best quarter of the year. When talking about plywood, as you may remember, we announced the strategic review of the UPM Plywood business in September. We see plywood as a very good business with strong positions in the mid- to high-end market segments in Europe and globally in the LNG segment. The business has strong customer partnerships, operational and commercial excellence and a diversified portfolio of distinctive products. It has shown over time that it is able to provide good profitability and cash flow in different economic cycles. On the other hand, despite it has the scale of a midsized company in Finland, so relevant per se, absolutely relevant per se, it is the smallest of the UPM businesses. With this strategic review, we want to assess whether acting as a separate entity or as a part of a different entity, it could create even further value. The strategic review contemplates different possible future outcomes, including maintaining the status quo, a divestment, a partial demerger or an initial public offering. At this point in time, all options are in play and the review is expected to be concluded by the end of 2026. We closed 2025 with an announcement in December, an announcement about the fact we signed a letter of intent with Sappi that shall lead to the creation of a joint venture in the graphic paper market. As a reminder, we are planning an independent graphic paper company owned 50% for each of the 2 parts, UPM and Sappi, 50-50, which would include what is within the perimeter of the UPM Communication Papers business in Europe and in the U.S. and Sappi's graphic paper business in Europe. The transaction would create a more efficient, adaptable and sustainable graphic paper business. It will also create structurally competitive cost base and ensure supply security for the European and global customers. For UPM, the transaction would have a positive impact on profit margins, balance sheet and leverage. The numbers are here -- the key numbers are here represented in this slide. With the successful execution of this initiative, UPM would no longer have direct sales exposure to the declining European and North American graphic paper markets. The definitive agreement is expected to be signed during H1 during this first part of 2026, and the closing of the deal is expected to take place by the end of 2026. So by closing with this part, with this portfolio initiatives, the ones that I mentioned now about Plywood and Communication Papers, but also the other activities and investment, Decarbonization Solutions, Advanced Materials and then the Fiber business, we aim to change the profile of the company, increasing its focus on growth and improved margins and leverage. The future UPM would have an attractive portfolio made by Decarbonization Solutions, Advanced Materials and Renewable Fibers. In fact, all these businesses operate in growing markets and UPM has shown a strong track record of realized growth already above GDP in the past years in this perimeter. Focused innovation and investments targeted to combine sustainable renewable feedstock and CO2-free energy into high-margin products for customers all around the world will be the catalyst for an accelerated profitable growth ahead. But I'll pause here, and I'll hand it over to Tapio for some further analysis on our quarter 4 results. Tapio Korpeinen: All right. Thank you, Massimo. So here, you can see our EBIT and cash flow by the quarter for last year and '24. And from this, you can see that our fourth quarter EBIT increased significantly from the previous quarter, third quarter in '25, but decreased 15% from the last quarter of the previous year. And as Massimo already mentioned, the EBIT margin as such for the fourth quarter was at the same level as it was 1 year ago. Most of our businesses improved their performance from the previous quarter. As we have guided earlier, we booked the annual energy refunds in Communication Papers in the fourth quarter. And then also in the fourth quarter, we booked the increase in the fair value of our Forest in Finland, which was EUR 72 million. We had the same items benefiting the fourth quarter result in '24 as well. Only this year this year in the fourth quarter, they were slightly smaller. Operating cash flow was very strong in the fourth quarter, totaling EUR 720 million. This includes a working capital release of EUR 460 million for the quarter. Part of that release is seasonal by nature, which you can sort of see if you look at the previous years, but a large share is structural, thanks to our intensified efforts and measures that we have taken during the year to improve working capital efficiency permanently. Net debt then continued to decrease from the previous quarter. Net debt to EBITDA was 2.29x at the end of the year. And we will continue our efforts to increase cash flow and strengthen the balance sheet during this year. And here on the left-hand side, you can see our fourth quarter EBIT as it developed compared with the fourth quarter last year. Sales prices continue to be the biggest negative driver impacting particularly Fibers, but also Communication Papers and Specialty Materials. Variable costs decreased significantly year-on-year as well, but their positive impact was still smaller at the UPM level than the negative impact from lower sales prices. Perhaps worth mentioning is that for the yearly comparison in Finland, wood cost still was on the increase, so year-on-year, still increasing. Delivery volumes were slightly lower and fixed cost broadly stable in the fourth quarter. Changes in the exchange rates had a EUR 20 million negative impact on the fourth quarter EBIT as compared to last year's fourth quarter after hedging results. On the right-hand side, you can see the sequential comparison to the third quarter of '25. Sales prices decreased also in this comparison, but variable cost decreased then more. In this slide, this bar showing the lower variable cost includes also the benefit of energy refunds in the Communication Papers that were booked in the fourth quarter. However, if you exclude them, variable costs in other areas -- in other inputs decreased more than sales prices. Delivery volumes were broadly stable, while fixed costs were up seasonally. In this quarter, by the way, we had also the maintenance shutdown in Fray Bentos, which went according to plan and somewhat lower cost than what we had guided earlier, about EUR 22 million impact on the quarter. Then the other bar on the right-hand side, that includes the fair value increase of Forest assets, which was EUR 75 million higher in the comparison to the third quarter. This page summarizes UPM's currency exposures. As many of you know, most important currency in terms of our exposure is the U.S. dollar. We look at the impact on the 2025 result as compared to the previous year. Changes in currencies reduced UPM's comparable EBIT by about EUR 50 million after the impact of hedges. And here is the outlook for the first half of 2026. We expect our comparable EBIT in the first half of the year to be approximately in the range of EUR 325 million to EUR 525 million. In the first half of 2025, by comparison, our EBIT totaled EUR 413 million and the second half EBIT in '25 was EUR 508 million. In the first half of this year, '26 compared to the second half of '25, UPM's performance is expected to benefit from moderately higher sales prices and delivery volumes and moderately lower fixed costs. Performance is expected to be held back by continued weak Communication Papers markets and also by increased costs during the early phase of the production ramp-up at the UPM Leuna refinery. Currencies started the year at similar levels compared to the second half of 2025. In the second half of 2025, comparable EBIT benefited from the timing of energy refunds and increased fair value of Forest assets. So as I mentioned earlier, those were booked during the second half of last year, and these items are not expected to take place during the first half of 2026 in similar quantities. Then looking year-on-year in the first half '26 compared to first half '25, UPM's performance is expected to benefit from lower variable costs and moderately higher delivery volumes. Maintenance activity is expected to be lower than in the comparison period. Performance is expected to be held back by continued weak Communication Paper markets and also the increased costs during the production ramp-up of UPM Leuna biochemicals refinery. In the beginning of the year, currencies are negative in terms of their impact on comparable EBIT when comparing to the first half of 2025. Then the fourth quarter now was the second quarter that we were able to decrease net debt and that while we also paid out the second dividend installment during the fourth quarter -- second dividend installment for the 2024 dividend. And as I said, we aim to lower our leverage and bring the net debt to EBITDA back to below 2x in a timely manner. Our CapEx estimate for this year is EUR 300 million. the cycle of large investments in Paso de los Toros and Leuna is behind us and our maintenance investment needs are consistently below EUR 200 million per annum looking forward. And finally, the Board of Directors has today proposed an unchanged dividend of EUR 1.50 per share for the year 2025. The dividend represents 113% of UPM's comparable earnings per share for '25 and is equaling a dividend yield of about 6%. And now I'll hand it back over to Massimo for the summary and some final remarks. Massimo Reynaudo: Thank you, Tapio, and this is just going to be a brief recap of the main aspects we have seen so far. So we ended a complex year 2025 with improving performance in most businesses, strong cash flow and decreasing net debt. 2025 has been a transformational year. Across all our businesses, we launched a number of important initiatives aimed to ensure competitiveness and continued performance in the short term, while preparing to change the company profile for continued success in the long run. The future UPM will have a portfolio of innovative and sustainable materials and solutions. It will be focused on growth, improved margins, robust balance sheet and disciplined capital allocation. All of this as a base to support solid returns. Our Board is confident on the UPM's ability to create value and has proposed an unchanged dividend of EUR 1.5 per share for the year 2025. And this ends the prepared part of our presentation. And I think with Tapio, we are ready to take your questions. Operator: [Operator Instructions] The next question comes from Linus Larsson from SEB. Linus Larsson: I'd like to start off, if I may, with Fibres South. You did give some comment, but if you could provide some additional comment on your EBITDA performance as it is right now and where we are in terms of cost per tonne. You said there is still some improvement ahead in 2026 and 2027, but how much, please? Massimo Reynaudo: Yes. When it comes to the, let's say, the cost improvement potential, we have indicated earlier on, I believe it was in October, we estimate that potential across the next couple of years in the scale of EUR 15 per tonne. And that's -- yes, that's about that metric. Then when it comes to the EBITDA performance in quarter 4, I'll leave to Tapio to provide some more color. Tapio Korpeinen: Well, let's say, we give the EBIT at this point, as said, we will give some further lines on the performance then when we start reporting during this year. But I would sort of remind you of the fact that we had the maintenance shutdown in Fray Bentos during the quarter. So that had that sort of EUR 22 million impact. And even with that, we had an EBIT of EUR 78 million or 21% of sales. So if you look at the EBITDA margin, which we will get some more transparency on then later on, that obviously is at a healthy level as it is. And as I said, then we will work on the cost side more. Linus Larsson: Sure. And the cost improvement that you're seeing, is that a linear, gradual improvement over a 2-year period? Or is it more of a step change on an earlier time horizon? Massimo Reynaudo: Well, as I've commented earlier on, this comes from improvement, for example, in maturity of the plantation, wood supply, wood cost, logistic improvement. So we are talking more of a gradual and progressive improvement, no big step change. Those have been realized, implemented and materialized already in 2025 or before. Linus Larsson: Great. And then if I may shoot a second question, please, regarding energy in these volatile markets, if you could please update us on your hedging. How much of your volume in your Energy division is hedged in the first quarter and for the full year 2026, please? Massimo Reynaudo: Well, look, I will leverage the fact that Tapio leads also the Energy business and he is the most knowledgeable person in this room to talk about energy and transfer the question to him. Tapio Korpeinen: Yes. So well, like we have said before, we don't sort of disclose the hedging rate directly or percentage to our business. But maybe what I'll sort of rather point out to you is that if you look at our result, which is in Massimo's notes already that he told you, we achieved EUR 10 better average sales price during last year for the full year than what the average spot was. So that is coming from 2 sources. One, us being able to create value on the output that we can regulate primarily then, meaning hydro and then also from the hedging results. So we have been able to sort of create value on both ends. And let's say, coming into this year, we are looking to sort of perform in a similar manner. The sort of volatility in the market continues and the year has started with a real winter, which obviously you can see in the spot prices at the moment and in the fact that the hydro balance is dropping quite quickly now in the Nordic area. So in that sense, weather, obviously difficult to forecast any longer term, but the year has started in that manner. Linus Larsson: Right. But are you then suggesting that the premium that you just mentioned, is that what you expect to achieve in the first quarter as well? Tapio Korpeinen: That we will see. Operator: The next question comes from Charlie Muir-Sands from BNP Paribas. Charlie Muir-Sands: Just in terms of the evolution into the first half of 2026, I know you qualitatively called out a number of the moving parts. But just in terms of the -- a few of the discrete components, am I correct to read that your energy rebate was around EUR 100 million in the fourth quarter? Can you give us any indication on what losses you would expect from Leuna? Should we expect those to be even greater than they were in the second half of '25? And any kind of indication on the path to profitability of that operation? And I think you talked about fixed cost savings of about EUR 70 million from some of your communication paper closures. I just wanted to confirm, should we be thinking about that as a run rate immediately for Q1 versus Q4? Tapio Korpeinen: Yes, if I'll take that. So in round figures, it was -- the rebate impact was similar to last year. And well, this EUR 100 million that you mentioned is in the sort of right ballpark. Then in terms of the impact of the Leuna refinery, if we now had EUR 49 million negative EBIT in the second half of last year, we still -- as the production is ramping up, kind of in advance of significant sales will have additional costs, so a headwind from the sort of operating cost side, plus then we will have also depreciation kicking in now during the first half of the year. So in that sense, there will be a kind of larger negative impact still during the first half compared to the second half of last year. I would say, for the whole year, this kind of additional headwind will be, let's say, in the scale of some ten millions -- tens of millions. And then maybe on the fixed cost comment, yes, we -- as announced then towards the end of the year, production stopped both at -- or had stopped both at Ettringen mill and Kaukas. So this EUR 70 million fixed cost as a run rate will then benefit us during the first half of the year in the Communication Papers. Charlie Muir-Sands: If I could just ask a follow-up on Communication Papers. Regarding the joint venture, can you give us an update on the status with the major antitrust authorities? Have you filed with them yet? Have you received any feedback from them yet at all? Massimo Reynaudo: Yes. All what we can say at this point in time is that we have engaged with them in a dialogue, in a constructive dialogue and work is ongoing on building the necessary, let's say, information and so on, but there is not more than this to share at this point in time. Operator: The next question comes from Robin Santavirta from DNB Carnegie. Robin Santavirta: First question I have is related to the H1 EBIT guidance you provide. Now we started the year with higher hardwood pulp prices compared to last year. And I guess you expect somewhat higher volumes in H1 and also lower input costs, plus we have quite significantly less mill maintenance cost in H1 this year versus last year. Still the midpoint of the guidance range is close to last year's outcome. What are the key negatives we should expect in H1? Tapio Korpeinen: Well, if I comment, of course, one thing you have to remember that last year, we started with the U.S. exchange rate of 1.04. And obviously, that sort of exchange rate impact is mostly felt by -- in the Fibres business. So that obviously is a headwind in that sort of year-on-year comparison. Then we have, as pointed out in the forecast or in the outlook commentary Communication Papers where, let's say, despite our measures to cut and save on fixed cost, then reality is that we have a sort of a declining paper market to work in. We had also -- even if we have said earlier that the direct impact of tariffs has been still small in the sort of low tens of millions of euros for the full year last year. That, in a sense, impact we did not have in the beginning of the year last year. And then perhaps also as a significant sort of point that we just discussed a minute ago that we have the additional headwind even if we do see improvement on the biofuel side, we have additional headwind in the biochemicals. So those are the factors that are then included in the range that we have given. Robin Santavirta: That is very clear. Second and last question I have is related to the wood cost in Finland. We have seen quite significant declines. I can also see from data that the Finnish forest industry's procurement of wood raw material has been very low since last summer, many months, almost 50% lower procurement of wood compared to historical averages. How should we now look when we go into the high season of wood procurement in spring? Is the expectation now that pulpwood and even log prices could start to come up towards or to higher levels in the spring and early summer? Or how do you sort of -- what do you bake in, in your assumptions related to Finnish wood cost? And also added to that, the Finnish pulp mills, your former Chairman expects a big pulp mill to close in Finland. You now generate EBIT losses, not EBITDA losses, but still EBIT losses. Are you looking at sort of even terminal closures of any of your pulp mills in Finland? Massimo Reynaudo: Yes. Let me pick the second question. I'll leave the first one to Tapio. But well, when you assess the profitability of an asset, you don't do it on a base of a quarter. You do it on a long-term perspective. And if we look for a longer-term perspective, and our assets have been profit positive. Our assets in Finland have been profit positive. And they are well maintained. They are of a scale to grant sufficient competitiveness. And we are continuing to work to enhance that competitiveness, the deal with Versowood, what we are operating to in terms of internal improvement and so on. Last but not least, your first question was about declining wood cost. So first, a decision about closing an asset is not something you speculate about or you forecast for. And second, this is not part of our current considerations. Tapio Korpeinen: Maybe if I comment on the, let's say, questions that you had on cost and harvest and so on. So obviously, why the harvest levels have been low in Finland is that like we have said already, a while ago, a good while ago that the wood prices in Finland have been on unsustainable levels. So that's why wood has not been purchased. That's why also we have seen some moderation on the wood market prices in Finland. Having said that, good to remember that the wood prices more or less doubled in Finland. So if they have come down by 30%, it doesn't mean that they are low. And I would expect that, that will also, in a sense, be something that kind of will calibrate any sort of kind of market dynamics then going forward as well. Operator: The next question comes from Ioannis Masvoulas from Morgan Stanley. Ioannis Masvoulas: Just 2 questions from my side. The first, when we look at the EBIT bridge '24 to '25, what sort of fibre cost increase have you seen in your business? Because you talked about pulpwood prices doubling, but you didn't necessarily bought at the peak. So some clarity on that would be very useful. And then the second point, I think in October, you were talking about a $25 to $30 per tonne improvement in Fibres South. Today, I think you're talking about a EUR 15 per tonne improvement. Could you just reconcile the 2 figures? And what shall we be baking in on a 2-year view? Massimo Reynaudo: Yes. Well, let's put the currency apart. If I mentioned euros, that was, let's say, a mistake. We always talk dollars over there. And then, yes, let me correct it. I think we talked at the time I'm checking in $25 to $30 in 2 years. So I restated that, not $15, but $25 to $30 in 2 years, dollars. And then there was the other question about... Tapio Korpeinen: So wood cost. So basically, again, point being that when it comes to Finland and wood cost during last year, as we do have a delay of, let's say, at least 6 months from when we buy wood to when we actually consume it at our mills, then we did still see during the last year '25, as said, even in the fourth quarter, a negative impact from wood cost compared to the previous year. Then any kind of benefit from the fact that from summer on, we have seen a movement downwards in the wood market price in Finland, that benefit then will start coming into the bottom line only during this year. And I would say, let's say, more meaningfully from the second quarter on. Ioannis Masvoulas: Okay. That's very helpful. But if I were to push you a bit, could you perhaps provide a quantum of cost tailwind you've seen realized through your P&L in 2025? Tapio Korpeinen: No, we don't disclose that. Operator: The next question comes from Andres Castanos from Berenberg. Andres Castanos-Mollor: Two questions on the Versowood deal, please. Can you please describe the efficiencies that you will unlock by partnering with Versowood? Meaning why and how partnering with them will make the cost of the pulpwood you need cheaper versus spot prices? And I guess also the complement to this question is, how much of your wood needs in the Northern platform are now covered either by the Versowood agreement and by the forest that you own in Finland? Massimo Reynaudo: Okay. Let me cover the question about the deal and the logic behind the deal. Basically, Versowood being, as I said, the biggest sawmill in Finland and was in, let's say, -- had an interest for locks to feed is capacity and for a sawmill that is what we could put in this deal and what we did put in this deal. On the other hand, what we are getting through this deal is availability of pulpwood and chips, which is what is important for us, for our pulp production. So this is the, call it, industrial logic behind the deal. I do not have at hand numbers to share when it comes to, let's say, percentages of wood needs covered either way. Let me see, Tapio, do you have anything? Tapio Korpeinen: Well, let's say one can say in terms of our own forest, obviously, that varies in a sense a little bit depending on the market situation, but round figures, one can say that from our forest we can get -- which is about 0.5 million hectares in Finland, we can get around 10% of what we need. So still majority has to come from -- vast majority from sort of outside sources and don't have a number to disclose in a sense how much this Versowood deal will impact that, but obviously, will be a sort of meaningful increase in our sort of secured wood supply from the synergies that this partnership will give us. Andres Castanos-Mollor: Okay. Another question, please, if I may, would be on the biodiesel market, good improvement this quarter. And I was wondering if this outcome was sustainable or we are seeing one-off effects because of maybe from buying ahead of the implementation of the new RED III regulations. Do you think this performance is sustainable going forward? And yes, what dynamics are you seeing there in the biodiesel market? Massimo Reynaudo: Yes. I would say that to answer your question, we need to do -- to go behind what is -- sorry to go and talk about what's behind this performance or this performance improvement. So some elements are linked to, I would say, improved market dynamics and improved prices on the market. But there is also a part which is meaningful that is down to own actions in terms of improved operational efficiency and output out of the Lappeenranta refinery and improved sourcing of crude tall oil and improved cost of crude tall oil, which is the feedstock that we are utilizing for this business. So if we look -- so the market considerations, we leave it to everybody because we can guess about that the same that everybody else can guess, if not acknowledging the improvement that has been visible in the last couple of quarters. But then when it comes to our actions, they are there and they will be continuing to yield results. Now also if we -- in this area, I want to take the opportunity of this question to broader the angle a bit beyond one or a couple of quarters. And because there have been some significant changes in this space with the issuing of the so-called RED, Renewable Energy Directive #3 in Europe. And on the base of that directive, if and when implemented and implementation is going to be driven by the different countries, that is going to be increasing according to a number of sources, the demand for biofuels and sustainable aviation fuels from 6 million to 20 million tonnes in Europe by 2030. So it is a significant step up. And this is going to be coming from elements like increased minimum targets, minimum greenhouse gas reduction targets in transportation. A minimum target needs to be achieved of 14.5% for all transformation modes. Then when it comes to aviation, there is a target to increase the use of sustainable aviation fuel from 2% in 2025 to 6% in 2030. Besides that, by 2030 as well, let's say, first-generation biofuels made, for example, out of palm oil or palm oil waste will have to be phased out. And Germany, for example, talking about implementation of the directive in the different countries, Germany has made the decision to phase it out latest by 2027. So basically, and without going into further detail, there are the implementation of this directive is going to be changing and changing in a very positive way the general market situation in this space. Okay. With this, I'm mindful of time and that we have used the time that was available. So thank you all for your participation and for the questions that we are being able to answer. Thank you very much. Have a nice day. Bye. Bye-bye.
Operator: [Interpreted] Thank you very much for attending the Renesas Electronics Quarter and Full Year 2025 Earnings Call. Today, we offer you simultaneous interpretation service. Please utilize interpretation icon and choose the language of your preference speakers. Speakers, please turn your video on. For today's presentation, we have presented Executive President and CEO, Hidetoshi Shibata; executive officer CFO, Shuhei Shinkai; and other staffs are present. After Shibata has given his words, Shinkai will explain about fourth quarter and full year earnings. And then we'll go into a Q&A session. We're planning for 60 minutes for this earnings call. The presentation material that we're using today is available on our website on the IR site. Mr. Shibata, the floor is yours. Hidetoshi Shibata: Good morning. This is Shibata speaking. So the fourth quarter, I think it was better than our expectations. The end demand, not large, but it has grown. And AI is strong. I think that goes without saying. And on top of that, the industrial applications, it has been slightly moderate than expected, but we have seen a good, strong, robust growth. So towards the first quarter of next fiscal year, and I would like to give you an outlook about that. So our revenue outlook, it is shown in the presentation. But beyond that, the end demand outlook, so Automotive, IIoT, we are expecting a moderate growth, specifically for IIoT. And of course, AI is going to be very strong. And for the Industrial we are expecting solid growth first quarter consumer applications due to seasonality will go down. But IIoT, overall, will be -- saw a moderate and solid growth. And as a result, for the whole company, this is a repetition, but although moderate, we think we'll be able to show some solid growth. For this fiscal year for the full year, we haven't shown you guidance in terms of the numbers because we have not been able to decide the details. But mid to the previous presentation, I think we have started to see a better momentum. For Automotive, basically sometimes it goes up, sometimes it goes down. But Industrial, we think we were able to expect a solid growth. So the AI, data center, those areas, I think we'll be able to see robust growth. And for AI infrastructure, for this year, I think I see for the sites other companies, we are expecting a very good growth year-on-year basis. So we have transferred the timing business. So towards the Capital Day that we're going to hold in June, we want to update our AI business. But roughly speaking, maybe double and grew by double. I think that is our outlook. In terms of IIoT, a very moderate growth is what we are expecting, specifically towards the second half, the DRAM shortage may have an impact on the business. So that is the reason why we are a little subdued in our outlook. So compared to the previous earnings call, I think we have a more positive view. So then let me pull up a slide and talk about the transfer of the timing business. So this is a brief summary. And after that, I will hand it over to Shinkai for more detailed numbers. So broadly speaking, the timing business. So mainly, this is a clock business, we have decided to transfer this business. So half and half cash in common stock is in total, $3 billion transaction value. So from our point of view, our timing clock business, we think we can grow this business. But for the technological trend, it is high potential MEMS timing. So if that is the case, SiTime is a better owner. And it is better for us to integrate this business and seek for growth. It's not the case that we just sell it and then that's it. We will acquire some stock from SiTime's. And from my point of view, we would like to enjoy some of the fruit that will be coming from the growth of the MEMS timing. So there's a reason of the partnership. The timing business transfer that we're going is the size of the scales on the top right. So before -- so this is for FY 2024 because we have not closed the books yet. For 2025, the full year revenue won't change that much from this level. So $207 million to [ $208 million ] business is what we are going to talking about. So I think for SiTime, this is a very complementary business. So we focus on clock SiTime as basically focusing oscillators. So if you combine both, this will be a kind of end-to-end technological coverage. So we do not assume any roadblocks, but of course, we have to clear some regulation hurdles. So by the end of this year at the latest, we think we'll be able to close this deal. So in terms of the use of this cash, so whether we go to hold all this cash? Or is we going to sell at early timing? We are still considering. But in any case, this is growth for investment or for the shareholder return, we will look at both ways to allocate the cash. So that has been the summary about the just for the timing business. Then I will hand it over to Shinkai and talk about the details of our numbers and then go to Q&A afterwards. Shinkai-san, please. Shuhei Shinkai: So this is Shinkai. I would like to talk about our fourth quarter, full year results based on presentation. For the fourth quarter, please look at the left-hand side, from the left to the middle. So the revenue is JPY 350.9 billion. Gross profit margin, 59.3%; operating profit, JPY [ 108 ] billion; operating margin, 30.8%; EBITDA, JPY 127.8 billion; net profit, JPY 90 billion. The ForEx, JPY 152 to the dollar; EUR 1, JPY 176. So compared -- and for the full year, please look at the blue column on the right, blue one. So the revenue, JPY 1,318.5 billion; gross profit ratio of 57.6%; operating profit, JPY 386.9 billion; operating margin, 29.3%; EBITDA, JPY 464.1 billion; net profit JPY 329.3 billion; ForEx assumptions, JPY 150 to the dollar, JPY 167 to the euro. So for the full year outlook, I would like to give you some brief comments. So this is on the year-over-year comparison is shown. In terms of the revenue, it's 2.2% of decline. So Automotive due to minus, and Industrial IIoT is minus -- plus. So net-net, it was a minus. In terms of the gross margin year-over-year, 1.6% of improvement. This is due to the manufacturing cost reduction based mainly on the fixed cost. And last year -- from last year, from FY '25, we have been changing the depreciation period. So this is not a one-off. This will contribute to us going forward. In terms of the operating profit margin, so 0.2% worsening because of cost reduction, we have been able to reduce costs, but basically, this was offset with the demerits. So the sales volume decreased, and there has been a backlash coming from a one-off in the '24. So net 2.2% worsening. So let's go to the next slide. So the fourth -- going back to the fourth quarter, so let's look at the column on the right, revenue 3.2% plus. So half is through the weaker yen, half is through the actual demand -- due to demand, Automotive, Industrial, IIoT, this has been our expectations. And in terms of the gross margin, plus 2.3% improvement. So this is due to the mix improvement and the reduction of the manufacturing expenses. In terms of the mix, we were anticipating that this will worsen, but it has not been bad as such. So the high gross margin products, for instance, memory, timing, et cetera, has increased and that led to improvement of the gross margin. In terms of the manufacturing cost, so there are some a lot of one-offs. For instance, the project -- manufacturing-related projects cost has been less than expected due to this. The gross margin improvement -- this has [ made ] contribution to the improvement of the gross margin. But the operating margin is plus 3.3% improvement against the target. So the volume growth, the gross margin improvement, there is some contribution for the operating cost. Expenses has been in line. In terms of the expenses, it was basically in line with our expectations. So the quarter-on-quarter comparison, please look at this chart. In terms of the revenue plus positive, gross margin plus 1.7 percentage points. On a quarter-on-quarter basis, manufacturing cost has gone down. The utilization has improved. In terms of the operating expenses, minus. So the OpEx has increased, is the main reason. And this is due to the seasonality because it's more concentrated at the year-end. For each segment, it is on the right-hand side for Automotive and Industrial, Infrastructure and IIoT, there's nothing that's notable this time around. But when you look at OP margins for Industrial, Infrastructure and IIoT; it has deteriorated Q-o-Q by 3.4 points. This is due to development items and loss recognition that happened in the fourth quarter. Also, regarding segment performance for this fiscal year from fiscal '26, non-GAAP segment performance definition is scheduled to change. Up until 2025, as shown here, out of total company non-GAAP adjustments items, if they are inherent to the segment, we were adding it back; or if it's a loss, we were deducting it by segment. However, from this fiscal year, in principle, we will be adjusting it together with company-wide non-GAAP performance. So that is the way we intend to report going forward. Please turn the page. So this page is about revenue. We changed the format a little. For Industrial, Infrastructure and IIoT, we made it more visible. And on the right-hand side, for revenue, this is year-on-year and Q-on-Q numbers that are shown. Inclusive of FX as well as in parenthesis, it's excluding FX impact. We have added that because FX is fluctuating quite a lot. So we wanted to make things more visible and easier to understand. Please turn the page. This page is about inventory. First, on the left-hand side, for in-house inventory. For Q4, Q-on-Q, inventory amount and DOI both increased in line with expectations, and it was at 117 days of DOI as of end of Q4. For Q1, we are expecting an increase in amount Q-on-Q due to demand recovery, we will be expanding the Diebank in anticipation. And also in Q2, the IT system or the ERP system integration is scheduled to happen. Therefore, at the time of integration, we will need to build up towards this phase. And due to this impact in Q1, we expect a little higher work-in-progress inventory. And under the third bullet, as shown for the DOI target, it used to be 120 days. We have updated it and are thinking about raising it to 150 days. It's because demand is increasing, especially around AI and data centers and also supply chain risk-wise, we believe that we need to have some more buffer stock for finished products and Diebank on top of that to secure raw materials that may be subject to risk. In consideration of these factors, we have decided to raise DOI targets from 120 to 150 days in managing our in-house inventory. Looking at the right-hand side, it's channel inventory. For Q4, Q-on-Q, channel inventory declined. Overall, it was 7.5 weeks of inventory WOI. For Automotive, we were planning to do shipments in line with sell-through. But sell-through went higher than expectation, so channel inventory went down. For Industrial, Infrastructure, IIoT; inventory went up slightly, but this was due to power for data centers and AI where demand is strong. So we were shipping as soon as it was completed. And therefore, sell-through was a little bit higher than expected. And for Q1, Q-on-Q, we are planning to expand sales channel inventory. Orders have been brisk. And up until the end of Q4, WOI was trending at low levels. So for sales channel inventory, we would like to strive to have higher levels of inventory. That is why we intend to expand inventory levels. Turning the page. We talk about utilization rates on the left-hand side. First of all, for Q4 compared to our forecast, it was a little bit higher, at close to 50%, 5-0. And also for Q1, we are expecting a slight increase in trend at around 50%-plus utilization. Regarding capital expenditures on the right-hand side, Q4, there is no items that were notable. But for Q1 towards capacity expansion, we are planning to make investments, which we will share with you on a later date. Please turn the page. So this is our forecast for Q1 '26. Please look at the shaded area in the middle. For revenue and the midpoint forecast, it's JPY 375 billion; gross margin, 58.5%; operating profit margin, 32%; and FX, JPY 154 against the dollar and against JPY 182 against the euro. For revenue, Q-on-Q, we're expecting growth of 6.9%, as you can see on the right column. FX-wise inclusive, we're expecting revenue growth of 1.9%; and excluding FX impact, 4.9% growth. And we're expecting gross margins to go down by 0.8 points to 58.5%. The weak yen is a tailwind. But due to mix, we're expecting a reactionary fall Q-on-Q. And due to the price increases, we are expecting a minus 8 point decline. For operating margin, we are expecting 1.2 points higher operating margins Q-on-Q to 32% due to volume growth due to revenue growth. That is the main factor. And for OpEx, Overall, we are expecting flattish trends Q-on-Q expenditure-wise. For FX sensitivity, you could see the sensitivity analysis at the bottom. Based off the sensitivity, the forecast for Q1 and OP margins of 32%, we -- at JPY 100 against the dollar and JPY 120 against the euro, OP margins will be 25.7%. So I would like to also pick up some slides from the appendix as well. Please turn to Page 18. These are the GAAP numbers. On a full-year basis, the second from the right, please refer to this column. On a GAAP basis for net income, JPY 51.8 billion of losses were generated. This is related to Wolfspeed. And impairment losses were JPY 237.6 billion. That has led to the loss. So this is the big difference between GAAP as well as non-GAAP. And please also turn to the next page. These are highlights from the fiscal year under review. we will continue to pay dividends worth JPY 28 a share. And for Wolfspeed transactions, CFIUS approval came through. So common stock and convertible notes, the rights have -- will be acquired. Looking at the next page, this is a continuous update on Altium. Left-hand side shows ARR steadily increasing. And for the KPIs concept, we continue to work on it. For comprehensive updates, we will do it in June when we have Capital Market Day. That concludes my explanation. Thank you for your kind attention. Operator: Let's go to Q&A. [Operator Instructions] UBS Securities, Yasui-san, please. Kenji Yasui: So I have two questions. The first question is that the comment Shibata-san made at the beginning, the AI, said that it may double for this year. Basically, it will be interface, PMIC that will be the major applications. Can you explain in more detail? What is your outlook for [ 2026 ]? I think that will be also pipeline, PMIC, GPU plus custom is going to -- ASIC is going to grow. So what are the types of things that will drive the growth in these applications? The second question, this is not related to the earnings, but in Japan, there is a lot of realignment or integration with the domestic power semiconductors. Mitsubishi Electric's President has said that maybe they would like to consider that for the -- for this fiscal year. So maybe for the silicon carbide again, maybe for the data center demand, maybe it will improve again. So are you going to be engaged in this type of realignment in the industry for the domestic business. Hidetoshi Shibata: For the AI-related business, as I said in the beginning, well, our definition, so we are going to transfer the timing business, and we are considering how to update the business. So in June, what we are going to present is based on updated information. But as of today, basically, we'll be talking based on the existing definition. In terms of the digital power, this will drive the growth in terms of the absolute amount, in terms of the growth rate, I think this will be the driver. Last year, so GPU has grown strongly. For this year, ASIC, I think application for ASIC is going to grow a lot. So going to the first quarter numbers, I think that's what I'm anticipating for the hyperscalers. ASICs for hyperscalers by phases, they are being ramped up. So I think that will be the main driver for this business. But the memory interface, again, the same story. I think it's going to grow. But the baseline has been bigger. So I think the growth rate in itself will be more moderate. But overall, maybe if we include all these factors, maybe double around that level will be the level of growth that we're anticipating. So power will be the driver, and memory will grow as well. So we are -- we have to understand this more deeply. The AI computing when it is growing, it used to be the case that the GPU draw a lot of attention. But CPU, I think, will grow as well. So the ARM is showing a greater stronger position. So I think it will be SOCAMM, et cetera, maybe a lot of directions. But if you look at 1-year timeline, I think traditional-based architecture will be the mainstay. Our memory interface will be used in various content. So that is what we are anticipating. About for the power semiconductors, GaN, as you know, we have already our own, do it internally. So of course, we need some time, but you're going to internalize our manufacturing. So I think I talked about the utilization rate at our plants continue to be slightly higher than 50%, out of which some is going to be utilized for GaN. And what we have to be more conservative is about the silicon-based MOSFET because in terms of volume, it's going to be used a lot. And BCD process, we want to bring this internally as well. So the utilization rate of the plant with CapEx, I think -- including CapEx, I think this will be going up. So SiC, what are we going to do about SiC? All this is a thing that we have been pondering a lot. Currently, ourselves -- well, we are not anticipating that we will be doing the development. And Wolfspeed is one of the partners that we are looking at and with other partners. By having these partnerships, we will procure the SiC and then embed it into solutions. I think that is the direction that we are considering. So in terms of the realignment with the power semiconductor industry, us taking the lead of being proactive, I don't think that, that matches our direction right now. But depending on how things go, we'll consider it case by case. Operator: The next question is from Takayama-san from Goldman Sachs Securities. Daiki Takayama: My first question is about -- you talked about digital power, and a follow-up question about it. Regarding your share positioning, it's about 1/3 to 50% for GPU. And for ASIC related, it's likely to grow this year. And in November, you were saying that it's really high. But for this year and your positioning, what are you going to target? Or what do you already see? Also related to profitability, I think you were saying that it's relatively low. But when volume goes up this much, are you going to be able to secure better profitability? Can you give us some implication on that? Hidetoshi Shibata: Well, actually, it's really hard. For us, having 1/3 or 50%, we have it as milestones. And of course, it would be better to be on the better side of things. And at minimum, we would like to exceed 1/3. But then on the other hand, I think other companies are the same. But when you look at the demand coming from customers, supply is not keeping up. Therefore, it's always the case in these circumstances. So what is the inflated demand piece and what is the underlying demand? When demand is strong, everybody always talks about this, and we are not able to figure it out. But if it's real demand, obviously, we won't be able to catch up. Therefore, qualifying multiple suppliers will happen on a constant basis. So the 1/3 or 50% numbers, we do not feel that it's going to be steady, depending on generation or because of a supply pickup, I think we're going to see our positioning dramatically change and possibly it will go up or down. For power interfaces, right now, we need to ensure that we supply steadily as a supplier. So as Mr. Shinkai said in his part, we would like to ensure we have sufficient inventory as well as sales channel inventory or else it's going to be dangerous. Therefore, even if we have to put a further load on our balance sheet, we would like to have greater levels of inventory so that we won't have to sacrifice our share or positioning. How about profitability? For gross margins, depending on the product or the customer, it differs and varies. But for gross margin itself, compared to the company-wide average, it's not that great greater. It's not that greater. But if volume goes higher, operating margins should improve, as you rightly said, Takayama-san. So if volume increases, it should be a positive incremental impact on OP margins. Daiki Takayama: My second question is about managing company-wide profitability. At JPY 100, it's 25 to 30 -- well, 30 to 35 based off current FX levels. So you're at around 32% right now. So you were saying that -- were you trying to say and imply that the improvement is going to be moderate this year? But because you were also talking about advanced investments in R&D spend. So if profitability is going to steadily improve, there may be a chance that you will be able to exceed 35%, right? Or there are some companies who decide to invest more because profits are increasing. So are you going to allow profitability to improve? Or are you going to allocate the excess profits to fund your future growth? -- and make investments? Hidetoshi Shibata: Just because profits are higher, we are not thinking about simply allocating that for investment purposes. And when you think about increasing R&D on a quarter-by-quarter basis, the nature of it is not one where you could increase it significantly all of a sudden. As we said, operating margins in the first quarter, my personal view is we are facing challenges because when we show these numbers, we will get questions like the one you asked, Takayama-san. So we would like to increase R&D spend steadily in the future. So for this fiscal year, for top line, our forecast looks good at this moment. So if operating margins become higher as a result, of course, that is -- that may be possible. However, we don't want to be reactive to top line and would like to ensure that we make R&D spends to areas that we need to invest into. Of course, for digital power, investments are necessary, and we would like to go ahead with our investments. But I would say recently, when it comes to AI in the edge or embedded world of things, regarding its adoption, it has been spreading nowadays. And when it comes to automotive and robotics, mainly for inference. AI, the role of AI is becoming greater, and it's likely to become even greater in the future. So we are reviewing where we stand, and we are thinking that towards AI, we need to be more proactive in our efforts, meaning understanding AI applications better and showing our capabilities, developing capabilities internally if needed. So regarding power and AI, those are some big R&D targets. Another area would be AI inference, especially for automotive and robotics. We do believe we will need to make some big AI-related investments there. So is this going to be through an M&A? Or is this going to be organic? Of course, we are thinking about the options constantly with an open stance, and we will accordingly give you updates. But compared to before, we do believe we need to do more in a proactive manner. That's all from me. Daiki Takayama: So if that's the case, just to confirm, you're not going to control profitability intentionally, but you will also be making necessary spending in areas like AI for R&D. But as a result, if top line goes up, because of marginal profitability, you should see naturally profitability increase. Is that all right? Do you feel comfortable with that? Because that was my view in hearing your comment. Hidetoshi Shibata: Yes. For OP margins, naturally, it should go up and down. Right now, in this case, it should be increasing. Just because of increasing profitability, it's not like we're going to open or shut R&D spend. Operator: Let's go to the next question, BofA Securities, Hirakawa-san. Mikio Hirakawa: This is Hirakawa from BofA Securities. My first question is at the beginning, you have explained about the timing business transition. So I think basically, you're going to allocate it to the growth investment or the shareholder returns. What we have been understood in terms of the cash usage, so paying the debt. So growth in investment and then -- I think basically, you've given us in terms of your priority of usage of cash. What is your idea right now? My second question, so in terms of the Automotive business, I think basically, you said that it goes up and down. And I understand it's very difficult to have a visibility, but what's your take on the first quarter for the full year of FY 2026? What are the positive and negative factors for the Automotive business? Hidetoshi Shibata: So in terms of the AI-related -- in terms of cash usage, AI-related investment, well, we are not being coy. We have -- nothing is decided, so that we have been very frank about that. So depending on how we're going to look at this matter, I think the use of cash allocation will be different. So that's the reason why the use of proceeds, we gave you to all these factors. If there are no major acquisitions and no major M&A, if that -- if we assume that way, I think, Hirakawa-san, you're right, so paying the debt, shareholder return, I think that will end. I think that will be our focus. So internally, I discussed this Shinkai-san, maybe at this point, we will show this and say that we pay the debt and then make it -- use it for shareholder return. So if it's a growth investment, if that happens, we'll be acting that way. But we didn't want to mislead you. So we decided that this will be the right expression. So if there's no specific investment target, then we will use it for repaying debt and shareholder return. So if there is a specific candidate, then we will invest for growth. I think that is the idea behind this. For the Automotive business, so if you talk about the quarter-on-quarter and compare the quarter-on-quarter, there are individual reasons that have an impact on the business. So I do not want to mislead you. If you look at the first quarter, some -- Nikkei has written about this in China, so we have a major client there, and they are slowing down right now. So for our overall Automotive business, and it is not a positive. So China as a whole slowing down, I think that is what we're looking. So Japan, I think flat. So for better or for worse, it's stable. Europe, mainly Europe, maybe the same situation as us, but I think that maybe they're trying to build up the inventory more. The end demand is not that strong, but maybe they are feeling that they reduced inventory too far. So Europe, maybe we think the revenue is going to go up. So all in all, a slight growth. So as a momentum or a trend, we do not feel that this is the beginning of the higher growth. I think for individual reasons, I think the business will go up and down. So things are very fluid right now. And there is a possibility that I may change what I'm going to say. But as we have been considering the situation for a long period of time, for geopolitics-related supply situations and we have to consider the supply chain and the way to hold inventory; well, the dramatic change happening and then things will not -- we will be driven to a corner. I do not think that it's going to happen. In the short term, there will be some specs or some pushbacks, et cetera. But depending on that, the inventory of the supply chain will be disrupted. Maybe that's the nature of the thing that is happening right now. So that is the way I'm thinking right now. From that perspective, so trying to dramatically change the direction of the supply chain, no, we're not thinking about that. We will, of course, look at the supply chain. But actually, looking at the inventory by looking at the way to hold inventory to how to absorb this for short-term stocks, I think that is the most effective way to operate the business. I think I have the feeling the customers are going to that direction. So with the change of geopolitics and the impact that has on the business is not will lead to a drastic change of the supply chain. I think having the inventory in a strategic matter will be the way the people will be responding to the situation. Operator: The next person is Okawa-san from Daiwa Securities. Junji Okawa: This is is Okawa from Daiwa Securities. I have two questions. First, regarding gross margin for Q4, you talked about you were expecting deterioration, but it didn't. So can you give us more flavor on that? Q4-wise, Q-on-Q, Automotive and IIoT improved by 1 point plus. Therefore, can you sort things out for us? Shuhei Shinkai: For Automotive, there were price negotiations for certain deals. And we were anticipating price decline Q-on-Q, but that didn't happen as a result of the negotiations. Also regarding mix, low gross margin, sales were expected to rise, but it didn't grow as much. So these products are new products related to digital power as well as automotive, old products for mix. That's all for me. Junji Okawa: For Automotive and that prices didn't go down as much. Is that because of positive impact from demand and supply? Or is that because positive impact from share? Or was it by chance? So are there any reasons why things are working out well? Hidetoshi Shibata: It's more of a specific factor actually. So it's not notable. But from Q1, actually, it's going to deteriorate. So it's just a timing thing. Junji Okawa: The second question is about Automotive and IIoT regarding share or products. When you look at other company results, Europe, Automotive; they have a cautious outlook and a cautious outlook on Automotive overall. But when you look at your forecast as well as hear your comments, it's not that bad. It seems that your share is also rising in Europe apparently. So for Automotive and share, are you getting good response in business? Are there any unique reasons why you're feeling that way? And for IIoT, physical AI has now come into the picture. So it may be too early to say, but have you been able to capture any opportunities? So can I have a comment on both Automotive and IIoT? Hidetoshi Shibata: Unfortunately, we won't be able to meet your expectations, Okawa-san. In Automotive, idiosyncratically, there is nothing that we're seeing that is amazing that's underway. It was last year or the year before last, our MCU share went down. And when we were talking about what we're going to do about it, we were saying that it may take time, but we do have various countermeasures underway. So we're not that concerned about the longer future. And that was true actually. It's not that bad. But it's not as if we're going to see big impact this year or next year. Over the short term, 28 MCUs, we do believe steady growth this year. And for Gen 4 [ Alcon ], we will start to pick up as well, which are likely to become growth drivers. But as you rightly know, probably, since last year, traditional auto OEMs technology updates, in a sense, have started to slow down. It's probably because it's under review. 47 MCU and Gen 4 [ Alcon ] is likely to sell. But it was more moderate than expected. For '26, I think we'll go back and forth. Hopefully, we'll move forward and move backwards less. For IIoT, I would say the DRAM impact is the uncertainty, so impact from memory. Of course, we have accounted for this uncertainty when looking at the second half of the year. If we're able to well manage this, for IIoT, I think business will be strong because AI is strong, and military and aero is strong in Industrial. And for mobile IIoT, I don't know if I should put it as a share gain, but a number of sockets we were able to win have increased in number. So due to inherent reasons, we are expecting growth. However, because of lack of DRAM, there might be converged to higher-end models. And I think that trend is likely to happen. So we are cautious in our stance. But trend-wise, momentum-wise, I think it's relatively strong. That's all from me. Operator: Next, Citigroup Securities, Fujiwara-san. Takero Fujiwara: Fujiwara from Citi Securities. I have two questions. First, this time, so 150 days, you're going to raise your internal inventory target to 150 days. So when you answer your question, so you think you have to increase your inventory for AI-related applications, so 150 by applications for segment by Automotive and IIoT; is it different inventory levels? How -- and the pace of this increase of the inventory. And by doing so, how much can we expect this will push up the profit. So this is the first question. Shuhei Shinkai: So between Automotive and IIoT, we do not that there is an appropriate way to look at the inventory. The reason is that we have 3 buckets that we're looking at. One is the high -- the demand growing area, that will be data center AI. So that is IIoT. The second bucket is that we want to be -- we don't know how to respond to the request of the customers [ who ] have redundant supply chain. That will be more on the Automotive side. And the third bucket is, generally speaking, the risk of the supply of the material. For instance, if it's rare earth, some will be difficult maybe to acquire or so there are some situations that some parts was difficult to acquire. So this was taken up by other demand, meaning that demand/supply was tight. So we want to be proactive in securing that procurement. So we have these 3 buckets that we're thinking about when we talk about inventory. In terms of pushing up the profit, we are not actually looking into that too much because in terms of raw material, we have to have the raw material. And then for AI data center, that we procure from data centers, so that will be contributed to the profit. So the buffer stock based on some products, some producing internally, some not; so it's not the case that the 30 days of increase of the inventory will fully cater profits, maybe some contribution, but not all. Takero Fujiwara: My second question is that you said to the previous person is that due to the high price of memory, so I would like to ask you about that. So I think PC, smartphone, automotive, I think that is where the DRAM price will hit you. If you look at PC, smartphones; the impact on the volume in itself, and specifically, maybe smartphone is in the case, but if we look at the cost, maybe there is a negative impact when you have a price negotiations compared to the competitors. In terms of Automotive, so infotainment area, maybe that will impact the infotainment area. So when you're negotiating the customers currently, do you think that this will impact the volume? In the previous cycle of the lack of semiconductor, so there was a move to have lower specs for the automotive applications. Are you discussing about this at this point? Hidetoshi Shibata: So for automotive, we do not have a clear visibility about the situation right now. In terms of volume, it's not that big business. So maybe the volume is not that large in terms of usage. So maybe you can just pay up, we'll be able to get our hands on the DRAM. So volume-wise, that's the situation. But what I said that I don't know what's going to happen is that so there are applications that they're using old models. So for instance, using DRAM, [ DDR4 ]. So the memory suppliers are saying that we can't supply [ DDR4 ], but we can supply [ DDR5 ]. I think that's going to happen. So that is where we do not have a visibility. So all in all, I think things it's like one step forward and one step backwards. I do not think that the volume in itself is going to plunge, but we cannot be too optimistic about the situation. So for the nonautomotive areas, of course, the DRAM price is going up this level. Some customers will ask us to do something about that. But as of now, we are not experiencing that. I think our customers are very, very careful in this area already. As Shinkai has implied, this frenzy that the AI is generating, some raw material is already lacking in supply. So there are already some areas there is a lack of supply. So if that is the case, if they put too much pressure on the suppliers, then there is a risk that they will not be able to get their products from the suppliers. I think the customers are trying to strike a balance in this area because it is true that there is a shortage of products. So we do want to be ahead of placing orders and try to build up an inventory so that we don't have a lack of the supply. So this kind of imbalance situation is already there. So we are telling ourselves that we should be very careful about the supply chain. Operator: Thank you. We are dry close to the ending time. So we would like to conclude the Q&A session here. Finally, Mr. Shibata will expand closing comments. Hidetoshi Shibata: Market cycle-wise, we are finally at a point where we're seeing light, also centered around AI. In consideration of geopolitical risk, the way we hold inventory as well as how we can settle in supply, will be one of our focus areas for the time being. It will be a tailwind if we do it well. And if we fail, it will be a headwind. And regarding the transfer of the timing business, in the area of AI, the necessity of making investments are growing higher day by day. So we're going to change our narrative compared to before. And accordingly, we would like to make -- think about making significant investments where necessary. Apart from that, we will be focusing on balance sheet management and shareholder return. And like I always say, factors that may allow our performance to go upwards or downwards are all over the place. Therefore, we would like to ensure that we are able to disclose information to you so that we could heighten your predictability without delay. That's all from me. Thank you very much. Operator: Thank you very much. This concludes Renesas Electronics Fiscal '25 Q4 and Full Year Results Briefing. Thank you very much for joining today.
Operator: [Interpreted] Thank you very much for attending the Renesas Electronics Quarter and Full Year 2025 Earnings Call. Today, we offer you simultaneous interpretation service. Please utilize interpretation icon and choose the language of your preference speakers. Speakers, please turn your video on. For today's presentation, we have presented Executive President and CEO, Hidetoshi Shibata; executive officer CFO, Shuhei Shinkai; and other staffs are present. After Shibata has given his words, Shinkai will explain about fourth quarter and full year earnings. And then we'll go into a Q&A session. We're planning for 60 minutes for this earnings call. The presentation material that we're using today is available on our website on the IR site. Mr. Shibata, the floor is yours. Hidetoshi Shibata: Good morning. This is Shibata speaking. So the fourth quarter, I think it was better than our expectations. The end demand, not large, but it has grown. And AI is strong. I think that goes without saying. And on top of that, the industrial applications, it has been slightly moderate than expected, but we have seen a good, strong, robust growth. So towards the first quarter of next fiscal year, and I would like to give you an outlook about that. So our revenue outlook, it is shown in the presentation. But beyond that, the end demand outlook, so Automotive, IIoT, we are expecting a moderate growth, specifically for IIoT. And of course, AI is going to be very strong. And for the Industrial we are expecting solid growth first quarter consumer applications due to seasonality will go down. But IIoT, overall, will be -- saw a moderate and solid growth. And as a result, for the whole company, this is a repetition, but although moderate, we think we'll be able to show some solid growth. For this fiscal year for the full year, we haven't shown you guidance in terms of the numbers because we have not been able to decide the details. But mid to the previous presentation, I think we have started to see a better momentum. For Automotive, basically sometimes it goes up, sometimes it goes down. But Industrial, we think we were able to expect a solid growth. So the AI, data center, those areas, I think we'll be able to see robust growth. And for AI infrastructure, for this year, I think I see for the sites other companies, we are expecting a very good growth year-on-year basis. So we have transferred the timing business. So towards the Capital Day that we're going to hold in June, we want to update our AI business. But roughly speaking, maybe double and grew by double. I think that is our outlook. In terms of IIoT, a very moderate growth is what we are expecting, specifically towards the second half, the DRAM shortage may have an impact on the business. So that is the reason why we are a little subdued in our outlook. So compared to the previous earnings call, I think we have a more positive view. So then let me pull up a slide and talk about the transfer of the timing business. So this is a brief summary. And after that, I will hand it over to Shinkai for more detailed numbers. So broadly speaking, the timing business. So mainly, this is a clock business, we have decided to transfer this business. So half and half cash in common stock is in total, $3 billion transaction value. So from our point of view, our timing clock business, we think we can grow this business. But for the technological trend, it is high potential MEMS timing. So if that is the case, SiTime is a better owner. And it is better for us to integrate this business and seek for growth. It's not the case that we just sell it and then that's it. We will acquire some stock from SiTime's. And from my point of view, we would like to enjoy some of the fruit that will be coming from the growth of the MEMS timing. So there's a reason of the partnership. The timing business transfer that we're going is the size of the scales on the top right. So before -- so this is for FY 2024 because we have not closed the books yet. For 2025, the full year revenue won't change that much from this level. So $207 million to [ $208 million ] business is what we are going to talking about. So I think for SiTime, this is a very complementary business. So we focus on clock SiTime as basically focusing oscillators. So if you combine both, this will be a kind of end-to-end technological coverage. So we do not assume any roadblocks, but of course, we have to clear some regulation hurdles. So by the end of this year at the latest, we think we'll be able to close this deal. So in terms of the use of this cash, so whether we go to hold all this cash? Or is we going to sell at early timing? We are still considering. But in any case, this is growth for investment or for the shareholder return, we will look at both ways to allocate the cash. So that has been the summary about the just for the timing business. Then I will hand it over to Shinkai and talk about the details of our numbers and then go to Q&A afterwards. Shinkai-san, please. Shuhei Shinkai: So this is Shinkai. I would like to talk about our fourth quarter, full year results based on presentation. For the fourth quarter, please look at the left-hand side, from the left to the middle. So the revenue is JPY 350.9 billion. Gross profit margin, 59.3%; operating profit, JPY [ 108 ] billion; operating margin, 30.8%; EBITDA, JPY 127.8 billion; net profit, JPY 90 billion. The ForEx, JPY 152 to the dollar; EUR 1, JPY 176. So compared -- and for the full year, please look at the blue column on the right, blue one. So the revenue, JPY 1,318.5 billion; gross profit ratio of 57.6%; operating profit, JPY 386.9 billion; operating margin, 29.3%; EBITDA, JPY 464.1 billion; net profit JPY 329.3 billion; ForEx assumptions, JPY 150 to the dollar, JPY 167 to the euro. So for the full year outlook, I would like to give you some brief comments. So this is on the year-over-year comparison is shown. In terms of the revenue, it's 2.2% of decline. So Automotive due to minus, and Industrial IIoT is minus -- plus. So net-net, it was a minus. In terms of the gross margin year-over-year, 1.6% of improvement. This is due to the manufacturing cost reduction based mainly on the fixed cost. And last year -- from last year, from FY '25, we have been changing the depreciation period. So this is not a one-off. This will contribute to us going forward. In terms of the operating profit margin, so 0.2% worsening because of cost reduction, we have been able to reduce costs, but basically, this was offset with the demerits. So the sales volume decreased, and there has been a backlash coming from a one-off in the '24. So net 2.2% worsening. So let's go to the next slide. So the fourth -- going back to the fourth quarter, so let's look at the column on the right, revenue 3.2% plus. So half is through the weaker yen, half is through the actual demand -- due to demand, Automotive, Industrial, IIoT, this has been our expectations. And in terms of the gross margin, plus 2.3% improvement. So this is due to the mix improvement and the reduction of the manufacturing expenses. In terms of the mix, we were anticipating that this will worsen, but it has not been bad as such. So the high gross margin products, for instance, memory, timing, et cetera, has increased and that led to improvement of the gross margin. In terms of the manufacturing cost, so there are some a lot of one-offs. For instance, the project -- manufacturing-related projects cost has been less than expected due to this. The gross margin improvement -- this has [ made ] contribution to the improvement of the gross margin. But the operating margin is plus 3.3% improvement against the target. So the volume growth, the gross margin improvement, there is some contribution for the operating cost. Expenses has been in line. In terms of the expenses, it was basically in line with our expectations. So the quarter-on-quarter comparison, please look at this chart. In terms of the revenue plus positive, gross margin plus 1.7 percentage points. On a quarter-on-quarter basis, manufacturing cost has gone down. The utilization has improved. In terms of the operating expenses, minus. So the OpEx has increased, is the main reason. And this is due to the seasonality because it's more concentrated at the year-end. For each segment, it is on the right-hand side for Automotive and Industrial, Infrastructure and IIoT, there's nothing that's notable this time around. But when you look at OP margins for Industrial, Infrastructure and IIoT; it has deteriorated Q-o-Q by 3.4 points. This is due to development items and loss recognition that happened in the fourth quarter. Also, regarding segment performance for this fiscal year from fiscal '26, non-GAAP segment performance definition is scheduled to change. Up until 2025, as shown here, out of total company non-GAAP adjustments items, if they are inherent to the segment, we were adding it back; or if it's a loss, we were deducting it by segment. However, from this fiscal year, in principle, we will be adjusting it together with company-wide non-GAAP performance. So that is the way we intend to report going forward. Please turn the page. So this page is about revenue. We changed the format a little. For Industrial, Infrastructure and IIoT, we made it more visible. And on the right-hand side, for revenue, this is year-on-year and Q-on-Q numbers that are shown. Inclusive of FX as well as in parenthesis, it's excluding FX impact. We have added that because FX is fluctuating quite a lot. So we wanted to make things more visible and easier to understand. Please turn the page. This page is about inventory. First, on the left-hand side, for in-house inventory. For Q4, Q-on-Q, inventory amount and DOI both increased in line with expectations, and it was at 117 days of DOI as of end of Q4. For Q1, we are expecting an increase in amount Q-on-Q due to demand recovery, we will be expanding the Diebank in anticipation. And also in Q2, the IT system or the ERP system integration is scheduled to happen. Therefore, at the time of integration, we will need to build up towards this phase. And due to this impact in Q1, we expect a little higher work-in-progress inventory. And under the third bullet, as shown for the DOI target, it used to be 120 days. We have updated it and are thinking about raising it to 150 days. It's because demand is increasing, especially around AI and data centers and also supply chain risk-wise, we believe that we need to have some more buffer stock for finished products and Diebank on top of that to secure raw materials that may be subject to risk. In consideration of these factors, we have decided to raise DOI targets from 120 to 150 days in managing our in-house inventory. Looking at the right-hand side, it's channel inventory. For Q4, Q-on-Q, channel inventory declined. Overall, it was 7.5 weeks of inventory WOI. For Automotive, we were planning to do shipments in line with sell-through. But sell-through went higher than expectation, so channel inventory went down. For Industrial, Infrastructure, IIoT; inventory went up slightly, but this was due to power for data centers and AI where demand is strong. So we were shipping as soon as it was completed. And therefore, sell-through was a little bit higher than expected. And for Q1, Q-on-Q, we are planning to expand sales channel inventory. Orders have been brisk. And up until the end of Q4, WOI was trending at low levels. So for sales channel inventory, we would like to strive to have higher levels of inventory. That is why we intend to expand inventory levels. Turning the page. We talk about utilization rates on the left-hand side. First of all, for Q4 compared to our forecast, it was a little bit higher, at close to 50%, 5-0. And also for Q1, we are expecting a slight increase in trend at around 50%-plus utilization. Regarding capital expenditures on the right-hand side, Q4, there is no items that were notable. But for Q1 towards capacity expansion, we are planning to make investments, which we will share with you on a later date. Please turn the page. So this is our forecast for Q1 '26. Please look at the shaded area in the middle. For revenue and the midpoint forecast, it's JPY 375 billion; gross margin, 58.5%; operating profit margin, 32%; and FX, JPY 154 against the dollar and against JPY 182 against the euro. For revenue, Q-on-Q, we're expecting growth of 6.9%, as you can see on the right column. FX-wise inclusive, we're expecting revenue growth of 1.9%; and excluding FX impact, 4.9% growth. And we're expecting gross margins to go down by 0.8 points to 58.5%. The weak yen is a tailwind. But due to mix, we're expecting a reactionary fall Q-on-Q. And due to the price increases, we are expecting a minus 8 point decline. For operating margin, we are expecting 1.2 points higher operating margins Q-on-Q to 32% due to volume growth due to revenue growth. That is the main factor. And for OpEx, Overall, we are expecting flattish trends Q-on-Q expenditure-wise. For FX sensitivity, you could see the sensitivity analysis at the bottom. Based off the sensitivity, the forecast for Q1 and OP margins of 32%, we -- at JPY 100 against the dollar and JPY 120 against the euro, OP margins will be 25.7%. So I would like to also pick up some slides from the appendix as well. Please turn to Page 18. These are the GAAP numbers. On a full-year basis, the second from the right, please refer to this column. On a GAAP basis for net income, JPY 51.8 billion of losses were generated. This is related to Wolfspeed. And impairment losses were JPY 237.6 billion. That has led to the loss. So this is the big difference between GAAP as well as non-GAAP. And please also turn to the next page. These are highlights from the fiscal year under review. we will continue to pay dividends worth JPY 28 a share. And for Wolfspeed transactions, CFIUS approval came through. So common stock and convertible notes, the rights have -- will be acquired. Looking at the next page, this is a continuous update on Altium. Left-hand side shows ARR steadily increasing. And for the KPIs concept, we continue to work on it. For comprehensive updates, we will do it in June when we have Capital Market Day. That concludes my explanation. Thank you for your kind attention. Operator: Let's go to Q&A. [Operator Instructions] UBS Securities, Yasui-san, please. Kenji Yasui: So I have two questions. The first question is that the comment Shibata-san made at the beginning, the AI, said that it may double for this year. Basically, it will be interface, PMIC that will be the major applications. Can you explain in more detail? What is your outlook for [ 2026 ]? I think that will be also pipeline, PMIC, GPU plus custom is going to -- ASIC is going to grow. So what are the types of things that will drive the growth in these applications? The second question, this is not related to the earnings, but in Japan, there is a lot of realignment or integration with the domestic power semiconductors. Mitsubishi Electric's President has said that maybe they would like to consider that for the -- for this fiscal year. So maybe for the silicon carbide again, maybe for the data center demand, maybe it will improve again. So are you going to be engaged in this type of realignment in the industry for the domestic business. Hidetoshi Shibata: For the AI-related business, as I said in the beginning, well, our definition, so we are going to transfer the timing business, and we are considering how to update the business. So in June, what we are going to present is based on updated information. But as of today, basically, we'll be talking based on the existing definition. In terms of the digital power, this will drive the growth in terms of the absolute amount, in terms of the growth rate, I think this will be the driver. Last year, so GPU has grown strongly. For this year, ASIC, I think application for ASIC is going to grow a lot. So going to the first quarter numbers, I think that's what I'm anticipating for the hyperscalers. ASICs for hyperscalers by phases, they are being ramped up. So I think that will be the main driver for this business. But the memory interface, again, the same story. I think it's going to grow. But the baseline has been bigger. So I think the growth rate in itself will be more moderate. But overall, maybe if we include all these factors, maybe double around that level will be the level of growth that we're anticipating. So power will be the driver, and memory will grow as well. So we are -- we have to understand this more deeply. The AI computing when it is growing, it used to be the case that the GPU draw a lot of attention. But CPU, I think, will grow as well. So the ARM is showing a greater stronger position. So I think it will be SOCAMM, et cetera, maybe a lot of directions. But if you look at 1-year timeline, I think traditional-based architecture will be the mainstay. Our memory interface will be used in various content. So that is what we are anticipating. About for the power semiconductors, GaN, as you know, we have already our own, do it internally. So of course, we need some time, but you're going to internalize our manufacturing. So I think I talked about the utilization rate at our plants continue to be slightly higher than 50%, out of which some is going to be utilized for GaN. And what we have to be more conservative is about the silicon-based MOSFET because in terms of volume, it's going to be used a lot. And BCD process, we want to bring this internally as well. So the utilization rate of the plant with CapEx, I think -- including CapEx, I think this will be going up. So SiC, what are we going to do about SiC? All this is a thing that we have been pondering a lot. Currently, ourselves -- well, we are not anticipating that we will be doing the development. And Wolfspeed is one of the partners that we are looking at and with other partners. By having these partnerships, we will procure the SiC and then embed it into solutions. I think that is the direction that we are considering. So in terms of the realignment with the power semiconductor industry, us taking the lead of being proactive, I don't think that, that matches our direction right now. But depending on how things go, we'll consider it case by case. Operator: The next question is from Takayama-san from Goldman Sachs Securities. Daiki Takayama: My first question is about -- you talked about digital power, and a follow-up question about it. Regarding your share positioning, it's about 1/3 to 50% for GPU. And for ASIC related, it's likely to grow this year. And in November, you were saying that it's really high. But for this year and your positioning, what are you going to target? Or what do you already see? Also related to profitability, I think you were saying that it's relatively low. But when volume goes up this much, are you going to be able to secure better profitability? Can you give us some implication on that? Hidetoshi Shibata: Well, actually, it's really hard. For us, having 1/3 or 50%, we have it as milestones. And of course, it would be better to be on the better side of things. And at minimum, we would like to exceed 1/3. But then on the other hand, I think other companies are the same. But when you look at the demand coming from customers, supply is not keeping up. Therefore, it's always the case in these circumstances. So what is the inflated demand piece and what is the underlying demand? When demand is strong, everybody always talks about this, and we are not able to figure it out. But if it's real demand, obviously, we won't be able to catch up. Therefore, qualifying multiple suppliers will happen on a constant basis. So the 1/3 or 50% numbers, we do not feel that it's going to be steady, depending on generation or because of a supply pickup, I think we're going to see our positioning dramatically change and possibly it will go up or down. For power interfaces, right now, we need to ensure that we supply steadily as a supplier. So as Mr. Shinkai said in his part, we would like to ensure we have sufficient inventory as well as sales channel inventory or else it's going to be dangerous. Therefore, even if we have to put a further load on our balance sheet, we would like to have greater levels of inventory so that we won't have to sacrifice our share or positioning. How about profitability? For gross margins, depending on the product or the customer, it differs and varies. But for gross margin itself, compared to the company-wide average, it's not that great greater. It's not that greater. But if volume goes higher, operating margins should improve, as you rightly said, Takayama-san. So if volume increases, it should be a positive incremental impact on OP margins. Daiki Takayama: My second question is about managing company-wide profitability. At JPY 100, it's 25 to 30 -- well, 30 to 35 based off current FX levels. So you're at around 32% right now. So you were saying that -- were you trying to say and imply that the improvement is going to be moderate this year? But because you were also talking about advanced investments in R&D spend. So if profitability is going to steadily improve, there may be a chance that you will be able to exceed 35%, right? Or there are some companies who decide to invest more because profits are increasing. So are you going to allow profitability to improve? Or are you going to allocate the excess profits to fund your future growth? -- and make investments? Hidetoshi Shibata: Just because profits are higher, we are not thinking about simply allocating that for investment purposes. And when you think about increasing R&D on a quarter-by-quarter basis, the nature of it is not one where you could increase it significantly all of a sudden. As we said, operating margins in the first quarter, my personal view is we are facing challenges because when we show these numbers, we will get questions like the one you asked, Takayama-san. So we would like to increase R&D spend steadily in the future. So for this fiscal year, for top line, our forecast looks good at this moment. So if operating margins become higher as a result, of course, that is -- that may be possible. However, we don't want to be reactive to top line and would like to ensure that we make R&D spends to areas that we need to invest into. Of course, for digital power, investments are necessary, and we would like to go ahead with our investments. But I would say recently, when it comes to AI in the edge or embedded world of things, regarding its adoption, it has been spreading nowadays. And when it comes to automotive and robotics, mainly for inference. AI, the role of AI is becoming greater, and it's likely to become even greater in the future. So we are reviewing where we stand, and we are thinking that towards AI, we need to be more proactive in our efforts, meaning understanding AI applications better and showing our capabilities, developing capabilities internally if needed. So regarding power and AI, those are some big R&D targets. Another area would be AI inference, especially for automotive and robotics. We do believe we will need to make some big AI-related investments there. So is this going to be through an M&A? Or is this going to be organic? Of course, we are thinking about the options constantly with an open stance, and we will accordingly give you updates. But compared to before, we do believe we need to do more in a proactive manner. That's all from me. Daiki Takayama: So if that's the case, just to confirm, you're not going to control profitability intentionally, but you will also be making necessary spending in areas like AI for R&D. But as a result, if top line goes up, because of marginal profitability, you should see naturally profitability increase. Is that all right? Do you feel comfortable with that? Because that was my view in hearing your comment. Hidetoshi Shibata: Yes. For OP margins, naturally, it should go up and down. Right now, in this case, it should be increasing. Just because of increasing profitability, it's not like we're going to open or shut R&D spend. Operator: Let's go to the next question, BofA Securities, Hirakawa-san. Mikio Hirakawa: This is Hirakawa from BofA Securities. My first question is at the beginning, you have explained about the timing business transition. So I think basically, you're going to allocate it to the growth investment or the shareholder returns. What we have been understood in terms of the cash usage, so paying the debt. So growth in investment and then -- I think basically, you've given us in terms of your priority of usage of cash. What is your idea right now? My second question, so in terms of the Automotive business, I think basically, you said that it goes up and down. And I understand it's very difficult to have a visibility, but what's your take on the first quarter for the full year of FY 2026? What are the positive and negative factors for the Automotive business? Hidetoshi Shibata: So in terms of the AI-related -- in terms of cash usage, AI-related investment, well, we are not being coy. We have -- nothing is decided, so that we have been very frank about that. So depending on how we're going to look at this matter, I think the use of cash allocation will be different. So that's the reason why the use of proceeds, we gave you to all these factors. If there are no major acquisitions and no major M&A, if that -- if we assume that way, I think, Hirakawa-san, you're right, so paying the debt, shareholder return, I think that will end. I think that will be our focus. So internally, I discussed this Shinkai-san, maybe at this point, we will show this and say that we pay the debt and then make it -- use it for shareholder return. So if it's a growth investment, if that happens, we'll be acting that way. But we didn't want to mislead you. So we decided that this will be the right expression. So if there's no specific investment target, then we will use it for repaying debt and shareholder return. So if there is a specific candidate, then we will invest for growth. I think that is the idea behind this. For the Automotive business, so if you talk about the quarter-on-quarter and compare the quarter-on-quarter, there are individual reasons that have an impact on the business. So I do not want to mislead you. If you look at the first quarter, some -- Nikkei has written about this in China, so we have a major client there, and they are slowing down right now. So for our overall Automotive business, and it is not a positive. So China as a whole slowing down, I think that is what we're looking. So Japan, I think flat. So for better or for worse, it's stable. Europe, mainly Europe, maybe the same situation as us, but I think that maybe they're trying to build up the inventory more. The end demand is not that strong, but maybe they are feeling that they reduced inventory too far. So Europe, maybe we think the revenue is going to go up. So all in all, a slight growth. So as a momentum or a trend, we do not feel that this is the beginning of the higher growth. I think for individual reasons, I think the business will go up and down. So things are very fluid right now. And there is a possibility that I may change what I'm going to say. But as we have been considering the situation for a long period of time, for geopolitics-related supply situations and we have to consider the supply chain and the way to hold inventory; well, the dramatic change happening and then things will not -- we will be driven to a corner. I do not think that it's going to happen. In the short term, there will be some specs or some pushbacks, et cetera. But depending on that, the inventory of the supply chain will be disrupted. Maybe that's the nature of the thing that is happening right now. So that is the way I'm thinking right now. From that perspective, so trying to dramatically change the direction of the supply chain, no, we're not thinking about that. We will, of course, look at the supply chain. But actually, looking at the inventory by looking at the way to hold inventory to how to absorb this for short-term stocks, I think that is the most effective way to operate the business. I think I have the feeling the customers are going to that direction. So with the change of geopolitics and the impact that has on the business is not will lead to a drastic change of the supply chain. I think having the inventory in a strategic matter will be the way the people will be responding to the situation. Operator: The next person is Okawa-san from Daiwa Securities. Junji Okawa: This is is Okawa from Daiwa Securities. I have two questions. First, regarding gross margin for Q4, you talked about you were expecting deterioration, but it didn't. So can you give us more flavor on that? Q4-wise, Q-on-Q, Automotive and IIoT improved by 1 point plus. Therefore, can you sort things out for us? Shuhei Shinkai: For Automotive, there were price negotiations for certain deals. And we were anticipating price decline Q-on-Q, but that didn't happen as a result of the negotiations. Also regarding mix, low gross margin, sales were expected to rise, but it didn't grow as much. So these products are new products related to digital power as well as automotive, old products for mix. That's all for me. Junji Okawa: For Automotive and that prices didn't go down as much. Is that because of positive impact from demand and supply? Or is that because positive impact from share? Or was it by chance? So are there any reasons why things are working out well? Hidetoshi Shibata: It's more of a specific factor actually. So it's not notable. But from Q1, actually, it's going to deteriorate. So it's just a timing thing. Junji Okawa: The second question is about Automotive and IIoT regarding share or products. When you look at other company results, Europe, Automotive; they have a cautious outlook and a cautious outlook on Automotive overall. But when you look at your forecast as well as hear your comments, it's not that bad. It seems that your share is also rising in Europe apparently. So for Automotive and share, are you getting good response in business? Are there any unique reasons why you're feeling that way? And for IIoT, physical AI has now come into the picture. So it may be too early to say, but have you been able to capture any opportunities? So can I have a comment on both Automotive and IIoT? Hidetoshi Shibata: Unfortunately, we won't be able to meet your expectations, Okawa-san. In Automotive, idiosyncratically, there is nothing that we're seeing that is amazing that's underway. It was last year or the year before last, our MCU share went down. And when we were talking about what we're going to do about it, we were saying that it may take time, but we do have various countermeasures underway. So we're not that concerned about the longer future. And that was true actually. It's not that bad. But it's not as if we're going to see big impact this year or next year. Over the short term, 28 MCUs, we do believe steady growth this year. And for Gen 4 [ Alcon ], we will start to pick up as well, which are likely to become growth drivers. But as you rightly know, probably, since last year, traditional auto OEMs technology updates, in a sense, have started to slow down. It's probably because it's under review. 47 MCU and Gen 4 [ Alcon ] is likely to sell. But it was more moderate than expected. For '26, I think we'll go back and forth. Hopefully, we'll move forward and move backwards less. For IIoT, I would say the DRAM impact is the uncertainty, so impact from memory. Of course, we have accounted for this uncertainty when looking at the second half of the year. If we're able to well manage this, for IIoT, I think business will be strong because AI is strong, and military and aero is strong in Industrial. And for mobile IIoT, I don't know if I should put it as a share gain, but a number of sockets we were able to win have increased in number. So due to inherent reasons, we are expecting growth. However, because of lack of DRAM, there might be converged to higher-end models. And I think that trend is likely to happen. So we are cautious in our stance. But trend-wise, momentum-wise, I think it's relatively strong. That's all from me. Operator: Next, Citigroup Securities, Fujiwara-san. Takero Fujiwara: Fujiwara from Citi Securities. I have two questions. First, this time, so 150 days, you're going to raise your internal inventory target to 150 days. So when you answer your question, so you think you have to increase your inventory for AI-related applications, so 150 by applications for segment by Automotive and IIoT; is it different inventory levels? How -- and the pace of this increase of the inventory. And by doing so, how much can we expect this will push up the profit. So this is the first question. Shuhei Shinkai: So between Automotive and IIoT, we do not that there is an appropriate way to look at the inventory. The reason is that we have 3 buckets that we're looking at. One is the high -- the demand growing area, that will be data center AI. So that is IIoT. The second bucket is that we want to be -- we don't know how to respond to the request of the customers [ who ] have redundant supply chain. That will be more on the Automotive side. And the third bucket is, generally speaking, the risk of the supply of the material. For instance, if it's rare earth, some will be difficult maybe to acquire or so there are some situations that some parts was difficult to acquire. So this was taken up by other demand, meaning that demand/supply was tight. So we want to be proactive in securing that procurement. So we have these 3 buckets that we're thinking about when we talk about inventory. In terms of pushing up the profit, we are not actually looking into that too much because in terms of raw material, we have to have the raw material. And then for AI data center, that we procure from data centers, so that will be contributed to the profit. So the buffer stock based on some products, some producing internally, some not; so it's not the case that the 30 days of increase of the inventory will fully cater profits, maybe some contribution, but not all. Takero Fujiwara: My second question is that you said to the previous person is that due to the high price of memory, so I would like to ask you about that. So I think PC, smartphone, automotive, I think that is where the DRAM price will hit you. If you look at PC, smartphones; the impact on the volume in itself, and specifically, maybe smartphone is in the case, but if we look at the cost, maybe there is a negative impact when you have a price negotiations compared to the competitors. In terms of Automotive, so infotainment area, maybe that will impact the infotainment area. So when you're negotiating the customers currently, do you think that this will impact the volume? In the previous cycle of the lack of semiconductor, so there was a move to have lower specs for the automotive applications. Are you discussing about this at this point? Hidetoshi Shibata: So for automotive, we do not have a clear visibility about the situation right now. In terms of volume, it's not that big business. So maybe the volume is not that large in terms of usage. So maybe you can just pay up, we'll be able to get our hands on the DRAM. So volume-wise, that's the situation. But what I said that I don't know what's going to happen is that so there are applications that they're using old models. So for instance, using DRAM, [ DDR4 ]. So the memory suppliers are saying that we can't supply [ DDR4 ], but we can supply [ DDR5 ]. I think that's going to happen. So that is where we do not have a visibility. So all in all, I think things it's like one step forward and one step backwards. I do not think that the volume in itself is going to plunge, but we cannot be too optimistic about the situation. So for the nonautomotive areas, of course, the DRAM price is going up this level. Some customers will ask us to do something about that. But as of now, we are not experiencing that. I think our customers are very, very careful in this area already. As Shinkai has implied, this frenzy that the AI is generating, some raw material is already lacking in supply. So there are already some areas there is a lack of supply. So if that is the case, if they put too much pressure on the suppliers, then there is a risk that they will not be able to get their products from the suppliers. I think the customers are trying to strike a balance in this area because it is true that there is a shortage of products. So we do want to be ahead of placing orders and try to build up an inventory so that we don't have a lack of the supply. So this kind of imbalance situation is already there. So we are telling ourselves that we should be very careful about the supply chain. Operator: Thank you. We are dry close to the ending time. So we would like to conclude the Q&A session here. Finally, Mr. Shibata will expand closing comments. Hidetoshi Shibata: Market cycle-wise, we are finally at a point where we're seeing light, also centered around AI. In consideration of geopolitical risk, the way we hold inventory as well as how we can settle in supply, will be one of our focus areas for the time being. It will be a tailwind if we do it well. And if we fail, it will be a headwind. And regarding the transfer of the timing business, in the area of AI, the necessity of making investments are growing higher day by day. So we're going to change our narrative compared to before. And accordingly, we would like to make -- think about making significant investments where necessary. Apart from that, we will be focusing on balance sheet management and shareholder return. And like I always say, factors that may allow our performance to go upwards or downwards are all over the place. Therefore, we would like to ensure that we are able to disclose information to you so that we could heighten your predictability without delay. That's all from me. Thank you very much. Operator: Thank you very much. This concludes Renesas Electronics Fiscal '25 Q4 and Full Year Results Briefing. Thank you very much for joining today.
Operator: Thank you for standing by. This is the conference operator. Welcome to Sangoma's Second Quarter Fiscal 2026 Conference Call. [Operator Instructions] and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms. Reburn. Samantha Reburn: Thank you, operator. Hello, everyone, and welcome to Sangoma's second quarter of fiscal year 2026 investor call. We are recording the call, and we will make it available on our website for anyone who's unable to join us live. I'm here today with Charles Salameh, Sangoma's Chief Executive Officer; Jeremy Wubs, Chief Operating Officer; and Larry Stock, Chief Financial Officer. Charles will provide a high-level overview of the quarter. Jeremy and Larry will then take you through the operating results for the second quarter of fiscal year 2026, which ended on December 31, 2025. Following their presentation, we will open the floor for Q&A with analysts. We will discuss the press release that was distributed earlier today, together with the company's financial statements and MD&A, which are available on SEDAR+, EDGAR and our website. As a reminder, Sangoma reports under International Financial Reporting Standards, IFRS. And during the call, we may refer to terms such as adjusted EBITDA and free cash flow, which are non-IFRS measures that are defined in our MD&A. Before we start, I'd like to remind you that the statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, estimates, plans, expectations and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in the accompanying MD&A, unaudited condensed consolidated interim financial statements, our annual information form and the company's annual audited financial statements posted on SEDAR+, EDGAR and our website. With that, I'll hand the call over to Charles. Charles Salameh: Good afternoon, everyone, and thanks for joining us. I'm pleased to report that fiscal Q2 tracked right to plan, including one of our strongest booking quarters in recent history. This is a clear indication that our go-to-market strategy is gaining traction and that the investments we've made in positioning Sangoma for growth are starting to show tangible results. As we outlined last quarter, Q2 would show sequential revenue growth, and we delivered on that expectation. Revenue for the quarter was $51.5 million, up 1.2% sequentially. And importantly, service revenue grew 1% -- this is an important signal as it reflects the early impact of improving bookings momentum beginning to translate into recurring revenue growth. We delivered $8.3 million in adjusted EBITDA with 16% margins and conversion of adjusted EBITDA to operating cash flow was very strong at more than 120%. This continues to reinforce quality, consistency and discipline of our earnings model. And as a result, free cash flow improved sequentially to $8 million or $0.24 per fully diluted share. Now building on the KPIs we introduced last quarter, we're starting to see sustained progress in our mid-market strategy. Pipeline conversions remain solid, our bookings profile continues to improve, and we're seeing growing traction across our verticals and our wholesale motions. Collectively, these trends highlight the increasing effectiveness of our platform approach and our ability to execute at larger scales. With regard to pipeline, our pipeline remained steady in Q2, reflecting a healthy balance between new opportunity creation and deal conversion. Importantly, we're continuing to see improvements in our close rates, which reinforces both the quality of the pipeline and the effectiveness of our go-to-market execution. On bookings, MRR bookings grew significantly, up 67% sequentially and 60% year-over-year. As we increasingly engage with these larger, more complex mid-market opportunities, we expect some quarterly volatility, but with a higher long-term value and stronger recurring revenue. This is exactly the type of shift we want to see as we scale this business. On churn, also very proud of this, we also saw sequential improvement in that churn rate. Retention remains excellent with blended churn holding just under 1%. This reflects the stability of our recurring revenue base and the progress we've made in our customer experience, service delivery and platform stability. Now as we continue to execute on our FY '26 priorities, we are seeing momentum across all the business. Our essential communications platform, combined with more focused solution bundles, deeper vertical alignment and a strengthening partner ecosystem is enabling us to compete more effectively for larger multisite and more strategic mid-market opportunities. And more broadly, this reflects a shift in how customers are buying. And we're seeing that dynamic increasingly show up in the structure and the quality of opportunities we're pursuing. The progress we are seeing is not isolated to individual wins, but it's visible in the overall size of the opportunities, the quality of those bookings and the breadth of the customer segments engaging with us on our platform. With our leadership team, our operating systems, our partner programs now firmly in place, we are investing to scale our go-to-market engine. As outlined last quarter, we committed approximately $2 million in incremental SG&A to accelerate pipeline development, customer acquisitions and execute on partner enablement. In Q2, we began deploying these investments in a measured way, focused on building momentum while maintaining strong financial discipline. Our approach to capital allocation remains balanced and pragmatic. We continue to reduce debt and return value to our shareholders through our normal course issuer bid. At the same time, we maintain the flexibility to pursue strategic and selective accretive M&A aligned with our strategy should that right opportunity show up. And before I hand it over to Jeremy, I want to take a moment just to step back and frame how we see the next phase of our business. What we are seeing in the market today, particularly in the mid-market, continues to reinforce the direction that we've been intentionally pursuing over the past several years. Customer expectations are evolving towards fewer vendors, more integrated solutions and partners that can deliver dependable service in industry-specific context. In this environment, scale becomes a strategic priority, not as an objective on its own, but because it supports stronger economics, consistent execution and deeper long-term customer relationships. The key point here is that our ability to pursue scale is now an enabler for Sangoma rather than a constraint. The foundational work we completed has positioned Sangoma extremely well. We have the balance sheet, the operating discipline, platform breadth and the partner ecosystem required to grow organically while also being able to pursue opportunities that expand our scale and momentum as industry dynamics continue to evolve. As a result, we have real flexibility in how we move forward. That includes continuing to execute organically, selectively expanding the platform where it makes sense and maintaining the ability to evaluate broader opportunities as the market continues to mature. Any path we pursue will be grounded in discipline and clear focus on long-term value creation as we have been doing for the past 2 years. And importantly, we've already seen the impact of the foundation show up in the fundamentals, stronger bookings, growing recurring revenue base, improving churn and consistent cash generation. I want to thank this entire Sangoma team for their continued focus and execution as well as the key stakeholders who have been with us through this entire transformation. The progress we're seeing is the direct result of the work being done across the whole company, and its what positions us well for the next phase of our growth. Jeremy is now going to walk you through how the momentum is translating into our go-to-market execution and our booking performance. Over to you, Jeremy. Jeremy Wubs: Thanks, Charles. I am pleased to provide an update on our go-to-market progress. Building on the bookings momentum Charles highlighted, what I want to emphasize today is how those wins are being driven and why we're confident in the trajectory of our go-to-market engine. As mentioned, our pipeline remains healthy, and we continue to convert a balanced mix of volumetric business and larger strategic mid-market opportunities. During the second quarter, we closed $7.5 million of the $14.8 million in new large strategic deal TCV identified last quarter, bringing our total large strategic TCV bookings to $10.8 million for the first half of fiscal 2026. Equally important, we backfilled the pipeline as we move into the second half. These bookings further validate our strategy as an essential communications provider and our ability to move upmarket. Several of these large wins also include upfront product or NRR components and will contribute to a slightly higher product mix in Q3. In prior quarters, I referenced a number of our go-to-market strategies targeting service providers, MSPs, vertical solution providers and wholesale opportunities. Regarding the wholesale opportunities, last quarter, I talked about a CLEC win of over $20,000 MRR and a comparable deal in our pipeline for a large health care organization of $12,000 MRR. I'm very pleased to confirm that this opportunity, which supports 2 large hospitals and 9 urgent care facilities is now a closed win. We also closed a large multi-location retail customer worth $18,000 MRR that previously had 3 separate vendors for voice, access and managed services. This client was looking for a single provider and value the bundled solution from Sangoma to standardize the technology stack across all locations and ensure scalability, repeatability and simplified support. Our most substantial service win this quarter was a greater than $150,000 MRR deal with a large distributed retail customer with 350-plus locations and a fragmented and disparate business communications environment. This customer was also looking for a single provider to once again ensure scalability, repeatability and simplified support. Beyond these large and strategic MRR wins, our hardware products, such as our prem UC products, phones and gateways continue to contribute to our product revenue as they move through distribution. I'm very pleased that this channel continues to show strength with revenue up 4% over the same quarter last year. We are also seeing strong momentum with our carrier voice and trunking solutions. During the quarter, we announced a contract with Commio, who selected our wholesale SIP trunking solution to support their nationwide cloud voice and messaging footprint. They are one of many new customers that are leveraging our trunking infrastructure, which is up over 10% from the same quarter last year. I'm encouraged by the progress of our go-to-market. We have a disciplined and focused team driving a growing pipeline of volumetric business alongside larger strategic opportunities. These larger deals are being closed, and we will see the revenue impact in later quarters, providing solid visibility towards our growth. I want to extend my thanks and appreciation to the entire Sangoma team. It's truly a team effort for their continued execution and focus on driving sustainable, profitable growth. I'll end here and pass things over to Larry. Thank you. Lawrence Stock: Thank you, Jeremy, and welcome, everyone. We appreciate you joining us for today's call. Fiscal Q2 landed exactly where we expected, reflecting continued execution across the business. As a result of the bookings momentum in Q2, our starting backlog for Q3 is up approximately 125% compared to the start of Q2. This provides strong visibility into the second half of the year and reinforces the improving consistency of our operating performance. In the second quarter, we generated $10.1 million in net cash from operating activities, representing a 122% conversion rate from adjusted EBITDA. This reflects positive working capital movements as trade receivables returned to historical levels following the timing impact we discussed last quarter related to our ERP implementation. Year-to-date, our conversion of adjusted EBITDA to net cash from operations was 91%, which is right in line with our expectations for the fiscal year. Free cash flow for the second quarter was $8 million or $0.24 per diluted share. Given our strong free cash flow yield relative to the share price, we continue to take advantage of our normal course issuer bid. During the second quarter, we repurchased approximately 196,000 shares. Since launching the program last April, we have retired more than 700,000 shares or 2.1% of shares outstanding. This reflects both our capital discipline and our confidence in the long-term value of the business. We also continued to reduce debt, retiring an additional $5.2 million in debt during the second quarter. We ended Q2 at $37.6 million of total debt compared to $60.4 million in Q2 of last year. This ongoing deleveraging remains an important part of our capital allocation strategy. And as our credit profile improves, it further enhances our flexibility as we think about the next phase of the business. Quarter end cash was $17.1 million, up 27% from June 30. Looking ahead to the remainder of fiscal '26 and into fiscal '27, our capital priorities remain unchanged, leveraging strong cash generation to support organic growth and profitability, continue reducing debt to provide greater strategic flexibility, return capital to shareholders where appropriate, including through the NCIB and evaluate disciplined, strategically aligned M&A opportunities. This balanced approach positions us to drive durable long-term value creation. Now turning to the P&L. Total revenue for the second quarter was $51.5 million, representing sequential growth of 1.2% from Q1 as we had indicated last quarter. Excluding $6.4 million of revenue from VoIP Supply, which was strategically sold to exit low-margin nonrecurring resale activity, revenue was 2% lower year-over-year on a like-for-like basis. As Charles noted, services, which represents 92% of total revenue, grew 1% sequentially driven by higher cloud services revenue. Gross profit was $38.2 million in the second quarter, and gross margin improved to 74% compared to 72% in the first quarter and 68% in the prior year period, reflecting a more favorable revenue mix and continued strength in recurring services. Adjusted EBITDA for the second quarter was $8.3 million or 16% of revenue, consistent with Q1. We also had higher commissions tied to several large contracts booked in Q2, a healthy sign of commercial productivity. We expect adjusted EBITDA margins to improve in the second half of fiscal '26 as revenue builds and we benefit from operating leverage. With the first 2 quarters coming in largely as expected and a solid backlog, we are tightening our guidance for fiscal '26. We now expect revenue of $205 million to $208 million, adjusted EBITDA margin in the range of 17% to 18%. Achieving this outlook assumes other sequential revenue increase in Q3, and we anticipate returning to year-over-year organic growth once we adjust for the divestiture of VoIP Supply. We look forward to building on these foundations as we move through the back half of the year and into fiscal '27. Before we open the line for questions, I want to thank the broader Sangoma team. Your focus, commitment and execution continue to drive the progress we're seeing across the entire business. We're now ready to open the call for questions. Operator? Operator: [Operator Instructions] Our first question is from Robert Young with Canaccord Genuity. Robert Young: Great. The 67% quarter-over-quarter growth in MRR bookings, I'd like to dig into that a bit. What are the key drivers there? I mean you mentioned a lot on -- in the prepared remarks, timing of larger deals, higher close rates, I guess, the go-to-market biting where you want it to. Maybe you could just dig into that a little more because it's a big number. What are the key drivers? Jeremy Wubs: Yes. I mean the key drivers, Rob, is really tied to some of those larger strategic deals. We've got a really kind of healthy new partner program in place, and we're seeing some of those bigger strategic partners working closely with us to find larger logos. So some of those logos that kind of I mentioned just a few minutes ago, some of those larger deals are what grew both our pipeline and really our bookings quarter-over-quarter. Charles Salameh: And those are deals, Rob, has it going, by the way, pal? Those were deals that we started developing early in Q3 of last year and Q4, and they're just now they're coming into fruition, as I was talking about that the pipeline was building with these larger transactions, these multisite locations, and they started landing in Q1 and Q2, and we will see that continued trend going forward and hopefully growing. Robert Young: And that's my second question is just the trend. I mean that 67% growth quarter-over-quarter, but 60% year-over-year, is that the sort of growth in bookings that you anticipate? Or is there seasonality? Like is the pipeline still shifting towards large bundled deals that can continue to support that type of bookings growth? Or is this just a special quarter for that? Charles Salameh: No. Well, certainly, we're -- as I've said before, right, we've kind of gone from the transformational phase, which was sort of ending in June into the sort of growth phase. And the booking pipeline will continue to grow as the deals continue to grow. We built the company as I've been saying for 2 years, to integrate multiple components of essential communications to serve the rising more sophisticated mid-market. And the premise behind that was that this mid-market industry vertical is going to be looking for single vendors, lower TCO, top quality service to handle their essential communications. That's what we built. That's where now these last 2 quarters are beginning to show. We never had these size deals before. This is now a new area of business as we take the company. So this quarter and particularly in this first half, the bookings growth numbers are going to be big because we really didn't have it before. We had smaller deals, component selling in the past. So I think we are -- you're beginning to see the proof points of the strategy of integration and the idea of our ability to put larger deals together of components of voice, data, video security and hardware. Prove itself out now because we closed 5 fairly significant deals, and we see more of them in the pipeline going forward in the company. That is where this company is focused. That is our growth strategy. And now we have real proof points that validate the thesis that customers are going to be buying this way. Robert Young: Okay. And last question for me would just be on the wholesale activity. I think you had 2 this quarter, that you had talked about before. And so that's a relatively new channel, as I understand it. Maybe if you could just go into the opportunity in wholesale and white label a little more deeply and whether that's something that can significantly expand the TAM, grow the -- be supportive of accelerated growth maybe, and then I'll pass the line. Charles Salameh: I'm going to start with a real quick update on that. So the wholesale channel really is really about these large ecosystem partners, whether it's a carrier, a CLEC or even private healthcare, where you have multiple big hospitals that combine together with an ecosystem of special care centers scattered all over the United States. These infrastructures, these ecosystems are now being realized through our wholesale channel to be monetized, where the hospital themselves, for example, might say, "Hey, we want to have a standard offering for all the special care facilities that are attached to our ecosystem. We want a wholesale price for you for a bundle for a special care center 1, 2 or 3 depending on their size, and we want to make money off of that." Carriers the same way, right? They're buying our packages. They're wholesaling into their ecosystem of residential customers, small businesses that are attached to. So this idea of leveraging our ability to integrate and sell to the retail channel is now being used for the wholesale channel who can then use the lower retail -- or sorry, wholesale pricing to monetize their ecosystem. Do want to add to that, Jim? Jeremy Wubs: Yes. I'd just add, Rob, there's -- there are 2 big players that were in the industry selling soft switches, right, as well, right? So I mean, Microsoft and Metaswitch and kind of where all that went and then Cisco BroadSoft. And so there's customers that have been on those platforms. They're getting pushed to kind of new business models that don't have the same type of margin that they used to. And we've got a really great platform with our wholesale offering. So we're inserting ourselves into that transformation opportunity. And the 2 examples I gave are examples of that, customers that have soft switches, they're looking for something competitive that still held the kind of margin profile they had in the past. And so they're moving with us as part of that transformation plan. Operator: The next question is from Gavin Fairweather with ATB Cormark. Gavin Fairweather: Maybe just to start out on the bundling and nice to see some more examples of bundled wins. Curious how many of your kind of newer prospects are you seeing that are interested in a bundled solution? And how you're thinking about that opportunity in the base? I mean presumably, a lot of the base would still be kind of components selling. Is there a way for you to move in there and really kind of drive greater upsell momentum? Jeremy Wubs: Yes, that's a great question. I'd say there's 3 things, Gavin, to think about. One, we highlighted a few of these larger strategic deals that were kind of that full stack opportunity like we're seeing momentum and success for those. We're very bullish on more of that showing up certainly in our pipeline over the coming quarters. Second is kind of new customers, and we've reorganized our go-to-market to really focus on that integrated proposition, full bundle sales so that our partners are able to go out and kind of sell that full stack solution versus point solution. So those 2 kind of well in motion part of our plan. And then the third component kind of which you're highlighting is we do have a lot of customers that are single threaded with one single offer. We have a team very specifically that's actually using some new AI tools to examine analytically that base, use data models to look at where within those existing customers and partners, the opportunity to cross-sell and upsell. So that's a motion that the team is running now. We do a bit of upsell, I would say, today, not as much as I would like. But on a go-forward basis, we expect to see a pretty significant increase in the cross-sell, upsell for 2 reasons, one, like we've really put a focused team around it. And second of all, we are using some data models and AI tools to help us target those clients. Charles Salameh: We've also made it easier just close out part of the transformation, we made it easier through our coding tools to give our partners the opportunity to pick and choose from a menu of different items that they really couldn't do before, and we can present them now on a more concise bill. These 2 components that you've been hearing me talk a lot about were prerequisites to be able to do this a lot of you as more and more partners begin to understand that this tool is now there. There's kind of an easy button to put pieces together, the bundling proposition becomes way more attractive because it's larger commission for them. Gavin Fairweather: Great. And then just on partner maturity. I know you narrowed down your network of partners to a bit over 1,000. I'm wondering, is the read-through from the bookings that we're seeing that the partner network has really kind of hit maturity and is quite effective? Or do you think that there's further kind of partner enablement that you can do to help get to a new level? Charles Salameh: I think there's 2 things. One, the continued growth within the existing partner ecosystem because we're far more strategic with them, and we've given them tools to allow them to see the breadth of the entire portfolio of Sangoma. Secondly, there are -- is a much more focused effort on new partners because we've narrowed not only our partners, but we're also narrowing our focus, at least for the foreseeable fiscal year, which is let's go win and dominate in 4 verticals where we're very strong, healthcare, education, retail, hospitality. In those environments, we're actually acquiring new partners who specialize in these fields. And we're also partnering up with from not only a technical point of view, but also from an ecosystem point of view, software vendors who are very much entrenched in these verticals, whether it's Jazzware in and hospitality or QuickLaunch in education that we've had press releases on, where the partner ecosystem will continue to expand, but now with much more precision than we had in the past, where it was just a holistic set of partners who can advocate for us and just sell any one of our solutions, were much more precise. So you'll see deeper entrenchment with our existing narrow down partner group, and you'll see expansion of the partner ecosystem along the vertical lines that I described. Gavin Fairweather: Maybe just lastly on churn. I did notice the change in language from 1% to just under 1%. I think last quarter, you talked about some nonideal customers churning out that have been on 3-year contracts. I'm curious if a lot of that is now flushed through the system or do you think that churn could maybe move lower here in the coming quarter? Jeremy Wubs: I think we have a little bit of room, Gavin, to improve. I mean, for a couple of reasons. One is some of the more challenging accounts have kind of moved through the system. The second is similar to what I mentioned before about kind of data models to cross-sell and upsell. We have some new AI tools, again, data models to help us kind of target some customers that might have a higher churn propensity, and we're getting more proactive with those customers to kind of offer more for the same to competitively obviously protect that base and use it as an opportunity to cross-sell and upsell. Charles Salameh: I don't have a problem just telling you we're putting money into churn reduction, something we can't control, like macroeconomic issues, things that business is shutting down or what have you. We're not seeing that as a major part of our business. But there's also ways we can get proactive with customers, early renewals, things of that nature. And I set a pretty bold target. I want 0.85%. We were at 0.96%. We should be -- we're going to be focusing on trying to push churn down as much as we possibly can. And we've got a lofty goal to try and go after. So it's a very important part of our revenue plan and the way we handle LTV in this company. Because we're going after larger deals, churn is an important metric, and it's a very important priority for me and for, I think, where we're putting our money to invest in this company. Jeremy Wubs: The next question is from David Kwan with TD Securities. David Kwan: Just want to clarify one quick thing. Just on the revenue guidance. It sounds like you still think are expecting to grow year-over-year, excluding VoIP Supply starting in Q3 and then continuing into Q4 in addition to growing sequentially? Lawrence Stock: That's correct. David Kwan: Okay. Perfect. And as it relates to the product revenue, I think there was talk about expecting some higher hardware product sales in Q3. So should we assume that the gross margins probably are coming down a bit sequentially because of that due to revenue mix? Lawrence Stock: No, I don't think so. We're expecting our margins to be stable as we get into Q3. Q4, even with -- even if we did have some changes in the mix, I'd expect those to stay stable. Jeremy Wubs: A bit of the product mix is just coming from some of those larger strategic deals and there's a bit of NRR upfront associated with them. So it's -- we just expect a little bit of a shift. But again, it's really tied to the NRR associated with the MRR business. Lawrence Stock: That's right. David Kwan: Right. Perfect. And then as it relates to the growth investments, I know -- I think, Larry, you talked -- or not, Larry, Charles, I think you said in your commentary just about the $2 million, I think, that you guys were talking about last quarter as it relates to the investments kind of go-to-market. And I think it was talking about over the next few quarters, we saw a notable pick up in sales and marketing, which I would have expected, but also on the G&A side. So I was wondering if you could talk about, A, what some of that spend -- what that spend went into? And B, did you maybe expedite that spend level given the uptick we saw this quarter on the OpEx side? And is Q2 kind of the new baseline for -- that we should be basing our forecast off of? Lawrence Stock: Yes. So it's a combination of things, actually, David. So we did have some increased commissions in the quarter for some of the new bookings that we had. Excuse me, just the timing. We also had also in timing, some tax-related items that hit G&A this quarter. Nothing unusual, and that will fluctuate a little bit as we move forward but not by much. I would expect that we're in line with where we've been and that, that trend will continue for both G&A and sales and marketing. In light of the investments that we've made, I think we'll be right in line with that. David Kwan: Okay. Great. And just one last question. Curious what you're seeing in the M&A market. Obviously, we've seen some pretty significant downdrafts here on the software market in particular. So curious to see what you're seeing from an M&A perspective as you look at maybe adding some maybe tuck-in acquisitions. Charles Salameh: Well, when we started this journey 2 years ago, you heard me say this, David, a number of times, the whole idea was set the company up for optionality on what we perceive to be a market that will be under pressure because of some of the extraneous factors, some of them technically related around AI, some of them commoditization because there are a lot of players in the industry. I think it's an opportune time. We're seeing a lot of opportunities in the marketplace, both small scale and larger scale. We're seeing valuations come down. We're seeing our valuation kind of begin to be a little bit more level set with, I think, where the market was 2 years ago, which gives us even greater opportunity to get off our balance sheet position. So -- and we're seeing it across the spectrum, companies of all sizes and scales and of all dimensions that really add value to our platform, whether it's vertically oriented software companies, MSPs, which have really kind of come down in valuation, hardware companies, but we're not really interested in those, but security players and even distribution scale companies of our ilk, right, in the communications space, in the call center space. These are all areas where would be valuable to the platform, given the platform is now integrated and have come down in valuation that we can take advantage of, as I said in my comments, of leveraging scale as a strategic option for the company because the balance sheet is now at a point where it enables us to do so. So I think it's an opportune time the market is providing. I think I've said this before, even said to my Board today. I've seen this movie 3 or 4 times in my career where the industry offers opportunities and those who have strong balance sheets and good financial discipline can take advantage of the discontinuities that are occurring in the industry. And the M&A world is providing that opportunity as we speak. So we're seeing it across the spectrum. And as I said, I think the last couple of days of what you've seen in the market, I think, will continue. It will put pressure on the software industry, and we could take advantage of that. Operator: The next question is from Suthan Sukumar with Stifel Canada. Suthan Sukumar: Congrats on the quarter. For my first question, I wanted to talk about the partner ecosystem. It sounds like the -- post all the changes and investments you guys have made, the partner channel sounds like it's humming quite nicely here. Can you talk a little bit about the level of partner engagement and contribution to bookings growth versus your direct sales organization this quarter? And what are some of the metrics you look at to measure performance here on an ongoing basis? Jeremy Wubs: Yes. Thanks, Suth. I mean a couple of things. I mean the bulk of our revenue outside some of the sort of carrier trunking and other things we do are partner driven, right? So when you hear me talk about the bookings increase, the large TCV deals we've signed, those have all come through partners, really the combination of new, more strategic partners. Some of them are oriented around the verticals that Charles mentioned earlier. And then other just new partners, right, that are enticed by the bundles that we have and kind of getting out in front of their customers with that integrated value proposition. But I would say our partner program from a metrics perspective, it's certainly about are we signing up the kind of new partners, how quickly are those partners quoting, how quickly are those partners getting to win. So we sort of track the, call it, the life cycle of our partners, say, they're the right strategic fit. They are able to represent our value proposition well on to customers and they're quoting and closing business for us. So we keep a pretty close and kind of intimate eye on our partnerships and want to make sure we put all the right partner programs and support in place to help them grow because it helps us grow. Suthan Sukumar: That's great. For my second question, I want to touch on the on-prem component of your current pipeline. How is that piece trending now? And how do you think about the conversion of that pipeline over the course of this year? Just kind of curious how this is -- how this opportunity is tracking to your initial expectations. Jeremy Wubs: Yes. We continue to see our Prem UC business, Prem PBX up. It's been up every -- year-over-year every quarter for the last number of 4, 5 quarters, right? We've got great momentum there. We're typically seeing the share come from both Avaya and Mitel. Those are the places we've been hunting, like we're a little more oriented, which is probably not surprising around small, medium business, and that's kind of where our product sits. It drives both our prem solution as well as some of our phones. So it's continued to have strong momentum for us. There is an absolute market for prem solutions out there, certain customers profile, sometimes in government, education and others that want that solution, and we continue to see momentum there. So we're pretty bullish on continuing to take share and grow in that space. Suthan Sukumar: Okay. Great. Just one last question for me. Just on the -- just overall booking strength this quarter and kind of heading into Q3. How do you guys think about that conversion of bookings to revenues over the course of the year? I mean, to me, it sounds like these are some significantly larger projects than you've dealt with in the past. So it feels like there's more moving pieces than you might be used to, but just kind of curious what you're assuming here. Charles Salameh: I mean the book -- these types of deals do take time to roll out, like the one Jeremy mentioned that we won this quarter. It's 300-plus locations. There's a deployment of equipment at every location. There's an installing partner that's got to be on site. And you work as fast as you can with the client in combination with them to coordinate, dispatch and install and testing and so forth. And so we've got a pretty good machine running now. Joel Kappes, who runs our provisioning team. We've got a very disciplined, well-trained project management organization that understands how to thoughtfully and efficiently execute on these to roll out and convert revenue drop in the quarters as fast as possible, not only for our sake, obviously, because we want the revenue as quickly as possible, but customers want to move that fast. Once they get their understanding of the value prop that this is going to standardize their network stack, lower their TCO, they want to move fast, too. So you've got motivated customer, you've got a motivated company. And Jeremy and the team have done an excellent job of building the infrastructure, the process, the systems, the tooling, the competencies, the structure of the team to be able to execute on -- because both of us have had lots of experience doing this in our career, executing on these larger transactions. So it's not any more complicated unless you do the -- it's complicated if you didn't do the hard work of what we did in the last 2 years, which was transform the company and get it set up to do just this type of work. We see -- I'll just answer your question, we see revenue dropping pretty consistently from quarters of deals that are done in the previous quarters, right? So there'll be a natural wave that keeps building wave upon wave as bookings go up, that revenue can either drop from deals we may have signed 2 quarters, 3 quarters ago will drop into the quarters. And so our goal is to try and be much more transparent so you can see those bookings coming through. You understand the translation to revenue. You understand the provisioning cycle. And then within 8 months, usually to 10 months or so, depending on the size of the deal, you're going into full throttle for 3 to 5 years. And when you combine that with a churn rate of below 1% or 0.96% where we're at now, the LTV becomes very, very compelling. right? So you take the $11 million that Jeremy talked about, at those churn rates, you're going to assume they churn 3x. That's a $30 million TCV as long as you can keep customer service and all those things up. So that's how we see it. Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
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