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Operator: Welcome to the HMS Networks Q4 Presentation for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Staffan Dahlstrom; and CFO, Joakim Nideborn. Please go ahead. Staffan Dahlstrom: Thank you. Good morning, everybody. We are standing here from a beautiful winter Stockholm with snow on the street. It's a fantastic day. And we also have some good news to present quarter 4 report. Myself, Staffan Dahlstrom will start, and Joakim will take the following sessions about financial summary, and then we end up with a Q&A. So just a quick highlight. Quarter 4, we are quite happy to see a very good development on net sales, organic growth, 23% and that's good, we think. On the order intake, we see organic growth, but it's -- we see also that the market is still a little bit soft, a bit hesitant. We're happy to get to 3% growth, but we're also waiting for the pickup that we've been talking about, and we hope that this will come 2026 instead. Very good development on all our profits, depending on which line you look at, it's either 50% or 100% up. So it's -- we really see a good development. Good gross margin, good profits, and this lands in an adjusted EBIT margin of 28%, slightly higher than our target in combination with a good cash flow. And we are very happy to see this. And this -- Joachim will talk more about our net debt and things like that, but this really plays out with a good adjusted EPS of SEK 4.17. So we closed 2025 as a quite good year. Net sales, we are growing after quite a lot of years of inventory reductions and things like that. We are back in good shape again. We see the order intake has been growing organically by 10%. So the market is not great, but it's not that bad either compared to 2024. And SEK 911 million as the adjusted EBIT, and we see also at the end that we are doing a good adjusted EPS, SEK 13.73. And this also means that the Board proposed the highest dividend so far, SEK 4.80 per share for the meeting in April. If we look on the markets, we see in quarter 4, a small improvement in Europe, also in Germany, we are growing compared to last year. So even if the data isn't great for Central Europe, we're seeing that it goes in the right direction. We had a fantastic year in North America, but a little bit of softer market in quarter 4, especially for this larger project orders in infrastructure. We're also comparing ourselves with quarter 4 where we've got some really nice orders in North America. But we are quite sure that North America will pick up again. So we think this softer order intake is a temporary effect in North America. We also made a lot of changes in the Red Lion, and we got this new factory when we acquired this, where we keep on investing. We are seeing a much better delivery performance. We're not fully yet completed there. But so far, we are seeing that quarter 4, we're delivering a lot from the order book, and we're getting back into relevant lead times, and we hope to be fully in shape here in quarter 1. So that's good. We also keep our flag high when it comes to sustainability. So our planet target is important for us, and we got approval from Science Based Targets, a significant milestone for the company in our reduction of both reducing our own CO2, but also being active partner with our customers to help them reduce their CO2 impact for the coming years. So now we are committing to the 2030 targets, and then we also have the long-term targets for 2050. We made a small acquisition. We signed it last quarter, and we now 2nd of January, closed the acquisition of Molex Industrial Communication, a business that we are integrating now in Industrial Network Technology, INT division. And I just would like to show 2 slides to describe this acquisition. Molex is a gigantic private owned company by the Koch Industries family. They were saying that what we have in industrial communication, it's not bad, but we don't really have the ability to -- the size we have to really focus on it. And they were asking us, maybe HMS can take this and revitalize the business. They also felt that the main business for them is cables, connectors and these kind of things and these active components with software and hardware was difficult for the sales -- big sales teams to sell because it's very complex products. So we made a deal with them to take over this asset. So we get 2 R&D teams, 1 in Canada, 1 in France, 31 R&D engineers, very happy to get this. We are investing more in R&D. So getting more resources here is very good. But we also get complementing products and technology. We get large customers in mainly U.S. and Japan. Some of them are already HMS customers. But with this offer, we also can make a more complete solution. We paid USD 7 million, and we expect this to be north of USD 10 million in annual revenue. And what we do here is that the Molex products compared to HMS products, HMS is really working with what is called adapters. These are all the thousands of devices inside a factory that is sitting into robots or drives or sensors and these kind of things. And all these things are connected to the controllers of the network. So the high-volume products that HMS has been focused on, that is more than 90% of all devices, that's relevant for our current offer. But the network controllers where Molex is very good, they are less in volume, but higher in complexity, higher in price and making both these things are very important. And you see the examples here with our robot customers where we've been connecting the robot to the network, but also around Molex, we can also do sub networking around the robots, and we think this is a very good step for the division INT. And we are quite excited about how we can develop this together with the teams in Canada and France here. So a lot of things is happening. And Joakim, let's move into some numbers. Joakim Nideborn: Yes, let's do that. We will start with having a look at the order intake. And as Staffan already said, we do see a small organic growth of 3% on the orders. And if you see on the graph to the upper left, you see that we had a really strong Q4 in 2024, where we had some good project orders in the IDS business. And therefore, we think that 3% is not so bad actually, even if we strive for more than that, given the comparable, that's a fair number. You also see that there is a massive currency effect with a 10% negative effect from currency movements, where we see that especially the U.S. dollar, but also the euro versus the SEK is continuing to be weaker and weaker, and we've been seeing that also after the period ended. If we look on the different markets, we do see Europe continuing slowly but safely in the right direction. It's been improving throughout the year. And upfront, we thought this would be a little bit of a quicker recovery, but we still see it going in the right direction. So we think that is a little bit positive after all. And Staffan also mentioned that we had a bit of a weaker market in North America in the fourth quarter. Looking at the pipeline and so on, we believe that this is a temporary decline that we're facing. So we think that there is potential to improve a little bit from those levels going forward. If we look in Asia, we've been having a bit of a slow market in Japan for us, where China has been growing well the whole year. And now we do see a bit of a recovery in Japan. It's related a lot to INT business and some of the big customers coming back and placing some orders. This inventory buildup situation with our customers have been the largest in Japan, and that's why that's been taking a bit of more time. And overall, if we lift the view to a higher altitude, we see that for the full year, we see organic growth now in the orders of 10%. So it is moving in the right direction, and I think 10% is a decent place for us to move forward here. Going over to sales, a little bit of a different situation. We have very good deliveries in Q4. So we reached SEK 951 million in sales, organically plus 23%. And the reason -- the story behind this is basically what you saw in the order intake in Q4 2024 and Q1 2025, when we had a lot of good project orders where the bulk is delivered now in Q4. So we managed to deliver out on that nice backlog, and we've been fighting a lot in our delivery -- on our delivery sites, especially in North America, to get all the goods out. And I think we managed to catch up fairly well in Q4 to what we're supposed to deliver and try to keep our customers as happy as possible here with the lead times. Looking for the whole year, we've been struggling a little bit in the first quarter, also due to pretty strong comparables in 2024. And now we actually turn the whole year positive growth, organic growth of 3% with the strong ending of the year. So of course, we would like to show more than 3% growth for the full year, but it's good that we can turn this around and show a positive development. It's been a bit of a bumpy road for the last year for us, and we've been having maybe a little bit more than the industry average, having the inventory buildup during '22 -- '21 and '22 and then the reduction in '24 and maybe partly in '25 as well. So all in all, showing growth is good to see. The drivers of the growth is a lot the IDS division and the North Americas market, where we're doing those good deliveries in the fourth quarter. We also see on the sales side, continued recovery in Europe, same as on the order side, slowly but safely better, that's not the main driver in the quarter, but it's going in the right direction. And of course, also here, you see overall that the currency is playing a big role. So it's a pretty big difference on the reported and the organic numbers. For the full year, you also see that we have a pretty big acquisition effect with 18% growth from the Red Lion and the PEAK acquisition. A few words about the divisions. You have first IDS, Industrial Data Solutions, where I think you see in the graph, you see the story that I was talking about with really good order intake in Q4 and Q1 -- Q4 '24 and Q1 '25. And then you see the sales graph is improving in Q3 and especially in Q4. So I think those project orders that were received in the end of '24 and beginning of '21 -- sorry, beginning of 2025, you should maybe see that more of the sales graph that it's evening out a little bit over the period. And with that strong comparable, obviously, the order intake is down now 15% organic. We would love to see a little bit more than SEK 374 million, and we think that we have a good chance to improve going forward here. And on sales, of course, a very nice number, SEK 481 million, and as I said, deliveries of these big projects. So I think we're very happy about the delivery in IDS. We do almost 29% margin in Q4, which is extremely high and not something that we probably will show going forward. For the full year, we are now at 24% in this business. And then with 2/3 roughly coming from the Red Lion acquisition, we're very happy with that development that we've had over this period within the HMS family. And this, of course, is a big contributor to the overall strong profitability in Q4. Then over to INT. And here, we see pretty clear this gradual improvement that we were talking about. You see on the order side, now we have 17% growth that we present. Organic, this is 27%. So in that pretty big currency headwind, we're still managing to grow this in a good way. And the main thing we see here is that some of the bigger customers are coming back, filling up their inventories and also the European market, partly also the Japanese market are now coming back and placing orders. So this is very positive, we think. And you see not maybe the full thing converting to sales, but also sales is moving in the right direction and showing a 13% organic growth. As you know, this is our cash cow, delivering really solid margins. We do 31% margin in the quarter and almost at that level for the full year. So this is a very solid business. And the team now will have their hands full with integrating this Molex acquisition and also delivering on the strategy for 2030. So it will be an eventful year 2026 in INT. And then we have New Industries. Also solid development, both on the orders and on sales. Organic orders, 18% up; organic sales, 12% up, and an okay quarter. We would maybe like to see a little bit higher margin, but 22.7% is an okay level. We had, in Q3, a very good development in building automation. Now it's a little bit softer in building automation, a little bit better in vehicle communications. So it's good that those parts are complementing each other and smoothing out the curve for us. Over to the profitability and obviously, a record profitability in the quarter, SEK 268 million in the adjusted EBIT, a 28% margin, which is, of course, strong for us. And for Q4, it sticks out maybe even more where we normally have a bit of a higher cost in Q4. And we don't see the same increase on the cost side in Q4. We are starting some of those development projects that we presented earlier this year on the Capital Markets Day. We will see those projects coming rolling into 2026 and onwards with us trying to deliver those 2030 strategic plans. So all in all, over SEK 900 million, SEK 911 million for the year, 25.5% in adjusted EBIT margin. I think that was good to see that we managed to beat the long-term goal of 25%, and this puts us in a good position for the future as well. The good profitability comes from primarily the volume increase. The gross margin is stable at 63%, in line with our own expectations, and we think that's fairly where we should be with this constellation that we have in the group. And maybe the other thing that sticks out a little bit is the lower OpEx, where I think we've been still being a bit careful on the cost side. And as I mentioned before, we will start doing a bit more investments going forward. Maybe to mention also on the FX side, we've been having a -- you've been seeing the FX effects a lot on the top line, not to the same extent on the bottom line due to some good hedges throughout the year. We're starting to see that effect wearing off a little bit now. The hedges are not as good as they were before, not the same high rates. And we do see an EBIT impact of minus SEK 15 million due to currency, which is a bit more than what we've seen earlier this year. And yes, with the recent development of currencies, I think this is something that we need to keep an eye out for in 2026. So there will be a bit of an impact from this going forward, obviously. And then to our EPS. And I'm showing in the graph here an adjusted EPS of SEK 4.17, which is in itself very nice. The reported EPS is a lot lower, SEK 1.44 compared to SEK 1.49. And then obviously, we have the net financials and all that is nothing strange. But we also have a nonrecurring tax effect of SEK 104 million, which is related to the Red Lion acquisition, and we elected to do a so-called 338(h)(10) election. And that basically means that we're treating for tax purposes in the U.S., we are treating this acquisition as an asset deal. So we have an amortization of the -- all those assets that we got in the deal, which will lower our tax in the U.S. for the coming 15 years. And that is giving us now a positive effect to make this election. We need to pay this onetime tax, but we will have a pretty big upside for the coming years. So the net present value of the tax saving is a lot bigger than this cost that we take in Q4. This is really complicated and complicated material and very special U.S. tax laws that we're working with here. So this is the situation, and we're going to look into this forward if it's really right that it should be SEK 104 million. Looking for the full year, we do SEK 13.73 in adjusted EBIT (sic) [ EPS ]. It's plus 42% compared to a year ago. And the Board, as Staffan mentioned, also proposes a dividend of now SEK 4.8. And the reason it was 0 last year was not that we didn't make any profits, it was that we made 2 really big acquisitions and to not having to take in more new shares, we elected to cancel the dividend for a onetime thing in 2024. And then over to the cash flow. So here, we have continued improvements on working capital and inventory reductions. So we've been now reducing our inventory for the full year of SEK 207 million. And that is, of course, helping the cash flow a lot. We do SEK 231 million in the quarter and SEK 877 million for the full year, which we are very happy with. And the cash conversion is still quite good, 82% for the full year. And obviously, this onetime effect in tax is holding back the cash flow with SEK 104 million. So without that, you would have seen a record cash flow for the group. And for the future, we still believe that we are in a pretty good situation here. Even if we grow in 2026, we believe that we should be able to keep working capital neutral, maybe even reduce a little bit of inventory further. So we should be able to show a good cash conversion also for the coming year. And then to -- I just love this graph to the left, the net debt graph. It's continued to be reduced. And we were in a situation a year ago where we took on a lot of debt to make these 2 acquisitions in 2024. And of course, in my role, it's really nice to see that we are following the plan and managing to close the year net debt-to-EBITDA pre-IFRS 16 of 2.13. And we said here before that we should be in line with our long-term target to be below 2.5 and that we can also deliver that is very good to see. And of course, has a lot to do with the good performance and the strong cash conversion throughout the year. In Q4, when we have now a new strategic plan in place, we also signed a new financing agreement in December here with 2 Swedish banks for the coming years to be able to finance our expansion plans in the 2030 strategy plan. Finally, to -- before we'd like to open up for questions, some takeaways for the full year, if we look what's been happening. From an internal perspective, we've been making a big change from the 1st of January 2025 with a completely new organization, a pretty big change actually going into 3 divisions with now full accountability of strategy, resources, finances and all that comes with that. And the reason for that was to get the full customer focus throughout the whole organization from sales, from R&D, from product development and all this. And I think with the performance in the year, we are quite happy how this has been actually playing out in real life as well, taking it from the plan to reality. And as a step in the new divisions, we also worked with the 2030 strategy. All divisions have set their own strategy for 2030 here that we presented in September. Performance-wise, we still managed to deliver some organic growth in what we say is a bit of a challenging or a bit uncertain market with a lot of macro challenges being -- that's been playing out throughout the year. We grow now the orders by 10% and sales 3% for the year. And we managed to also to lift the profitability and show a really good cash flow with an adjusted EBIT that is up 37% in the whole year, delivering 25.5% margin. And solid cost control is, of course, a good part of delivering that good results. And also, as I mentioned before, the cash flow that we managed to convert those profits into cash is, of course, very key for us. So all in all, a solid year. And with that, we are sure that there are a lot of questions from the group. So feel free. Operator: [Operator Instructions] The next question comes from Simon Granath from ABG. Simon Granath: Congrats on the very impressive margins here. I'd like to start on the supply chain and see if you could help us understand the impact, if so, from rising memory prices. How much is memory prices of the bill of materials? Can you pass this through to customers similar as you have done in 2022, but also in 2025 after Liberation Day? Or should we assume any margin headwind ahead? Staffan Dahlstrom: Actually, in our more embedded electronics, the portion of our material cost for memories is not that significant. So our products are not memory intensive. So this is not something we worry about. Maybe the only benefit with a weaker U.S. dollar for us is that many of the electronics components are based in U.S. dollar. So may we get a little bit of tailwind there. But all in all, this is not something we worry about for our products. Simon Granath: Very clear. And on orders, you mentioned that you think the weakness in North America is temporary. Could you shed some more light on what indicators you see that makes you anticipate that? Is it perhaps connected to customer dialogues or similar? Staffan Dahlstrom: I think many of these larger projects we had last year in quarter 4, they are large and also difficult to predict when they land. So we are seeing still good activity, but we haven't really seen that we had closed any larger of these orders as we expected. So I think this is just delays, and we expect this to be temporary. And since it's a few larger orders, it's also difficult to predict the effects. So we think activity is still good in U.S. And if we here in Europe are concerned about the uncertainty, we don't feel the same kind of uncertainty in the U.S. market. They keep on investing in infrastructure and automation over there. So it will come back in U.S. Simon Granath: Sounds very encouraging. And just a final question for me. I know that Joakim mentioned or did make one comment around the cost, given your comments at the CMD of gradually increasing investments ahead. How should we think about this? Is it fair to assume that this will be more back heavy in 2026? Or can you give us any more light on timing consideration about these growth initiatives? Joakim Nideborn: Absolutely. So I think you will be seeing a gradual increase in the OpEx throughout 2026, starting ramping up pretty much now, and then it will probably increase throughout the year, with us adding some extra resources to carry out those plans. So it's -- maybe that's good enough for you. I don't know what you're after, but it's -- you'll see gradual improvement and exactly what percentage is up, I think we keep for the time being. Simon Granath: Congrats again on the strong results. Operator: The next question comes from Gustav Berneblad from Nordea. Gustav Berneblad: It's Gustav here from Nordea. Maybe just to build on Simon's question on costs and the OpEx there. I mean, looking at your administrative expenses, I mean, if we look at the sequential delta from Q3 to Q4 last year, these costs were up SEK 18 million. Looking at the delta this year, it's down SEK 20 million from Q3 to Q4. So can you just help us understand this effect? And is this the new base? Or is there something extraordinary here impacting this quarter? Joakim Nideborn: Maybe just first comment. I think what is -- comparing 2024 to '25 is very difficult to do on a line item base. Since when we made a new organization change, we completely changed the classification of the cost. So it's very clean. Now everything that has to do with something around admin is in admin, even if it's a sales admin person. So maybe that's a clarification, first of all. And then the reason for being a bit lighter in Q4 is that we've been doing some of the investments on the ERP side throughout Q2 and Q3. That is now done in Q4. So that has taken down the admin burden a little bit on the ERP development or the rollout in the U.S. And also the integration project is more or less done when it comes to -- fully when it comes to Red Lion and to the largest extent when it comes to also to PEAK. That's maybe the 2 main things that is taking down this cost level. Gustav Berneblad: Yes. Okay. Got it. But I mean, the first part there, I mean, that would likely increase the admin expenses because you have moved the cost from selling expenses to admin, right? So that would be sort of contradictionary or... Joakim Nideborn: It's -- so in admin now is a larger share than what it was before. And then, of course, there is a reduction compared to 2024 in the overall cost base. I mean we're growing, what do we say, 3% organically in Q4 on the cost side. So we've been -- only been adding 3% organically. And then you have the FX effect on that. So in reported figures, it becomes less than it was a year ago. That makes sense? Gustav Berneblad: Yes. Okay. Perfect. And then yes, yes. Maybe then, is it possible to say anything how demand has continued here in the early start of January? Joakim Nideborn: So just to clarify the last question as well. If you're talking about the development from 2024 to '25, the main reason for the decline is, of course, the currency. But I think your question was about why it's lower than in Q3, right, in this year. So I think the ERP is the answer for why it's lower compared to Q3 this year and otherwise, it's a currency. Gustav Berneblad: Okay. Perfect, Joakim. And on the start here in early January, is it possible to say anything there? Staffan Dahlstrom: It's, I mean, very early. We keep on tracking. Joakim Nideborn: That's pretty much the same pace as you see in the quarter. Gustav Berneblad: Okay. Perfect. And then just the final 1 here on the order backlog. I mean, it has been reduced as we've seen here in Q2, Q3 and Q4. So do you still see that you have excess orders to deliver on here short term, would you say? Or is it sort of stabilized at lower levels now? Joakim Nideborn: It's pretty much stabilized. We do have a couple of tens of millions left, but it's been really important for us to reduce this backlog because the customer wants the goods. So that's why we've been struggling or fighting in Q4 to be able to actually reduce the backlog and get the deliveries out to our customers. But from now on, I think you can expect that I've said it a couple of times before, and I think now is another one of those situations where we need to get in when we're going to deliver out pretty much. So book-to-bill should be around 1 or maybe increase higher than 1 in 2026. Staffan Dahlstrom: I think in addition to this, we are during quarter 1 here, completing all the investments we've done to making sure that our new factory in York, Pennsylvania becomes state-of-the-art high-tech manufacturing. We've done a lot of things there. So the capacity will increase. We see it already in Q4. We see another expansion in Q1. So from Q2 and onwards, we will have better delivery capacity. So of course, we are open for more orders because we can't ship. So it's a big focus also to make sure we fill up the order pipeline as well. Operator: The next question comes from Erik Larsson from SEB. Erik Larsson: A follow-up on North America and the project orders. So is it a fair observation that in 2025, you really only had project orders in Q1, whereas Q2, Q3, Q4 was a bit slower? And had just another question on that topic. How would you look at project orders in 2025 versus previous years? Is it lower or higher than usual, et cetera? Any flavor there? Staffan Dahlstrom: I think many of these project orders, if I start, Joakim, is related to Red Lion. So it's quite new for us with this kind of larger project orders. And we see that since it's large and not so many, it's a bit bumpy. And I think Q4 2024 and Q1 2025, we got better-than-expected orders. Since then, it's been I guess, lower than expected. Joakim Nideborn: I think maybe the main difference is the size of the orders. We do get a lot of product orders, but the size that we had in Q4 and Q1, that's kind of unusual. And that size we haven't seen since then. Erik Larsson: All right. And then second and final question, I just noted your peer, I guess, Ependion established a business unit within defense with pretty high ambition. So I'm just curious if you have any defense exposure, if you've thought about this, any opportunities or so? Staffan Dahlstrom: We got a lot of questions from investors about this. We have quite little. I mean, could it be less than 1% of revenue will end up in defense applications. And mainly, it's not really in, I would say, more in application where you have automation of these things. Most if you look on Swedish factories, for example, as one big factory up in Örnsköldsvik making tanks for BAE. I mean this is not high-volume manufacturing. We are looking into some customers where there is more ammunition and there's more automation. It's a new field for us. We have very little business. Maybe it's potential there. But yes, for us, it's a small market today. Operator: The next question comes from Fredrik Lithell from Handelsbanken. Fredrik Lithell: I would like to have a little bit of discussion hearing your views on the very strong margin progress you have in IDS. I understand it's probably driven a little bit by Red Lion. So if you could sort of explain a little bit what you have done in Red Lion and what that brings to the table would be very interesting. Joakim Nideborn: Of course, we'll try to cover that. It's a couple of things. Now of course, if you look in the quarter in itself, it's obviously a lot driven from volume. But over the year, as I said, we've pretty much taken the business from like a 20% business to now maybe 24% for the full IDS, where 2/3 of IDS is now Red Lion. There are a couple of things we've done on the gross margin side. We've been doing -- we're now through all the investments in the manufacturing that has been helping a lot. We've been looking into the distributor and reseller structure and change the discount programs a lot. So the ones that actually promote our products will have high discounts and the ones that do not, they will have a reduced discount. So doing some cleaning on pretty simple things. I think that's maybe the main thing. And then we've also been looking into the cost structure a little bit, taking out more or less a layer of management and now been making also the ERP investments to be more efficient and be able to use the back-office functions of the whole group around the world. So it's a couple of different things that we're doing to get to these improvements. Staffan Dahlstrom: And Joakim, when we acquired Red Lion, one thing we identified when we start meeting them was that they didn't really have the ambition to improve their margins, and we saw some real low-hanging fruits, but there were no push for picking it. So I think also we've just been executing on some of the things we saw when we acquired them. So it's not really complicated. The discount changing -- implementing our manufacturing system where we have some things in-house, something outsourced to partners. So I think all this is falling into the right places at the moment. Joakim Nideborn: And maybe 1 final thing to get also our sales team some credit. We have been seeing now some cross-selling as well that is helping this, a couple of million dollars. So that's also been good. Fredrik Lithell: Would you say that you now are on the right level? Or do you still have maybe not low-hanging fruits, but do you still have structural improvements that will continue to push the margins higher over time the work on Red Lion. Staffan Dahlstrom: I think we don't want to get inflated expectations. But of course, we also have ambition internally to drive this. So we're a little bit careful about how we answer this. But there are more things we can do, but the fruits are higher up in the tree now. Fredrik Lithell: Okay. My second question is the 338 tax sort of application that you did send in and that gave you a charge of SEK 104 million in the quarter. Is it possible to somehow gauge sort of the benefits you see over time sort of a net between the 2? Is it very big compared to the SEK 104 million you had as a charge in the quarter? Or is it closer to? Joakim Nideborn: So it's a super relevant question. And if I would have been 100% certain of the full impact, I would give a very clear answer. I'm not 100% certain. I can give you some direction. So what it will mean, you will not see anything in the P&L. So the tax cost will still be there. But cash flow-wise, there will be a part that is not payable. So it's -- overall, I think that the potential will be around 2% of the group tax cost for the full year. That's around the upside that we will see yearly. But you will not see [indiscernible] and this is -- everybody loves IFRS, right? And this is a rather technical thing. Fredrik Lithell: Yes. All right. Understood. Final question. You talked a little bit about your ERP implementation. Could you describe a bit wider where you are in that process on a group basis and what you have in front of you in terms of the various parts of ERP project would be interesting also. Joakim Nideborn: Yes. So we started this project in 2023. And since then we rolled out the same ERP and more or less the full group. And during 2025 and up until Q3, we also implemented this in Red Lion. So we have now one common ERP, one common CRM, which we think is great for enabling all the cross-selling and see all the customer activities in one system. What is left is the sales entity in Australia and also now the new acquisition with PEAK. And the Molex acquisition, since that was an asset deal, we cannot get that implementation for free. So that is already done. It's already working in the new system. So it's not a lot left for us to be in this structure. And it is, of course, a big project that has been going on for now some years with different intensity throughout the different quarters. But it's an investment we've been taking. And I mean we've been seeing -- you see also in the admin cost this year that we do see a payoff from that investment. So soon we'll be there with the full implementation, and then I'm sure we'll have acquired something else to keep it going for the future as well. Operator: The next question comes from Joachim Gunell from DNB Carnegie. Joachim Gunell: So we can perhaps start with where we left off. So in light of the stellar deleveraging progress here and the financing agreements in place, can you just talk a bit about your appetite when it comes to go back into more an active acquisition mode, I mean, Molex aside? Staffan Dahlstrom: I think we are feeling that we have good financing. We have a debt level that is good for us even after this dividend we do. So I think we are positive and we see continued strong cash flow going forward. So we have an appetite. We work mainly now in each division. And in each division, they have their own pipeline and looking for this. But of course, it's not easy to find this. It's always long processes. Most of the companies we look at have been private or privately held. That's a very long process. So we have the appetite. The challenge is to really identify and take these processes forward. So I think that's where we -- it's difficult to find and it's long processes. So -- but appetite is there. Joachim Gunell: Understood. Perfect. You talked a bit about the -- an update on the York facility investments here. But can you mention just a bit where you are in terms of capacity utilization in your U.S. operations? Staffan Dahlstrom: Are we? Yes, if you -- maybe quarter 4, we felt there's some general things in ERP and stuff like that. If we look more on the things we love here with machines and stuff like that, I think quarter 4, we were halfway and quarter 1 will be the full way in equipment and the software and all these things we do. And actually, what we have done is that we did not move to a new factory. We refurbished what we had. So it's been a bit of -- we're talking about a factory that had not been getting a lot love in the last 15 years, I think. So there's been a lot of -- it's from changing lightning in the facility to change new concrete floor. It's really been starting from the beginning. But what we see now is something that looks really great, and we hope that this can also be like a way a showroom for customers to see that for -- this is how we should do manufacturing. And it's not so common in U.S. to have this kind of modern manufacturing. So we hope that this can also be a showroom to customers to show that automation is the way forward also in U.S. So we are, yes, halfway there. Joakim Nideborn: I think you can say maybe in Q4, SMT was capacity constrained in the U.S. And now with the new investments in place, it will not be capacity constrained going forward. Joachim Gunell: That's clear. And then the INT EBIT margins were strong here again despite volume, call it, perhaps being slightly low and then also the FX headwinds. So what's your confidence on maintaining this high level of profitability in this division as the volumes potentially recover? Staffan Dahlstrom: For INT, I think we have some small customers and some large customers. What we are waiting for is the bounce back at some of the large customers that we -- in Japan, we see still some inventory at some INT customers. But what's different here is that the product mix per customer generate different gross margins. So here, we see a little bit of disappointment on the revenue, but very good gross margins. But if revenue have been increasing on these large customers, we would see slightly lower gross margins as well. So that's -- it's not easy to --... Joakim Nideborn: I think there are 2 -- maybe 2 things. One is what Staffan said, that we might have a bit of a gross margin pressure in INT with the large volumes coming back. And then we should also keep in mind that this Molex acquisition is fully integrated in INT and we'll have a little bit of dilution affected margins. We will still expect it to be good, but it might be a little bit down from what you see in 2025. Joachim Gunell: Lovely. And just to end, just on this -- the customers' conversations and how they are evolving, in particular the U.S., you mentioned the broadening and deepening here. Can you just talk a bit about what that means for you? Staffan Dahlstrom: Yes. I think what we say here, we feel good activity. We have not seen so many of the larger projects. But in general, it's a solid market. We think we have good access to customers and doing the right thing. We have a very motivated and well-integrated sales teams now. We have a good relationship with our distributors, so highly motivated. So I think we are we are in a good situation. The market is not great, but it's good in the U.S. There are investments. People are quite optimistic, and we also see many companies who want to have more manufacturing in at least North America, which drives the investments in Mexico and other places, but also in domestically in U.S. So we think it's a good market, and it will bounce back for us after quarter 4 here. Operator: [Operator Instructions] The next question comes from Gustav Berneblad from Nordea. Gustav Berneblad: It's Gustav again from Nordea. Just 1 follow-up, sorry. Because in Q3, you guided or commented on a potential negative impact here in Q4 from production upgrades. I guess that's related to IDS here. But just a clarification, is there any negative impact here on IDS that you're not discussing? Joakim Nideborn: You mean in the gross margin? Gustav Berneblad: No, on just on the EBIT margin that you report here on 28.9%. Joakim Nideborn: I think what we probably were talking about in Q3 is since we went into this upgrade of facilities, we would maybe have a bit extra challenges to deliver. I think that's what we've been talking about that we've been really -- I think the team has been doing a great job to get all the volumes out. And there is maybe a little bit on the OpEx, but it's minor. I mean the most part is CapEx in that upgrade of facilities. So maybe SEK 1 million or SEK 2 million in OpEx, but the vast majority CapEx. Staffan Dahlstrom: I would say rather opposite, I think, Q4 was in IDS was better than expected. We are quite impressed about the team here and we saw some risks go into Q4, and they've really been managing this well. So it's been better than expected. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Staffan Dahlstrom: Thank you. All right, everybody. Thanks for joining this call and helping us to close a good year 2025. We're very happy to see the good development of our organic growth coming back again. And of course, also the integrations of Red Lion, PEAK, that's been instrumental for our growth going forward. I'm also very happy to see that we have the new acquisition INT coming in, and we are quite excited about 2026. Of course, we live in a world that is quite uncertain, but we think we are at a good place in our market, and where we see continued future for investments in automation and this regionalization. So we remain fairly optimistic about 2026, I think, and, of course, it's good to also close the year with good cash flow and solid net debt and stuff like that. So we feel that we are in a good place for the coming quarters. And we hope you join us for the coming quarters and look forward to talk more about this after quarter 1. All right. Have a good day. Thanks, everybody.
Louise Tjeder: A warm welcome to Sandvik's Presentation of the Fourth Quarter Results 2025. My name is Louise Tjeder, Head of Investor Relations. And beside me, I have our CEO, Stefan Widing; and CFO, Cecilia Felton. We will start off with the presentation. Stefan and Cecilia will take you through the highlights of the quarter and the remaining time we will spend on the Q&A session. So, let's start. The word is yours. Stefan Widing: Thank you. And also from my side, of course, a warm welcome to the fourth quarter report in 2025. If we summarize the quarter, we see a strong ending to the year with double-digit order intake and revenue growth. We see a strong demand in mining and infrastructure is continuing to improve. There's a mixed demand in cutting tools with strong demand in, for example, aerospace and defense, while automotive remains weak. We also see a strong demand in both software solutions and powder solutions. Total order intake grew by 4%, and the organic order intake growth was 15%. Revenue increased totally by 1% and organically by 12%. We also see a stable margin on the significant currency headwinds. Adjusted EBITA came in at just below SEK 6.4 billion, corresponding to a margin of 19.6%, which is a slight improvement versus last year, even though the figures round to the same number. On the rolling 12 months basis, the margin is 19.3%, up from 19.2% in the year before. The savings in the restructuring programs had a positive bridge effect of SEK 131 million in the quarter. And the adjusted profit for the period came in at SEK 4.2 billion, up from SEK 4.1 billion. We also had a strong free operating cash flow of SEK 6.7 billion, corresponding to a cash conversion in the quarter of 110%. A couple of strategic highlights, as always. We continue to see strong momentum for digital solutions in Mining. In the quarter, we booked two large automation orders, which were significant. We also see strong growth in our software offering in mine planning. And overall, Digital Mining Technologies booked good double-digit order intake in the quarter. And for the full year, the business also grew in the double digits. In Intelligent Manufacturing, our Metrologic business unit launched a new version of their software, where we now include our Copilot AI technology also in this software. They also launched a New Machining Module, which is important for us because it means that the Metrology software will, based on the measurement, recommend machining process updates to ensure that the component is more aligned with the intended design. So, we start to connect the loop between metrology and machining. Rock Processing launched a new Jaw Crusher platform with significant new automation features, also significant productivity gains and longer service life. And this platform also received Sandvik's Internal Innovation Prize Award in 2025, because of the significant improvements in the product. If we look at the market development, and we start with a geographical perspective, Europe was up 13%. And here, cutting tools was up in the mid-single digits. North America, up 9% with cutting tools up in the high single digits. Asia up 14% and China cutting tools up in the double digits. And then mining markets, Africa, Middle East, up 5%, Australia, up 43% and South America up 13%. So, solid growth across all geographies. If we then go to mining, as I said, we continue to see strong demand basically across the board. General engineering, here, underlying, it's stable, but we do see low double-digit growth, driven then by good double-digit growth in China. Europe up low single digits and North America up mid-single digits. In infrastructure, we see continued improvement in particularly driven by North America. But overall, on a global scale, we still characterize it as a fairly stable development. We also see some signs of improvement in Europe. Automotive is a bit weaker, overall, up in the low single digits. Europe is flat. North America up mid-single and China is down high single digit. Aerospace, strong, up in the double digits, and both Europe and North America is up in the double digits, while China was down in the double digits, primarily driven by timing of orders. In the other segments, we are up high single digits. Europe is up high single, driven then in particular by defense. North America is up mid-single, while China is flattish. Summarizing then the order intake and revenues. We booked orders in the quarter of SEK 32.7 billion, revenues SEK 32.5 billion, and this is a positive book-to-bill of 101%, which is fairly unusual in the fourth quarter where we typically have strong deliveries of equipment. But thanks to the strong order intake, we still maintain a positive book-to-bill also this quarter. Looking at this from another angle, we can see the order intake continues to be strong in the solid double-digit space. We also see revenues picking up also now in the double digits. And this is, of course, a consequence of that we are also now delivering and invoicing mining equipment at a higher level than before, showing that we have managed to ramp up production to meet demand in a good way. Adjusted EBITA improved by 1.4% in absolute terms, SEK 6.4 billion almost, up from almost SEK 6.3 billion last year. This corresponds to a margin of 19.6%. And here, we see solid leverage on the higher volumes. We also have good price execution and good savings, but then offset by the strong currency headwinds. The currency impact came in at almost SEK 1.2 billion negative, a dilution of 130 basis points. And as you know, this is a more adverse headwind than we had guided for when the quarter started. Of course, driven by a continued weakness of the U.S. dollar and a continued strengthening of the Swedish SEK. Rolling 12 months then a margin of 19.3%. Going first into the Mining business. We continue to see a strong momentum with strong demand both for our underground and our surface solutions. We see a double-digit organic growth across all our equipment divisions as well as Parts and Services and Digital Mining Technologies. Total order intake increased by 5%. The organic growth was 17% and the growth of equipment was up 39%. Excluding major orders, we were growing organically by 12%. The adjusted EBITA came in at just below SEK 3.4 billion -- sorry, SEK 3.8 billion, corresponding to a margin of 21.5%. We have good leverage on the higher volumes, but it is offset by the very negative currency. The operating leverage was 32%, which we are satisfied with in this business. The currency then was negative by over SEK 700 million year-on-year, corresponding to a dilution of 120 basis points. Rock Processing. Here, we saw order intake in the mining part of the business declining year-on-year on tough mining comps. The underlying market demand was robust. We saw solid demand in infrastructure, driven in particular by U.S. demolition and recycling as well as for the first time in a long time, I would say, an improvement in aggregates. And we also see positive signs in Europe. Total order intake declined by 9%, but organically, it was a black 0%. And excluding major orders, it was an organic growth of 2%. Adjusted EBITA came in at just below SEK 400 million. This corresponds to a margin of 14.5%, slightly down from 14.6%, but a strong operating leverage of 41% with good savings was offset then by a very negative currency impact, almost SEK 100 million negative impact corresponding to a dilution on the margin of 170 basis points. And then Machining and Intelligent Manufacturing. Of course, the last quarter, we will present this in this form. Going forward, you will see these two businesses being reported separately. We see a mixed demand for cutting tools between the regions and segments. Strong demand in aerospace and defense, as I've said, while demand in general engineering improved, but it was primarily then driven by a strong development in Asia and China, while automotive remained weak across more or less all the regions. Orders in cutting tools overall increased in the high single digits. It's partly due to low comps. Remember, for example, that Boeing was on strike in the fourth quarter of '24, but also positive contribution from price and tariff surcharges. We see a double-digit growth in intelligent manufacturing and also in powder solutions. And total order intake increased by 5% and the organic increase was 15%. If we look at the start of January, we continue to see a stable development compared to the fourth quarter if we look at the daily order intake and take normal seasonality into account. The adjusted EBITA came in at SEK 2.4 billion, corresponding to a margin of 19.7%, which is up from 19.4% in the prior period. We see good price execution, very good savings and also structure supporting margins, then partly offset by a negative currency. The savings had a positive effect in the quarter of SEK 103 million. Acquisitions had an accretive effect of 20 basis points, while currency then had a negative impact of SEK 330 million, corresponding to an 80 basis point dilution. With that, I'll hand over to you, Cecilia, to take us through the details. Cecilia Felton: Thank you, Stefan. Hi, everyone. All right. So, as usual then, let's start with the growth table on the right-hand side here. As Stefan mentioned, we had very strong organic growth. Orders grew by 15% and revenues by 12%. Structure was neutral on both orders and revenue, while currency had a significant negative impact, minus 12% on orders and minus 11% on revenues. All-in-all, though, total order growth of 4% and a revenue growth of 1%. Adjusted EBITA increased year-over-year to SEK 6.4 billion, corresponding to a resilient margin of 19.6%. Net financial items continued to trend downwards year-over-year. I will show you a few more details around that in a few minutes. The tax rate, excluding items affecting comparability and also on a normalized basis was 24.4%, so within our guided range. Net working capital also continued to gradually trend downwards. We ended the year on a 12 months rolling basis at 28.7%. So, an improvement of 1.2 percentage points compared to last year. As Stefan mentioned, strong cash flow in the quarter, SEK 6.7 billion, corresponding to a cash conversion of 110%. Returns improved year-over-year and adjusted EPS grew to SEK 3.38. If we then continue with the bridge. And as usual, starting with the organic column, you can see that revenues grew by SEK 3.9 billion, and that generated an EBITA of SEK 1.2 billion. So, solid leverage of 31%, which was accretive to the margin by 1.3 percentage points. Significant currency headwind, both in absolute numbers, as you can see here and a dilution to the margin of 1.3 percentage points, and structure was slightly accretive. But all-in-all, resilient margin and good development considering the currency headwind. If we then continue down the P&L, looking at the finance net, it came down year-over-year, and this is mainly driven by the lower interest net. You can see it on the first row here. And that's the result of both lower yield cost but also lower borrowed volumes. Reported tax rate came in at 24.5%. Items affecting comparability had a small impact in the quarter. So, excluding items affecting comparability and also on a normalized basis, the tax rate was 24.4%, so within the guided range. As I said, working capital continued to trend downwards, an improvement of 1.2 percentage points on a 12-month rolling basis. So, a good achievement this year, but also a continued focus area for us across the group. And on the right, you can see that the net working capital improvement was driven by Mining and Rock Processing. In the bars, you can see that it was a strong cash flow quarter, as we said, 110% cash conversion. In the trend line, you can also see that for the full year, we had a cash conversion of 95%. If we then look at the year-over-year development, earnings adjusted for non-cash was higher. CapEx was a little bit lower and a positive impact from net working capital was also a little bit lower compared to last year. But all-in-all then, an increase in free operating cash flow to SEK 6.7 billion. The positive cash flow also resulted in a reduction in financial net debt, which came in at SEK 27 billion. And in relation to 12 months rolling EBITDA, we're now at 0.9. Capitalized leases and the pension liability came down a little bit sequentially, which resulted in a net debt of SEK 34 billion. Looking then at outcome versus guidance. Currency, as Stefan mentioned, came in at SEK 1.2 billion, a bit higher than our guidance of SEK 1 billion that was based on the rates at the end of September. CapEx for the full year, a bit lower than guidance. This is partly driven by currency, but also timing of some projects and initiatives. The interest net and the normalized tax rate came in, in line with guidance. And looking ahead then at the first quarter and the full year. If we start with currency. Here, we expect the significant currency headwind to continue into the first quarter, both on top line and also on EBITDA. And as you know, from a seasonality point of view, Q1 is also typically a low invoicing quarter. Nevertheless, unexpected negative currency impact of minus SEK 1.4 billion, and this is now based on the currency rates as of the 23rd of January. Then if we look at full year, we estimate CapEx to come in at between SEK 4 billion and SEK 4.5 billion. We expect the interest net to continue to trend downwards with a guidance of SEK 0.6 billion. And for the tax rate, we have left the guidance unchanged. And with that, I will hand back over to you, Stefan. Stefan Widing: Thank you. So, if we go into the conclusion, we see a strong financial performance, both in the fourth quarter and in 2025 overall. In the fourth quarter, we have double-digit organic growth in orders and revenue and improved margin and strong cash conversion. For the full year, the organic order intake and revenues increased by 11% and 5%, respectively. And the margin came in for the full year at 19.3% despite tariffs and significant currency headwinds. We also continue to make good progress in our strategic priority areas. We have a continued good innovation pace, and we welcomed several new companies into the group. We see strong progress in our digital offerings. Strong growth in both Intelligent Manufacturing and Digital Mining Technologies. And in my view, this has been the strongest year we have had when it comes to the development of our digital businesses, both in terms of financial performance and the strategic progress we have made. We also continue to make successful traction in the surface mining business, and we see strong growth in important regions in Machining such as India, and the local premium segment in China. And for us, this is not only the last quarter of the year. It's also the last quarter of our 5-year strategy period, the shift to growth strategy period. And if we summarize this period, we see a strong and good financial performance throughout the period with strategic progress despite the significant macro and geopolitical challenges that we have managed throughout the period. We have strengthened our offerings. We have gained traction in important growth areas and also introduced many leading solutions. So overall, we go now into the new strategic period, Advancing to 2030 as a stronger group. Thank you. And let's go to Q&A. Louise Tjeder: Thank you, Stefan, and Cecilia. Yes, it's time to move on to the Q&A session. So operator, please, we can take the first question. Operator: [Operator Instructions] The first question comes from Gustaf Schwerin from Handelsbanken. Gustaf Schwerin: Yes. I have a question on the cutting tool growth. The positive trend you're calling out for general engineering in Asia, is that mainly an effect of pre-buys in China on the tungsten prices? And secondly, given the spike now in price, do you have any evidence at all that customers and other markets have been building inventory as well? Stefan Widing: On China cutting tools, it's a combination. We see an underlying growth in the demand picture. But we also see an effect from pre-buying, not because we are raising prices, sort of, here and now. But because of the increased tungsten prices some customers are buying or they're increasing their inventory levels basically to, because you anticipate some level of price increase. We are not seeing it anywhere else. It's a dynamic we have seen in China specifically. Operator: The next question comes from Chitrita Sinha from JPMorgan. Chitrita Sinha: I have three, please. My first question is just on mining demand. So 17% order organic growth is obviously a very strong result. But could you provide more color on the demand by commodity and whether you're seeing anything incrementally different given where gold and copper prices have got to the start of this year? Stefan Widing: I wouldn't say, we have seen any specific change throughout, sort of, the past quarters. Of course, gold and copper are key drivers. They remain above 60% of our total exposure. But of course, we are also seeing many other commodities, silver, palladium, et cetera, that are strong. So yes, maybe led by gold and copper, but a strong demand across the board. Chitrita Sinha: Very helpful. And then, my second question is just on the margin in mining. So, operating leverage was obviously very strong this quarter. But how should we think about the margin heading into 2026, especially if we expect equipment deliveries to pick up? Cecilia Felton: For mining, we have a margin corridor of 20% to 22%. And we also have a normal leverage of around 30%. So that gives a rough framework of where -- what we are aiming for in terms of the margin. When it comes to higher equipment growth, there, you need to look at the incremental leverage of those additional equipment sales. So, even if you look at the full margin of equipment versus aftermarket, of course, equipment has a lower margin, but the incremental margin that we get on additional equipment sales should not be dilutive. Stefan Widing: And just to add to that, I mean, this is something we have been talking about for a few years based mainly on comments from other in the industry. If you want proof that what we just say is correct, and just look at Q4, we had significant increase in equipment deliveries and we see a solid operating leverage. So, no negative mix impact. Chitrita Sinha: Perfect. Very helpful. And then my final question is just on Machining and Intelligent Manufacturing. So, comps were slightly easier in Q4 than Q3, especially in software and aero, as mentioned. Can you please explain the moving parts heading into Q1? And is there any easy or tough comps to be aware of? Stefan Widing: I think the main thing that impacted, sort of, from a comps point of view was that we had a dip in aerospace in Q4 in '24. As I said, there were strikes in the U.S. in particular. And then there were maybe a few other segments that were on the weaker side. The fall of '24 was a little bit weaker. It jumped up a little bit in Q1. So sequentially, so to say, on a dailies perspective. But that's the only thing I would call out. Operator: The next question comes from Edward Hussey from UBS. Edward Hussey: Maybe just a couple, if I may. So just firstly, on the organic drop-through in Machining and Intelligent Manufacturing of 28%. I mean, clearly, a strong drop-through. However, my understanding was that when volumes returned in metal cutting, we could be looking at drop-through closer to 40% or 50%. Could you maybe just talk through the delta between the two? I mean, is 40% or 50% organic drop-through an unrealistic expectation? Or has tungsten been a headwind to achieving that level? Cecilia Felton: No. We still stick with the assumption that around 40% is a realistic leverage for the machining business long term. Now in this quarter, a lot of the growth was driven by price to offset inflation, we have tariffs surcharges and so on. And when you have a very high component of the growth driven by price, then to mitigate these type of effects, then we are protecting our margin. We're not expecting an incremental margin of that -- on that type of growth. So, that's why it's a little bit lower in the quarter. Edward Hussey: Yes. That's very helpful. And then just maybe -- I mean, you might not be able to answer this, but I mean, do you have any concerns around the tungsten price? I mean, do you see any risk that it might pull back this year? I mean, for example, if new supplies brought online, if the pre-buying, sort of, stops or if China relaxed export restrictions. I mean, what's your kind of base case at the moment into 2026? Stefan Widing: I can start with that. No, but I mean, there are several dynamics driving this. One, as you say, is sort of some type of constraint of supply from China. That is, of course, possible that it's being reversed quickly and then that can have an impact on the prices. There are other dynamics as well, such as the growth in defense industry, which is also driving demand for tungsten. And then, you have tariffs and so on, that comes into the picture as well. So it is a complex picture. Tungsten, historically, has been volatile. So we are prepared for all, sort of, eventualities and scenarios. But yes, currently, the momentum is positive, at least. I don't know if you want to add. Cecilia Felton: No, I think you summarized it well. Operator: The next question comes from Alex Jones from Bank of America. Alexander Jones: Two, if I can. The first, just on the capacity ramp-up in mining as you, sort of, start to deliver more equipment, clearly, strong revenue growth this quarter. Could you just give us an update on that capacity ramp-up and whether you've encountered any bottlenecks or it's all going smoothly so far? Stefan Widing: Yes, I think it's going well and very happy with the strong deliveries in the quarter, which I think is a testament that -- I mean, when we invoice, it means we have produced them maybe 3, 4, 5 months earlier, and then it takes a while to get them to customers and do local adaptations and so on. So this shows that a while back, mid-year production levels were starting to ramp up and reach higher levels, and then it has now taken a while to get it out to customers. And of course, now we have a continuous feed of new equipment on its way to customers. We are continuing to do adjustments to the production plans and so on as we speak. But I think the step change has been managed. And we can also see it on the lead times that we are managing to keep the lead times under control despite the high order intake, which I've said has been a high priority for us, because we have seen in prior upturns that if the lead times becomes too long, you start to lose business on lead time, and we have really wanted to minimize the risk of that. Then of course, as Cecilia mentioned, we have a bit of seasonality in the business, as you know, with Q1 being typically a little bit lower invoicing, simply because you have the southern hemisphere with countries being on holiday in the beginning of the quarter. But yes, I'm happy with the ramp-up, and I cannot say we -- there are anything I would like us to have done differently or more. Alexander Jones: Great. Okay. And then, one just on capital allocation. Could you give us any color or update on, sort of, the pipeline for bolt-on opportunities in the various areas you outlined as strategic priorities at the Capital Markets Day last year? Stefan Widing: Yes. I mean, if we start with -- I mean, as we have seen here, the cash flow is strong and the net debt-to-EBITDA is coming down. We've always said we want to be maybe slightly below 1, and that's where we are now. It also means that we have given green light since a while back to most of our divisions to pursue M&A in the strategic areas. It takes a while once you have taken a little bit of a pause to get back and, sort of, make the pipeline active again. But I would say across the areas we did identify, we have ongoing conversations. And then it's always a matter of right price, right timing. But we have an active pipeline, and I would expect more M&A to come in this year than in '24 and '25. Operator: The next question comes from Klas Bergelind from Citi. Klas Bergelind: My first question is on the growth in cutting tools of 8%. How much was pure pricing out of the 8% growth, so not tariff surcharge of 1.4%, but the pure price component. And when you look at this running quarter, the first quarter, Stefan, I would assume that you will push prices further. You are -- I think, correct me if I'm wrong, but I think that you are 15% to 20% self-sufficient on tungsten. So obviously, the cost headwind should grow. So I would assume that the pure price component should move up even more into the first quarter. Interested in the dynamics there. Stefan Widing: Do you want to take the price first? Cecilia Felton: Yes. When it comes to pricing for the cutting tools, we don't give a detailed breakdown in terms of the specifics. We had slight volume growth. And then, surcharges related to tariff and the rest is price, but we cannot, unfortunately, be more specific than that. Stefan Widing: Then it was a little bit difficult to hear you, but were you talking about the pricing dynamics coming into 2026? Klas Bergelind: Yes. On the back of that, obviously, you have your own mind, Stefan, but you're not that self-sufficient, right? Stefan Widing: Yes. I mean -- okay. So I mean, tungsten prices, of course, continue -- have continued to go up, scrap as well, which means there will be a continued price dynamic here. On the powder itself, we are adjusting prices on a regular basis, basically on a monthly basis, depending on the latest APT notation. And then, when it comes to our other products, cutting tools or drill bits and so on, then of course, we adjust prices when needed to compensate for the increased raw material costs. But I cannot give more specifics. Other than that, we are -- if tungsten prices continue up, we will, of course, have to continue to do price adjustments for that. Klas Bergelind: Yes. My second one, and I hope you can hear me, is on the demand in Europe. So if you look at construction, you're saying that there are positive signs, but you didn't move the arrow upwards on infrastructure in Europe. And then, on -- if you can comment, Stefan, on general industrial demand in Europe through the quarter, it seems like there is a little bit of, sort of, green shoots, but I'm interested to hear across what products and countries that you see this development? Stefan Widing: Yes. No, you're right on the infrastructure. We say there are positive signs, but it hasn't really translated into order intake increasing to a level where we put our arrow up, but we are positive. We are seeing a little bit more activity, quoting, stock levels coming down and so on. So, it is a positive trend, but not yet visible in our order intake in Q4. Of course, Q1 will be important. As you know, it's the order where you typically get the orders for the summer season, construction season. So, we will have to see in Q1 if we can continue with this trend. For general engineering, yes, we say it's in Europe, it's stable. You are right. I would also say that there is a little bit of also positive sentiment in some areas, in particular, certain countries where maybe we have seen a little bit more positive development, some of the larger continental European countries. But also here, not something we can really claim is visible in the numbers, and PMI is hovering around the 50. There is still uncertainty. So, I would say the jury is still out on, sort of, more broad-based recovery. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: A couple of questions, if I may. Staying on the topic of visibility and demand. What are you seeing, if anything, from stimulus programs, particularly in Europe? Or any early signs there? Stefan Widing: No, I wouldn't say -- I mean, some of this infrastructure, sort of, positive sentiment is, of course, also coming in Germany where there is a big package. And even if it hasn't, sort of, come through yet, it means that some dealers or customers are maybe preparing for higher demand picture. So in that sense, indirectly, it might impact. But otherwise, I cannot point to any specific, sort of, stimulus outcomes. Unless you count -- sorry, unless you count defense into the stimulus package, of course, but that's -- I put that in a different category. In defense, we indeed see, of course, significantly increased demand. John-B Kim: Okay. And if we -- zero in on the SRP division, the comments indicated that you saw some good activity in demolition. I'm wondering if you could give us some color here, whether that's more infrastructure or construction related. Stefan Widing: So demolition and recycling for us, that's our attachment tools, and they go into things like civil construction projects, also infrastructure projects. So it's a mix. We also say we see an improvement in aggregates, which is more, kind of, infrastructure, road building and so on. So I would say, if you look at the U.S., we are positive in infrastructure more generically right now. We did get -- for a couple of years, we haven't really seen, sort of, dealer orders coming in, in anticipation of the summer season. But in Q4, we started to get some dealer orders for that, which is a good sign. We'll see if it continues into Q1. John-B Kim: Okay. Great. Last question, if I may. Any color on the CapEx focus for this year? Cecilia Felton: On CapEx focus, well, we gave the guidance. Typically for us, the larger share of our CapEx is maintenance or replacement CapEx. But then, of course, we also have expansionary CapEx built in there, and that's mainly for the mining business. Operator: The next question comes from Rory Smith from Oxcap. Rory Smith: It's Rory from Oxcap. Hopefully, you can hear me okay. My first question is just on the breakdown of order intake in mining between brownfield, greenfield replacement, or cutting it a different way, between surface and underground, is that something that you could comment on? Stefan Widing: Yes. If we start with the first one. It was pretty similar to prior quarter and also the, sort of the, full year picture, meaning brownfield is the majority, slightly over 50%, replacement is about 1/3, and then the remaining being greenfield. And that's been fairly consistent besides certain quarters when we have received a large greenfield orders such as the second quarter. But that's a general trend, I would say that's been there for a couple of years. Which actually means, if you look at the growth that it is a broad-based growth because that, of course, means that everything is growing since the ratio is the same. On underground versus surface, I would say and as I mentioned earlier, we see solid double-digit growth in all equipment divisions, meaning both surface and underground. If you take more specifically, for example, the rotary business, I would say we see growth that is higher than the average for our business. But in general, surface and underground are equally strong. Rory Smith: That's great. And then my second question, and apologies, this is quite short term in nature, but just looking at 1Q '26, is there any reason to believe that, that operating leverage in machining is going to be any different to the sort of 28%, 30% level seen in Q4? Cecilia Felton: I mean, we cannot say too much, but I think the main driver for it being higher than around 20%, 30% now, it would be if we would have a volume recovery. And that is, of course, something we do not give guidance on. We said Q1 started at a stable level compared to Q4. Rory Smith: I understand. That's helpful. And then just finally from me, maybe I misunderstood this, but I was -- given the tungsten price action last year and the Wolfram mine that you own, maybe I misunderstood this, but I was sort of expecting to see slightly better margins in Rock Processing. So I was just wondering if there was, A, have I misunderstood that? Or if there's any, sort of, comment you could give around the breakdown of the margin outcome in Rock Processing? Cecilia Felton: Yes. The tungsten, the prices don't really impact the Rock Processing business. When we look at the margin development for this year, it's driven by a positive price versus inflation last year with a weak comparable. We had some price pressure in wear parts last year. Then we have good leverage on the higher volumes. We have the positive impact from savings, but then a significant currency headwind of 1.7 percentage points. So those are the main components for the margin development within Rock Processing. Stefan Widing: The tungsten dynamics will be in the machining business. That's where we have it. Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: Thanks very much for taking my three questions. I'll ask them one by one. First one, could you give us an idea on what was the share of growth projects in the new equipment mining orders specifically? I suspect the share of total orders that you provide also includes aftermarket, which is, of course, the reflection of historical installed base. What would be interesting is to see the proportion of new mining demand coming from [ coal ] customers specifically. Stefan Widing: Yes. I mean we will -- you will get an updated figure with the annual report, but I don't think we give quarterly breakdown for commodity. I'll look at you, Louise. Louise Tjeder: No, I think we can wait. Stefan Widing: Yes. What I can say is that, of course, copper and gold are -- have been a bit stronger than the average that you would see in 2024. But as I also said, it is a broad-based demand picture. I mean, we have a good business within silver, palladium and so on as well. So slightly higher than the historic average, but yes, not materially higher. Louise Tjeder: I think it's a fair reflection that the quarter looks quite similar as the -- on a full year basis. Vladimir Sergievskiy: Understood. That's very helpful. Also, is there a reason why orders from mining customers in the Rock Processing were down? Is it a function of commodity mix over there compared to your main mining business or something else? Stefan Widing: No, actually, the main reason this quarter was high comps. They had some larger orders and a strong demand in Q4 of '24. The underlying demand, as we see it, is unchanged. Then of course, if you compare to our mining business area, they don't have the same dynamics in the sense that their largest commodity exposure is to iron ore, where you have a lot of crushing and screening. And iron ore, of course, is at decent levels, but it's not at the gold, copper, silver type dynamics there. And then finally, downstream' mining have a different -- slightly different cycle than upstream' mining. It tends to be a little bit more late cycle. You need to first ramp up production enough to hit your thresholds for the processing plant capacity before you do additional investments there. So, it is a little bit of different dynamic. But overall, the mining demand in Q4 also for Rock Processing was robust. Vladimir Sergievskiy: Excellent. My final one would be on cutting tools. You mentioned some pre-buying effects in China because of the tungsten price. Why do you think you are not seeing those pre-buying effects outside of China? I assume your customers can see what's happening to tungsten price and can anticipate what will happen to cutting tools price later on. Stefan Widing: I can start, and you can see if you want to add something. Yes. Of course, it's -- we don't have a straight answer to why we see a different dynamic. But one reason is that the pricing dynamics in China is different. In China, the pricing for cutting tools are also more directly linked to the tungsten price. While in the rest of the world, it is, sort of, embedded into a normal list price. So I think it's, the visibility is much higher. And also, I think the way they operate is a little bit different as well, but it's difficult to say, but that would be my speculation. Cecilia Felton: And maybe also another factor that could have an impact is we haven't had price increases in China for a very long time. So this is a little bit of a new phenomenon. I think in the rest of the world, Europe, U.S., we have had continuous price increases for a long time now. So, I think that could also feature into the dynamic. Stefan Widing: I think it's a very good comment. I mean, we have had many years in China where price increases has been off the table completely. Now also our local competitors, which have been operating at very low margins are -- have to raise prices in line with the tungsten increase, which maybe creates a broader market dynamic anticipating this phenomena, so to say. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have two. One is a follow-up on this tungsten debate. When we think about the technologies it gets used on, is there any potential substitution? Have you seen that in the past when tungsten prices went up a lot? Or is it just simply not possible and customers are just going to have to eventually weather the full price increase? That's my first question. I'll ask the second once you answer this. Stefan Widing: There is, to my knowledge, no substitute, unless you go to even more advanced materials such as diamond-based materials and so on, which is even more expensive. Daniela Costa: Got it. And then one other thing, I guess, that we have, sort of, started to hear about is more and more, sort of, memory chip shortages, I guess, throughout your portfolio, be it in metrology or in some of the automation that you have on mining, I'm not sure. Can you talk through like how significant a user you are of this and whether you see any tightness? Or how are you prepared for potential tightness there? Stefan Widing: We see no impact from that. And I mean, overall, we have, of course, it's high mix, low-volume products that we have in this area. So our volumes are -- we tend to not feel this kind of dynamics since we can always, worst case, find things on the spot market since our volumes are so low. Operator: The next question comes from Sebastian Kuenne from RBC. Sebastian Kuenne: Thank you for taking my two remaining questions. One again on tungsten. You got your own mine, as mentioned. Can you confirm that it has about 1,000 tons of tungsten output per year? And then I would like to know if your priority is to maintain the margin in the tooling business or to kind of take a little bit of market share, because you can be less aggressive on the full price increases? Or if you go with the same price increases as your competitors and therefore take a bit more profit? I would just like to understand a little bit more your thinking here. Stefan Widing: I think the last question, I think we got it last time as well, and my answer is the same. I mean this is, let's call it, the business tactics or business secret. We will not give that away to the audience. So we will manage that tactically as we feel gives the most value to the business. Sebastian Kuenne: I think you mentioned earlier something like flat margin if volumes are not increasing, when it's were to increase, you get some operating leverage in the tooling business. Cecilia Felton: Yes, that will come with a -- yes, just because we would have better cost absorption with higher volumes, that is what will drive a higher -- a more normal leverage around 40% as opposed to the 20%, 30% we're seeing at the moment. Stefan Widing: And on the mine output, I don't have a ton for you. But what we can say is that for -- in terms of the overall production of powder, the mine is roughly or just over 10% of our supply. And then 55% roughly is recycled material from buyback programs, and the rest is sourced from other sources to make sure we have a diverse supply base. Sebastian Kuenne: Understood, okay. And then, my second question is on mining OE. You mentioned that you plan to increase capacity this year for obvious reasons. And in what areas do you see bottlenecks specifically on the supply chain at the moment? Stefan Widing: I mean, historically, we have typically seen bottlenecks with major components such as engines or certain drivetrain components. We worked fairly diligently about a year ago to get ahead of that this time. So at the moment, I mean, we can produce as we have planned to produce. No specific bottlenecks. We have, of course, been helped, A, by the fact that we were early out here. And secondly, that we don't -- I mean, in general, we don't see this type of, let's say, increase in production in adjacent industries. So, we have -- we can get what we want, so to say, for the moment. When it comes to assembly and these kind of things, we can scale fairly straightforward with partners, our own people and also the fact that we have said before that we have also new sites coming online in Asia, both in India and Malaysia. So it's -- we can produce what we have or want to produce right now. Operator: Next question comes from Max Yates from Morgan Stanley. Max Yates: Just two quick questions from me. Just the first one is on the aftermarket side of mining. I guess, we're kind of used to these businesses growing mid- to high single digits and some people would make the case that given the commodity price backdrop, there's a huge amount of incentivization to get stuff out of the mines by the customers. But that's also been happening already. So, I guess my question is simply kind of from those, sort of, 8% growth rates that we're seeing now, is it actually possible for the business to grow much faster than that given volume production rates, what the customers are doing already? Or would we think that is a very good growth rate historically and therefore, kind of any acceleration or meaningful kind of next step-up has to come from the brownfield and greenfield? Stefan Widing: I mean, we stick to what we have said in terms of long-term growth rate should be high single digits. Now in this quarter and some quarters in '25, we have been in the double digits. And that is maybe a bit of an acceleration driven by the commodity prices and the fact that customers want to push even harder. But I think the long-term trend, we believe it should be high single digits. And it's driven by a number of factors. Our fleet size continues to grow. That obviously drives aftermarket growth. The fleet is still very old in relation to historic fleet age. That also drives aftermarket. The technology content in each machine we deliver is increasing constantly, which both means you need more service and parts, different types of parts as well, sensors and so on. It also increases our aftermarket capture rate because the more advanced the machine is, the more difficult that is for a third party or local service workshop to do the service. So, all of these things are combining into the dynamic that we are seeing this healthy growth in the aftermarket business. Max Yates: Okay. And maybe just a follow-up. Obviously, if you kind of go back a few years, there were a lot of discussions around -- well, at least from the, sort of, investment community about, sort of, potentially a separation of Sandvik into the machining business and the mining business. We're continuing to see kind of businesses simplify across industrials. I guess your share price and multiple would kind of indicate your decision for not doing that at Sandvik, given it's clearly been a great run for the share price. I guess my question is, to what extent do you still discuss this internally? And is there any consideration on this debate as to it matters where machining is in its cycle and if we get to a more, sort of, mid-cycle level in demand and margins, then that decision comes more back on the table? Or given where the multiple is versus the peers, which looks very healthy and looks like there's no major discount versus the peers, is that decision -- is that discussion really internally, kind of, off the table for now? Just -- so the latest thinking around that would be helpful. Stefan Widing: I mean, our approach to this has always been that you have to have a very long-term perspective. We have obviously explained before how we believe we can be value accretive to our shareholders based on the strategy and execution that we have had or have. And we are, of course, very happy that we feel we have gotten a recognition for that in the past, yes, 12 months or so. And if the discussion would be there in any way, it would never be around tactics around share price or cycles or anything like that because if you do it, you do it once and for eternity, so to say. So it has to be driven by other fundamental reasons. And we believe, as we have said, that Sandvik is a great group. We have 23 market-leading divisions. And based on the strategy and the operational performance, we should be able to create value, and we have created value now in the current group structure. Louise Tjeder: Okay. So we have a few minutes left, and three in line, so I ask you to keep your Q&As short. Operator: The next question comes from James Moore from Rothschild & Co. James Moore: I'll try and make it shorter. If cutting tools were high single, machining overall 15%, it would suggest 80% for powder and software. Could I assume triple-digit powder in 2030 software? And I'll give all three together at the same time. And on whatever the tungsten and tariff price impact is to the whole of machining in orders in the fourth quarter, is that the peak? Or would you expect that impact as a percentage of contribution to growth to increase going forward? And finally, on the mining aftermarket side, you said high single, I think? Did you say the number? Did you say if it was 7 or 8? And how are Rock Tools and Ground Support doing? Are they flat or down? And what's happening there? Stefan Widing: Okay. Louise Tjeder: That was record long, is that okay? Stefan Widing: If we start with the growth in machining, I mean, as we said, software is growing double digits. Now, it's not in the 20% to 30% range. And if you wait a little bit, you will soon get the broken out Intelligent Manufacturing restated figures, as you know, since we will start to report it separately. So then you will get even more or you will get the exact figures. But it's not in the -- it's not -- it's below 20%, let's say that. I'll jump to your third question on... Cecilia Felton: Rock Tools and Ground Support. Stefan Widing: Rock Tools and Ground Support, yes. Yes. So, I mean if parts and services are growing double and aftermarket is high single, you can see that they are a little bit dilutive. That is, I would say, normal. They -- all the dynamics I mentioned around the growth dynamic, around service and parts, all of them are, of course, not relevant for Rock Tools and Ground Support. They are more purely production-driven. So you have a little bit of a lower overall market growth there. On tungsten, I'm not sure if we can say about that. Cecilia Felton: I think, well, it was a question on tungsten and the tariff and this is reaching the peak now in terms of the PV impact. I think here, there are -- I mean, some dynamics is that we will start to have these effects also in our comps from the second quarter onwards. So that's, of course, limiting the impact when you look at the year-over-year development, but I think in terms of, are we at the peak or not, it's very hard to say, both how tungsten or ATP prices will develop, also with tariffs. There were some discussions, as you know, between U.S. and Europe, again, just a couple of weeks back around additional tariffs. So very hard to say, I think, how this will develop in '26. Stefan Widing: Yes. Louise Tjeder: All right. The time is out. The idea was good, but we can't manage now to take any more questions. But please reach out to Investor Relations, and we can help you further. And with this, we thank you for calling in, and as usual, for good questions. Thank you.
Louise Tjeder: A warm welcome to Sandvik's Presentation of the Fourth Quarter Results 2025. My name is Louise Tjeder, Head of Investor Relations. And beside me, I have our CEO, Stefan Widing; and CFO, Cecilia Felton. We will start off with the presentation. Stefan and Cecilia will take you through the highlights of the quarter and the remaining time we will spend on the Q&A session. So, let's start. The word is yours. Stefan Widing: Thank you. And also from my side, of course, a warm welcome to the fourth quarter report in 2025. If we summarize the quarter, we see a strong ending to the year with double-digit order intake and revenue growth. We see a strong demand in mining and infrastructure is continuing to improve. There's a mixed demand in cutting tools with strong demand in, for example, aerospace and defense, while automotive remains weak. We also see a strong demand in both software solutions and powder solutions. Total order intake grew by 4%, and the organic order intake growth was 15%. Revenue increased totally by 1% and organically by 12%. We also see a stable margin on the significant currency headwinds. Adjusted EBITA came in at just below SEK 6.4 billion, corresponding to a margin of 19.6%, which is a slight improvement versus last year, even though the figures round to the same number. On the rolling 12 months basis, the margin is 19.3%, up from 19.2% in the year before. The savings in the restructuring programs had a positive bridge effect of SEK 131 million in the quarter. And the adjusted profit for the period came in at SEK 4.2 billion, up from SEK 4.1 billion. We also had a strong free operating cash flow of SEK 6.7 billion, corresponding to a cash conversion in the quarter of 110%. A couple of strategic highlights, as always. We continue to see strong momentum for digital solutions in Mining. In the quarter, we booked two large automation orders, which were significant. We also see strong growth in our software offering in mine planning. And overall, Digital Mining Technologies booked good double-digit order intake in the quarter. And for the full year, the business also grew in the double digits. In Intelligent Manufacturing, our Metrologic business unit launched a new version of their software, where we now include our Copilot AI technology also in this software. They also launched a New Machining Module, which is important for us because it means that the Metrology software will, based on the measurement, recommend machining process updates to ensure that the component is more aligned with the intended design. So, we start to connect the loop between metrology and machining. Rock Processing launched a new Jaw Crusher platform with significant new automation features, also significant productivity gains and longer service life. And this platform also received Sandvik's Internal Innovation Prize Award in 2025, because of the significant improvements in the product. If we look at the market development, and we start with a geographical perspective, Europe was up 13%. And here, cutting tools was up in the mid-single digits. North America, up 9% with cutting tools up in the high single digits. Asia up 14% and China cutting tools up in the double digits. And then mining markets, Africa, Middle East, up 5%, Australia, up 43% and South America up 13%. So, solid growth across all geographies. If we then go to mining, as I said, we continue to see strong demand basically across the board. General engineering, here, underlying, it's stable, but we do see low double-digit growth, driven then by good double-digit growth in China. Europe up low single digits and North America up mid-single digits. In infrastructure, we see continued improvement in particularly driven by North America. But overall, on a global scale, we still characterize it as a fairly stable development. We also see some signs of improvement in Europe. Automotive is a bit weaker, overall, up in the low single digits. Europe is flat. North America up mid-single and China is down high single digit. Aerospace, strong, up in the double digits, and both Europe and North America is up in the double digits, while China was down in the double digits, primarily driven by timing of orders. In the other segments, we are up high single digits. Europe is up high single, driven then in particular by defense. North America is up mid-single, while China is flattish. Summarizing then the order intake and revenues. We booked orders in the quarter of SEK 32.7 billion, revenues SEK 32.5 billion, and this is a positive book-to-bill of 101%, which is fairly unusual in the fourth quarter where we typically have strong deliveries of equipment. But thanks to the strong order intake, we still maintain a positive book-to-bill also this quarter. Looking at this from another angle, we can see the order intake continues to be strong in the solid double-digit space. We also see revenues picking up also now in the double digits. And this is, of course, a consequence of that we are also now delivering and invoicing mining equipment at a higher level than before, showing that we have managed to ramp up production to meet demand in a good way. Adjusted EBITA improved by 1.4% in absolute terms, SEK 6.4 billion almost, up from almost SEK 6.3 billion last year. This corresponds to a margin of 19.6%. And here, we see solid leverage on the higher volumes. We also have good price execution and good savings, but then offset by the strong currency headwinds. The currency impact came in at almost SEK 1.2 billion negative, a dilution of 130 basis points. And as you know, this is a more adverse headwind than we had guided for when the quarter started. Of course, driven by a continued weakness of the U.S. dollar and a continued strengthening of the Swedish SEK. Rolling 12 months then a margin of 19.3%. Going first into the Mining business. We continue to see a strong momentum with strong demand both for our underground and our surface solutions. We see a double-digit organic growth across all our equipment divisions as well as Parts and Services and Digital Mining Technologies. Total order intake increased by 5%. The organic growth was 17% and the growth of equipment was up 39%. Excluding major orders, we were growing organically by 12%. The adjusted EBITA came in at just below SEK 3.4 billion -- sorry, SEK 3.8 billion, corresponding to a margin of 21.5%. We have good leverage on the higher volumes, but it is offset by the very negative currency. The operating leverage was 32%, which we are satisfied with in this business. The currency then was negative by over SEK 700 million year-on-year, corresponding to a dilution of 120 basis points. Rock Processing. Here, we saw order intake in the mining part of the business declining year-on-year on tough mining comps. The underlying market demand was robust. We saw solid demand in infrastructure, driven in particular by U.S. demolition and recycling as well as for the first time in a long time, I would say, an improvement in aggregates. And we also see positive signs in Europe. Total order intake declined by 9%, but organically, it was a black 0%. And excluding major orders, it was an organic growth of 2%. Adjusted EBITA came in at just below SEK 400 million. This corresponds to a margin of 14.5%, slightly down from 14.6%, but a strong operating leverage of 41% with good savings was offset then by a very negative currency impact, almost SEK 100 million negative impact corresponding to a dilution on the margin of 170 basis points. And then Machining and Intelligent Manufacturing. Of course, the last quarter, we will present this in this form. Going forward, you will see these two businesses being reported separately. We see a mixed demand for cutting tools between the regions and segments. Strong demand in aerospace and defense, as I've said, while demand in general engineering improved, but it was primarily then driven by a strong development in Asia and China, while automotive remained weak across more or less all the regions. Orders in cutting tools overall increased in the high single digits. It's partly due to low comps. Remember, for example, that Boeing was on strike in the fourth quarter of '24, but also positive contribution from price and tariff surcharges. We see a double-digit growth in intelligent manufacturing and also in powder solutions. And total order intake increased by 5% and the organic increase was 15%. If we look at the start of January, we continue to see a stable development compared to the fourth quarter if we look at the daily order intake and take normal seasonality into account. The adjusted EBITA came in at SEK 2.4 billion, corresponding to a margin of 19.7%, which is up from 19.4% in the prior period. We see good price execution, very good savings and also structure supporting margins, then partly offset by a negative currency. The savings had a positive effect in the quarter of SEK 103 million. Acquisitions had an accretive effect of 20 basis points, while currency then had a negative impact of SEK 330 million, corresponding to an 80 basis point dilution. With that, I'll hand over to you, Cecilia, to take us through the details. Cecilia Felton: Thank you, Stefan. Hi, everyone. All right. So, as usual then, let's start with the growth table on the right-hand side here. As Stefan mentioned, we had very strong organic growth. Orders grew by 15% and revenues by 12%. Structure was neutral on both orders and revenue, while currency had a significant negative impact, minus 12% on orders and minus 11% on revenues. All-in-all, though, total order growth of 4% and a revenue growth of 1%. Adjusted EBITA increased year-over-year to SEK 6.4 billion, corresponding to a resilient margin of 19.6%. Net financial items continued to trend downwards year-over-year. I will show you a few more details around that in a few minutes. The tax rate, excluding items affecting comparability and also on a normalized basis was 24.4%, so within our guided range. Net working capital also continued to gradually trend downwards. We ended the year on a 12 months rolling basis at 28.7%. So, an improvement of 1.2 percentage points compared to last year. As Stefan mentioned, strong cash flow in the quarter, SEK 6.7 billion, corresponding to a cash conversion of 110%. Returns improved year-over-year and adjusted EPS grew to SEK 3.38. If we then continue with the bridge. And as usual, starting with the organic column, you can see that revenues grew by SEK 3.9 billion, and that generated an EBITA of SEK 1.2 billion. So, solid leverage of 31%, which was accretive to the margin by 1.3 percentage points. Significant currency headwind, both in absolute numbers, as you can see here and a dilution to the margin of 1.3 percentage points, and structure was slightly accretive. But all-in-all, resilient margin and good development considering the currency headwind. If we then continue down the P&L, looking at the finance net, it came down year-over-year, and this is mainly driven by the lower interest net. You can see it on the first row here. And that's the result of both lower yield cost but also lower borrowed volumes. Reported tax rate came in at 24.5%. Items affecting comparability had a small impact in the quarter. So, excluding items affecting comparability and also on a normalized basis, the tax rate was 24.4%, so within the guided range. As I said, working capital continued to trend downwards, an improvement of 1.2 percentage points on a 12-month rolling basis. So, a good achievement this year, but also a continued focus area for us across the group. And on the right, you can see that the net working capital improvement was driven by Mining and Rock Processing. In the bars, you can see that it was a strong cash flow quarter, as we said, 110% cash conversion. In the trend line, you can also see that for the full year, we had a cash conversion of 95%. If we then look at the year-over-year development, earnings adjusted for non-cash was higher. CapEx was a little bit lower and a positive impact from net working capital was also a little bit lower compared to last year. But all-in-all then, an increase in free operating cash flow to SEK 6.7 billion. The positive cash flow also resulted in a reduction in financial net debt, which came in at SEK 27 billion. And in relation to 12 months rolling EBITDA, we're now at 0.9. Capitalized leases and the pension liability came down a little bit sequentially, which resulted in a net debt of SEK 34 billion. Looking then at outcome versus guidance. Currency, as Stefan mentioned, came in at SEK 1.2 billion, a bit higher than our guidance of SEK 1 billion that was based on the rates at the end of September. CapEx for the full year, a bit lower than guidance. This is partly driven by currency, but also timing of some projects and initiatives. The interest net and the normalized tax rate came in, in line with guidance. And looking ahead then at the first quarter and the full year. If we start with currency. Here, we expect the significant currency headwind to continue into the first quarter, both on top line and also on EBITDA. And as you know, from a seasonality point of view, Q1 is also typically a low invoicing quarter. Nevertheless, unexpected negative currency impact of minus SEK 1.4 billion, and this is now based on the currency rates as of the 23rd of January. Then if we look at full year, we estimate CapEx to come in at between SEK 4 billion and SEK 4.5 billion. We expect the interest net to continue to trend downwards with a guidance of SEK 0.6 billion. And for the tax rate, we have left the guidance unchanged. And with that, I will hand back over to you, Stefan. Stefan Widing: Thank you. So, if we go into the conclusion, we see a strong financial performance, both in the fourth quarter and in 2025 overall. In the fourth quarter, we have double-digit organic growth in orders and revenue and improved margin and strong cash conversion. For the full year, the organic order intake and revenues increased by 11% and 5%, respectively. And the margin came in for the full year at 19.3% despite tariffs and significant currency headwinds. We also continue to make good progress in our strategic priority areas. We have a continued good innovation pace, and we welcomed several new companies into the group. We see strong progress in our digital offerings. Strong growth in both Intelligent Manufacturing and Digital Mining Technologies. And in my view, this has been the strongest year we have had when it comes to the development of our digital businesses, both in terms of financial performance and the strategic progress we have made. We also continue to make successful traction in the surface mining business, and we see strong growth in important regions in Machining such as India, and the local premium segment in China. And for us, this is not only the last quarter of the year. It's also the last quarter of our 5-year strategy period, the shift to growth strategy period. And if we summarize this period, we see a strong and good financial performance throughout the period with strategic progress despite the significant macro and geopolitical challenges that we have managed throughout the period. We have strengthened our offerings. We have gained traction in important growth areas and also introduced many leading solutions. So overall, we go now into the new strategic period, Advancing to 2030 as a stronger group. Thank you. And let's go to Q&A. Louise Tjeder: Thank you, Stefan, and Cecilia. Yes, it's time to move on to the Q&A session. So operator, please, we can take the first question. Operator: [Operator Instructions] The first question comes from Gustaf Schwerin from Handelsbanken. Gustaf Schwerin: Yes. I have a question on the cutting tool growth. The positive trend you're calling out for general engineering in Asia, is that mainly an effect of pre-buys in China on the tungsten prices? And secondly, given the spike now in price, do you have any evidence at all that customers and other markets have been building inventory as well? Stefan Widing: On China cutting tools, it's a combination. We see an underlying growth in the demand picture. But we also see an effect from pre-buying, not because we are raising prices, sort of, here and now. But because of the increased tungsten prices some customers are buying or they're increasing their inventory levels basically to, because you anticipate some level of price increase. We are not seeing it anywhere else. It's a dynamic we have seen in China specifically. Operator: The next question comes from Chitrita Sinha from JPMorgan. Chitrita Sinha: I have three, please. My first question is just on mining demand. So 17% order organic growth is obviously a very strong result. But could you provide more color on the demand by commodity and whether you're seeing anything incrementally different given where gold and copper prices have got to the start of this year? Stefan Widing: I wouldn't say, we have seen any specific change throughout, sort of, the past quarters. Of course, gold and copper are key drivers. They remain above 60% of our total exposure. But of course, we are also seeing many other commodities, silver, palladium, et cetera, that are strong. So yes, maybe led by gold and copper, but a strong demand across the board. Chitrita Sinha: Very helpful. And then, my second question is just on the margin in mining. So, operating leverage was obviously very strong this quarter. But how should we think about the margin heading into 2026, especially if we expect equipment deliveries to pick up? Cecilia Felton: For mining, we have a margin corridor of 20% to 22%. And we also have a normal leverage of around 30%. So that gives a rough framework of where -- what we are aiming for in terms of the margin. When it comes to higher equipment growth, there, you need to look at the incremental leverage of those additional equipment sales. So, even if you look at the full margin of equipment versus aftermarket, of course, equipment has a lower margin, but the incremental margin that we get on additional equipment sales should not be dilutive. Stefan Widing: And just to add to that, I mean, this is something we have been talking about for a few years based mainly on comments from other in the industry. If you want proof that what we just say is correct, and just look at Q4, we had significant increase in equipment deliveries and we see a solid operating leverage. So, no negative mix impact. Chitrita Sinha: Perfect. Very helpful. And then my final question is just on Machining and Intelligent Manufacturing. So, comps were slightly easier in Q4 than Q3, especially in software and aero, as mentioned. Can you please explain the moving parts heading into Q1? And is there any easy or tough comps to be aware of? Stefan Widing: I think the main thing that impacted, sort of, from a comps point of view was that we had a dip in aerospace in Q4 in '24. As I said, there were strikes in the U.S. in particular. And then there were maybe a few other segments that were on the weaker side. The fall of '24 was a little bit weaker. It jumped up a little bit in Q1. So sequentially, so to say, on a dailies perspective. But that's the only thing I would call out. Operator: The next question comes from Edward Hussey from UBS. Edward Hussey: Maybe just a couple, if I may. So just firstly, on the organic drop-through in Machining and Intelligent Manufacturing of 28%. I mean, clearly, a strong drop-through. However, my understanding was that when volumes returned in metal cutting, we could be looking at drop-through closer to 40% or 50%. Could you maybe just talk through the delta between the two? I mean, is 40% or 50% organic drop-through an unrealistic expectation? Or has tungsten been a headwind to achieving that level? Cecilia Felton: No. We still stick with the assumption that around 40% is a realistic leverage for the machining business long term. Now in this quarter, a lot of the growth was driven by price to offset inflation, we have tariffs surcharges and so on. And when you have a very high component of the growth driven by price, then to mitigate these type of effects, then we are protecting our margin. We're not expecting an incremental margin of that -- on that type of growth. So, that's why it's a little bit lower in the quarter. Edward Hussey: Yes. That's very helpful. And then just maybe -- I mean, you might not be able to answer this, but I mean, do you have any concerns around the tungsten price? I mean, do you see any risk that it might pull back this year? I mean, for example, if new supplies brought online, if the pre-buying, sort of, stops or if China relaxed export restrictions. I mean, what's your kind of base case at the moment into 2026? Stefan Widing: I can start with that. No, but I mean, there are several dynamics driving this. One, as you say, is sort of some type of constraint of supply from China. That is, of course, possible that it's being reversed quickly and then that can have an impact on the prices. There are other dynamics as well, such as the growth in defense industry, which is also driving demand for tungsten. And then, you have tariffs and so on, that comes into the picture as well. So it is a complex picture. Tungsten, historically, has been volatile. So we are prepared for all, sort of, eventualities and scenarios. But yes, currently, the momentum is positive, at least. I don't know if you want to add. Cecilia Felton: No, I think you summarized it well. Operator: The next question comes from Alex Jones from Bank of America. Alexander Jones: Two, if I can. The first, just on the capacity ramp-up in mining as you, sort of, start to deliver more equipment, clearly, strong revenue growth this quarter. Could you just give us an update on that capacity ramp-up and whether you've encountered any bottlenecks or it's all going smoothly so far? Stefan Widing: Yes, I think it's going well and very happy with the strong deliveries in the quarter, which I think is a testament that -- I mean, when we invoice, it means we have produced them maybe 3, 4, 5 months earlier, and then it takes a while to get them to customers and do local adaptations and so on. So this shows that a while back, mid-year production levels were starting to ramp up and reach higher levels, and then it has now taken a while to get it out to customers. And of course, now we have a continuous feed of new equipment on its way to customers. We are continuing to do adjustments to the production plans and so on as we speak. But I think the step change has been managed. And we can also see it on the lead times that we are managing to keep the lead times under control despite the high order intake, which I've said has been a high priority for us, because we have seen in prior upturns that if the lead times becomes too long, you start to lose business on lead time, and we have really wanted to minimize the risk of that. Then of course, as Cecilia mentioned, we have a bit of seasonality in the business, as you know, with Q1 being typically a little bit lower invoicing, simply because you have the southern hemisphere with countries being on holiday in the beginning of the quarter. But yes, I'm happy with the ramp-up, and I cannot say we -- there are anything I would like us to have done differently or more. Alexander Jones: Great. Okay. And then, one just on capital allocation. Could you give us any color or update on, sort of, the pipeline for bolt-on opportunities in the various areas you outlined as strategic priorities at the Capital Markets Day last year? Stefan Widing: Yes. I mean, if we start with -- I mean, as we have seen here, the cash flow is strong and the net debt-to-EBITDA is coming down. We've always said we want to be maybe slightly below 1, and that's where we are now. It also means that we have given green light since a while back to most of our divisions to pursue M&A in the strategic areas. It takes a while once you have taken a little bit of a pause to get back and, sort of, make the pipeline active again. But I would say across the areas we did identify, we have ongoing conversations. And then it's always a matter of right price, right timing. But we have an active pipeline, and I would expect more M&A to come in this year than in '24 and '25. Operator: The next question comes from Klas Bergelind from Citi. Klas Bergelind: My first question is on the growth in cutting tools of 8%. How much was pure pricing out of the 8% growth, so not tariff surcharge of 1.4%, but the pure price component. And when you look at this running quarter, the first quarter, Stefan, I would assume that you will push prices further. You are -- I think, correct me if I'm wrong, but I think that you are 15% to 20% self-sufficient on tungsten. So obviously, the cost headwind should grow. So I would assume that the pure price component should move up even more into the first quarter. Interested in the dynamics there. Stefan Widing: Do you want to take the price first? Cecilia Felton: Yes. When it comes to pricing for the cutting tools, we don't give a detailed breakdown in terms of the specifics. We had slight volume growth. And then, surcharges related to tariff and the rest is price, but we cannot, unfortunately, be more specific than that. Stefan Widing: Then it was a little bit difficult to hear you, but were you talking about the pricing dynamics coming into 2026? Klas Bergelind: Yes. On the back of that, obviously, you have your own mind, Stefan, but you're not that self-sufficient, right? Stefan Widing: Yes. I mean -- okay. So I mean, tungsten prices, of course, continue -- have continued to go up, scrap as well, which means there will be a continued price dynamic here. On the powder itself, we are adjusting prices on a regular basis, basically on a monthly basis, depending on the latest APT notation. And then, when it comes to our other products, cutting tools or drill bits and so on, then of course, we adjust prices when needed to compensate for the increased raw material costs. But I cannot give more specifics. Other than that, we are -- if tungsten prices continue up, we will, of course, have to continue to do price adjustments for that. Klas Bergelind: Yes. My second one, and I hope you can hear me, is on the demand in Europe. So if you look at construction, you're saying that there are positive signs, but you didn't move the arrow upwards on infrastructure in Europe. And then, on -- if you can comment, Stefan, on general industrial demand in Europe through the quarter, it seems like there is a little bit of, sort of, green shoots, but I'm interested to hear across what products and countries that you see this development? Stefan Widing: Yes. No, you're right on the infrastructure. We say there are positive signs, but it hasn't really translated into order intake increasing to a level where we put our arrow up, but we are positive. We are seeing a little bit more activity, quoting, stock levels coming down and so on. So, it is a positive trend, but not yet visible in our order intake in Q4. Of course, Q1 will be important. As you know, it's the order where you typically get the orders for the summer season, construction season. So, we will have to see in Q1 if we can continue with this trend. For general engineering, yes, we say it's in Europe, it's stable. You are right. I would also say that there is a little bit of also positive sentiment in some areas, in particular, certain countries where maybe we have seen a little bit more positive development, some of the larger continental European countries. But also here, not something we can really claim is visible in the numbers, and PMI is hovering around the 50. There is still uncertainty. So, I would say the jury is still out on, sort of, more broad-based recovery. Operator: The next question comes from John Kim from Deutsche Bank. John-B Kim: A couple of questions, if I may. Staying on the topic of visibility and demand. What are you seeing, if anything, from stimulus programs, particularly in Europe? Or any early signs there? Stefan Widing: No, I wouldn't say -- I mean, some of this infrastructure, sort of, positive sentiment is, of course, also coming in Germany where there is a big package. And even if it hasn't, sort of, come through yet, it means that some dealers or customers are maybe preparing for higher demand picture. So in that sense, indirectly, it might impact. But otherwise, I cannot point to any specific, sort of, stimulus outcomes. Unless you count -- sorry, unless you count defense into the stimulus package, of course, but that's -- I put that in a different category. In defense, we indeed see, of course, significantly increased demand. John-B Kim: Okay. And if we -- zero in on the SRP division, the comments indicated that you saw some good activity in demolition. I'm wondering if you could give us some color here, whether that's more infrastructure or construction related. Stefan Widing: So demolition and recycling for us, that's our attachment tools, and they go into things like civil construction projects, also infrastructure projects. So it's a mix. We also say we see an improvement in aggregates, which is more, kind of, infrastructure, road building and so on. So I would say, if you look at the U.S., we are positive in infrastructure more generically right now. We did get -- for a couple of years, we haven't really seen, sort of, dealer orders coming in, in anticipation of the summer season. But in Q4, we started to get some dealer orders for that, which is a good sign. We'll see if it continues into Q1. John-B Kim: Okay. Great. Last question, if I may. Any color on the CapEx focus for this year? Cecilia Felton: On CapEx focus, well, we gave the guidance. Typically for us, the larger share of our CapEx is maintenance or replacement CapEx. But then, of course, we also have expansionary CapEx built in there, and that's mainly for the mining business. Operator: The next question comes from Rory Smith from Oxcap. Rory Smith: It's Rory from Oxcap. Hopefully, you can hear me okay. My first question is just on the breakdown of order intake in mining between brownfield, greenfield replacement, or cutting it a different way, between surface and underground, is that something that you could comment on? Stefan Widing: Yes. If we start with the first one. It was pretty similar to prior quarter and also the, sort of the, full year picture, meaning brownfield is the majority, slightly over 50%, replacement is about 1/3, and then the remaining being greenfield. And that's been fairly consistent besides certain quarters when we have received a large greenfield orders such as the second quarter. But that's a general trend, I would say that's been there for a couple of years. Which actually means, if you look at the growth that it is a broad-based growth because that, of course, means that everything is growing since the ratio is the same. On underground versus surface, I would say and as I mentioned earlier, we see solid double-digit growth in all equipment divisions, meaning both surface and underground. If you take more specifically, for example, the rotary business, I would say we see growth that is higher than the average for our business. But in general, surface and underground are equally strong. Rory Smith: That's great. And then my second question, and apologies, this is quite short term in nature, but just looking at 1Q '26, is there any reason to believe that, that operating leverage in machining is going to be any different to the sort of 28%, 30% level seen in Q4? Cecilia Felton: I mean, we cannot say too much, but I think the main driver for it being higher than around 20%, 30% now, it would be if we would have a volume recovery. And that is, of course, something we do not give guidance on. We said Q1 started at a stable level compared to Q4. Rory Smith: I understand. That's helpful. And then just finally from me, maybe I misunderstood this, but I was -- given the tungsten price action last year and the Wolfram mine that you own, maybe I misunderstood this, but I was sort of expecting to see slightly better margins in Rock Processing. So I was just wondering if there was, A, have I misunderstood that? Or if there's any, sort of, comment you could give around the breakdown of the margin outcome in Rock Processing? Cecilia Felton: Yes. The tungsten, the prices don't really impact the Rock Processing business. When we look at the margin development for this year, it's driven by a positive price versus inflation last year with a weak comparable. We had some price pressure in wear parts last year. Then we have good leverage on the higher volumes. We have the positive impact from savings, but then a significant currency headwind of 1.7 percentage points. So those are the main components for the margin development within Rock Processing. Stefan Widing: The tungsten dynamics will be in the machining business. That's where we have it. Operator: The next question comes from Vlad Sergievskii from Barclays. Vladimir Sergievskiy: Thanks very much for taking my three questions. I'll ask them one by one. First one, could you give us an idea on what was the share of growth projects in the new equipment mining orders specifically? I suspect the share of total orders that you provide also includes aftermarket, which is, of course, the reflection of historical installed base. What would be interesting is to see the proportion of new mining demand coming from [ coal ] customers specifically. Stefan Widing: Yes. I mean we will -- you will get an updated figure with the annual report, but I don't think we give quarterly breakdown for commodity. I'll look at you, Louise. Louise Tjeder: No, I think we can wait. Stefan Widing: Yes. What I can say is that, of course, copper and gold are -- have been a bit stronger than the average that you would see in 2024. But as I also said, it is a broad-based demand picture. I mean, we have a good business within silver, palladium and so on as well. So slightly higher than the historic average, but yes, not materially higher. Louise Tjeder: I think it's a fair reflection that the quarter looks quite similar as the -- on a full year basis. Vladimir Sergievskiy: Understood. That's very helpful. Also, is there a reason why orders from mining customers in the Rock Processing were down? Is it a function of commodity mix over there compared to your main mining business or something else? Stefan Widing: No, actually, the main reason this quarter was high comps. They had some larger orders and a strong demand in Q4 of '24. The underlying demand, as we see it, is unchanged. Then of course, if you compare to our mining business area, they don't have the same dynamics in the sense that their largest commodity exposure is to iron ore, where you have a lot of crushing and screening. And iron ore, of course, is at decent levels, but it's not at the gold, copper, silver type dynamics there. And then finally, downstream' mining have a different -- slightly different cycle than upstream' mining. It tends to be a little bit more late cycle. You need to first ramp up production enough to hit your thresholds for the processing plant capacity before you do additional investments there. So, it is a little bit of different dynamic. But overall, the mining demand in Q4 also for Rock Processing was robust. Vladimir Sergievskiy: Excellent. My final one would be on cutting tools. You mentioned some pre-buying effects in China because of the tungsten price. Why do you think you are not seeing those pre-buying effects outside of China? I assume your customers can see what's happening to tungsten price and can anticipate what will happen to cutting tools price later on. Stefan Widing: I can start, and you can see if you want to add something. Yes. Of course, it's -- we don't have a straight answer to why we see a different dynamic. But one reason is that the pricing dynamics in China is different. In China, the pricing for cutting tools are also more directly linked to the tungsten price. While in the rest of the world, it is, sort of, embedded into a normal list price. So I think it's, the visibility is much higher. And also, I think the way they operate is a little bit different as well, but it's difficult to say, but that would be my speculation. Cecilia Felton: And maybe also another factor that could have an impact is we haven't had price increases in China for a very long time. So this is a little bit of a new phenomenon. I think in the rest of the world, Europe, U.S., we have had continuous price increases for a long time now. So, I think that could also feature into the dynamic. Stefan Widing: I think it's a very good comment. I mean, we have had many years in China where price increases has been off the table completely. Now also our local competitors, which have been operating at very low margins are -- have to raise prices in line with the tungsten increase, which maybe creates a broader market dynamic anticipating this phenomena, so to say. Operator: The next question comes from Daniela Costa from Goldman Sachs. Daniela Costa: I have two. One is a follow-up on this tungsten debate. When we think about the technologies it gets used on, is there any potential substitution? Have you seen that in the past when tungsten prices went up a lot? Or is it just simply not possible and customers are just going to have to eventually weather the full price increase? That's my first question. I'll ask the second once you answer this. Stefan Widing: There is, to my knowledge, no substitute, unless you go to even more advanced materials such as diamond-based materials and so on, which is even more expensive. Daniela Costa: Got it. And then one other thing, I guess, that we have, sort of, started to hear about is more and more, sort of, memory chip shortages, I guess, throughout your portfolio, be it in metrology or in some of the automation that you have on mining, I'm not sure. Can you talk through like how significant a user you are of this and whether you see any tightness? Or how are you prepared for potential tightness there? Stefan Widing: We see no impact from that. And I mean, overall, we have, of course, it's high mix, low-volume products that we have in this area. So our volumes are -- we tend to not feel this kind of dynamics since we can always, worst case, find things on the spot market since our volumes are so low. Operator: The next question comes from Sebastian Kuenne from RBC. Sebastian Kuenne: Thank you for taking my two remaining questions. One again on tungsten. You got your own mine, as mentioned. Can you confirm that it has about 1,000 tons of tungsten output per year? And then I would like to know if your priority is to maintain the margin in the tooling business or to kind of take a little bit of market share, because you can be less aggressive on the full price increases? Or if you go with the same price increases as your competitors and therefore take a bit more profit? I would just like to understand a little bit more your thinking here. Stefan Widing: I think the last question, I think we got it last time as well, and my answer is the same. I mean this is, let's call it, the business tactics or business secret. We will not give that away to the audience. So we will manage that tactically as we feel gives the most value to the business. Sebastian Kuenne: I think you mentioned earlier something like flat margin if volumes are not increasing, when it's were to increase, you get some operating leverage in the tooling business. Cecilia Felton: Yes, that will come with a -- yes, just because we would have better cost absorption with higher volumes, that is what will drive a higher -- a more normal leverage around 40% as opposed to the 20%, 30% we're seeing at the moment. Stefan Widing: And on the mine output, I don't have a ton for you. But what we can say is that for -- in terms of the overall production of powder, the mine is roughly or just over 10% of our supply. And then 55% roughly is recycled material from buyback programs, and the rest is sourced from other sources to make sure we have a diverse supply base. Sebastian Kuenne: Understood, okay. And then, my second question is on mining OE. You mentioned that you plan to increase capacity this year for obvious reasons. And in what areas do you see bottlenecks specifically on the supply chain at the moment? Stefan Widing: I mean, historically, we have typically seen bottlenecks with major components such as engines or certain drivetrain components. We worked fairly diligently about a year ago to get ahead of that this time. So at the moment, I mean, we can produce as we have planned to produce. No specific bottlenecks. We have, of course, been helped, A, by the fact that we were early out here. And secondly, that we don't -- I mean, in general, we don't see this type of, let's say, increase in production in adjacent industries. So, we have -- we can get what we want, so to say, for the moment. When it comes to assembly and these kind of things, we can scale fairly straightforward with partners, our own people and also the fact that we have said before that we have also new sites coming online in Asia, both in India and Malaysia. So it's -- we can produce what we have or want to produce right now. Operator: Next question comes from Max Yates from Morgan Stanley. Max Yates: Just two quick questions from me. Just the first one is on the aftermarket side of mining. I guess, we're kind of used to these businesses growing mid- to high single digits and some people would make the case that given the commodity price backdrop, there's a huge amount of incentivization to get stuff out of the mines by the customers. But that's also been happening already. So, I guess my question is simply kind of from those, sort of, 8% growth rates that we're seeing now, is it actually possible for the business to grow much faster than that given volume production rates, what the customers are doing already? Or would we think that is a very good growth rate historically and therefore, kind of any acceleration or meaningful kind of next step-up has to come from the brownfield and greenfield? Stefan Widing: I mean, we stick to what we have said in terms of long-term growth rate should be high single digits. Now in this quarter and some quarters in '25, we have been in the double digits. And that is maybe a bit of an acceleration driven by the commodity prices and the fact that customers want to push even harder. But I think the long-term trend, we believe it should be high single digits. And it's driven by a number of factors. Our fleet size continues to grow. That obviously drives aftermarket growth. The fleet is still very old in relation to historic fleet age. That also drives aftermarket. The technology content in each machine we deliver is increasing constantly, which both means you need more service and parts, different types of parts as well, sensors and so on. It also increases our aftermarket capture rate because the more advanced the machine is, the more difficult that is for a third party or local service workshop to do the service. So, all of these things are combining into the dynamic that we are seeing this healthy growth in the aftermarket business. Max Yates: Okay. And maybe just a follow-up. Obviously, if you kind of go back a few years, there were a lot of discussions around -- well, at least from the, sort of, investment community about, sort of, potentially a separation of Sandvik into the machining business and the mining business. We're continuing to see kind of businesses simplify across industrials. I guess your share price and multiple would kind of indicate your decision for not doing that at Sandvik, given it's clearly been a great run for the share price. I guess my question is, to what extent do you still discuss this internally? And is there any consideration on this debate as to it matters where machining is in its cycle and if we get to a more, sort of, mid-cycle level in demand and margins, then that decision comes more back on the table? Or given where the multiple is versus the peers, which looks very healthy and looks like there's no major discount versus the peers, is that decision -- is that discussion really internally, kind of, off the table for now? Just -- so the latest thinking around that would be helpful. Stefan Widing: I mean, our approach to this has always been that you have to have a very long-term perspective. We have obviously explained before how we believe we can be value accretive to our shareholders based on the strategy and execution that we have had or have. And we are, of course, very happy that we feel we have gotten a recognition for that in the past, yes, 12 months or so. And if the discussion would be there in any way, it would never be around tactics around share price or cycles or anything like that because if you do it, you do it once and for eternity, so to say. So it has to be driven by other fundamental reasons. And we believe, as we have said, that Sandvik is a great group. We have 23 market-leading divisions. And based on the strategy and the operational performance, we should be able to create value, and we have created value now in the current group structure. Louise Tjeder: Okay. So we have a few minutes left, and three in line, so I ask you to keep your Q&As short. Operator: The next question comes from James Moore from Rothschild & Co. James Moore: I'll try and make it shorter. If cutting tools were high single, machining overall 15%, it would suggest 80% for powder and software. Could I assume triple-digit powder in 2030 software? And I'll give all three together at the same time. And on whatever the tungsten and tariff price impact is to the whole of machining in orders in the fourth quarter, is that the peak? Or would you expect that impact as a percentage of contribution to growth to increase going forward? And finally, on the mining aftermarket side, you said high single, I think? Did you say the number? Did you say if it was 7 or 8? And how are Rock Tools and Ground Support doing? Are they flat or down? And what's happening there? Stefan Widing: Okay. Louise Tjeder: That was record long, is that okay? Stefan Widing: If we start with the growth in machining, I mean, as we said, software is growing double digits. Now, it's not in the 20% to 30% range. And if you wait a little bit, you will soon get the broken out Intelligent Manufacturing restated figures, as you know, since we will start to report it separately. So then you will get even more or you will get the exact figures. But it's not in the -- it's not -- it's below 20%, let's say that. I'll jump to your third question on... Cecilia Felton: Rock Tools and Ground Support. Stefan Widing: Rock Tools and Ground Support, yes. Yes. So, I mean if parts and services are growing double and aftermarket is high single, you can see that they are a little bit dilutive. That is, I would say, normal. They -- all the dynamics I mentioned around the growth dynamic, around service and parts, all of them are, of course, not relevant for Rock Tools and Ground Support. They are more purely production-driven. So you have a little bit of a lower overall market growth there. On tungsten, I'm not sure if we can say about that. Cecilia Felton: I think, well, it was a question on tungsten and the tariff and this is reaching the peak now in terms of the PV impact. I think here, there are -- I mean, some dynamics is that we will start to have these effects also in our comps from the second quarter onwards. So that's, of course, limiting the impact when you look at the year-over-year development, but I think in terms of, are we at the peak or not, it's very hard to say, both how tungsten or ATP prices will develop, also with tariffs. There were some discussions, as you know, between U.S. and Europe, again, just a couple of weeks back around additional tariffs. So very hard to say, I think, how this will develop in '26. Stefan Widing: Yes. Louise Tjeder: All right. The time is out. The idea was good, but we can't manage now to take any more questions. But please reach out to Investor Relations, and we can help you further. And with this, we thank you for calling in, and as usual, for good questions. Thank you.
Operator: Good morning. The Roper Technologies conference call will now begin. Today's call is being recorded. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing 0. I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead. Zack Moxcey: Good morning, and thank you all for joining us as we discuss the fourth quarter and full year 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer, Jason Conley, Executive Vice President and Chief Financial Officer, Brandon Cross, Vice President and Principal Accounting Officer, and Shannon O'Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. And now if you please turn to page two. We begin with our safe harbor statement. During the course of today's call, we will make forward-looking statements, which are subject to risks and uncertainties as described on this page in our press release and in our SEC filings. You should listen to today's call in the context of that information. And now please turn to page three. Today, we will discuss our results primarily on an adjusted non-GAAP and continuing operations basis. For the fourth quarter, the difference between our GAAP results and adjusted results consists of the following: amortization of acquisition-related intangible assets, and financial impacts associated with our minority investment in Indicor. Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now if you please turn to page four, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil? Neil Hunn: Thank you, Zack, and thanks to everyone for joining our call. As we turn to page four, you'll see the topics we plan to cover today. Start by highlighting our Q4 and full year performance, then Jason will walk through our enterprise financials, our Q4 segment performance, our balance sheet and capital limit capacity. Next, we'll discuss our segment highlights and introduce our 2026 guidance and then we'll close with a few summary thoughts before opening the call for questions. So let's go ahead and get started. Next slide, please. As we turn to page five, I want to highlight three takeaways for today's call. First, we delivered solid execution in 2025. Revenue was up 12%, EBITDA was up 11%, and free cash flow was up 8%. Importantly, enterprise software bookings grew in the low double-digit range for the year providing strength as we head into 2026. Second, we continue to invest for our long-term and sustainable growth. That said, organic growth this past year was below our expectations for 2025, and we own that. Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy, improved execution across the portfolio and that work is showing up for the enterprise. To this end, our application software business, save for Deltek, improved organic growth in the 70 basis point area demonstrating broad-based growth improvements occurring within the segment. Importantly, we're not starting the year assuming organic growth will inflect in 2026 despite the traction we believe we're starting to achieve. We're going to execute and will reflect any improvement in organic growth in our guidance as it materializes throughout the year. We'll have much more to say on this later in the call. On AI specifically, we continue to be excited about the AI product opportunity because our businesses sit directly inside mission-critical, high-frequency workflows where we already have deep domain knowledge, proprietary data, and trusted distribution. The way AI can move from productivity to on-stack embedded automation improves outcomes for our customers and is highly monetizable. Importantly, our decentralized model lets each business deploy AI with the appropriate domain specificity across their various end markets. To further accelerate our pace of AI product development, we hired Shane Luke and Eddie Raphael to lead the Roper AI accelerator team. They'll coach and partner directly with our businesses, build a small AI development strike team, and leverage reusable elements and best practices across the portfolio so we can deploy AI with increasing speed and market-specific precision while scaling what works. Exciting stuff for sure. Zack Moxcey: And our third key takeaway centers on capital allocation. Neil Hunn: During 2025, we materially advanced our portfolio and foundation through capital deployment, deploying $3.3 billion towards high-quality vertical software acquisitions during the year, highlighted by Central Reach, SubSplash, and several tuck-in acquisitions. Also and importantly, we leaned into opportunistic repurchases buying back 1.1 million shares for $500 million in Q4. As we look to 2026, we have north of $6 billion of capacity for potential M&A and share repurchases. We're very encouraged by the size and quality of our acquisition pipeline and we expect to remain active while staying highly disciplined on price and business quality, and in parallel, we'll continue to use buybacks opportunistically when they represent the most attractive risk-adjusted path to durable cash flow per share compounding. So with that, Jason, let me turn the call over to you so you can walk through our quarterly and full-year results. Jason? Jason Conley: Thanks, Neil, and good morning, everyone. We'll start off here with the fourth quarter results. To summarize, we finished ahead of expectations on DEPS, driven by very strong margin performance. Revenue of $2.06 billion was up 10% over the prior year, with acquisitions contributing 5% and organic growth of 4%, which was below our expectations. I'll expand on this shortly. EBITDA of $818 million was also up 10% over the prior year. Notably, our core EBITDA margin expanded 60 basis points in the quarter, representing 54% incremental margin. DEPS of $5.21 was above our guidance range of $5.11 to $5.16, and up $0.40 over the prior year. Shares were reduced by 1.1 million in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year-over-year basis. However, the repurchase did not impact DEPS in the quarter versus our guidance, given the partial quarter share count benefit and higher interest expense. Now if you turn it with me to Slide seven, I'll walk through the Q4 segment performance. Application software revenue grew 10% with organic growth of 4% and margins were solid, expanding 70 basis points to 42.2%. It's important to outline some details on organic revenue. Recurring revenue grew 6% in the quarter, however, nonrecurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid-single-digit outlook. In our last call, we talked about Deltek being the big swing factor in the quarter. With the prolonged government shutdown, large GovCon commercial activity and perpetual license revenue, was meaningfully impacted, leading to Deltek being up at the lower end of mid-single digits for the year as compared to the solid mid-single-digit plus grower it's been over the decade that we've owned the business. That said, we are cautiously optimistic about a 2026 improvement for Deltek given both the 2025 disruptions caused by Doge, and the shutdown, and the forward benefit of the O triple B appropriations coming into the market. As improvements occur, we will reflect this in our outlook. For network software, revenue grew 14% with organic growth of 5%. Margins were lower at 52.8% due to the recent bolt-ons for DAT that are currently scaling into profitability. On organic revenue, recurring growth here was also 6%. The recurring performance was consistent with patterns over the last two quarters with mid-single-digit growth at DAT despite a muted market backdrop and steady improvement at Foundry. However, nonrecurring revenue was down 3% on lower services revenue and some customers electing to move from perpetual to SaaS, which negatively impacts the quarter but benefits long-term growth and customer lifetime value. For our test segment, revenue grew 6% or 5% organically, while margins held flat to the prior year at 34.8%. NDI outperformed in the quarter given strong demand for solutions in the cardiac ablation space, while Neptune was down slightly as expected. As we comped against a stronger prior fourth quarter and worked through the final surcharge negotiations. Now let's turn to slide eight, where I'll summarize our 2025 full-year results. 2025 was a solid year in terms of cash flow and DEPS performance, despite lower than expected organic revenue. Revenue posted at $7.9 billion or up 12% over the prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in Central Reach and Subsplash that will be accretive to 2026 second-half organic growth. We also made three strategic bolt-ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come, which will ultimately inflect the growth rate for DAT. Organic growth was nearly 5.5% which Neil will discuss in the segment detail. EBITDA reached $3.1 billion or 39.8% margin and was up 11% over the prior year. Of note, core margin improved 30 basis points and represented 47% incremental margin, which is in line with our long-term growth algorithm. DEPS of $20 was up 9% over the prior year and reflects the top end of our 2025 guidance range provided in January, despite lower organic revenue and in-year dilution from recent acquisitions. Free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year. This represents an 18% CAGR since 2022, or excluding the impact from section 174 in both periods, it was at 14%. As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital, and cash tax improvements. This will put us safely over 30% of revenue next year issued in the 2025. However, Q1 will be a bit lower given the timing of coupon payments for new bonds. This, of course, does not contemplate future capital deployment towards either M&A or share repurchases. Neil Hunn: Which brings us to our balance sheet discussion on Slide nine. We're entering 2026 in a strong financial position with a net leverage ratio of 2.9 times and ample near-term liquidity with about $300 million of cash nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion capacity for capital deployment this year. Regarding M&A opportunities, we've been proactive and successful in executing high-quality acquisitions for the last couple of years despite a weak M&A market. Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for many acquisition targets' CEOs. Additionally, we have the attractive optionality of a share repurchase program, which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed $500 million to acquire 1.1 million shares in the quarter at an average price of just under $446. This leaves us $2.5 billion remaining on our current $3 billion authorization. We will remain agile in deploying capital to the best return for shareholders. Given the current valuation dislocation, we are now very pleased to have the buyback option available. With that, I'll turn it back over to Neil to discuss the segment performance and outlook. Neil Hunn: Thanks, Jason. As we turn to page 11, let's review our Application Software segment. Revenue for the year grew by 16% in total, organic revenue grew by 5%. EBITDA margins were 42.5% and core margins improved 80 basis points in the year. For the segment, we saw recurring and recurring revenue grow on an organic basis 7% for the year and total organic revenue improved about 70 basis points save for the Deltek related market weakness. Both of which provide evidence of underlying strength for the businesses in this group. Aderant continues to execute from a position of strength. FY 2025 revenue grew in the mid-teens area with strong bookings throughout the year. Importantly, they're leaning into the right long-term work, accelerating SaaS and AI-led innovation while modernizing their tech platform and data lake. Deltek was the primary weaker part of the story for this segment and has been straightforward all year, with GovCon remaining a challenging market throughout most of 2025. That said, we view the passage of the O triple B as a positive development for the market. It should drive upside over time, but we've not included any benefit in our 2026 guidance, and we'll monitor customer activity as the year progresses. Vertafore has another solid year with growth driven by strong recurring revenue performance and continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of priorities. Scaling automation, particularly AI-enabled workflow improvements, while continuing to deliver steady innovation to the agency and carrier ecosystem. PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation, customer experience, and internal operating capabilities improving their long-term organic growth profile. Shout out to Raffi for carrying the leadership mantle forward at PowerPlan and great job managing the transition from Joe. Illumia, formerly known as Seaboard and Transact, continues to execute well and is progressing in its integration and platform roadmap while maintaining solid commercial momentum. And we're excited to welcome Greg Brown, our new CEO at Illumia, brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, Taran, and Rob for executing the VCP driving the business combination and achieving the year one target. We look at the broader portfolio of businesses we've acquired over the last couple of years: Centellus, Transact, SubSplash, Central Reach, and ProCare, feel very good about the quality and long-term growth potential of this group. However, ProCare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year. Specifically, we improved payments execution, upgraded the entire leadership team, and continued to win competitively in the market where ProCare remains a category leader. The biggest constraint was implementation timing across both software and payments which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities. ProCare's leader Joe Gomes has executed this playbook before at PowerPlan. Central Reach is off to an outstanding start and ahead of our deal model. The business is scaling well with strong recurring software momentum and expanding profitability, they're building a broader growth engine through cross-sell and steady cadence of new product releases, including AI-enabled offerings. Now turning to our outlook for 2026. We expect organic growth to be in the higher end of the mid-singles range. We also expect a modest back-half weighting as Central Reach turns organic and non-recurring comparables ease in the second half. As mentioned previously, maintaining a conservative posture in GovCon at Deltek until we've seen sustained improvement in commercial activity. So overall, application software remains a durable growth engine, supported by recurring revenue momentum and continued product execution across this portfolio. Please turn with us to page 12. Total revenue growth in our Network segment was 8%, organic revenue grew 4% for 2025. EBITDA margins came in at 54.1%. DAT continues to execute well on what they can control. Broker integrations, value capture, and trust in network, leading to ARPU expansion. Although the freight recession persisted throughout 2025, DAT is continuing its evolution from a traditional load board into a more automated market where brokers and carriers can match loads with greater trust efficiency and increasingly transact with the platform. And as this happens, DAT's TAM and monetization opportunities grow. To this end, DAT is advancing its AI-first operating model with concrete use cases across carrier onboarding, fraud detection, freight matching automation. This is a pattern we like, AI then improves customer outcomes, lowers transaction friction, expands our TAM, where you have a very high rate to win. ConstructConnect had another strong year of recurring revenue growth and the team made material technical advances with their AI-based takeoff solution Boost. Foundry is making steady progress with year-over-year growth in ARR as the market continues to recover. We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows small improvements can materially improve artist throughput. Importantly, these are high-frequency, high-value tasks that Foundry already sits inside. AI is being delivered as embedded features that customers should adopt quickly given the clear and integrated efficiency gains offered. MHA, SoftWriter's SHP continued to execute well supported by stable end market demand and strong reoccurring revenue models. Each team is advancing its roadmap with targeted investments in functionality, workflow efficiency, and service levels to deepen customer value and retention. SunSplash is off to a great start in the portfolio with strong execution and solid momentum across the business. We're encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time. As we turn to the outlook for the year, we expect network software organic growth to be in the higher end of the mid-singles range, representing a modest improvement versus 2025. We expect a stronger Q4 driven by Subsplash turning organic in the quarter. Of note, remain conservative on DAT by assuming no meaningful improvement in the freight market. Now please turn to page 13 and let's review our TEP segment's full-year results. Revenue here grew 7% on a total and 6% on an organic basis. EBITDA margins remained strong at 35.7%. We'll start with NDI whose growth is being driven primarily by sustained momentum in its electromagnetic tracking solutions supported by strong OEM demand and program ramps. Importantly, OEM order activity has remained strong and the business is converting that demand into higher revenue scale and operating leverage. Great job by Dave and the entire team at NDI. Verathon continues to perform very well with solid growth across its GlideScope and BFlex franchises. Importantly, Verathon is the US market share leader in single-use bronchoscopes, reflects several years of consistent execution and reinforces the durability of a model as the business continues to take share in an attractive procedural workflow area. Looking to 2026, we're optimistic about several new product launches planned throughout the year. For the full year, Neptune grew modestly notwithstanding the year-long backlog normalization supported by demand for its static ultrasonic meters and its cloud-based software solutions. Although the second-half commercial challenges tied to our tariff surge program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance. Finally, the balance of the businesses in this segment, Civco, FMI, Innovonix, IPA, and RF Ideas, performed really strong throughout 2025 and are meaningful contributors to the segment's results. For the full year, we expect segment organic growth in the mid-single-digit range with the first half being more in the low singles area as Neptune's backlog continues to normalize. Given the more limited visibility at Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters. With that, please turn us to Page 15. So now let's turn to our Q1 and full-year 2026 guidance. Based on what we previously discussed in our segment overviews, we're initiating our 2026 financial guidance to grow full-year revenue in the 8% area, organic revenue growth between 5-6%, and adjusted DEPS of $21.3 to $21.55. Our guide assumes a full-year effective tax rate in the 21% area and more in the 22% area for Q1. To reiterate from earlier, our full-year guidance does not bake in improvement at Deltek's GovCon business or in DAT's freight market and assumes modest top-line weakness at Neptune versus 2025. As discussed, we expect stronger second-half organic growth driven largely by Central Reach and SubSplash turning organic and easing non-recurring comparables. Our guidance does not assume a meaningful revenue uplift from our AI development work either. We view AI as incremental upside as we scale commercialization across the portfolio. Finally, we remain positioned to be active and opportunistic on capital deployment. We continue to have a robust M&A funnel, a meaningful remaining share repurchase authorization, and substantial financial flexibility, and we'll remain disciplined and unbiased between M&A and buybacks based on what drives the highest and most durable cash flow per share compounding. For the first quarter, we expect adjusted DEPS to be in the range of $4.95 to $5 reflecting the dynamics previously discussed. Now please turn us to page 16 and let's open up for your questions. We'll conclude with the same three takeaways with which we started. First, in 2025, we delivered both double-digit revenue and EBITDA growth and solid free cash flow. Enterprise software bookings grew in the low double-digit range, which positions us well entering 2026. Second, we're investing for long-term sustainable growth improvements while staying disciplined in our expectations. Throughout 2025, we upskilled talent, sharpened strategy, and improved execution across the portfolio and we are accelerating AI product development. We're not baking in an organic inflection in 2026 and our guidance will reflect improvement as it materializes. Third, we materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high-quality vertical software acquisitions, executed opportunistic repurchases, and maintained more than $6 billion of forward capacity. As we look ahead, Roper remains an advantage and preferred buyer for both management teams and private equity sellers and believe the M&A backdrop remains constructive as private equity firms face increasing pressure to generate liquidity for limited partners. Our pipeline is robust and our team is deeply engaged. We will remain disciplined and unbiased on valuation, and business quality. In parallel, we'll continue to balance acquisitions with opportunistic buybacks, allocating capital to whichever path drives the best risk-adjusted and long-term cash flow per share compounding. As we turn to your questions, please flip to the final slide strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over a long arc of time with a disciplined strategy anchored on three things. First, we own market-leading vertical-focused businesses: application-specific, deeply embedded, and mission-critical. These are durable franchises with highly recurring revenue and organic cash flow growth that can improve over time. Second, we're running a decentralized operating model so our teams stay exceptionally close to customers and their workflows, so we can consistently compete and win. That customer intimacy is a core competitive advantage. It's also how we win in AI. In our markets, AI isn't a generic overlay. It has to be grounded in a real workflow context, tuned to domain-specific use cases, and deployed through trusted embedded relationships. So our AI delivers measurable value and better customer results. Third, we pair that with disciplined, centrally-led capital deployment. Focused on high-quality M&A and opportunistic share repurchases. Allocating capital objectively to maximize durable cash flow per share compounding. Niche leading businesses, decentralized operations close to customers, and disciplined capital deployment. That's our long-term compounding flywheel. We're excited to compete and win and continue delivering long-term and improving cash flow compounding per share. So with that, thank you for your continued interest and support. Let's open it up to your questions. Operator: We will now go to our question and answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch-tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then the digit two again. We request that callers limit their questions to one main question and one follow-up. Your first question comes from Brent Thill with Jefferies. Your line is now open. Brent Thill: Good morning, Neil. Regarding Deltek, I'm curious if you could just give everyone a sense of what you're baking into the 26 guide and how you're protecting against another potential government shutdown. Yeah. Go ahead, Jason. Jason Conley: Yeah. So good morning, Brent. Yeah. I think we are not assuming an improvement this year. You know, the fourth quarter was depressed by the perpetual license revenue. As I talked about, most of the Con Enterprise still buys perpetual licenses. So that's what drove our lower organic NAS in the fourth quarter. So we don't think that's gonna repeat next year. So we do have a comp benefit, but otherwise, we're not really assuming improvement in that market until we see it. Brent Thill: Okay. And, on ProCare, Neil, what do you think needs to happen to get that back meeting expectations? Neil Hunn: I think it's just to go through a little bit of what we talked about in the prepared remarks and then add a little bit more to it. So, hey, the business is the leader in the marketplace. It is the clear leader. We've done a lot of good things there. We sort of cleaned up and fixed the payments cost infrastructure and processing capability. We've fixed and improved the go-to-market. So, we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor. And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to the software, which means we're slow to implement the payments. And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that. It's a completely fixable problem. It's one of the problems that you don't like to have problems generally, but when you do have one that is imminently fixable, which this one is, the larger problem would be if we had a competitive situation, something like that, which we do not have. Brent Thill: Great. Thanks. Neil Hunn: Yep. You bet. Operator: Your next question comes from Clark Jeffries with Piper Sandler. Your line is now open. Clark Jeffries: Hello. Thank you for taking the question. I wondered if specifically on the GovCon business, you could maybe give a rank order of kind of appropriation bills. What would have the most impact? Or within Deltek's exposure? What segments of the government getting those appropriation bills passed would be most significant? Neil Hunn: Yeah. So I'll just draw back to the O triple B. And this is as you know, we're not Deltek doesn't have direct exposure to the government. It's our customers that are the federal contractors that have the direct exposure to the government, just to remind everybody. The O triple B is heavy on defense, Department of War, Department of Defense, and DHS funding and spending, that tends those categories tend to have a larger percentage of contractor spend. It could be north of 50% of the whole category. It can be contractor spend, so that's definitely a tailwind. The civilian programs tend to have a lower percentage, so it's not necessarily a bad thing for Deltek's customers. But it's certainly better on the current appropriations, the O triple B. Clark Jeffries: Perfect. And then the last two years hovered around $3 billion deployed towards acquisitions. Wondering if you could talk about expectations for how much you might deploy in 2026? What scenario might push you towards a number closer to $4 billion or a number closer to $2 billion? What are you factoring into the deployment outlook for '26? Thank you. Neil Hunn: As we mentioned, there's about $6 billion sort of is what the forward capacity is over the next twelve months. We have the two levers available to us on the capital, the M&A and the buyback. On the M&A side, you know, the thing for us I mean, I've been here fifteen years, Jason's been here twenty. You know, when you're building a business that has an M&A lever, we never view the amount of capital in the next twelve months as the budget or we gotta spend it because we're building a business that's gonna own businesses in perpetuity. So you have to buy very high-quality businesses at an appropriate price. And so that discipline guides us. So it's hard to set an expectation that says we're gonna get x dollars deployed against the $6 billion, excuse me, in M&A or buyback. But we like having both levers available to us, and we're gonna do what's best objectively to compound cash flow per share at the best rate we can. Jason Conley: I will say that we think this coming into this year, you know, I think the market is right for more assets to become available. I mean, we've been very proactive the last couple of years with a in a very muted market. So as I mentioned, I think it's a net positive for us, but, you know, we'll just stay disciplined and focused. Neil Hunn: Yeah. Don't mistake anything I'm saying. Like, was just saying, as Jason said, the opportunity the number of deals, the number of the amount of LP pressure on the GPs and private equity just continues to mount. There's gonna be there's an aging portfolio of very high-quality assets. A number of those assets that we have relationships with and are meeting with management teams and becoming the preferred owner. All that is very, very ripe for opportunity. But we're gonna remain, as we always do, disciplined. Finally, on that, over the last really, two and a half or three years, we've really leaned in and built capacity for tuck-ins and bolt-ons. That's a more predictable pace. I think we did seven or eight maybe eight small tuck-in acquisitions last year. That'd be more sort of predictable because it's a lower dollar per transaction but more of them. Clark Jeffries: Perfect. Thank you very much. Operator: Your next question comes from Joseph Vruwink with Baird. Your line is now open. Joseph Vruwink: Great. Thank you for taking my questions. On AI, when would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level? I think it's evident in certain areas already. The utterance callouts, you know, if they're mid-teens growth. They're 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives, and so there's an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically and attribute some of the organic improvement ex Deltek you're already seeing and say that's directly or indirectly related to AI investments? Neil Hunn: Yep. So appreciate the question. We spent a fair amount of time talking about that internally. A couple of guiding principles that we have internally is, one, we're not gonna AI wash or allocate revenue. Like other companies, have done or are doing. We're not gonna say x dollars, R&D's, therefore, y dollars of revenue is AI-related. So we're not gonna AI wash our revenue stream. That said, we do aspire to be able to report a number, yeah, that's Nick. AI revenue SKU related is x or y. Unfortunately, if we do that, I mean, we're gonna monetize AI in more ways than just AI SKUs. It's going to be cloud uplift. It's going to be in packaging. It's going to be lots of ways that we monetize this. So this is actually you know, it says simple. It does pretty hard from how we're gonna be able to sort of report this where it's credible. At the end of the day, Joe, you highlight the most important thing, which is we believe this is a TAM meaningful TAM expander for us, which means it should be a growth driver for us you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. We see that at Central Reach. We'd expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper, 25 the chapter on AI would be how we learned to develop the initial set of products across our software business. Essentially, every one of our software businesses either has or is right on the precipice of having AI-related product to deliver to our customers. 26, I think the chapter is gonna be how we commercialize. How do you sell, deploy, drive implementation? And ultimately sort of monetize all of the product. And so that's gonna be the journey of learning for us across the portfolio organization. We'll look forward to providing updates on that as we get through the year. Joseph Vruwink: Great. That's helpful. On your approach to guidance this year, I think it's very clear that you're gonna let the upside come to you and, you know, future changes are gonna happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? I'm thinking in the past, you've talked about how your current portfolio could be capable of sub and, in a best-case scenario, eight to nine. That's more of a long-term framework within FY '26. If things go right and you get some redirection and where the pressure is within the portfolio have been what sort of upside possibility could there be? Neil Hunn: So I would say the long-term to first point, the destination for the longer term certainly not a '26 comment. The longer-term entitled growth in a portfolio, we still have conviction is north of 8%. You know, we go company by company. About what their entitled realistically achievable growth can be so that number, sort of the target destination has not changed. We are definitely, as you've heard from our commentary, taking a much more appropriate and balanced view for the initial guide here. No improvement at Deltek on the government contracting side. No DAT market recovery, actually underwriting a slight decline at Neptune. And so you know, if you sort of thumb each one of those, I don't wanna get into the order of magnitude of what it could look like, but would say it definitely tilts more, conservative than, than in this past year, for instance. Joseph Vruwink: Thank you. Operator: Your next question comes from Dylan Baker with William Blair. Dylan Baker: Hey, gentlemen. I appreciate it. Maybe kind of following up on one of Joe's questions too. I think the Deltek perpetual piece makes sense, but you also called out some softness on nonrecurring due to some of those cloud migrations, and maybe that's just kind of rev rec of upfront for ratable. I guess, as you think about kind of AI's opportunity to accelerate this modernization and cloud journey given kind of the heavy maintenance space you still have there. How do you think about kind of that trade-off in those long-term economics? It seems favorable. I think it's kind of evident in the subscription bookings in that low double-digit framework. But maybe kind of walk through some of the nuance between those as well too. If you can. Thank you. Jason Conley: Yeah. Certainly appreciate the question. I think, you know, we've seen some of this just in our AS segment over the last years, you know, nonrecurring revenue has been sort of flattish, up a little bit, you know, here and there because you know, some of our businesses have moved more to the cloud, be it Aderant or in recent years PowerPlan. We see that at Deltek is gonna be a significant opportunity. So that's a part of our thinking in '26. Deltek's really put a lot of AI functionality into their cloud product. And so some of these large government contract customers are contemplating going to the cloud, and they have a big push for that. So you're right. That will obviously increase customer lifetime value. But it'll have a more muted impact in the year. So we thought through a little bit of those dynamics this year. And I think that's probably the biggest area where we will see that because a lot of the rest of our businesses are sort of on their cloud journey. But they will continue, to your point, to include, only AI features in the cloud, and so, that'll just increase adoption as we go forward. Neil Hunn: Yeah. And just to add to what Jason said, you know, we don't expect a pronounced j curve because we have a very large install base that's on-premise. That's gonna lift that is lifting and shifting at two to three x recurring. So the j curve is less pronounced than if because you're converting an existing recurring base at a higher level. And as you sort of, if you will, can a trip or convert net new perpetual to recurring. So they offset one another, and we think we have that harnessed in our guidance. Dylan Baker: Okay. Great. Thank you. And then maybe, Neil, for you too, on the kind of topic between platform and bolt-on M&A, I guess, you kind of give us a sense if you see any opportunity maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate some of the initiatives in one effort. I know we've built out kind of the bolt-on team. There's a little bit more visibility into those. Platform acquisitions, maybe have come down to a particular level as well. But just kind of think about kind of the mix between capital deployments between bolt-on and platform if you can. Thank you. Neil Hunn: Always hard to predict mix. I can tell you that if there is a genetic generally speaking, if there's a rank order, bolt-ons or tuck-ins are gonna be first order because they are advancing sort of the organic growth as direction of one of our platform businesses. At the same time, you always have a little bit of back-office G&A synergy, enables to sort of buy down the initial purchase price pretty quickly, and then you get to a growth-oriented. So that continues and will always be a focus of ours. What we see, by the way, on that front is it takes a little bit of time as we added the resources. They get to know the company. They build a relationship with our company. They build a relationship with sponsors and targets and founders. I think something like 60% of our pipeline for bolt-ons is either proprietary or founder-driven. That's a completely new motion for us. That would not have been the case three years ago. I think it bodes well, but these things do take time to matriculate through and mature to where they can become actionable. On the platform side, the number of opportunities and the high quality of assets is very interesting. The question on the table is gonna be what happens relative to valuation. We've never been a short-term, you know, next twelve-month multiple arbitragers. We're not gonna do that. But we definitely have to sort of we have to look at buybacks versus bolt-ons versus platforms on what is the best long-term compounding. In terms of value creation opportunities for us. Dylan Baker: Great. Thank you, guys. Operator: Your next question comes from Brad Reback with Stifel. Your line is now open. Brad Reback: Great. Thanks very much. I know you guys gave the software bookings for the entire year. Can you give us what it was in 4Q? Jason Conley: Yeah. It was up high single digits. And that is with Deltek being down in the low double-digit area. Actually, Deltek's SaaS was strong, but, like I mentioned, perpetual was down meaningfully. The rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a really tough comp last year, so they're continuing to just have success in 2025, and that should be good for them for twenty-six. And then as I mentioned last quarter, healthcare has been really strong for us, and that was the same in the fourth quarter. Brad Reback: Great. Thanks. Neil, this is the second quarter in a row you've missed expectations. And you're guiding to a back-half acceleration in '26. So maybe take a moment and help us understand where the incremental conservatism is in the '26 guide versus the last couple of quarters? Thanks. Neil Hunn: Sure. So we did say and we're certainly disappointed with the last couple of quarters, but we did say this time last quarter we had a wider range of outcome, fan of outcome. Especially because of the uncertainty at Deltek. And so while disappointing, we try to be sort of very straightforward in that regard. I think for this year, I said it before, I'll say it again, when you look at where we're exiting this year, look at 25 compared to 26. And you just go and let me back up. When you look at 25, the initial guide versus where we ended up, it really reconciles to three things we talked about. It's Deltek because of GovCon. It's Neptune because of the dynamics we talked about, and it's ProCare. That almost fully reconciles the difference between the initial guide and where we ended up. You then have that in mind. You take it. You carry it forward. We're assuming in 2026, there's no improvement in Deltek. There is no acceleration at DAT. There's actually or right underwriting a modest decline at Neptune versus '25. And the only thing that sort of then you get the accretion to organic growth from SubSplash and Central Reach that turn organic this year. Then we have this easing second half not sort of nonrecurring. So optically, it looks like an acceleration through the year, but when you look at the pieces, it's actually pretty steady, save for the things that we just said. Jason Conley: Yeah. And just to remind you, all the Central Reach and SubSplash becomes organic second half. So it's gotta create some of that ramp. And I would just call out too, just again, just a small comp, a couple of call comp issues. Foundry gets a little bit better this year, and I know it's small dollars, but in network, it matters. And then, we had the '25 a pretty depressed network number because we were comping against a bigger number in '24. So that comp goes away. So there's some math too. Know, just going from '25 to 26. Brad Reback: Great. Thank you. Operator: Your next question comes from Terry Tillman with Truist Securities. Your line is now open. Terry Tillman: Yes. Hey, Neal, Jason, and Zack. Thanks for taking my questions. The first one is going to be on Deltek, the second one the follow-up is going to be on DAT. But on DELTECH and I know these months or these part of the quarters are probably less seasonally strong. But did you actually see any improvement in order volumes for perpetual in December or January? And also with Deltek, are the effects of Doge kind of lessening, or is that still in POC? And then I had a follow-up. Jason Conley: Yeah. So, Terry, I'll this is Jason. I think the, you know, December's always stronger than the other months, and that's just the natural kind of inertia. Of how orders flow in Deltek. I will say we had two large, contractor government contractor deals that slipped. So it was, like, right at the end. And so we think they'll both land in the first half of next year. But we've also sort of hedged that, just in case. But the so usually, we get some big deals, and they were right at the finish line, and they didn't close. But they're still in the queue, and we still think we're gonna close the rest of this year. Neil Hunn: Yeah. Exactly. This year. And just to pick up on that, Terry, as well, just to add. While the signature is on paper are slower because of the shutdown, the commercial activity, the pipeline build has actually been encouraging. It's been encouraging throughout. It's because, you know, all the this is an environment, unfortunately, that our customers live in. They sort of they're subject to the vagaries of what's happening in the government, but they have a business to run. And they have contracts that are likely gonna get awarded, and they have to sort of manage sort of our software in that regard. And so there's no competitive issue here at all. The has been asked, but zero competitive issue here. It's just deals that are building that are to the right a little bit given the uncertainty. Doge, I would say, is, to your question, is lingering impact, but it's not the topic that anybody's talking about the way it was in the first third the first half of the year of last year. Terry Tillman: Got it. I appreciate that. And just a follow-up is on DAT. Do you see ARPU lift continuing to play out through the year? And are you on track for that autonomous kind of load matching technology innovation to play out in '27? Thanks. Neil Hunn: Yeah. So we do expect ARPU to continue improving and growing in 2026. There's a couple of reasons for that. One is you just have like-for-like pricing that'll sort of get cascaded in during the year as it normally does. But for the second reason is we have more value to sort of sell to both sides of the network. And so you're gonna get, you know, in the past, it was just load board. So it's load board in pricing. Now it's load board in automation. It's load board in data. Load board in a number of things on both the carrier and the broker sides. In terms of the automated matching, it's early days. But we're encouraged by the progress. The tech unambiguously, the technology does the job. Let's just be clear. It is the ability for a broker to tender to the DAT one platform and automatically match a load and have a carrier pick it up, complete the commerce with payment sort of overlay across all that. Works, and it's working every day in the marketplace. The number one focus of that business is to build both sides of the network. That starts on the broker side by getting native integrations with their TMS systems. And you have seen and will continue to see during 2026 a cascade of announcements about the various TMS's that we're integrating with. That allows the brokering or the tendering to our platform to be native and the workflow of the brokers. And then we continue to build the carrier side of the network, gotta be a high trust, no fraud environment. That's part of the core technology that we have and we're integrating. So early days, but we like the tendering percentage. We like the completion percentages. We like the factoring percentages, and we wanna see that business scale as Jason and Shannon and the and Satish, the team at DAT look at this on a monthly basis. Terry Tillman: Thank you. Operator: Your next question comes from Ken Wong with Oppenheimer. Your line is now open. Ken Wong: Fantastic. Thanks for taking my questions. You guys are guiding to 5% to 6% organic for '26. You know, as we think about 1Q first half, with a lot of faster growth businesses coming in second half 4Q and no Deltek tailwinds, like, is there the possibility that you could be below that 5% low end? Any context there so we could properly level set our numbers? Jason Conley: Yeah. No. I don't think so. We're kind of thinking for AS, we'll be, you know, sort of in the mid-single-digit range with nonrecurring being flat and the recurring reoccurring being, like, mid-single-digit plus. Which is consistent with Q4 levels. I mean, you central reach turning organic. Not we're not gonna have the same nonrecurring, decline, like we did in the fourth quarter. And then as you mentioned, the second half gets better on the We've got this the nonrecurring, as I just mentioned, we get a better comp in the fourth quarter. So not a lot of I would just say not a lot of go get in that second half number. And then, on, on NS, you know, I think sort of the, you know, recurring revenue will be just sort of continue to be mid-single-digit plus out of the gate, and then as we go throughout the year, sub slash actually comes in in the fourth quarter, so that'll be that'll be helpful. And so think that's sort of how it sets up. Nothing nothing outside of that. To call out. Ken Wong: Got it. Really appreciate the color there. And then perhaps just any additional context you provide in terms of what the new business activity pipeline conversion looks like versus maybe the renewal business, you know, term expansion, contraction? And any details would be helpful. Neil Hunn: Ken, is that a broad portfolio question or specific to a business? Ken Wong: Broad, broad question? Yeah. Yeah. Just like a yeah. Correct. It's more of a broad kind of software selling you know, kind of trends that you guys are noticing across Yeah. Across the group? Neil Hunn: Understand the question. Yeah. I would say we're broadly encouraged by what we saw in the finishing the year. It was it was the bookings and retention statistics were quite good. You know, as you know, our enterprise, our gross retention in the mid-nineties for our enterprise businesses. That's steady to tick up a little bit during 2025. And then in terms of the bookings activity, hey. You know, while there's a little bit we expect there to be volatility quarter to quarter, low double-digit bookings growth in the year. And being pretty broad-based with sort of weakness at Deltek, I think is all you need to see. You know, we and so it's been it's been pretty good. Ken Wong: Okay. Fantastic. Thanks a lot, guys. Operator: Your next question comes from George Kurosawa with Citi. Your line is now open. George Kurosawa: Great. Thanks for taking the questions. You guys brought in some new AI leadership Shane and Edward, Would love to hear a little bit about the team they're building out, what you have them focused on, and if there's any kind of low-hanging fruit that you know, learnings they can apply across the portfolio. Neil Hunn: Yeah. So we're excited to have Shane and Eddie join and the team. They're starting to build out. So you know, three things they're generally focused on. First is, all in pursuit of accelerating the top-line goals, accelerating sort of our pace of AI product development and ultimately, you know, shipping, selling monetization. That's where the focus is. So three subcomponents to that. It's coaching and teaching. Right? Our businesses did a meaningfully above average, above expectation job in 2025, late twenty-four or '25 learning, making mistakes, learning, making mistakes, learning, around AI, AI AI development, what works, what doesn't, and getting product into the hands of customers. That was great to see. But some of these a lot of these AI tasks are quite complicated, complex from a technical point of view. And also, unlike regular way, software development, there's some art in this, in this AI development. And so Shane and Eddie and the team, they're bringing really bring just a history. These are people that studied machine learning and AI in university quite a while ago and spent their entire careers. They've seen a lot of pattern recognition. So they're gonna coach and teach our leadership teams, our technical leaders, our product teams on all things AI, ML related. That's one. Number two, they are gonna build an AI sort of development strike team or accelerator team to where when there are you know, a company might have more than it can do from its internal resources, and we'll supplement those teams to accelerate in some pockets. And then third, there is in their first quarter with the business and they met with most of our software businesses, there is clear opportunity for some reuse inside the portfolio, certain AI-based sort of capabilities we can sort of produce and sort of have if you will, Roper open source model where we can reuse some components and componentry. And so we're gonna focus there and early days, it's been just really great. They understand our culture. Our teams have really engaged them. And they're just looking forward to scaling the team. And getting to the work. George Kurosawa: Okay. Great. Did also wanna touch on the margin side. Core gross margins were up over one point in the quarter. Maybe talk through the tailwinds there. How do you how should we think about any sustainability to improvements? Jason Conley: Yeah. I mean, think we've always said in our long-term incremental margins at the EBITDA lines around 45%, did a little bit better this year. I think as we go into next year, you know, I think AS might be up a little bit. Network's gonna be down just because we've got the full year of convoy and our algo, rolling through. And so that'll accrete up over time, but a little bit of a drag in '26. And then you know, I think our dinner test segment will be for the full year sort of. We've got more consumables rolling through next year. Than normal, which has a little bit lower margin. And that's really more pronounced in the first half. So maybe down a little bit in TAP in the first half, and then it'll improve throughout the year. Operator: Your next question comes from Josh Tilton with Wolfe Research. Your line is now open. Josh Tilton: Hey, guys. Thanks for sneaking me in here. Neil Hunn: You bet. Josh Tilton: Maybe just first kind of appreciate all the color that you gave. A simple high-level one on the guide for next year. I On Deltek and DAT and Neptune. But if you were to take those three businesses aside and treat the rest of the organic business as one, like, what would be the one-line color on the rest of the organic business? Does the guidance assume that everything ex DAT, Neptune, and Deltek gets better? Stays the same, gets worse. Like, how would you characterize what the rest of the business has to do that's baked into the guidance? That make sense? Jason Conley: It does. Yeah. So, I mean, I would say broadly, you know, it gets a little bit better, but not a lot. Not meaningful enough. To draw inflection. That's baked in. I mean, when you think about we finished around 5.4%, the deals are a tailwind. This nonrecurring, in 10 basis points or so to the enterprise. And then, really, the swing factors, I talked about the confidence in Q1 twenty-five that didn't repeat. Then you just talk about like, the swing factors. It's all within Neptune. And that's what our low single-digit to mid-single-digit guidance has for TEP. And that's what kind of bridges you to the from the low to the high end. Josh Tilton: And then maybe just a quick follow-up. I understand that some businesses go organic in the second half. Is there any conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following like, kind of the little hiccups that you saw in Procore that you're kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year? Neil Hunn: Yes, Josh, it's Neil. I'll take that one. So sure answer is heck yes. There's a lot of learning from our ProCare governance what worked, what didn't work, and how we're governing both SubSplash and Central Reach. And we can spend more time talking about offline. But in essence, when we see a small variance in a monthly reporting package, relative to one of the key levers in the value creation plan. In ProCare, we observed that variance for a longer time we decided to take action to correct it. Now we immediately jump to a corrective action, a countermeasure and, we don't let small variances turn into large variances. And as a result, you know, Central Reach is ahead of the underwrite model and SubSplash is on the underwrite model. For the outlooks for those businesses. Just that we can get in much more detail when we have more time offline, but that's the essence of it. Jason Conley: And I would just say that for know, for Central Reach and SubSplash, know, feel good about the contribution in the second half, you know, the path that we're on. Bookings momentum, the recurring, the gross retention, just the path to get to that accretion in the second half. We feel very good about that. Josh Tilton: Super helpful. Thanks, guys. Operator: Your next question comes from Deane Dray with RBC Capital Markets. Your line is now open. Deane Dray: Thank you. Good morning, everyone. Neil Hunn: Good morning, Dean. Deane Dray: Hey, this has come up several times today about the M&A bias and looking for a durable cash flow compounding. I'd be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some assets prices today versus what you perceive as where there might be a wider moat against AI in these assets. So how are you weighing those? Neil Hunn: I wanna reframe, Dean, the question to make sure that we answer the right question. If not, if you correct us. And so the question is, you know, looking at both private and public companies that have evaluation dislocation, are we looking at that? And then how does the AI moat influence our thinking? Can you just reframe it? I wanna make sure we answer the right question. Deane Dray: Yes. So, yeah, I wasn't specifically talking about public valuations, but that would be great to hear that as well because you've done those in the past. Versus thinking more, strategically about where there might be wider moats? Neil Hunn: Yeah. So I would say so at the again, feel free. We won't ding you on one of your questions if I get I answer it incorrectly the wrong question. We're always for the long history of Roper, we're always investing in these vertical market application-specific businesses with deep deep moats. Right? And so that does not change. We believe in the AI world, you know, these the modes where you're intimate with the customer, you have unique and proprietary data. You're embedded in high-frequency workflows. Where on-stack AI is easier to implement, easier to monetize, and ultimately translates to the automation of tasks, which is this TAM expansion. We really like and are leaning in it. We're seeing it playing across our 21 software businesses. Days. So continue to lean in that thesis from a capital deployment point of view. Deane Dray: That's really helpful. That's what I was looking for there. And just a quick one on Neptune. You know, we've talked about the order delays. Is there how much of an impact is the spike in copper played? Is there a sticker shock? Is that does that need to be, kind of ripple through the market to reprice? It's just, you know, what's the impact there? Neil Hunn: I would say that, what we talked about last quarter, largely in the bucket of tariffs, but it's tariffs, it's copper pricing, this the generally the shock to the cost structure of a water meter when we started in really July pushing a surcharge to accommodate for that increase in cost of goods. It was definitely a shock in the system in Q3, and it really evaded during Q4. So I think our base case assumption is that is really in the rearview mirror and set to the side. And moving forward, it's just about the normalization of volumes in the market sort of on the very tail end of the COVID spike in volumes, and now we're on the backside of that spike into more normalizing range of volumes in the market. Deane Dray: Thank you. Neil Hunn: You bet. Operator: Your next question comes from Joe Giordano with TD Cowen. Your line is now open. Joe Giordano: Hey, guys. Good morning. How are you doing? Neil Hunn: Hey, Jeff. Good morning. Joe Giordano: Hey, I'm just curious how you're now weighing like, in terms of capital deployment, like, different, like, timing horizons here. Like, Right? Like, you have stock today is, I don't know, 15% below the average price of the buyback in the fourth quarter. You're trading at like almost a high single-digit free cash flow yield now. And it's a portfolio that you're intimately like, close to relative to something that you might buy that drives top line that is something that inherently has more risk because you don't know it as well? Like, how are you weighing you know, something that like, the certainty of what you know versus, like, the risk-reward of something you don't know at the price that you're paying? Neil Hunn: So I'll take the first half of that. I'm sure Jason will have some color he may wanna add. So, again, just to we've said it. It's on repeat. We'll say it again. The objective of M&A versus buybacks, sort of the levers available to us is what's the best risk-adjusted path to long-term cash flow per share compounding, period. Full stop. We're totally objective in dispassionate about the allocation of the two. There's $6 billion available so a big sort of large amount of capacity. On the buyback, we just the valuation dislocation is just is silly. And so we leaned into it in Q4 and we find it obviously you know, more attractive today. And it's a great opportunity to drive long-term cash flow content that way. On top of that, we're very excited and confident about our future. Right? And we get the growth, the AI, the leadership, the strategy, the execution, prowess, I mean, all of it feels very, very good to us and what we see internally. At the same time, you know, M&A is a real lever. I mean, there's not to somewhat to my surprise, you know, we introduced the buyback last quarter. There is commentary about oh my gosh, is the M&A thesis, you know, not intact? As one of those absurd things I've heard in my fifteen years at Roper. We are a preferred buyer of vertical market software leaders. We're absolutely preferred from a management point of view or preferred from a seller point of view. The pipeline's enormous. The, you know, the LP pressure is legit. Number of assets in private equity portfolio have to get liquidity are at levels we've not seen. So that thesis just needs to be eliminated from the talk track because it's not real. And so, for us, it's balancing those two. You know, buybacks are great in the short run. M&A generally is gonna beat in the long run, and we like having to balance between the two options in front of us. Jason Conley: Yeah. I would just add that, they're around the confidence, and we've had just these unusual things happen with three of our businesses. Like, the underlying quality is getting better. So there's that. And I would just say the AI or, you know, we have 21 different businesses working through AI right now. That are annual operating plan reviews and came out with an increased level of conviction that we're gonna win. Relative to AI. We're just we're so our customer intimacy is really proven to be a competitive advantage, and we've got the tools and resources to get after the AI just as fast as anyone else. So we feel really good about that. And so buying ourselves in that scenario where there's this dislocation makes all the sense in the world. But also gonna be an incredibly active year on M&A, so we're just really got an abundance of opportunity in front of us this year. Joe Giordano: And what now that you brought in this AI talent, on the accelerator team, were there any instances where like, negative instances where these guys coming in as experts of kind of identified that maybe parts of your business where you thought you had more of an opportunity is gonna be harder to drive or mean, I'm sure they're identifying places that you have opportunities, but was there any on, like, the negative side where something was like, well, maybe this isn't as attractive as I thought in a particular part of the company. Neil Hunn: Yeah. So I would say, on balance, their reviews and early takes are quite positive about the opportunity market-wise, technical-wise, the prowess of the teams that we have in place. But we also and we had them sort of do a short readout to our board last week. And then there was a few bullet points of things that were on the constructive ledger. None of it was market opportunity lack of market opportunity or lack of opportunity to win. Again, these are more technical resources. I'm saying might not have, like, the best acumen in, like, these vertical market spaces to judge that anyway. It was like, hey. As you'd expect, maybe there's we definitely need to improve the quantity of AI talent in the businesses. I mean, that's a little bit of why we're adding the central team to sort of spark some acceleration. It's just gonna take some time because we gotta build these people. You know? It's not something that we're gonna be able to hire en masse. We gotta build these people and did a good job last year. We'll continue to scale that. And compound the learning on that this year. Jason Conley: Yeah. Think the ideas have been well received by Shane and Eddie. I mean, they understand the specificity of what we're trying to solve at the individual sort of vertical level, and that's they view that as very unique, right, coming from a horizontal player. So I think they see the opportunity just like our businesses do. Joe Giordano: Thanks, guys. Operator: This concludes our question and answer session. We will now return back to Zack Moxcey for any closing remarks. Zack Moxcey: Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call. Operator: The conference has now concluded. Thank you for attending today. You may now disconnect.