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Operator: Good morning, and welcome to the West African Resources Investor Webinar and Conference Call.[Operator Instructions] I'll now hand over to West African Executive Chairman and CEO, Richard Hyde. Thank you, Richard. Richard Hyde: Thanks, Nathan. Good morning, and welcome to the December 2025 Investor Conference Call for West African Resources, and thanks for joining us today. Joining me on the call today, we have our Chief Financial Officer, Padraig O'Donoghue; and our General Manager of Finance, Todd Giltay; our Chief Operating Officer, Lyndon Hopkins, is on site at the moment in Burkina. The December 2025 quarter delivered another strong period of gold production across both our Sanbrado and Kiaka gold operations in Burkina Faso with just over 112,000 ounces of gold produced across the operations, delivering an operating run rate that bodes well for our gold production in calendar year 2026. Our total gold production for calendar year 2025 was a touch over 300,000 ounces of gold with Kiaka stepping up in Q4. This was well within our production guidance for the year. What's more is that we completed this achievement with no significant health, safety or social incidents, which is especially important to us and demonstrates our commitment to operating in a safe and responsible manner at all times. We sold 105,995 ounces of gold at an average price of USD 4,058 per ounce for the quarter, and we remain fully unhedged, therefore, allowing WAF to take full advantage of the record gold prices we are currently seeing. With all our sustaining costs -- sorry, with our all-in sustaining costs averaging USD 1,561 per ounce across the two operations, we've been able to deliver AUD 389 million of cash -- sorry, cash flow in the quarter, and that's after making income tax payments of AUD 48 million. Our cash balance at 31 December 2025 is AUD 584 million, plus we still held another AUD 177 million worth of unsold gold bullion, and that's just due to timing of shipments. Looking at our sites, the Kiaka ramp-up has been excellent since its second quarter start-up. And its performance in Q4 really demonstrated that. This is the first full quarter of operations for the site. It produced 62,287 ounces of gold for the quarter, surpassing production at Sanbrado for the first time. Kiaka's costs continue to improve as production has increased, which was what we expected, and it's pleasing to see this panning out. We expect costs to further reduce as our reliance on diesel generated power reduces over the coming quarters. Kiaka produced just over 95,000 ounces of gold for the year after commencing operations in Q2 and having a shortened operational phase in Q3. Open pit mining continues to ramp up as more equipment is commissioned for use. At Sanbrado, our steady production continued, and we produced just under 50,000 ounces of gold for the quarter, bringing our total for the year to 205,228 ounces. Sanbrado performed well against production guidance, achieving the upper end of our 190,000 to 210,000 ounces production range. Open pit recommenced in the quarter under our new owner mining operating model. Open pit mill feed in Q4 was sourced from both the M5 North pit and previously mined ore stockpiles. Mined ounces for the quarter from M1 South underground was 37,955 ounces, which was 16% below the previous quarter. This was due to a 14% drop in mined grade as well as slightly lower ore tonnes mined. With that overview of our production, I'll hand over to Padraig to discuss our financial details for the quarter. Padraig O'Donoghue: Thank you, Richard. WAF, as Richard mentioned, WAF has benefited tremendously from being unhedged and generated AUD 662 million of gold sales revenue in the quarter at an average realized price of USD 4,058 per ounce. For the full year 2025, WAF generated more than AUD 1.5 billion of revenue. As Richard mentioned already also, we generated AUD 389 million of operating cash flow in Q4 and ended the year with a very strong cash balance of AUD 584 million. Our capital investing activities in Q4 used AUD 113 million of cash, which included AUD 89 million for Kiaka and AUD 23 million for Toega. Financing activities used AUD 23 million of cash in Q4 with payments for loan interest, principal and financing expenses offsetting cash received from the drawdown of equipment finance facilities. I now hand back to Richard. Richard Hyde: Thanks, Padraig. So on the exploration front this quarter, diamond drilling beneath the M5 open pit ore reserve has confirmed potential for us to extend open pit mining at Sanbrado. Gold mineralization was confirmed more than 300 meters below the current ore reserve and mineralization remains open at depth. And this is really the first substantial drilling we've done at M5 North since about 2017. So it's no surprise that we can see that this mineralization being extended and then we're considering our options there, but most likely, updated ore reserve would consider cutting back the northern part of the M5 open pit. So some of the drilling results included 16 meters at 11.2 grams per tonne as well as more typical broad intersections such as 45 meters at 1.9 grams per tonne gold. Diamond drilling at M5 North will continue through 2026 and we look forward to further results from the program to help us better plan for the future mining at Sanbrado. But the future looks very good. Our last ore reserve estimate was completed at a much more conservative gold price of USD 1,400 an ounce. So recalculating today we would expect to use a higher gold price and obviously deliver more ounces into reserve. We also have drilling underway at underground for Toega. We continue to develop a satellite operation for Sanbrado, which we continue to develop as a satellite operation for Sanbrado. We're currently completing a 13,500 meter infill drilling program, which is infilling the underground resource and we'll have more results over the coming quarters. Grade control drilling also confirmed during the quarter with -- commenced during the quarter with 6,600 meters completed. This program is expected to be completed in early Q1 2026 with results to follow. In other developments at Toega, earthworks for the mine services area were completed and the construction of mobile maintenance workshop office and ancillary infrastructure has commenced. The haul road construction is well advanced and remains on schedule to enable order delivery to the Sanbrado process plant in early Q3 2026. Toega open pit mining operations will be owned and operated by WAF, similar to Sanbrado. Mining equipment continued to arrive on site during the quarter with commissioning activities underway. All mining equipment is expected to be fully operational by the end of this quarter. Pre-stripping of open pit mining of the open pit commenced during the quarter with a total of 250,000 BCMs moved to date. Material movement is expected to ramp up to steady-state production by the end of Q1 2026. Across other aspects of our business, we continue to invest heavily in social programs, including education, health, economic development, including providing scholarships to high school students from the area, upgrading our community health centers and constructing a new primary school and refurbishing an existing school near Kiaka, which will also be used for community events outside school hours. In relation to discussions with the Burkina Faso government regarding Kiaka, we continue to engage constructively with the government on these matters. But at this stage, there are no material updates on that matter. Overall, I'm really happy with our performance and progress throughout Q4, particularly with our ramp-up at Kiaka. We're looking forward to releasing our 2026 annual production guidance and outlining our capital management strategy later in Q1 2026. I'll now hand back to Nathan for the Q&A. Operator: [Operator Instructions] Your first question comes from Mike Millikan at Euroz Hartleys. Mike Millikan: Just a couple from me. Firstly, talking about obviously, very strong cash generation at the moment. Debt service, are you going to accelerate some of those payments? Richard Hyde: Yes. So that will be a focus throughout this year and get debt down to a management -- a manageable level. That's our first focus. And then we're having active discussions in the office now and amongst our Board about capital management, which will take us past 2026 whether that's buying back shares or paying dividends, that's the discussion that we're having at the moment. Mike Millikan: Yes. Is that the plan, certainly a buyback probably makes a lot of sense. Richard Hyde: Yes. Look, they both make sense. We just really need to gauge the market and really from -- I'm a follower of Berkshire Hathaway, and they've always bought shares back and they've never paid a dividend though. So -- but it's either/or, I think it's going to be a good outcome for shareholders if we do either. But that's certainly our focus at the moment is to pay down debt and then either buy back shares or pay a dividend. Mike Millikan: Yes. Awesome. Just looking at, obviously, the royalty rates currently in country, obviously pretty high. Is there any sort of changes expected there? I mean just it's obviously on a slowing scale and obviously, gold price is very high. Has some of your discussions also been centered around royalties? Richard Hyde: No, not at this stage. I mean the gold price has risen so quickly. I think we're an average sale price of about USD 3,500 in Q3, and we've sold an average over USD 4,000 an ounce in U.S. Q4. So -- and already, we're well over USD 5,000 an ounce as we speak now. So really, the action has been pretty recent, and we'll be back in country in a few months' time and definitely raise that with the administration. Mike Millikan: Yes, cool. And finally for me, just on Kiaka grid power, has it all been going? Has it been stable? What's your expectations for calendar '26 in regards to reliability? And what do you factor in some of your forecast? Richard Hyde: So that will be kind of -- I think we can explain more of that later in the quarter when we put our guidance out. We had 2 or 3 weeks of stability or stable grid in December, and that allowed us really to ramp up production. And we consistently hit 30,000 to 35,000 tonnes a day in production at Kiaka, which was really, really good. So clearly, the last piece of the puzzle for Kiaka is stable power. We're also looking at installing a full HFO power station, which would allow us to have full production. So we'll have more information on that in our annual guidance. We've also increased the diesel capacity on site. So there's another 5 gensets arrived overnight on site. So they'll be plugged straight in, and that should give us about 30 megawatts of diesel on site. The last week has been pretty unstable with the grid, but there has been work being done by SONABEL, which is the government's energy provider in country. So we should be back on the grid in the coming days. And then we've also got some other equipment arriving on site, which will help stabilize the grid on our side. So look, it's early days with the grid. Long term, it's definitely the right option. In the short term, we've made provisions for additional diesel power and we're making a plan to have full backup with HFO, which is much cheaper to run in diesel. So that's kind of the summary at the moment, but I think the takeaway is that with full power, Kiaka is capable of producing of processing more than 10 million tonnes per annum without any capital -- without any material infrastructure changes. So does that answer your question, Mike? Mike Millikan: Yes, it did. And congrats on a very good quarter. I will hand it on. Operator: Your next question comes from Richard Knights at Barrenjoey. Richard Knights: Just wanted to see if I could get you to give us a little bit more detail on the discussions with the government regarding the Kiaka stake. Just anything relating to time frames or whether or not you've made any progress on those discussions with potential co-investments in other projects? Just any more detail you can give on that? Richard Hyde: Yes. Thanks, Richard. Look, there isn't a lot of detail to give, unfortunately. We responded late last year to SOPAMIB, and we provided them with a lot of information about Kiaka, our construction costs and economic models. And again, the gold price has moved significantly since then. So I mean the discussions have been quite good and cordial. They've made it quite clear that they believe in paying market price for additional share in Kiaka. And we did counter with a proposal saying that if you have a look at our current quarter, I think we paid indirect taxes and royalties, USD 90 million in one quarter. So clearly, we're a very good partner to the government. And probably in our view, that's the best model is that the government already gets a significant proportion of cash flow from mining operations in Burkina, which is getting close to 60% of cash flow at the current gold price. So -- and with obviously, the escalating royalty as well. So that's a significant proportion of cash flow now. So really, there's not a lot of detail to add. We're currently waiting on a response to our most recent correspondence. And we'll update the market as soon as we've got something back. But we've given them an alternative proposal, which we showed demonstrates much higher returns on investment, given that there are assets the government already owns that aren't generating any cash flow. So clearly, that would grow the government's share of revenue much more quickly than an incremental investment in Kiaka. But it's a discussion that we're having with them, and we're doing that in a transparent and polite way. Operator: Thank you. There are no further questions at this time. So I'll now hand back to Richard for closing remarks. Richard Hyde: Thanks, Nathan. Look, I guess, closing remarks, we've got a number of activities underway at the moment, including our resource reserve update. Our new 10-year plan will be coming out in late March. The 10-year plan will include drilling from M5 North and M5 South as well as extensions at M1 South underground. So I'd expect that to be a positive increase on the 10-year plan that we issued last year, which was very close to 10 years at 500,000 ounces per annum, which has been a target of mine for a long time. So obviously, we'll keep the market updated with our discussions with the government around the ownership of Kiaka and also with the stability of the grid as it improves. So thanks very much for dialing in today, and we look forward to keeping the market updated over the coming weeks regarding our activities.
Operator: Thank you for standing by, and welcome to the Boss Energy Investor Conference Call December quarter 2025. [Operator Instructions] If we run out of time and do not have time for your question, we ask that you please call our office on 086263-4494 or e-mail boss@bossenergy.com and speak to our team. I would now like to hand the conference over to Mr. Matt Dusci, Managing Director and Chief Executive Officer. Please go ahead. Matthew Dusci: Thank you, Ashley. Good morning, everyone. Thank you for dialing into the Boss Energy December quarterly conference call. Joining me on the call this morning is Justin Laird, our CFO We will be both happy to take questions at the end of this call. Turning to Slide 2, there's been another significant quarter for the company, which I'll talk through during the call. Some of the key highlights include: we delivered record quarterly production of 456,000 pounds of uranium drummed, up 18% from the prior quarter. C1 cash costs for the quarter were $30 per pound, down 12% from the prior quarter; with all-in sustaining costs of $49 per pound, down 3%. Average price of $112 per pound or USD 74 per pound was realized with sales of $39.3 million. Alta Mesa produced 143,000 pounds of uranium drummed, of which Boss received 68,000 pounds during the quarter. We continue to build drummed inventory to 1.62 million pounds, up 175,000 pounds or 12% on the prior quarter. The balance sheet remains strong with $208 million of cash and liquid assets, including $53 million of cash. We remain on track to deliver FY '26 production guidance of 1.6 million pounds and are pleased to announce downward revision of guidance of C1 and all-in sustaining cost. On the 18th of December, we announced the conclusion of the Honeymoon Review and outlined a clear pathway forward for Honeymoon asset with a new feasibility study initiated. This fundamental change to our wellfield design will enable an increase in residence time at lixiviant, reduce our cost structure, unlock lower grade mineralization, improve the production profile and extend the life of mine. Now turning to Slide 3. As noted, this was a quarter of record drummed production at Honeymoon with production of 456,000 pounds of uranium drummed. This is up 18% on the prior quarter, reflecting a continued run on quarter-on-quarter growth since Boss commenced production in April 2024. IX production was up 8% from the prior quarter with 406,000 pounds produced with increased flow achieved from 4 wellfields B1 to B4, being online for the whole quarter. Key activities for the upcoming quarter will include the completion of the commissioning of NIMCIX columns 4 and 5. Flushing for wellfields B5 is underway and expected to begin production in the coming few days. We are expecting production in the third quarter to be softer than in the current quarter before lifting gain in quarter 4 to deliver the 1.6 million pounds production guidance for the full financial year. The pullback in the coming quarter is due to phasing of wellfields with an expected decline in average tenor. This quarter, we'll also have a major shut associated with the tie-ins of columns 4 and 5 along with power upgrades. In quarter 4, we expect an increase in production as Wellfield B5 will be running for the full quarter, and we'll also bring in Wellfield B6 coming online at the very back end of the quarter. This Wellfield B6 will be the first of the wellfield to operate for Far East Kalkaroo. Turning to Slide 4. As noted earlier, C1 cash cost for the quarter was $30 per pound. This was lower than both the original guidance of $41 to $45 per pound in the prior quarter of $34 per pound. This was a great achievement as we continue to see positive results from lixiviant optimization programs, reagent optimization in the plant and other cost reduction programs, driving cost savings and productivity improvements. The all-in sustaining cost for the quarter was $49 per pound, below original guidance of $64 to $70 per pound. The main variance relates to lower C1 cash cost and the phasing of new wellfield sustaining capital spend. Where there is an opportunity to delay wellfield capital expenditure under the existing plan, we are taking this decision while we execute the new feasibility study. We do not want to be spending capital on the nonoptimal plan. Project and Supporting Infrastructure capital costs increased in the quarter to $11 million from $9 million in the prior quarter. Of the $11 million spent in the current quarter, $4.5 million of related to ongoing completion of the NIMCIX columns, $6.5 million of the $11 million related to wellfield supporting infrastructure for East Kalkaroo, with $4 million spent on the trunkline, monitoring wells and high-voltage power upgrades and $2 million spent on delineation drilling. In terms of guidance for the remainder of FY '26, we continue to reconcile production guidance of -- to reconfirm production guidance of 1.6 million pounds of drum uranium. We are also pleased to revise downwards our C1 cash costs and all-in sustaining cost guidance. Our new C1 cash cost guidance is $36 to $40 per pound, down from the previous guidance of $41 to $45 per pound. All-in sustaining cost guidance has also been reduced from $64 to $70 per pound to a new revised guidance for FY '26 of $60 to $64 per pound. This is largely driven by the team's efforts to increase productivity and efficiencies while reducing costs for the business. This is an area that we'll continue to focus on. Sustaining costs remains mostly consistent as we balance this potential transition from existing plan to a new wide space wellfield design. Where possible, we do not want to spend capital on executing a suboptimal plan. It is in the shareholder interest that we defer as much of this capital as possible in parallel to the execution of the new feasibility study. Project and Supporting Infrastructure capital has been increased by $3 million from $27 million to $30 million to a new guidance of $30 million to $33 million for the full financial year. This increase is primarily due to the inclusion of the Honeymoon delineation drill program. Turning to Slide 5, the company is in a strong financial position, and I continue to reinforce that we are very well positioned to fund what we need to do as a business to drive value. We closed the quarter with no debt and $208 million of cash and liquid assets. Cash increased from $47.8 million to $52.9 million at the end of the quarter. There's a slight decline in the total cash and liquid assets quarter-on-quarter due to mark-to-market decline in fair value for our strategic equity shareholdings. Drummed uranium inventory increased during the quarter from 1.44 million pounds to 1.62 million pounds. We continue to view this inventory as strategic for the company as we continue to see tightening of the uranium market. Sales during the quarter consisted of 350,000 pounds at an average realized price of USD 74 per pound or AUD 112 per pound. First delivery into a legacy contract will occur in Q3 and will continue in Q4. This contract is linked to the Honeymoon Mining license from when Boss originally acquired the asset. The contract is for a maximum of 1.7 million pounds linked to either 20% of the previous calendar year's production or a maximum quantity of 250,000 pounds per year. This contracted material 250,000 pounds will reflect a realized price of approximately 65% to 70% of the spot price for those pounds. Moving to Slide 6. In terms of our 30% stake in Alta Mesa, a joint venture with enCore, production for the quarter totaled 143,000 pounds on a 100% basis during the quarter. Boss received 68,000 pounds of drummed production during the quarter. The production decline was associated with the timing of bringing new wellfields online. Additional modules are currently being installed at Wellfield 7 and Wellfield 3. Drilling at Alta Mesa East continued to confirm the potential extensions of mineralization from Alta Mesa West. Turning to Slide 7. As noted, on the 18th of December, we released the findings of the Honeymoon Review and have identified a clear pathway forward, a pathway that we are generally excited about. It's a pathway that has the potential to unlock significant value for the company. We have commenced work on the new feasibility study centered around the alternative wellfield design which has the potential to reduce operating cost and sustaining costs, unlock lower-grade mineralization, improve our production profile and extend the life-of-mine plan. Successful delivery of this new wellfield design at Honeymoon would also have a positive impact on our satellite deposits. This significant per work has been initiated as we work toward delivery of the new feasibility study, including continuation of the resource delineation, additional sample collection to improve geology, geometallurgy and hydrological characterization has commenced. Additional reactive transport simulations have also been completed. We've continued to advance the updated mineral resource model, and we have completed planning for trial test work patterns, with drilling also commenced on establishing these trial wide space patterns. Turning to Slide 8, work progressed during the quarter on advancing the technical and baseline studies at Gould's and Jason's satellite deposit. An updated mineral resource statement and timeline of work required to provide the permitting pathway will be provided in this coming quarter. It is worth noting that the wide space wellfield design that is being dot as part of the new feasibility study could potentially significantly improve the recoverable uranium metal and reduced capital intensity in C1 costs, both at Jason's and Gould's Dam. Turning to Slide 9, I'll provide a quick summary of the quarter and our priorities. We delivered record quarter production at Honeymoon, which is a credit to the team. Production was our highest ever quarter with 456,000 uranium produced. This was at a C1 cost of $30 per pound and an all-in sustaining cost of $49 a pound. Given the results of optimization, productivity and cost reductions, we have revised our guidance downwards for both C1 and all-in sustaining cost while maintaining our production guidance of 1.6 million pounds for FY '26. The company's financial position continues to strengthen in the quarter with cash of $53 million and total cash and liquid assets of $208 million as we continue to build inventory, which is now at 1.62 million pounds of uranium. Work has commenced on the new feasibility study, which defines a clear pathway forward to unlock significant value, both to the Honeymoon deposit, but also to Gould's and Jason's. Before moving to Q&A, I'd also note that during the quarter, Wyatt Buck, our Chairman, has informed the Board of his intention to step down as Chair. Upon a pointing out of a new Chair, Wyatt will continue to apply his extensive uranium operational and technical expertise as a Nonexecutive Director on the Board. I'm grateful to Wyatt, who has supported me and stepped into the CEO and MD role, and him wanting to continue to assist the company as a Non-Executive Director. With that, I'll hand back to Ashley, the operator, for questions and answers. Operator: [Operator Instructions] Your first question today comes from Alistair Rankin with RBC Capital Markets. Alistair Rankin: First question just on the contract -- the legacy contract that you've called out. So you mentioned it's 65% to 70% of the spot price, is going to be the realized price for that. Just wondering, is that implying that you're going to have part of that as fixed contract and you're estimating that it will be about 65% to 70% of the prevailing spot price? Or is it still a spot price mechanism and it's just at a lower percentage of the spot price? I'm just looking for a bit more color on how that pricing mechanism works. Justin Laird: Thanks for your question. It's Justin here. So the precise terms of that contract are commercially sensitive. It is a -- it does have a couple of different tranches for that contract and has different pricing mechanisms for those tranches. Given that commercial sensitivity, what we have done is tried to simplify it for you with noting that it would be 65% to 70% of the spot price at the time of delivery. Alistair Rankin: Okay. Justin. I appreciate that. Second question, just about the outlook for quarterly production. So you flagged that it's going to be declining in the third quarter for FY '26. And then lifting again in the fourth quarter with the connection of some additional wellfields. So included in those well fields is the East Kalkaroo, I think, B6. That's your first wellfield coming in from East Kalkaroo. Can you just remind me, are you still anticipating that East Kalkaroo production levels to boost your production at the mine? And sort of what are your expectations for production performance from the East Kalkaroo wellfields? Matthew Dusci: Yes. Okay. Yes. So we -- next quarter will be a little bit softer compared to the current quarter, but reminding ourselves that we'll finish the final actual year at 1.6. B6 from Far East Kalkaroo will come into production at the back end of that quarter. Production, it's not heavily weighted in terms of delivery of the 1.6 of that B6 production profile. B6 will provide production profile into FY '27. One of the things we're also considering is just balancing between delivery of this new feasibility study and continuing to support sustaining capital into that future production profile. What we're wanting to do is make sure that we don't -- if we can, we're deferring capital going into existing plan while we complete the new feasibility study. Operator: Your next question comes from Henry Meyer with Goldman Sachs. Henry Meyer: Just hoping you can share a bit more detail on plans to test the new wellfield design. Any color on what areas are currently being developed with that strategy? How long could you need to test it and get confidence in effectiveness? Matthew Dusci: Yes. Henry, so it's Matt. Yes. So as I noted in the commentary, we've planned those test work patterns associated with wide spacing. They vary. So they actually vary in spacing and location. Initial programs have actually has commenced in terms of establishing some of those test work patterns around the Honeymoon Resource as we currently have defined it, so extension to Honeymoon B1 to B5. Some of that spacing in that area varies. We are going up, one of the patents will be up to 100-meter spacing. We also plan as part of the feasibility study to also test Far East Kalkaroo minor wide spacing. B6 becomes quite an important part to this new feasibility study because it's also B6 is on that original plan of close spacing. So we're wanting to compare B6 production with wide spacing program production at the Far East Kalkaroo. In terms of time frame, that will all fit into that delivery of the new feasibility study due in Q3. Henry Meyer: Perfect. And second one for me. Any other detail you could share on recent drilling performance, I guess, over the last month since we got the update late last year? Grade thickness sort of in line with results being observed before or a bit of an improvement or perhaps not as good as the block model suggested? Matthew Dusci: Yes. Good question. The results can generally confirm what we're expecting. We are seeing some mineralization to the south of Far East Kalkaroo. So we are opening up some exploration areas that will come up, hitting some high-grade mineralization outside of design but holistically continue to confirm what we're seeing -- where we're seeing continuity of lower-grade mineralization with high-grade mineralization, but not necessarily as continuous as we previously thought. Operator: Your next question comes from Daniel Roden with Jefferies. Daniel Roden: Just wanted to ask on the contract that you've disclosed. And I just wanted to get some clarity on maybe some of the other contracts under your book that you've got several that you've signed over the past few years. Are you in a position to be able to provide, I guess, a sensitivity on -- at various price points that those various contracts and mechanisms might influence on your realized pricing? Like how should we think about that? And maybe something you can probably answer right now, but what volume of your production expectations for FY '26 and '27 are contracted? Matthew Dusci: Yes. I'll jump in, and then I'll hand across to Justin. I mean ultimately, as a business, we'll try and provide as much transparency as we can. We -- it's one of the things we are talking about is how do we continue to provide that transparency on those contracts and potentially look at doing that at some point as we work through the business. In terms of this contract, it represents about 15% of production at 1.6 million pounds. We still -- what's important to note as a company, we remain significantly uncontracted. I mean our contract book represents about 3 million pounds out to early 2030. So it hasn't changed -- it doesn't change that position in terms of us being relatively uncontracted. What we try to do in this is just provide a little bit of look through on realized pricing that you'll probably see in -- you'll see in Q3 and Q4 as a result of that legacy contract. So still highly exposed to uranium price as we see uranium price tighten both through our contracting strategy and the inventory that we do hold. Daniel Roden: Yes, sure. So that 15% for FY '26 -- in '26, that's the only contract that is applicable for FY '26. Is that 15% or the 250,000? Justin Laird: There are additional contracts that we will be delivering into in calendar year 2026. Those contracts have a mix of base escalated and market related with floors and ceilings. For Q3 of this financial year, most of those pounds have already been executed in terms of the forward sale or delivery into this legacy contract from Q4 onwards of this financial year. So then coming into Q1 and Q2 of the next financial year to complete calendar year 2026, we are mostly under contracted for that period. If you were to look further ahead in terms of calendar year 2027 onwards, our current contract book would get you a realized price that's probably around mid-80s to low 90% in terms of a correlation to the spot price at the time of delivery. Daniel Roden: Perfect. That's very helpful. And just a last one from me, but you kind of -- as you go through the process of building and designing a white space wellfields patents, obviously, there's some lead time into that. And I noted B6 is going to be under the original, I guess, design and plan. At what point do you start needing to, I guess, allocate some of the capital changes and capital spend? I imagine it's FY '27. But I guess from my perspective, that would seem like it would be, I guess, front running or pre the final study results release. So I guess, how do you think about deferring some of that CapEx? What's the amount of CapEx that, I guess, you would need to commit pre the final results of the study? Matthew Dusci: Yes. So this is where we're working that balance while we're completing the new feasibility study and also having to ensure that we can -- sustaining capital to provide that production profile going forward. Ultimately, from a market perspective, we'll be able to provide all that transparency with the new feasibility study to give an understanding of total capital and sustaining capital over that life with that study. Having said that, we are managing our -- within what we're saying with our guidance, both on a sustaining and total capital for execution of these trial patterns. So what you're seeing is we haven't changed sustaining and/or total capital projects only by that $1 million and $3 million, respectively. That includes the trial patterns that we're doing as part of the new feasibility study. Those patents include uranium pounds, which we haven't yet allocated either to any production profile. Justin Laird: I would just add to that as well. And so it is a balance, but there is a lot of wellfield capital that will still be relevant regardless of the wellfield design. So examples of that would be the wellhouse, the pumps, some of the surface infrastructure pipes, cables. A lot of that would be relevant regardless of the spacing of the wellfield. And so we're continuing to invest in that type of wellfield infrastructure, where we are holding back a little bit is in terms of drilling production wells as that could materially change, depending on the spacing of the wellfield. Daniel Roden: Yes. Got it. And so just a clarification, everyone understanding it correctly, but I suppose the findings of the white space drilling don't -- they won't change the pre-committed capital spend for these studies and projects and you're not going to have to go in and rework some of the infrastructure the study findings, I guess, something different. So there's not really going to be a change in, I guess, capital expenditure expectations from yourselves, depending on the study outcomes? Justin Laird: Yes. No, we don't expect any changes, Daniel, and the updated guidance that we've provided today reflects our latest view, and we don't expect any changes to that view for the financial year. Operator: Your next question comes from Regan Burrows with Bell Potter. Regan Burrows: Just on commissioning of Column 4, it looks like it's a little bit delayed there. I would have thought that you would have wanted to have that up and running as you saw the leach tenors coming off to sort of balance that production. So I guess are we -- is there something that's intentional there? Or is there something else that sort of hiccups that? Matthew Dusci: Yes. It is a little bit delayed in terms of that original schedule, but it's not really the key driver. The key driver actually is the flushing of B5, and that will increase flow. So although you see it as a delay here, one of the drivers to where we are probably is about a month on B5 relatively. Regan Burrows: Okay. So it's driven by the wellfields rather than -- platforms themselves... Matthew Dusci: Correct. So it's all linked together. Regan Burrows: Yes. Okay. And then just on, obviously, the results from the white space patent from, I guess, the original call, you said it would take up to sort of 90 days to get some initial results coming through. Curious, I guess, you're still targeting sort of Q3 feasibility study time frame to release those results from the white space patent. Are we going to get an update before then on whether or not this is successful? Matthew Dusci: Yes. Regan, as we're trying to do, we'll provide as much transparency and inform the market as we get data. What we -- how we've designed the feasibility study is to ensure that happens by breaking up into components. So yes, the answer is yes, we're happy to try and give as much clarity as we work through it. Regan Burrows: Okay. Great. And if I could just squeeze one in. Any sort of driver why Alta Mesa performance dropped so materially quarter-on-quarter? Matthew Dusci: Yes. So you saw that drop in production. Again, timing on wellfields really becomes critical in these ISRs. And that's a reflection at Alta Mesa as well as they look at bringing in new additional wellfields and extending wellfields onto -- and prospectivity onto Alta Mesa East project. Operator: The next question comes from Milan Tomic with JPMorgan. Milan Tomic: Just one from me. How should we be thinking about sales over the second half? Is it going to be broadly consistent with what we've seen in this quarter? Or should we be expecting it to move higher? Justin Laird: I'll take that question. So in terms of sales quantities, as we said, we will continue to see sales quantities roughly in line with production. In terms of realized price for quarter 3 this financial year, we'll obviously have the 125,000 pounds of the legacy contract. And then the remainder of the Q3 sales were largely executed in the prior quarter. So they will be based on a forward sales price from the prior quarter. For Q4 in this financial year, we'll have 125,000 pounds of the legacy contract. Again, we will be in that range of 65% to 70% of the spot price. And then we're still yet to execute the forward sales for Q4 of this financial year. So that remains uncontracted. Milan Tomic: Yes. Just in terms of delivering sales into those legacy contracts, how should we be thinking about that? I mean, are you kind of going to be looking to maximize those sales at 250,000 per quarter or so? Or would you be looking to kind of extend it out a little bit further? Justin Laird: The exact timing of the 250,000 pounds is out of our hands. That's the -- based on the terms of the contract, the utility advises a delivery date which is consistent with other utility contracts. And we would then deliver into that contract at the date advised by the utility. Operator: Your next question comes from Branko Skocic with E&P. Branko Skocic: Just on the topic of royalties, I just want to confirm if Honeymoon is now in a position that they're required to pay royalties moving forward. I guess my understanding was you weren't required to pay royalties across the first 1.25 million pounds. Can you just click over that in terms of sales? Matthew Dusci: Yes. So we are commencing to start to pay royalties, Branko. And we'll see that in this half. Branko Skocic: And the other question I had was just on the topic of fixed costs. I know you're not disclosing anymore in your quarterly, but it incurred about AUD 7 million per quarter in the second half of FY '25. I just was wondering if that was kind of a sensible run rate to be assuming over the next 12 or so months. Justin Laird: Branko, yes, we haven't disclosed the fixed cost. It's largely consistent. The fixed cost proportion is largely consistent with what we've previously disclosed. Operator: The next question comes from James Bullen with CGF. James Bullen: Congrats on the results in the core area. Just a question around that legacy contract. So you're saying the counterpart is a utility there. But is there any chance that you could buy your way out of that contract at all? Matthew Dusci: I think it's something that we'll probably look at whether we want to or not. Probably the ideal position would have been to do that earlier than we were at. But ultimately, it becomes a small part of the production profile as we go forward, too. James Bullen: Great. And I guess -- apologies if I've missed it, but this is the first time that this has been disclosed. Have you now gone through and checked pretty much everything? And is there any other artifacts here which could come back and bite you? Matthew Dusci: I feel comfortable that from a sales and contracting perspective, it's all there. Like I said previously, we'll try and provide a little bit more transparency. We can try and provide a little bit more transparency on some of that. We talked about that and when's the right catalyst and the time going forward is. But I mean it's a contracting position 3 million pounds out through 2030, again, relatively deleveraged from contracting. James Bullen: Understood. And just around the PLS, the tenor, there you're telling us not to extrapolate that because it is performing better than the previous feasibility study. Do you have any guidance around the profile it's going to have from the core area? How will it trend downwards? Matthew Dusci: Yes. So we do. We haven't disclosed that, but PLS head grade will come down as we see some of the life of those wellfields continuing to drop. And then with B5 coming back online, PLS tenor will jump again. And it's just -- it's all got to do with that sequencing of wellfields with the tenor. Having B5 come in line enables us to continue to increase flow, and that's with Column 4 also coming back coming into production profile. Operator: Your next question comes from Glyn Lawcock with Barrenjoey. Glyn Lawcock: Sorry, I just wanted to clarify the legacy contract again. So it's the maximum of 250,000 pounds each delivery year. Is that a calendar year? I mean, obviously, you said it's at the discretion of the utility. So does that mean there's nothing in the first half of fiscal '27? Matthew Dusci: It's calendar year, correct? So it's calendar year 250,000 pounds per year, up to a maximum of 1.7 million pounds capped, discretion to the utility on where in that calendar year. Glyn Lawcock: Yes. So there will be no deliveries in the first half of fiscal '27 then as a result? Matthew Dusci: Correct. Glyn Lawcock: And then just the second one, another way, just to think about the dollar spend because I know looking at your waterfall quarter-on-quarter, Honeymoon costs are up 30% from sort of $12.4 million spend in Q1 to just over $16 million. You've got more well fields coming on, more columns coming online to obviously lift production as well. Like where do you feel that dollar spend caps out? I mean I know you've got wellfield design coming as well, which didn't change it. But is that -- are we still going to see increasing dollar spend quarter-on-quarter, you think, into the second half? Matthew Dusci: You're seeing that increase because ultimately, production profile is also increasing quarter-on-quarter from a total dollar perspective, once production profiles level, then that dollar spend would also level approximately. The only variance then would be head grade. Glyn Lawcock: Alright. So if you take the first half total dollar spend in first-half production, you're sort of sitting at the top end of your guidance range, I guess. So -- but you look for more production in the back half? Justin Laird: Yes. I mean, Glyn, for the operating costs in there are some working capital movements. So probably the primary driver or difference between that. And the C1 cost we purchased some resin during the quarter, that will be amortized over quite a few years. We do have some capital accruals that you will have seen in the difference between our CapEx spend for the half compared to the cash flow waterfall. And we expect that CapEx accrual to unwind from a cash perspective over the next 2 quarters. And then other than that, kind of those kind of working capital overhangs from the current quarter, we've given you the cash costs and CapEx for the remainder of the half. So that's the best indication in terms of CapEx or cash spend for the remainder of the half as well. Glyn Lawcock: Okay. So the cost of production will sort of start to match the cash, you think, as opposed to the sort of the inventory movements, accruals, et cetera? Justin Laird: Yes, that's right. Operator: There are no further questions at this time. I'll now hand back to Mr. Dusci for closing remarks. Matthew Dusci: Thank you, everyone, for joining the call this morning. As noted on the call, it's been a record quarter, record production and below guidance cost. And as a result, we've downward -- decreased our cost guidance for C1 and all-in sustaining costs. We're also very clear about the pathway forward on how we drive value for both honeymoon and satellite deposits, which is the delivery of this new feasibility study. So with that, I thank everyone for joining the call. Thank you, Ashley. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome to the Seagate Technology Fiscal Second Quarter 2026 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Shanye Hudson, Senior Vice President, Investor Relations. Please go ahead. Shanye Hudson: Thank you, and hello, everyone. Welcome to today's call. Joining me are Dave Mosley, Seagate's Chair and Chief Executive Officer; and Gianluca Romano, our Chief Financial Officer. We've posted our earnings press release and detailed supplemental information for our December quarter results on the Investors section of our website. During today's call, we will refer to GAAP and non-GAAP measures. Non-GAAP figures are reconciled to GAAP figures in the earnings press release posted on our website and included on our Form 8-K. We've not reconciled certain non-GAAP outlook measures because material items that may impact these measures are out of our control and/or cannot be reasonably predicted. Therefore, a reconciliation to corresponding GAAP measures is not available without unreasonable effort. Before we begin, I'd like to remind you that today's call contains forward-looking statements that reflect management's current views and assumptions based on information available to us as of today and should not be relied upon as of any subsequent date. Actual results may differ materially from those contained in or implied by these forward-looking statements as are subject to risks and uncertainties associated with our business. To learn more about these risks, uncertainties and other factors that may affect our future business results, please refer to the press release issued today and our SEC filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q as well as the supplemental information, all of which may be found on the Investors section of our website. Following our prepared remarks, we'll open the call up for questions. In order to provide all analysts with the opportunity to participate, we thank you in advance for asking 1 primary question and then reentering the queue. With that, I'll turn the call over to you, Dave. William Mosley: Thanks, Shanye, and hello, everyone. Seagate closed out calendar 2025, with a record-breaking quarter, driven by sequential revenue growth across nearly all end markets. December quarter financial results exceeded both top and bottom line expectations and set new company records for exabyte shipments, gross margin, operating margin and non-GAAP earnings per share. We expanded non-GAAP gross margin above 42%, supported by the execution of our pricing strategy, along with an improving mix of our high capacity drives as HAMR shipments ramp. Looking at the entire calendar year, 2025 marked a transformational period for Seagate, both financially and operationally. Over the calendar year, we increased revenue by over 25%, improved gross margins by nearly 740 basis points and expanded operating margins by an even greater amount, demonstrating the profitability leverage in our financial model. 2025 also solidified HAMR technology as a long-term enabler of mass capacity storage. We ended the year shipping 3 terabyte per disk Mozaic-based HAMR products to our first CSP customer. And by year's end, quarterly HAMR shipments exceeded 1.5 million units and have continued to ramp. Mozaic 3 HAMR drives are now qualified with all of the major U.S. CSP customers and qualifications for our second-generation Mozaic 4 terabyte per disk products are tracking well to plan. These developments align with our long-term areal density road map that extends to 10 terabytes per disk, which we expect to deliver early in the next decade. I want to thank our Seagate teams around the world for exceeding our performance expectations and delivering outstanding value to our global customers. We continue to operate in an exceptionally strong demand environment, particularly within the data center end markets. In the December quarter, we saw sustained demand growth for our high capacity nearline drives across global cloud data centers as well as continued improvement from the enterprise edge. Based on our build-to-order pipeline, we anticipate these positive demand trends will continue for some time. Our nearline capacity is fully allocated through calendar year 2026, and we expect to begin accepting orders for the first half of calendar year 2027 in the coming months. Further out, demand visibility is strengthening based on the long-term agreements in place with major cloud customers through calendar '27. Additionally, multiple cloud customers are discussing their demand growth projections for calendar '28, underscoring that supply assurance remains their highest priority. We will continue to meet strengthening demand through our strategy to maintain supply discipline and satisfy exabyte growth through areal density advancements and without increasing unit production volume. In the December quarter, our average nearline drive capacities rose by 22% year-over-year, approaching 23 terabytes per drive, with those sold to cloud customers averaging significantly higher. This trend underscores the strong adoption of our higher capacity drives to support demand growth. At the same time, revenue per terabyte sold has remained relatively stable, reflecting the effectiveness of our pricing strategy. Seagate is well positioned to continue benefiting from the combination of powerful secular tailwinds and supply discipline. Video applications continue to drive significant demand for hard drives with platforms like YouTube witnessing 20 million video uploads daily, up from just 2 million 3 years ago. This staggering pace of growth extends to other cloud video platforms and doesn't yet include the full surge in content generation expected from emerging AI-driven video applications. These applications are not only fueling social media uploads, they are also transforming how organizations turn their data into tangible value, enabling personalized marketing, interactive education and advanced simulations, capable of training manufacturing, engineering, health care and other professionals. The strategic value of data is further underscored as new applications and use cases emerge across cloud and edge workloads. Among the most promising of these is agentic AI, which relies on persistent access to large volumes of historic data to enable effective planning, reasoning and independent decision-making. Adoption is already gaining momentum with one recent survey conducted by a leading cloud service provider reporting more than half of participating customers were actively using AI agents. Early adopters are already realizing measurable returns with benefits ranging from lower cost to increase revenue opportunities. With the deployment of AI agents at the edge, where untapped data often resides, we believe the stage is set for a sustained and meaningful increase in data generated and stored that will support inferencing, continuous training and also maintain model integrity. Modern data centers have evolved to address the complexity and scale that massive workloads bring through sophisticated data tiering architectures, ensuring that the right data is available at the right time and place. Hard drives are essential to these architectures, anchoring the mass capacity data tier that stores the vast majority of exabytes from storing the checkpoint data sets used to train and maintain model integrity to supporting vector databases that provide the context necessary for accurate inference results and agentic AI performance. By leveraging hard drives, data center operators, whether in the cloud or on-prem, can achieve the optimal balance of performance, capacity and cost efficiency at scale. Against this transformational backdrop, Seagate's HAMR technology road map positions us to meet growing demand and deliver ongoing TCO improvement for our customers. HAMR is a proven technology with large volumes of drives running in cloud production environments for more than 3 quarters now, and performing well across a broad spectrum of use cases. We are systematically ramping our Mozaic 3 HAMR products to qualified customers while maintaining focus on optimizing the profitability of our available supply. As noted earlier, Mozaic 3 is now qualified with all major U.S. CSP customers and remains on track to have all global CSPs qualified within the first half of calendar 2026. Additionally, qualifications of our second-generation Mozaic 4 products are progressing well. We expect to begin the ramp of Mozaic 4 later this quarter and have multiple CSPs qualified in the coming months in line with our plans. We continue to set the pace for the industry, recently demonstrating 7 terabytes per disk capability in our labs. As one of our largest CSP customers recently aptly described, hard drives are engineering marvels, a sentiment that we obviously share. Our deep expertise across mechanical engineering, material science, nanoscale fabrication and now advanced photonics, not only enable Seagate to deliver on the HAMR road map, but also creates a durable competitive moat for hard drive technology well into the future. Wrapping up, 2025 was a milestone year for Seagate in every respect. Financial performance, operational execution and technology leadership. We are carrying this momentum into calendar 2026 supported by a powerful demand backdrop as new AI applications start to complement traditional workloads. We will remain highly disciplined and focused on expanding profitability through our higher capacity product mix, underpinned by the strong economics of HAMR. Our areal density road map positions Seagate to sustain the core TCO and efficiency advantages of hard drives as data creation and storage requirements accelerate in the AI era. We believe this foundation creates a compelling long-term value proposition for the company, our customers and our shareholders. I'll now turn the call over to Gianluca to cover our results in greater detail. Gianluca Romano: Thank you, Dave. Seagate delivered another quarter of strong year-over-year revenue growth and set new record profitability metrics in the December quarter, underscoring the durability of data center demand trends. Additionally, we strengthened our financial position by retiring $500 million in gross debt and generating over $600 million in free cash flow, marking the highest level in 8 years. December quarter revenue came in at $2.83 billion, up 7% sequentially and up 22% year-over-year. We achieved non-GAAP gross margin of 42.2%, up 210 basis points sequentially, and we expanded non-GAAP operating margin by 290 basis points sequentially to 31.9%. Our resulting non-GAAP EPS was $3.11, up 19% quarter-over-quarter. These strong financial results demonstrate our ability to execute our strategic objectives, including leveraging our technology road map to support demand growth. To that end, we shipped 190 exabytes in the December quarter, up 26% year-over-year, while keeping overall unit capacity relatively flat. The data center market accounted for 87% of our shipment volume, supported by ongoing demand momentum from global cloud customers and sequential growth across the enterprise OEM markets. We shipped 165 exabytes in the data center market, up 4% sequentially and 31% year-on-year. Data center revenue grew at roughly the same pace totaling $2.2 billion for the quarter, up 5% sequentially and 28% year-on-year. Against this strong demand backdrop, both cloud and enterprise customers are transitioning to higher capacity drives. Average cloud nearline capacity increased to nearly 26 terabytes in the December quarter and will continue to grow with the ramp of HAMR-based Mozaic products. As Dave highlighted, Mozaic drives are running very well in production environment and meeting all performance, reliability and integration expectations. In the enterprise OEM market, we are benefiting from slight improvement in traditional server units, along with increasing demand for storage servers, driven in large part by the adoption of AI applications and need to store data at an enterprise edge. The edge IoT market made up the remaining 21% of revenue at $601 million, supported by anticipated seasonal improvement for consumer products in the VIA client market. We project the broader VIA market to grow over time with the largest growth contribution coming from VIA nearline products that are captured as part of our data center end market. Moving on to the rest of the income statement. Non-GAAP gross profit increased to $1.2 billion, [ up 14% ] quarter-over-quarter and 44% compared with the prior year period, significantly outpacing revenue growth. Non-GAAP gross margin expanded to 42.2% in the December quarter up from 40.1% in the prior period. This improvement reflects the ongoing execution of our pricing strategy and the growing adoption of our latest generation high capacity products, which collectively drove a modest sequential increase in revenue per terabyte, a trend we expect to continue into the March quarter. Non-GAAP operating expenses were $290 million, relatively flat quarter-over-quarter and in line with our expectations. Operating expense as a percent of revenue declined to 10.3%, rapidly trending towards our long-term target of 10%. The combination of strong top line growth and significant financial leverage drove an 18% sequential improvement in non-GAAP operating profit to $901 million, almost 32% of revenue. Other income and expenses were $70 million, reflecting slightly lower interest expenses on the reduced outstanding debt balance. We currently project other income and expenses to remain relatively flat in the March quarter. We grew non-GAAP net income to $702 million with corresponding non-GAAP EPS of $3.11 per share based on tax expenses of $129 million and a diluted share count of approximately 226 million shares, including the net impact of our 2028 convertible notes. Turning now to cash flow and the balance sheet. We invested $116 million in capital expenditures for the December quarter or roughly 4% of revenue. We are maintaining capital discipline while we continue to transition and ramp HAMR technology. To support these objectives, we anticipate capital expenditures for fiscal year 2026 to be inside our target range of 4% to 6% of revenue. Free cash flow generation was strong at $607 million, up 42% from the prior quarter. Looking ahead, we expect free cash flow generation to further expand in the March quarter, supported by sustained demand trends, operational efficiency and capital discipline. These factors position us well for durable long-term cash flow generation. Cash and cash equivalents totaled just over $1 billion at the end of December quarter, with ample liquidity of $2.3 billion, including our undrawn revolving credit facility. During the December quarter, we returned $154 million to shareholders through dividends. We retired approximately $500 million of exchangeable senior notes due 2028, which serves to limit further dilutive impact from business and optimized cash deployed for future share repurchases. Our resulting gross debt balance was approximately $4.5 billion exiting the quarter. Net leverage ratio improved to 1.1x based on adjusted EBITDA of $962 million for the December quarter, up 16% quarter-over-quarter and up 63% year-on-year. We expect the net leverage ratio will trend lower as profitability and cash generation increase while we continue to evaluate opportunities to further reduce debt. Turning now to the March quarter outlook. The demand environment remains strong, particularly among global cloud customers. As a result, we expect data center demand will more than offset typical March quarter seasonality in the edge IoT markets. We expect March quarter revenue to be in the range of $2.9 billion, plus or minus $100 million, which represent a 34% year-over-year improvement as a midpoint. Non-GAAP operating expenses are expected to be approximately $290 million. Based on the midpoint of our revenue guidance, non-GAAP operating margin is expected to approach the [ mid-30% range ]. Non-GAAP EPS is expected to be $3.40 plus or minus $0.20, based on a tax rate of about 16% and non-GAAP diluted share count of 230 million shares, including estimated dilution from our 2028 convertible notes of approximately 7.6 million shares. Seagate's strong December quarter performance and March quarter guidance underscore our continued focus on driving growth, enhancing profitability and optimizing cash generation. Based on our current outlook, we expect to deliver sequential improvement to both the top and bottom line throughout calendar 2026 and remain in a strong position to enhance value for both customers and shareholders over the long term. Operator, let's open the call up for questions. Operator: [Operator Instructions] And the first question comes from C.J. Muse with Cantor Fitzgerald. Christopher Muse: Given the supply-demand dynamics, you're obviously in the catbird seat. I wanted to really try to get some more detail on gross margins going forward. Your philosophy historically has been to share gains, both your customers and yourselves. But at the same time, given this tight environment, you are raising like-for-like pricing. So curious, is there a framework to think about in terms of the incremental gross margins that we should model from here? And then, I guess, maybe bigger picture, as you think about overall average pricing per exabyte, we've gone from kind of down double digits to high single digits. And I think we just exited the quarter down 4% year-on-year. Do you see a world where pricing could flat or even move positive year-over-year? William Mosley: Yes. Thanks, C.J. I'll let Gianluca chime in here as well, but the pricing will be dictated by the demand. Right now, the demand is really strong. So I think as we roll through into '27 and '28, we look at how much capacity we're having. We're bringing online by virtue of the fact that we're making all these aggressive product transitions. We'll bring more exabytes to bear and then people go out there and renegotiate for those. I think flat to slightly up is certainly possible. And that's the way we're really managing it as we talk to our customers. The value proposition of the new drives as they go up 5, 10 terabytes at a time is pretty strong. Gianluca Romano: C.J. So on the gross margin, we are executing very well, but executing a little bit better than what we discussed at our Investor Day, where we presented a model with a 50% incremental margin above $2.6 billion of revenue. We have done better every quarter, of course, is our objective to continue to optimize what we produce, what we sell and finance the profitability that we can get from the product. So the models cover over a longer period of time, now 2, 3 years, not 2 or 3 quarters, but I'm positive we are continuing to progress in the right direction. Operator: The next question will come from Wamsi Mohan with Bank of America. Wamsi Mohan: I have a similar type of question. I guess the gross margins in the guide and the incremental quarter-on-quarter gross margins on the guide are very strong. Can you maybe help bridge the drivers between mix and price? Obviously, you've got a better mix of data center revenue next quarter. But just wondering if you can dimensionalize that. And the opportunity for pricing, David, you just said sort of flat to up as possible. But as we think about the pricing that might be getting embedded within these LTAs and sort of beyond '26. Why can't that be a lot higher just given the tightness in the supply-demand environment? William Mosley: Yes. I think this gets into how persistent is the demand going to be, Wamsi, we talked about 2 or 3 years from now. The one behavior change that I really like in the last year is that people are starting to say, if I can't get it now, I'll plan next year better and the following year better. So we're having great dialogues on that front. Of course, supply has risen quite a bit in the last year's supply of exabytes from the industry. The industry has reacted pretty well, but I think demand is still pretty strong. And my perspective on this is I think demand will stay strong for quite some time. So in that kind of world, we're having great discussions with customers further out in time. And the biggest part that helps us in our planning is through these product transitions. They know that's how they get more exabytes. Gianluca Romano: Yes. And Wamsi, we are saying in the script today that for the rest of the calendar year, we expect revenue and profitability to continue to improve sequentially every quarter. So we are not implying in any way that this trend is changing. It's actually now getting better somehow. Operator: The next question will come from Erik Woodring with Morgan Stanley. Erik Woodring: Congrats on these results, incredible. Dave, at your Analyst Day last year, you kind of pointed to a mid-20% exabyte growth CAGR. And I'm just wondering where you think that supply growth can land this calendar year. And as you get closer to that HAMR crossover point later this year, like does that pace of exabyte growth accelerate? And I'm just asking this because demand is clearly outpacing supply. So can you maybe just help us try to better understand the shape of your exabyte supply growth because obviously, it will dictate kind of exabyte shipments for the year. William Mosley: Yes. Thanks, Erik. So we are planning to transition to 4 terabytes of platter. And fairly aggressively, but I think what people have to keep in mind is that we were fairly tight all throughout manufacturing. So we have products that are in the pipeline already that are committed to customers and so on. We don't just move very quickly to 3 or 4 terabytes of platter as things come. And it's a good problem to have, actually. We're running manufacturing quite, quite tight right now. So I think it will be a fairly prescriptive ramp, to your point. It won't be as fast as maybe we've done some ramps in the past, but it will be very profitable, and that's the way we look at it. As we go further out in time, I'm very optimistic that the 4 terabytes per platter is a very strong product. It will start to replace some of the other legacy products, I'll say, that way and because it has so much better value proposition in a lot of those markets. And then when that happens, then we see more opportunity. Operator: The next question will come from Asiya Merchant with Citi. Asiya Merchant: Great results here. Just a couple that are related to the prior question. You guys gave some projections on HAMR, not just for fiscal year '26, but even into fiscal '27. So if you could talk about upside to achieving those targets for the HAMR rollout. And related to that, how we should think about the blended cost reductions, pretty impressive, again, margins here and guiding for improved profitability. So if you could talk to us a little bit about the cost reductions going forward, especially as you ramp HAMR here with the Mozaic 4, that would be great. Gianluca Romano: Yes, Asiya. So I would say, first of all, we are very happy with the transition to HAMR. We qualified the last big cloud service provider in the U.S. and we have qualified 6 out of 8 of the top cloud service providers. So the transition from PMR technology to HAMR technology, is progressing very well. And we are now qualifying the new product, the 4 terabyte per disk to 40 terabytes per drive. Of course, this will help with the increase in exabyte in terms of mix. We gave a good indication, I think, at our Investor Day, and we want to be aligned to that. And the cost will be favorably impacted, especially when we start ramping high volume of the 40 terabyte drive. Of course, that will drive a fairly important reduction in cost per terabyte compared to the current HAMR, and of course will be a good contributor to further increase our gross margin. Operator: The next question will come from Karl Ackerman with BNP Paribas. Karl Ackerman: I was hoping you could clarify what portion of your LTAs for overall nearline HDD capacity has fixed or multi-quarter pricing agreements. I ask because as these LTAs roll off throughout 2026, any new agreements will be locked in at higher values reflective of not only the demand use case also widening price per terabyte gap between enterprise hardware drive HDDs. Shanye Hudson: And Karl, your -- the second part of your question was a little fuzzy. So we captured the first part, but I might ask you for clarity on that second. Karl Ackerman: Sure. Yes, I'll just repeat, if I could. As these LTAs roll off throughout 2026, I would imagine those new LTAs will be priced at perhaps a higher value or higher order value, particularly given the widening gap between hard drives and SSDs. So if you can comment on the mix of LTAs and how you think that progresses throughout '26 would be great. William Mosley: Yes. Thanks, Karl. So as we roll off, say, for example, somebody might have been qualified on a 2.4 terabyte per platter product or something, and then they might be qualifying a 3.2 or even a 4-terabyte per platter as we roll forward. So we changed based on the demand that we see, we changed -- and our available supply, we changed the pricing dynamic there. I think that's one of the biggest things you're pointing out. I'll say that '26 is fairly booked. We talked about that in the call a bit to the extent that we can out-execute our plan, it will be marginal like you saw last quarter, we get the qualifications done a little faster. We ship a few more drives. That's how we can do better than planned. But other than that, it's fairly predictable in '26, and we're looking to start '27 the same way. Operator: Next question will come from Jim Schneider with Goldman Sachs. James Schneider: I was wondering if you could maybe address -- given everything you just said about demand and about the mix effect from HAMR this year, maybe can you give us any kind of directional guidance about where you might expect exabyte shipments to end up on a calendar '26 versus calendar '25 basis relative to the sort of long-term targets you've laid out previously. It seems like you could do materially better than that, but I just wanted to confirm what your expectations were if you could give us a numerical range. Gianluca Romano: Jim, no, we are not guiding calendar '26. But we said in our financial model, we said that we expect exabyte -- nearline exabytes to grow in the mid-20%. We have done a little bit better if you look at the last few quarters, and we always -- as Dave said before, we always try to extract as many exabyte as we can from our manufacturing. So we are continuing this trend, but we don't guide for calendar '26. William Mosley: But moving from 2.4 per platter to 3 per platter to 4 per platter, you can see that we're on a trajectory like you described. It's -- when it gets down to the individual customer level, obviously, we have to be very predictable because they need what they need and what they -- what we've committed to in order to build out that data center. So we'll continue to execute that plan and maybe we can do a little bit better as we transition to 4 terabyte per platter. Operator: The next question will come from Amit Daryanani with Evercore. Amit Daryanani: Gianluca, I'm hoping you can talk a little bit about the March quarter guide because it seems to be a really sizable uptick in gross margins. I think it's up like 250 basis points or 100% plus incrementals. Could you just -- is there any you would call out in March quarter that's unique that's helping drive that kind of margin expansion? And is this really all coming from the core HDD business? Or is there a potential benefit from the old systems business helping you as well? Gianluca Romano: Amit, well, I would say, we expect it to be a very good quarter. I don't think it's different than what we have done before. It's always based on the pricing strategy and the mix, as you know. We qualified another customer on HAMR, so we will ramp a little bit more volume on HAMR. This is helping us to get better margin. But fundamentally, is not really different in how we think we are going to execute the quarter and is good. I think the incremental margin was very good. William Mosley: Yes. And it's not the systems business. The systems business is doing well, but it's fairly small scale in comparison. Operator: The next question will come from Mark Newman with Bernstein. Mark Newman: Congrats on great numbers today. Just want to touch again on this, the LTAs and pricing arrangements you have. Just curious, do you think there's an opportunity here for more significant price increases in NAND flash. We're hearing things like 40% to 100% up Q-on-Q for some contracts. I appreciate hard disk drives -- you have very long-term agreements. But I think there's a lot of questions I'd like to just touch on this as well. And a lot of -- as the LTAs roll off, is there an opportunity for some of those to be repriced at a more significantly higher price to change the trajectory, certainly numbers are great, you're printing. We're just trying to figure out, could you start to see more significant price increases rather than at the moment, you're seeing kind of flattish down a little bit, up a little bit. But overall, your average prices are flat, which I understand is a mixture of like-for-like slightly up, offset by new products coming in at lower price. Just wondered if that may change. And then just a quick update on HAMR mix, if there's any update on the trajectory of the HAMR mix that you've outlined before. William Mosley: Thanks, Mark. A couple of points. On the HAMR mix, we necessarily constrained ourselves on the 3 terabyte per platter because the factories were fairly full, and we knew we would be going to the 4 terabyte per platter product. So we've been leaning harder on that and making sure it gets through the development and qualification phases. As time goes on, then we'll move off and on to the 4 terabyte per platter very aggressively. So that helps you on the mix side. And the other thing about HAMR mix is it will be necessarily mixed up. I think the demand for those products will be at the high capacity points, not necessarily the lower capacity points just yet. And then relative to pricing, I think I said before, as we -- as one long-term agreement rolls into the next year or the next year, we've satisfied our existing supply commitments, people are looking at the new products, we have constrained supply of those new products, then we look at what the demand is, and we dictate where our pricing is. And one of the very first questions I said it could be flat to up a little bit. That's the way I think about it right now, but it all depends on what the demand is. Demand continues very strong. That's great. And again, what we're seeing is people who can't get what they need today, they're saying, okay, I need to be able to plan my data center procurement out in the future, let's get more predictable in the future, has given us better visibility, helps us run our factories for better cost and so on. So that's great. Operator: The next question will come from Krish Sankar with TD Cowen. Sreekrishnan Sankarnarayanan: I had a question, I just want to put it in 2 parts. One is how much was your HAMR as a percentage of your exabyte shipment last year? How much do you expect it to be this year? The genesis of the question is I'm just trying to figure out, obviously, a lot of questions on the very strong gross margins. If there's a way to put it in 3 buckets, like how much of the gross margin upside is driven by pricing? How much is driven by product mix? How much is driven by cost reduction by offshoring manufacturing? William Mosley: Yes, there's really no offshoring manufacturing or anything like that involved. Our manufacturing operations around the world are doing quite well and quite full. So that's helping from a cost perspective. But really no change in any manufacturing strategy to speak of. Relative -- I would say a lot of what -- the benefits we're seeing is mix and mix not just because we're actually transitioning into higher and more -- better products over time, but also because the demand for those products is quite high. You think about it, if you're building a data center with a 3 terabyte per platter versus the 4-terabyte per platter, you're going to be running that data center for a long time, you want the higher capacity point. And to the extent that we can do that as predictably as possible, that mix is what's driving the stability out in the market for us and helping us plan. Gianluca Romano: Yes, Krish, we don't give specific details on the impact of pricing, mix and cost. But they are somehow interrelated. I would say the change in mix is helping with the cost reduction and the supply-demand situation is, of course, supporting our pricing strategy. So they are all very good contributor to the increase in gross margin. And as we said before, this is going to continue through the calendar year. Sreekrishnan Sankarnarayanan: How much of HAMR as a percentage of the mix? Gianluca Romano: Well, Dave gave an indication of the unit that we shipped in the last quarter. So I think you can fairly easily calculate that. Operator: The next question will come from Steven Fox with Fox Advisors, LLC. Steven Fox: I guess I was just wondering on this -- on your mix question, looking at your average capacity per drive being up 22%. Like how much of that -- like obviously, the supply demand environment has tightened over the last year. And in reaction to that, are you taking steps to accelerate that mix up as the customers pushed you that way? Like I'm just curious how much you can control going forward now that we're here on even tighter supply to sort of help your customers in terms of absolute petabytes you're delivering. William Mosley: Thanks, Steve. So yes, we are -- the lead time out of the wafer fab is quite long. So we have to be predictable for our customers, say, 6 months, 9 months later and so on and so forth. That's one of the reasons why we talk kind of a year at a time inside of these LTAs. So we start wafers based on what we know we're going to be able to deliver, so that we're as predictable as we can be for our customers. As were -- if we're deploying manufacturing engineered resources we're trying to get through these product transitions. That's what gets us the most exabytes after that. And so going, mixing up is kind of our goal. So if that helps clarify what our strategy is. Steven Fox: It does, Dave. I'm just wondering like when you had your analyst meeting, you said that sort of a pretty well-defined time line for node transitions. Maybe just can you give yourself a report card on how you're doing on some of those time lines if we look out now versus the next year or longer term? William Mosley: Yes. I think that's good. We're on the plan or slightly ahead. And again, most of that's under our control. We execute well. We've been executing well. Some of it's under our customers' control as well. And the behavioral changes we've seen in the customer I made reference to earlier, they're really pulling hard because they need more exabytes. And so that helps get the calls done quickly. It helps a road map alignment and then supply -- specific supply alignment, which helps our factories. Operator: So next question will come from Aaron Rakers with Wells Fargo. Aaron Rakers: Congrats on the results. I want to go back to gross margin. I know you talked a lot about the pricing dynamics and the visibility you have. But the thing that stands out to me is you've been executing on like a cost per terabyte of like a mid-teens year-on-year decline in these last several quarters. As we roll out the 4 terabyte per platter Mozaic drive, how do I think about that cost down curve? Is it mid-single digits? Is it -- can you sustain at double digit and would not -- wouldn't we expect the 4 terabyte per platter HAMR drive to actually maybe accelerate the cost down, given the ability to bring that into lower end other outside of the nearline platforms. So I'm just curious how you think about that cost down curve. Gianluca Romano: Yes, we are very positive on the 4 terabyte per disk in terms of impact on the cost, as we discussed before. The unit costs tend to be fairly similar. But of course, we are adding a lot of content per unit. So that will be a good help to reducing the cost and improving profitability. So as you know, we are qualifying 2 major customers on these new products. So the time to finalize the call and their ramp probably through the end of the calendar year and for sure, well into -- the impact will be strong, I think, in the next calendar year, too. William Mosley: And we plan on making a big transition to 4 terabytes per platter over the coming few years and then getting to the 5 terabytes per platter as well. We do add complexity as we make those transitions. But I'd say the first order, the things that dictate the speed of the ramp are our ability to go work scrap and yield, all through our supply chain and so on, and we're working very hard on that. I like the product. So I think it provides for a bright and stable future for us. We just need to stay focused on it. Operator: The next question will come from Timothy Arcuri with UBS. Timothy Arcuri: I want to ask about LTSAs. I think you said nearline capacity is allocated through 2026. So it sounds like both pricing and exabytes are locked in this year. But for '27, I think you said something that I took that exabyte and pricing is not locked in, but you have some sort of agreement. So I guess I had 2 questions. First of all, is it right to assume that pricing is also locked in for all of '26? And what sort of agreement are you referring to for 2027 if volume and pricing is not locked in next year? Gianluca Romano: Yes. For this calendar year, we said basically, we have PO in place for all the quarters, so volume and pricing is well defined. As Dave said before, if in a quarter, we can produce a little bit more, of course, we will sell those exabytes in the open market at a good profitability. But I would say we have -- the vast, vast majority of the volume is already allocated. Calendar '27, we will start working on that fairly soon. Of course, we have very good indication and agreement on volumes, but we have not -- we have not fixed the price yet. William Mosley: Yes. And Tim, if this helps, so we haven't really started the longest lead time parts, but we will very soon for the start of '27. And we need to start having those discussions with our customers which calls are we going to get through together with -- what exactly is the plan, because a lot of them need predictability as well. So we'll have to build in our factories what -- based upon how hard they want to pull on those new products. Operator: The next question will come from Mehdi Hosseini with Susquehanna Financial Group. Mehdi Hosseini: Just a quick housekeeping item. Gianluca your CapEx has been increasing on a Q-over-Q basis. How should I think about depreciation, especially since it did dip in the December quarter? Any color here would be great looking forward. Gianluca Romano: Yes. No, our CapEx is aligned to our target of 4% to 6% of revenue. We are actually at the bottom of that range. So is not increasing in terms of what we want to achieve and what we said, of course, comparing to a period where we were more into the down cycle in terms of dollars, of course, is higher. We are supporting our HAMR transition and HAMR ramp. So I would say there is nothing different than what we said. William Mosley: Yes, the way I think about it as well, Mehdi is that if you go back 2 years ago, and you use that as a baseline, we were still significantly lower revenue, but also we were challenged on the supply and demand balance. Right now we're in a totally different environment, of course. So we'll probably stay well within the 4% to 6% range. But as the revenue goes up, we'll spend a little bit more and probably the first priority is maintenance tools and the things that we weren't doing a couple of years ago. Mehdi Hosseini: I apologize, I may have confused. I was focusing more on depreciation given these several quarters of increase in CapEx, should I expect a step-up in depreciation looking forward? Gianluca Romano: Depreciation will follow the CapEx. So you have your -- I guess you have your model on the revenue, so you can calculate the 4% to 6% of CapEx. And then depreciation for us is on a 10 years useful life. So you can probably model it that way. William Mosley: It's not like -- some other fabs, it's not necessarily the huge part of the cost drivers. There's a lot of other pieces of the cost that we can go manage them. Operator: The next question will come from Ananda Baruah with Loop Capital. Ananda Baruah: Dave, while we have you, a little bit of a technical one, are you -- what kind of activity are you seeing at sort of the so-called warm tier of storage. It's a question that comes up a bunch in our conversations. We've heard that it's obviously growing, it's growing both hard drive and flash storage is participating nicely, but would love to get your input on it. Because I think there's still -- first of all, we love to know if what we're hearing is accurate. But secondarily, I think there's a lot of people that are assuming that that's really like it's becoming a NAND tier. Largely a NAND tier in the GenAI world. And anyway, just love to get any context there that you have? William Mosley: Yes. I think you have to be a little bit careful, Ananda. So there are applications that are very memory dependent that are attached to compute and some of these applications are neat, I like them. When you get -- when you start talking about big data storage, if you will, in data centers, the tiering architecture is fairly well set and probably won't change based on economics and also architectures that are well known. People know how to play. So if the concept is that drives aren't working hard, they're in the background, just storing data. That's not the way -- a good way to think about it. That's not the way hard drives are being used right now. They're working 24/7. A lot of times, they're optimized for performance themselves, largely streaming performance not random small block workloads. That's more of a memory thing. And so if you had an application that's random small block, it's probably memory. If you have big data, it's probably a little bit of memory on the front end and a lot of hard drive on the back end. And we think that there are applications across the entire spectrum, of course, but we think that in the future, when we start to talk about the concepts in their enormity about checkpoints and physical AI and video and things like that. It's large, large data so that the architectural tier that stores the data will probably remain constant for the next decade. Ananda Baruah: That's super helpful. I'll keep it there. Operator: Next question will come from Vijay Rakesh with Mizuho. Vijay Rakesh: Just a quick question on HAMR. I know you're ramping it faster in the March quarter. Should that drive a much better gross margin profile, I guess? And any thoughts on how we should see the margins improve, I guess, as HAMR starts to ramp? And I have a follow-up. Gianluca Romano: Vijay, if you are referring to the March quarter, of course, ramp of HAMR is included in our guidance. And our guidance is indicating a fairly good improvement in gross margin again. And then I said for the rest of the calendar year, we expect both revenue and profitability to improve sequentially. And of course, part of that is coming from additional HAMR products. William Mosley: We think demand will be strong for the 4-terabyte per platter, of course. And so that's one of the reasons why we're making that a priority in the transition that we go through this calendar year and into next. Vijay Rakesh: Got it. Very helpful. And just a quick question also on the OpEx side. Very nice, obviously OpEx same time last year, somewhere in the 14% range, now is down to 10%. I know Gianluca, you said probably that's a long-term target, but it looks like as Dave mentioned, with the top line ramping up with all the design wins, it looks like OpEx could go down again. Is that fair as a percent of mix? Gianluca Romano: Well, I would say we are getting closer and closer to our fourth target of 10% of revenue for OpEx. We are almost there. We should be there actually in the March quarter. And then, of course, now that we relax our cost control, we will continue to keep our cost control and revenue is supposed to increase so we can probably do it a bit better. William Mosley: Yes. I'm glad you asked that, Vijay, because obviously, a few years ago, the tough times that we went through, we weren't investing in ourselves to the rate that I'd like. And of course, it's with the HAMR transition in front of us, that was a lot of work. Now that we've kind of cleared that HAMR transition, we can see the future fairly well. It's the -- clouds are parting, if you will. And we can see aerial density opportunities in front of us, and we will take that the money such as it is, even staying within our same model, and we'll take that money and reinvest in ourselves so that we can continue to drive the areal density. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. William Mosley: Thank you, Nick, and thanks to everyone for joining us on the call. The Seagate team is executing very well, delivering on our financial targets and advancing areal density road maps and successfully qualifying customers on our HAMR-based Mozaic products to address the sustained and growing demand for data storage. As data creation accelerates, driven by both traditional workloads and these emerging AI applications, Seagate's transformational technology positions us well to capture the significant demand opportunities ahead. I'd like to thank our employees for their dedication and innovation and our customers and suppliers for their trust and collaboration, and our shareholders as well for their continued support. Together, we're driving Seagate's ongoing success. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to the Alexandria Real Estate Equities Fourth Quarter and Year-end 2025 Conference Call. [Operator Instructions] Please also note, today's event is being recorded. At this time, I would like to turn the floor over to Paula Schwartz with Investor Relations. Ma'am, please go ahead. Paula Schwartz: Thank you, and good afternoon, everyone. This conference call contains forward-looking statements within the meaning of the federal securities laws. The company's actual results might differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's periodic reports filed with the Securities and Exchange Commission. And now I'd like to turn the call over to Joel Marcus, Executive Chairman and Founder. Please go ahead, Joel. Joel Marcus: Thank you, Paula, and welcome, everybody, to our Fourth Quarter and Year-end 2025 Conference Call. With me today are Peter, Marc and Hallie. And I want to wish everybody a happy New Year. And remember, most importantly, health is wealth. I want to thank our family team for their exceptional efforts during 2025 and particularly a very busy fourth quarter. In 2025, we witnessed the fifth year of a life science bear market. Our 2025 time line clearly evidences that no one could have predicted with the February 2025 nomination of HHS Secretary, the intense cascade of events from February 2025 on to the numerous key departures toward year-end at the FDA. And in fact, sadly, measles and polio may be back to some extent. We have been navigating a fast-changing life science industry landscape throughout 2025, which has been front and center for our team. Our Investor Day path forward is our North Star for 2026. As the industry begins to adapt to the fast-changing landscape, 2026 is all about timely execution of our plan, heavily focused on dispositions and maintaining a strong and flexible balance sheet, driving occupancy with intense leasing focus on vacant space, rollover space and redevelopment and development space and meeting the marketplace. We also plan to continue to significantly reduce CapEx. And with that, let me turn it over to Marc to highlight 4Q and 2025 briefly, and then we'll turn it over to everybody for questions. Since we had Investor Day less than 60 days ago and we just reported yesterday, we'll try to make our comments brief. So Marc? Marc Binda: Thank you, Joel. This is Marc Binda, Chief Financial Officer. Good afternoon, everyone. First, a congratulations to the entire Alexandria team for the outstanding operational execution during the fourth quarter, including the completion of $1.5 billion of dispositions spread across 26 transactions and 1.2 million square feet of total leasing volume for the fourth quarter, which was the highest quarter in the last year. We are focused on taking all the 7 steps to our path forward that we outlined at our recent Investor Day and are also included on Page 4 of the press release. Our team continues to navigate a challenging macro industry and regulatory environment. Please refer to our earnings release for our EPS results. FFO per share diluted as adjusted was $2.16 for 4Q '25 and $9.01 for the year, which represents the midpoint of our prior guidance provided on our last quarterly call. Leasing volume for the quarter of 1.2 million square feet was up 14% over the prior 4 quarter average and up 10% over the prior 8-quarter average. An important takeaway for the quarter is that the leasing of vacant space completed during the fourth quarter of 393,000 rentable square feet was almost double the quarterly average over the last 5 quarters. Free rent and rental rate changes on renewed and released space were under pressure this quarter, which reflects the market realities and included 2 large deals, 1 in Canada and 1 in our Sorrento Mesa submarket. Lease terms for the quarter of just over 7.5 years were consistent with the prior 3-year average of right around 8 years. Occupancy at the end of 2025 was 90.9%, which was up 30 basis points from the prior quarter and was up 10 basis points over the midpoint of our prior guidance. In addition, we've signed leases of almost 900,000 rentable square feet or about 2.5% of the portfolio that are expected to commence in the third quarter of 2026 on average upon completion of construction and will generate incremental annual rental revenue of $52 million. It's important to emphasize that our asset quality, location, best-in-class operations, sponsorship and brand trust continue to be a major distinguishing factor for tenants, as our Megacampuses, which represent about 78% of our annual rental revenue, outperformed the total market occupancy in our largest 3 markets by 19% for occupancy. We reiterated our year-end 2026 occupancy range of 87.7% to 89.3% that was provided at our Investor Day this past December. A key takeaway on our outlook for 2026 is that we expect occupancy to dip in the first quarter of 2026, and we expect occupancy growth in the second half of 2026. The projected decline in occupancy for the first quarter is primarily driven by the 1.2 million square feet of key lease expirations with expected downtime that we highlighted on Page 22 of our supplemental package, consistent with our outlook from Investor Day. We're making good progress across these spaces with 13% that's either lease negotiating, and we've identified prospects or in early negotiations on another approximately 40% of these spaces. Same-property net operating income was down 6% and 1.7% on a cash basis for the fourth quarter and down 3.5% and up 0.9% on a cash basis for 2025. The results for the year were at or better than the guidance midpoint we provided on our last earnings call. The full year 2025 results were primarily driven by a decline in occupancy which occurred in early 2025, and the cash results had a boost from the burn off of free rent in the first half of 2025. We reiterated our outlook for same-property performance for 2026, up/down 8.5% at the midpoint of our guidance range, which is expected to be driven by lower occupancy. And despite the anticipated decline in occupancy in 1Q '26 I previously mentioned, we continue to benefit from a very high-quality tenant base, with 53% of our annual rental revenue coming from investment-grade or publicly traded large cap tenants, long remaining lease terms of 7.5 years, average rent steps approaching 3% on 97% of our leases and strong adjusted EBITDA margins of 70% for the fourth quarter. We expect same-property NOI performance to be weaker in the first half 2026, driven by lower occupancy and stronger performance in the back half of 2026. Our guidance assumes the delivery of the nearly 900,000 square feet of signed leases commencing in the third quarter of 2026 on average, as well as about a 2% to 3% assumed benefit from a range of assets that could be sold or designated as held for sale in the second half of 2026. We highlighted several considerations for the first quarter of 2026 on Page 5 of our supplemental package, including the following 3 items that we expect to impact same property performance. First, the 1.2 million square feet of key lease expirations with expected downtime, of which around 60% expired in mid-January on average. Second, we terminated 1 lease for nearly 171,000 rentable square feet in South San Francisco in 4Q '25 that had annual rental revenue of $11.4 million. And we are announcing that we re-leased 100% of the space to a new tenant, but the new lease isn't expected to commence until beginning in the second half of 2026. So there will be some additional temporary vacancy in the first half of 2026. And third, our guidance assumes a reduction of rent of approximately $6 million per quarter, starting in the first quarter of 2026 related to potential tenant wind-downs. During 2025, we achieved tremendous general and administrative cost savings of $51.3 million or 30% compared to the prior year. And our G&A cost as a percentage of NOI was about half the average for other S&P 500 REITs at 5.6% for 2025. As we've guided in the past, we expect those annual savings in 2026, relative to 2024, to be cut roughly in half, given the temporary nature of some of the 2025 savings. We reiterated our guidance for capitalized interest for 2026 of $250 million, down 24% from 2025. With projects under construction and expected to generate significant NOI over the next few years and other earlier-stage projects undergoing important entitlement design and site work necessary to be ready for future ground-up development, we are required to capitalize a portion of our gross interest costs. Part of our strategic path forward includes goals to reduce the size of our pipeline and construction spending needs and to substantially complete our large-scale noncore disposition plan in 2026. During December 2025, we sold or designated for held-for-sale projects with more than $1 billion of basis that had previously been subject to interest capitalization. As a result, we expect a decline in capitalized interest headed into the first quarter of 2026, and we have a number of projects under construction where we are evaluating the business strategy and a number of future pipeline projects undergoing preconstruction activities with milestones in May 2026 on average. To the extent that we decide in the future to either pause or sell any of those projects, capitalization of interest and other costs would cease. While those ultimate decisions have not yet been made, we would like our disposition program for 2026 to include a significant component of land, which will also help us achieve 1 of our strategic objectives to significantly reduce the size of our land bank. During the fourth quarter, realized gains from our venture investments was $21 million, down from the approximate $32 million quarterly average for the preceding 3 quarters. For 2026, we reiterated our guidance range for realized investment gains of $60 million to $90 million or approximately $19 million per quarter at the midpoint. We continue to have 1 of the strongest balance sheets amongst all publicly traded U.S. REITs. Our corporate credit ratings continue to rank in the top 15% of all publicly traded U.S. REITs. We have tremendous liquidity of $5.3 billion, the longest average remaining debt maturity among all S&P 500 REITs at just over 12 years and modest leverage of 5.7x for net debt to adjusted EBITDA for the fourth quarter annualized. We reiterated our guidance range for 4Q '26 net debt to annualized adjusted EBITDA of 5.6x to 6.2x. While we remain on track to achieve our leverage goals for year-end 2026 leverage, we expect leverage in the first quarter of 2026 measured on a quarterly annualized basis to temporarily increase by 1 to 1.5x higher, driven by a reduction in quarterly adjusted EBITDA. Please refer to Page 5 of our supplemental package for detailed assumptions specific to the first quarter. We expect 1Q '26 leverage to significantly improve over the balance of 2026 as we make progress on our dispositions and sales of partial interest. As we announced at our Investor Day, we sold 1 of our campuses in South San Francisco. We expect to sell 2 redevelopment projects in 2026, and we pivoted to office on 1 project in the Fenway. And these changes reduced our future funding needs by more than $300 million. In addition, we are evaluating the go-forward business strategy for 4 additional projects that are currently under construction and have significant remaining capital needs. Again, a huge congratulations to the Alexandria team for the tremendous execution during the fourth quarter with $1.5 billion of dispositions that completed across 26 different transactions, which allowed us to achieve our leverage target of 5.7x for the fourth quarter. Over the course of 2025, we also made significant progress in reducing our investment in nonincome-producing assets as a percentage of gross assets from 20% at the end of 2024 to 17% at the end of 2025, and we expect that ratio to continue to decline by the end of 2026. In connection with our disposition program, we recognized our share of impairments of $1.45 billion in the fourth quarter. Five important items to highlight here. First, approximately 90% of that number was previously announced with our 8-K on December 3, and the remaining 10% was primarily related to 1 land parcel located in Greater Boston, which was designated as held for sale later in December. Second, 50% to 60% of our share of the real estate impairments recognized in the fourth quarter was related to land, which is notable given the oversupply in numerous submarkets. Third, the 2 largest impairments comprised 37% of the total and included our future development project at 88 Bluxome Street in SoMa located in San Francisco and our Gateway campus in South San Francisco, which was owned through a consolidated joint venture. Fourth, we sold our interest in the Gateway campus in South San Francisco in December. Ultimately, we decided to exit this investment given the challenging supply and demand dynamics in South San Francisco and the very significant capital required over time to redevelop the campus. And fifth, we expect to complete the sale of the 88 Bluxome Street, our only asset located in SoMa over the next few quarters. We originally acquired this site in 2017 with the intent to expand the Mission Bay cluster. However, Pinterest terminated their lease with us in 2020 and paid us an $89.5 million fee. And we ultimately decided the sale proceeds from this project would be better recycled into our Megacampus platform and to address our current funding needs We continue to focus on our disciplined strategy to recycle capital from dispositions and partial interest sales to support our funding needs with a focus on the substantial completion of the large-scale non-core asset program in 2026. And we expect non-core assets and land to comprise around 65% to 75% of the $2.9 billion midpoint of our guidance for 2026 dispositions and sales of partial interest. We expect most of our dispositions and partial interest sales to close in the second, third and fourth quarters with a weighted-average closing date in the third quarter. In early December, our Board also authorized a reload and extension of the common stock repurchase program of up to $500 million. And our guidance does not assume any common stock repurchase in 2026 based upon current market conditions. And lastly, we reaffirmed our guidance for 2026 FFO per share diluted as adjusted, as well as the key components of guidance. Now I'll turn it back to Joel. Joel Marcus: So can we go to questions, operator, please? Operator: [Operator Instructions] Our first question today comes from Farrell Granath from Bank of America. Farrell Granath: This is Farrell Granath. I want to start off, I know that we spoke about a month ago, but just given the sustained and slightly up quarter-over-quarter leasing that you've seen and recent commentary around better VC funding that we've seen in the broader biotech market, has that changed your outlook at all and expectations into '26? Or are you at least receiving greater inbounds in terms of sentiment as people are potentially making more decisions? Joel Marcus: Okay. So Farrell, is your question aimed broadly at leasing? Or is it aimed at venture-backed private? So I'm not sure how broad or narrow your question is. Farrell Granath: I want to just connect the dots between what we've seen as positive headlines for broader VC funding and how that may be connecting to leasing and sentiment towards leasing. Joel Marcus: Okay, because that's one segment of a very broadened market. So Hallie, maybe take her through a little bit of venture and the private side, but then maybe overall. Hallie Kuhn: Yes. Farrell, this is Hallie. As Joel mentioned, when we think about VC dollars going into this industry, it's very much tied to a specific segment, our private biotechnology segment. And we have seen, over the course of this year, sustained funding and numbers are similar, if not slightly higher to the last couple of years. This is money that is going into new companies. On the other hand, venture funds have raised the lowest amount of dollars in the last decade. So this is LPs investing in these funds. And so we have no kind of interesting dynamic going on here where it's certainly not back to a healthy robust environment that we would fully like to see. And what we see that manifesting in is that VCs and these companies continue to be very conservative. So we certainly are seeing demand. We have -- Peter can talk to tours increasing. There are some great companies out there. I do think by and large, decision-making is still taking longer and companies are very cautious in terms of how they think about taking on new space or expanding. So while we're cautiously optimistic, we are monitoring it closely because we don't necessarily think that we're back to a fully robust environment that we may have been in the past. More broadly speaking on headlines, the other big one is the XBI has certainly performed incredibly well over the past year, outperformed broader indices. As mentioned in the Investor Day, the majority of those companies are commercial or near commercial companies, which don't typically drive lab space needs. So we're not seeing the immediate translation of that activity to leasing. So altogether, while we do feel that we're moving in the right direction in terms of positive sentiment, we still have a lot more work to do. There's still a lot of volatility on the regulatory and pricing side of things. And so we just continue to monitor. And for the demand that is out in the market, meet the market and really capture our outsized share of leasing. Joel Marcus: Yes. Let me put 1 footnote on that, Farrell. If you look at the pie chart of our leasing for the year and the fourth quarter, you'll see in the fourth quarter, a notable, a very small amount of leasing for public biotech. That's something that we're hoping turns around in 2026 because that's a critical mainstay of this industry. And much of that has to do with the lack of availability of secondary offerings except on data or the lack of a real, robust open IPO market. Okay? Farrell Granath: And I also wanted to ask about your strategy of retaining the Fenway office property and looking to lease as an office. Is -- was that a one-off transaction that you're looking to maintain? Or is that something that you could see doing across other properties as well? Joel Marcus: Well, I'll have Peter comment on that. But you have to remember that the Fenway is made up of multiple buildings. The one we're speaking about is, in fact, an office building and in fact, has multiple long-term leases with some of the best institutions in LMA and the Fenway. And so we sometimes you think about would you create lab space or other things out of vacant space or stick with what makes sense and the demand there we think is -- will, on a go-forward basis, be pretty good office-wise. But Peter, do you want to comment on that, I think, 401? Peter M. Moglia: Yes. I mean, I would agree exactly with what you just said, we have seen an increase in demand for office space. And given the availability we have elsewhere in the Fenway for lab, it made more sense to just go ahead and follow a business plan to lease it as office and not create any more lab space in the near future. Joel Marcus: Yes. So that's more building and submarket specific as opposed to something much broader. Operator: And our next question comes from Ronald Kamdem from Morgan Stanley. Ronald Kamdem: Two quick ones. Just on -- starting with the dispositions. I saw some of the cap rates on the stabilized assets in the supplemental, which was helpful. But as you're sort of thinking about that $2.9 billion, I appreciate a lot of it is going to be land, but any sort of commentary on cap rate trends, sort of the interest, price discovery, how that's been going relative to your expectations? Joel Marcus: Yes. Peter? Peter M. Moglia: Yes. I mean there's still going to be a considerable amount of non-core assets that we're selling, and you've seen cap rates for those in the mid 6s, all the way up to the mid-9s. A lot has to do with what markets they're in, how much leasing or what the WALT is, the lower the WALT, the higher the cap rate. We do plan on a couple of executions during the year that would involve more core assets. So you should be able to get more discovery on what our NAV could be for what we're holding on to. But I'm not going to speculate on those cap rates yet. We have talked in the past and mentioned at Investor Day, and we do think our top end properties should have a 5 handle. And 1 or 2 of those types of properties could be involved in this execution, and we'll report on that when it happens. Ronald Kamdem: Great. Just my follow-up, I had sort of a similar question on the leasing chart, but maybe asking it a different way. Can you just comment on the leasing pipeline in terms of how it's rebuild after the quarter? And if any sort of notable groups are in the pipeline or not in the pipeline? That would be helpful. Joel Marcus: Yes. That's kind of a secret sauce. I'm not sure I want to say much. But Peter, do you have any overall comments? Peter M. Moglia: Yes. Look -- in practically all of our markets, the smaller space is under 50,000 square feet are still what is moving most of the tours or in that range. There is, as Joel mentioned and Hallie mentioned, there is a bit of a dearth of biotech, public biotech type of companies, which are usually the middle of the barbell, 50,000 to 150,000 square feet. We're not seeing a lot of that, but we do have, in certain markets, some good activity in the 100,000 square foot plus range. So we're pleased to see that. But as Joel mentioned, we really need to see the public biotech sector contribute to the leasing pipeline in order for it to really start to turn around. There is some good green shoots, we're very cautiously optimistic. But 1 example is that the Greater Boston region did see an 11% increase in tenants in the market, and that was really the first time we've seen an increase in a number of quarters. So we're happy to see that. And we'll keep you informed as we go. Operator: Our next question comes from John Kim from BMO Capital Markets. John Kim: I was wondering if you still felt comfortable with the previous guidance you gave for the fourth quarter '26 FFO of $1.40 to $1.60 stated at your Investor Day? And whether or not you believe this would represent trough earnings? I think in the presentation, you mentioned that earnings will be flattening out in the second half of the year. But there are some dispositions that looks like that's falling into the fourth quarter. Joel Marcus: Yes. So Marc? Marc Binda: Yes. John, yes, we're still tracking within that range that we gave for the fourth quarter of '26, which I think was $1.40 to $1.60. And that does represent kind of the trough for the year, at least for 2026. But as far as '27, I know you don't want to give guidance for that, but... Joel Marcus: Yes, we haven't and can't give guidance at this point for '27. But that was the point of saying that's a good run rate to think about as a base. John Kim: And then can you comment on dispositions you've completed year-to-date and what you planned for the year in terms of the type of buyers you're talking to as far as owner/users, other REITs, developers looking to convert some of that space potentially or other buyers? Joel Marcus: Yes. So maybe, Marc, do you want to just talk about the percentages of dispositions through the year? And then maybe ask Peter to comment on the buyer pool. Marc Binda: Yes, sure. Yes, the mix of dispositions was pretty consistent with what we kind of set out at Investor Day. So about 20% stabilized, 21% land and then 59% non-stabilized. So I mean, the biggest -- obviously, the biggest pot or portion was the non-stabilized properties, which is going to attract a certain type of buyer. Maybe I'll hand it over to Peter to go over it [indiscernible]. Joel Marcus: Yes. Before you do, talk about timing, quarter-by-quarter because I think that's... Peter M. Moglia: Oh, sure. So as we look forward to 2026, we've got just under $200 million of stuff that were under contract or under PSA negotiations. We've got about $580 million of assets on balance sheet today that have been designated as held for sale. And so I think that the first quarter closings will be pretty small. We expect the bulk of the closings to occur over 2Q, 3Q, 4Q. And again, I think if you -- on a weighted-average basis is probably closer to third quarter as a kind of a blended average for the closings for 2026. Joel Marcus: Yes, Peter. Buyer? Peter M. Moglia: Yes. So on our guidance page, we did indicate that we've got about $180 million under contract or in negotiations that we expect to close in the near term. That's essentially 3 assets. One is a portfolio that is being purchased by what we would classify as an investment fund. Investment fund buyers have been our fourth largest over the last couple of years, taking down about 12% to 15% of our inventory. That's the -- an investment fund as someone is buying it to hold long term and is usually private capital. The other 2 assets are residential conversions. They're land or assets that are at the end of their useful life that will be demolished and turned into a residential type of use. And that was another one of our largest segments of buyers last year and we anticipate that will continue this year. More than 55% of our available land is either zoned or could have an allowable residential use and is in urban environments that could use the housing. So we expect that out of the $2.9 billion midpoint this year, although as Marc said, there'll be a considerable amount of land, 25% to 35%, and we do expect the majority of that to go to residential developers. But there has not been a problem getting assets sold. There's a number of buyers. The biggest issue is just the yields that these buyers are looking for and that has created some impairments, and -- but the good news is when we need to get things sold, we do. And we fully are confident we'll do the same thing this year, even though it's a larger amount that we have to execute on. Operator: And our next question comes from Vikram Malhotra from Mizuho. Vikram Malhotra: I just wanted to clarify kind of the earnings, I guess, trajectory through the year. With the vacancy or the move-outs you mentioned, some of the fees, et cetera, onetime items in 4Q '25, I'm just wondering sort of the cadence that you showed at Investor Day trending down to that $1.40 to $1.60, is that cadence still intact? Marc Binda: Yes, Vikram. Yes, we still expect the fourth quarter to kind of be the low point in earnings for the year, for 2026. We did -- I think there was some question around where the first quarter goes and how steep of a decline that is coming off the fourth quarter. And so we tried to give a lot of color about the components that go in there, but the general trajectory that fourth quarter, things will even out in the back half of the year. And the fourth quarter being in that $1.40 to $1.60 range still holds. Vikram Malhotra: Okay. Great. And then I guess maybe Joel or Hallie. If -- from a broader perspective, I understand like it takes a while for all the changes on the macro front to translate to leasing. But I don't know if you've had any like recent conversations with FDA officials or any larger VCs in terms of the shifts that you may be hearing as a precursor to new company formation and hopefully then leaving down the pike. So maybe if you can update us on any thoughts around the FDA and like early-stage Series A, B type funding? Joel Marcus: Yes. So maybe let me make a couple of comments and ask Hallie to fill in the blanks. So I think it's fair to say that the FDA Commissioner has been active. He's out a lot. He's certainly trying to hit in the right direction and do the right things, given speed of approvals, looking at trying to get products into the clinic much quicker than otherwise. Remember, we talked about it at Investor Day, the things that the market really wants to see is a substantial compression of the 10- to 12-year billion-plus cycle of bringing up a compound from discovery to the market. And he's, I think, very much focused on that. Now have defections, DOGE firings, resignations and all that stuff at the FDA, how much does that practically impede the ability of the agency to do what they want to do, which I think they've got their mindset in the right place I think is a big question for this year. Last year, they did end up approvals at 46, which was a very, very respectable number, but a lot of that was in the pipeline. This year is going to be a much more telling result. But Hallie, other thoughts, comments? Hallie Kuhn: Sure. So maybe Vikram to take a step back on this question as it continues to come up. On Page 21 of the sup, we break out our leasing volume by business type, both for the fourth quarter and for the full year '25. And if you look at private biotechnology, in the last quarter, it made up about 1/5 of all leasing volume. So to be clear, we still continue to see demand from this segment. Whether that's going to pick up and how long that takes, I wish we could give you a specific time frame. These things take a while, right? And I think generally, we need a lot more confidence in terms of the broader landscape, being able to return capital to LPs, the IPO window opening up, which is a really important source of capital for private companies. But where we've really seen the drop off, as Joel mentioned, is in that public biotechnology cohort. So in terms of overall impact to our leasing going forward, we think that segment in particular is critical. And we are seeing some demand out there from some really good companies. They still are tending to be more capital conservative, more commercial, near commercial. And without that next bolus of new companies that are IPO-ing that tend to be earlier stage, they still seem to be on the back burner right now. At JPMorgan, there was a lot of, I would say, positive sentiment around the potential for some really strong companies to go public and raise capital. We haven't seen that yet. But that is really top of mind as we think about the next, I would say, 12 to 18 months. Vikram Malhotra: Okay. Great. And then can I just clarify? Like, the new leasing was really good this quarter and hopefully, the pipeline supports sort of that continuation. But where are we today in terms of like incentive packages, TIs, free rents to achieve that leasing? And I asked just because there have been a couple of leases in South San Francisco where we've heard like very big TI numbers. So I'm just wondering if you can give us a bit more granular color on the TI and free rents? Joel Marcus: Yes, Peter? Peter M. Moglia: Yes. I mean, tenant improvements haven't changed. They're still elevated for anything that's from shell. It's got to really be -- it's either you get an allowance to build the whole thing out or you have to spec build it. So on renewals and re-leasing, the TIs are also stable. The fact that the space is already built out and the fact that people tend not to change much in the generic labs that we build, that's an advantage to us. So really, where we continue to see weakening in fundamentals is in the free rent category, and it's continued to elevate. We did have a couple of leases this quarter that really had significant amount of free rent in order to win the deal. And Joel mentioned in the very -- in his comments that we're meeting the market. It's in our best interest to meet the market, but keep rental rates as stable as possible, because as free rent burns off, then you get the income that you can build upon and hopefully, the next generation of leasing, you can increase it from there. When you start taking rents down, then you're starting to destruct value. So Alexandria and others that are competing in the market, free rent is the tool that we're using. Tenants really appreciate it because obviously, it's good for their cash flow. And as long as we continue to have availability in the mid-20s to low 30s in the major markets, free rent is going to be the tool that people need to use in order to execute on deals. But outside of that, we are pretty happy to see that rental rates are stable, in certain cases, growing. And we just got to get the net effect is to improve, but that will take a decrease in supply over time in order to start seeing that. Operator: Our next question comes from Jim Kammert from Evercore. James Kammert: Just trying to triangulate on Peter and Hallie's comments regarding the public biotech. Is there any concern? I mean, you said they're both critical to sort of kick starting demand again. But is it possible that some of these public biotechs, if they raise more capital, already have sufficient space? Or do you really think there's expansion space need there? Joel Marcus: Well, yes, let me maybe give you an overarching comment, Jim. I think number one, historically, public biotech has been the mainstay of -- I mean, the broader industry is obviously institutional pharma product tools, services, all that. But when you get to biotech itself, the public market has been the mainstay of this industry, going back 50 years this year to Genentech. And one would assume that it would continue to be the mainstay and it's made up of really, 3 things. One, you get a good start at the venture level. You can get public through an IPO window that's reasonable, and you can continue to finance the company even if you don't have immediately actionable data. That's how it's worked over the last several decades, and that's what we're hoping to see a return to. Now in any given case, it's hard to say. Some will need more space, some will need less space. Some will be able to keep the same. But I don't know, Hallie, thoughts there? Hallie Kuhn: Yes, Jim, I think that is in a way what we have been seeing. If you look at the XBI this past year and follow-on financings, which on an absolute numbers basis have been pretty strong, most of those have been for particularly commercial stage companies, which is great in terms of sentiment for the industry, but these are by and large, not companies that are driving a lot of R&D expansion. So to Joel's point, we need to see that earlier funnel fill up. We need to see the venture stage companies go public, gain more liquidity, expand their investor base. Those are more likely at that stage to drive additional R&D needs, which is what we've seen historically. I think Peter did mention we have seen some requirements hit the market. Things take a while, but not to say that it's a complete desert, but it is further and fewer between than it has been in years past. James Kammert: That's very great color. And then 1 quick clarification. Peter, you also, I think, said that it's possible you might see a 5 handle on some of the core asset capital recycling in ' 26. Would that be potentially -- I mean, if it happens, on a JV? Or would that also be for an outright sale? I'm just trying to think about NAV implication sale versus JV. Peter M. Moglia: Yes, very likely a JV that would happen. We are not planning on selling any core assets outright unless there's a special situation. Operator: Our next question comes from [ Ray Zhang ] from JPMorgan. Unknown Analyst: My first 1 is on the capital allocation side, it seems like you guys did above midpoint of the guidance on dispo this year. And you guys -- I think Marc mentioned, buyback is still not on the table at this point. But with the excess cash, is the thinking that the priority is on the debt side? Or how should we think about that? And when would buyback be on the table with the excess cash? Joel Marcus: Yes. So Marc? Marc Binda: Yes. Ray, I think in terms of the buyback, we'd like to get farther along on the disposition program, which is going to involve paying down debt to keep the balance sheet in check before we consider buybacks. Now I say that given the current market conditions and -- will remain flexible. But as we sit here today, that's kind of our current thinking. Unknown Analyst: Got it. And a follow-up question on uses of funding then. You guys disclosed how much you historically spend on the non-real estate investments in the [ K ]. If I'm looking at it correctly, I think between $200 million to $250 million a year. How should we think about that moving forward? Anything -- any help on that front would be appreciated. Marc Binda: Yes, sure. So we really look at the fund kind of net of the inflows and outflows. So I think if you -- if you look at the cash that came in, it was maybe a net outflow of somewhere between $60 million to $70 million for the year. And that's been -- I mean, I think it was a similar number in the prior year. So I think we'd like to see that the fund be as close to neutral as possible so that we're not putting a ton of capital in there, but still continue to be very active in the space. Unknown Analyst: Got it. So the net will -- the expectation is hopefully get to net neutral on that front? Marc Binda: That's right. Or at least a small number. Like I said, it's been $60 million to $70 million in the last couple of years. Operator: And our next question comes from Rich Anderson from Cantor Fitzgerald. Richard Anderson: The elephant in the room is, I guess, stock is up 20% this year. It's great, or 19%. And yet, it still feels like pricing power is quite a ways off still with everything that's going on. Do you have any sense on the people that you're talking to, a different type of investor that's showing interest in the stock? Do you think it's just pure rotation, people sort of profit taking, looking for a bottom in life science? Do you have any sense of what's driving stock performance so far this year? Joel Marcus: Well, I think it's all of the above. And I think it's pretty clear that the slide that we showed at Investor Day, when you looked at stock price versus consensus NAV certainly tells the story in many respects. I think if one believes in this industry, 50 years after Genentech was founded this year back in 1976. Again, we've only addressed 10% of diseases, 90% are left. And if the public is willing to pay for therapies and addressable cures to the extent we can have that, that's -- one has to believe the industry has a promising future. We are making some, we're slipping back. As I said, when you look at some of the vaccine policy stuff, which is a little distressing to a lot of people. But I think if you set that kind of mentality aside and you look at what the FDA is trying to do, I think they're trying to do exactly the right thing to compress the time to go from discovery into the clinic, through the clinic and out of the clinic into the commercial side and assuming the policymakers and executive and legislative branches don't get too crazy to pay a fair return on these innovative therapies. I mean, just look at anybody who's been the beneficiary of any real therapy that saves somebody's life and made that more an ongoing chronic condition as opposed to life threatening, if you will. I think that's where the great promise is here, Rich. And -- so I think that when you look at our locations, quality of assets, quality of sponsorship, I mean it's not surprising that the sell-off after the third quarter was, I think, pretty radical. Richard Anderson: And -- but those are all good color, but do you think you're attracting a different investor? I think you're attracting a non-REIT investor, a biotech investor, a generalist investor to the name? Joel Marcus: I think the nature of investors change over time. I mean, think about when we went public, there are a lot of long-term investors today. There's very few long-term investors, a lot of ETF investors. But there's a large cohort of value-driven investors that don't look at quarterly day-to-day, monthly, year-to-year earnings, they look at quality of assets generating quality of cash flows. Obviously, people interested in the industry. So I think it's a whole bunch of sets of different interests that have come to bear because the sell-off just was, I think, foolishness. Richard Anderson: Thought Hallie was going to jump in there, but maybe I misheard that. So okay. Hallie Kuhn: No problem. Keep going. Joel covered it really well. Richard Anderson: Okay. Perfect. Okay. Second question for me is, let's say, your development exposure as a percentage just to use a simple way of looking at as a percentage of total assets goes from 20%-ish to 15% this year. I'm assuming that sort of a step in the process. And I'm curious, Joel, Peter, whoever, what do you think the appropriate run rate is for development exposure, financing risk, need to access capital, all those things? Like what is new Alexandria going to look like from a development exposure point of view, call it, 2, 3 years from now in your mind? Joel Marcus: Yes. I think we kind of articulated that at Investor Day, and there's a slide there that talked about. We think -- we don't know precisely because we're still in a -- I think, a -- how shall I say, a phase of trying to get used to a new reality with the industry. But I think we've hypothesized that we think 10%, somewhere 10-plus percent as a percentage of nonproductive or non-income-producing land as a percentage of overall gross assets is probably where we want to be very different than GFC, where there were no supply issues. The prospects were kind of unlimited because there was no supply constraint issue -- oversupply issue, if you will. So I think this is just a new reality. But yes, we've got great opportunities on many or most of our Megacampuses. And so those will be the instruments of future development and external growth, and we're excited about that. And there isn't just biotech. There is a whole host of other interested parties, both in our current pie charts and pie charts beyond that view those locations as top of mind. Operator: Our next question comes from Seth Bergey from Citi. Nicholas Joseph: It's Nick Joseph here with Seth. I guess, last month at the Investor Day, you talked about a 4- to 5-year recovery for life science broadly. And I recognize it's only been about 2 months, but you've been busy over those 2 months. So has anything changed that time line, either moving it up or delaying it from what you see? Joel Marcus: Yes. So that's actually -- I'm glad you teed this up because Peter, I think, addressed this, but a lot of people came away reporting it a little bit unclear. And he basically said that he thought that the time frame for recovery in our markets where we were very active would be in the 2- to 3-year range and that it may be as much as 4 to 5 in submarkets where we were not particularly involved or active. But Peter, do you want to comment on that? Peter M. Moglia: Yes. Thanks for clarifying that exactly. Like if you look at Greater Boston, for example, there's a significant amount of inventory in an area like Somerville and other tertiary areas and Alewife that -- where we're not at, which -- that's where we think that it's going to take 4 to 5 years for that to resolve. But Cambridge and Watertown, Seaport, where we're heavily invested, those -- that's probably more like 2 to 3 years and maybe even less depending on the trend of -- a lot of people are starting to realize that they should probably go a different path in life science, and we're hoping to continue to see that. So if we -- obviously, demand is going to be needed to take a lot of the lab space, but as a lot of it decides to change -- use that -- even that 4 to 5 estimate would be reduced. But Joel is exactly on point. 4 to 5 years for the areas that are the new markets that really didn't ever need to be lab markets, those will need a long time to resolve because it's not going to get resolved through lab demand, it's going to get resolved by changing use. But the lab markets that we're in that have been functional lab markets for decades, there has been some oversupply, and it will take 2 to 3 years for that to resolve. Operator: Our next question comes from Tayo Okusanya from Deutsche Bank. Omotayo Okusanya: Yes. In terms of the guidance, you talked a little bit about $6 million a quarter revenue headwinds from tenant wind down. Could you talk a little bit just about what's happening with that pool of tenants? Is it just they're not -- they didn't -- the drug trail failed or they ran out of cash? So just kind of thematically, what's happening with that group to just kind of understand what that headwind is? Joel Marcus: Yes. So I'll ask Marc to comment there, but I would say in this environment over the last handful of years, again, we're in the fifth year of a bear market, hopefully turning that around. And when you find that happening, obviously, more companies at the earlier stage or less companies are formed and more companies may be wound down. Some companies merged in the public markets. The bankers, certainly during the heyday of the last decade, led too many companies go public. So there has been a shake out there over the last handful of years of companies that probably shouldn't have gone public. So this is a natural outgrowth of that given where we are today. But Marc, you could comment more specifically. Marc Binda: Yes. The thing I would add is it's -- public and private biotech comprises the majority of it for the reasons that Joel and Hallie have mentioned. And some of it is kind of failure, which in their clinical milestones, which is normal in any market that will happen, but a lot of it is also ability to attract capital and just the kind of shorter runway that investors have given these companies that has caused part of the issue. Omotayo Okusanya: That's helpful. And if I may ask 1 more, the 4 development assets that is still under strategic evaluation. Could you -- does it all basically boil down to just leasing around these assets to determine whether you kind of proceed or you go through strategic alternatives? Joel Marcus: No. I think it's much more granular than that. It's what is the prospect broadly in the submarket, the nature of the asset, any competitive product that we may have with that asset. I mean there's a whole set of variability or analysis that you go through. Leasing is clearly important, but it's not the sole determinant. Operator: Our next question comes from Michael Carroll from RBC Capital Markets. Michael Carroll: Joel or Peter, can you guys provide some color on the 400,000 square feet of leases that were signed at previously vacant space? I mean, I would imagine a good chunk of that relates to the backfill at 259 East Grand Avenue? I guess if that's true, where were the other leases signed within that bucket? Joel Marcus: Yes. Peter, I don't know if you want to give any color there? Peter M. Moglia: I don't have the specific leases, but you are right that a significant amount of leasing was done at East Grand. I will say that one thing that we were asked about and did some investigation on is that a significant amount of that leasing was absolute new tenancy, not tenants relocating from one place to another, but new tenants actually coming in into our portfolio, which we really love to see. Hallie Kuhn: This is Hallie. I do have that list in front of me. And so just to say it was a pretty diverse from a regional perspective, leasing in Cambridge. We have RT, Seattle, some in San Francisco. So in terms of just generally seeing positive momentum backfilling the vacant space across the board. We think that diversity across the region is healthy. Joel Marcus: Yes, and broader base than you might otherwise guess. Michael Carroll: And that's -- is there any common themes on why those tenants were willing to lease space, I guess, in the fourth quarter? Joel Marcus: Yes, because we're great sponsors. Michael Carroll: Do they have like funding agreements where they just got funding? Or is there... Joel Marcus: It is so -- Yes, Mike, it's so episodical in a sense because if a company has a clinical milestone, a data milestone and they need to do something, I mean that's -- I mean, we've seen that with a couple of companies where they've doubled their space just on that 1 event. So it is very episodically-driven. And I'm not sure I'd read anything into -- was the fourth quarter substantially different than the second quarter vis-a-vis leasing trends because it tends to be very case specific. Michael Carroll: Okay. Great. That's helpful. And then just 1 last 1 for me. On 401 Park -- and I think I caught this earlier in the call. I just wanted to confirm to make sure I'm right. It's not necessarily that you have office tenants ready to lease that space. I don't know what type of interest. It's just that you had lab space available in that marketplace that you didn't need, you decide, okay, we have this building that could be lab or could be office, let's kind of diversify our approach and kind of go office with this specific property. Is that the right way to think about it? Or is there like a vibrant office market ready for that asset? Joel Marcus: Yes. I think that is the answer. It's an iconic office building that's been known for a long time. The mainstay is primarily anchor Boston institutions, brand names that you would know that have very, very specific uses there. Some are pure office, some are more clinical like or whatever. But in fundamental, this is part of and kind of adjacent to the LMA along with medical center. So this is a big, big market for those institutions and their office and other adjacent or other kinds of uses other than, say, traditional wet lab space. So it's not so much that it's a hard call. It's -- the call was, given the NIH's move on the 15% limitation on indirect costs in a variety of ways, we saw a big decline of demand and immediate decision-making by a lot of medical institutions, and we've seen that across the country. We did put in the [indiscernible]. There is a court decision that is -- has overruled that. That may start to move institutions in a different direction. But at some point, institutions still need to get space, and both Fenway and the LMA are the best locations for that. So it actually is a pretty easy decision. Operator: And our final question today comes from Mason Guell from Baird. Mason P. Guell: You had previously talked about San Carlos, San Bruno, Seattle and Campus Point as Megacampuses with large shadow pipeline and that you may look to reevaluate some of these in the future. I guess, do you have any updates? Or do you expect to have any updates any of these over the next few quarters? Joel Marcus: Are -- you're talking about the expansion? Mason P. Guell: Yes, [ large ] future shadow pipeline for [indiscernible]. Joel Marcus: Yes. I think those are all under pretty deep study in each market. And probably, at this point, don't want to get into that. But we clearly are looking to reduce our non-income producing assets, as we've said, as a percentage of the gross assets and where we can carve off land that we have for other uses or move into a monetization path at a much faster rate. We're trying to do that. And so I would stay -- say, stay tuned there. Certainly, for the Bay Area ones and Seattle. Operator: And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Joel Marcus for closing remarks. Joel Marcus: Okay. Well, thank you, everybody. We appreciate it and look forward to talking to everybody next quarter. Thank you, and stay safe. Operator: And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
Oleg Vornik: Good morning, and welcome to the DroneShield December Quarterly Investor Presentation. I'm Oleg Vornik, the Chief Executive Officer of DroneShield, and with me is Carla Balanco, our Chief Financial Officer; and Angus Bean, our Chief Product Officer. I will aim to speak for about 20 to 30 minutes, and then we'll turn to Q&A, which will be the majority of this session. I encourage everybody on this call to submit your questions as you go as opposed to wait until the end of my presentation, so we can commence the responses to Q&A as soon as we're done. I'm going to skip the basics of DroneShield as I assume most who have dialed into this call [Audio Gap] in revenues as well as about $202 million in cash receipts. This is a truly outstanding result and approximately just under 4x the increase from the top line of last year. But importantly also, we have started really strongly on the 2026. And a reminder that we are going in calendar year-end. So roughly this time last year, we would have begun the year with maybe $5 million or $10 million in locked in cash receipts and revenues while today, we're essentially $100 million that we have carried over from the end of last year, and that will be reflected in the next 1 or 2 quarters, plus any additional business that we're currently working on. The SaaS revenue similarly has continued to climb. So we have gone from just under $3 million in '24 to just under $12 million in '25, and we have already locked in over $18 million for 2026. And again, this we anticipate to continue to climb as we secure more sales with SaaS attached to it, but more on that as we speak about our SaaS strategy. In terms of the profit before or after tax, we're going to be releasing this in about a month from now as part of our annual results, and that is what our finance team are busily working on. The next slide gives roughly a quarter-on-quarter and a year-on-year comparison. So across all top line metrics, the revenues, the customer cash receipts, the SaaS revenue and the operating cash flows, we are seeing significant increases. The revenue from customers and the secured revenues is not the only metric. The pipeline remains strong at about $2.1 billion, and that is a small reduction from the $2.4 billion roughly that we had about 3 months ago. And a lot of it is driven by a -- us essentially being slightly more conservative when it comes to the civilian revenues in the U.S. We're seeing still a lot of momentum in those non-military opportunities in the U.S., and I'll talk more about it. But essentially as part of us being more strict in how we apply those metrics and also remembering that U.S. civilian sector is a very nascent industry and much like what military used to be several years ago when you had the early stages, you are not always seeing that progression. And if you go -- just give me one second. I have received and know that I need to reshare the slide deck, so I will do so now. [Technical Difficulty] Okay. Now you should be able to start seeing the screen again. Apologies for the IT issue. So $2.1 billion pipeline, which is an exceptionally strong pipeline that I will talk more to in the next couple of slides. But ballpark, we're talking 300 deals diversified across products, geographies, stages of maturity and so on. Underpinning all this is about 350 world-class hardware and software engineers here in Sydney that has taken a decade for us to build. There is no team of this sophistication and quantum in the market that we're aware of. And this is what's leading to the highly differentiated nature of our products, both the current products, which I believe, are the best out there, but also the next generation of products that we'll be commencing release of in the second half of the year, which we think will completely transform how our customers think about counter-drone solutions. The $70 million plus R&D spend and we expect that to continue, slightly increase, but not a lot. So we expect to go from about 500 to 600 people, assuming our recruitment program goes on track by end of '26. Most of those would be engineers as well as ops and salespeople. And this will continue building on our highly -- basically high gross margin products, so 65% gross margin as well as a healthy cash balance. So let's talk about the individual geographies. U.S. has, for a long time, been the engine of growth of the business, so 70% revenues. Last year, Europe has taken that title and Europe will continue driving a lot of our momentum as we're seeing a number of countries really ramp up their defense, realizing they cannot just rely on the U.S., they need to be self-reliant, and increasing their defense expenditures significantly. And within that, we're really well positioned, including setting up manufacturing in Europe. We have a number of well-credentialed distributors that we trained and are deeply ingrained with our military but also critical infrastructure and customers through Europe and set up our office in Amsterdam led by Louis Gamarra, our Global Chief Commercial Officer, who is then managing those distributors around Europe. In the U.S., after a relatively quiet '25, we expect to have a very strong '26 once the current U.S. congressional '26 budgetary discussions are concluding. And hopefully, that will be all in the next month or so. And that is across several verticals. The defense budget, which is already at the record of USD 1 trillion in '26 is proposed to be USD 1.5 trillion in '27 and we believe we're well positioned as JIATF 401, which is the centralized procurement office for counter drone in the U.S. will start kicking in. Outside of the defense, the Department of Homeland Security has set up a dedicated team, the Program Executive Office with USD 1.5 billion contract vehicle. And that's also linked into the FIFA World Cup in June, July where you need significant security, including counter drone. And Safer Skies Act in a nutshell enables police and majority of police in the U.S., state and local, not federal, enables states and local police to be able to jam on our product, if you think DroneGuns, RfPatrols, DroneSentry-X, on-car sensors and effectors are perfectly suited for police deployment. And also, we have been included in the Golden Dome, the $151 billion SHIELD IDIQ. Now those are primarily missile protection sites, but all of them will need counter drone protection. So that's where we intend to play. In the U.K., those of you following me on social media would have seen that I shared a picture in Hereford about a day ago where there was a U.K. Minister of Defense visiting the SAS HQ facility, and that was our RfPatrol basically being demonstrated as part of the visit, and that is not a stage marketing opportunity. This was a genuine visit unrelated to DroneShield and this shows how deeply embedded DroneShield is within the various arms of the Ministry of Defense. And we believe that the actual opportunity is much more than just $17 million or 5 projects. This is what we are actively tracking. But I think the U.K. will be spending significantly on counter drone, and I believe we are, by far, the best positioned business there. In Australia, we've recently been included into a Line of Effort 3 panel for LAND 156, which is saying to be the managing contractor on specific sites. And we expect that work to commence as in the participants on those panel will start getting those roles sometime this year as well as us being part of Line of Effort 2, which is purchases of portables like DroneGun and RfPatrol and where we received initial small couple of orders totaling $6 million last year, and we expect to get more off the back of that. In Asia, a lot of our efforts are driven off Japan and the rest of Chinese neighbors, and we expect that to continue ramping up significantly. Outside of all these geographies, South America is probably the key driver where we're very active in both Colombia and Mexico, and Colombia has announced USD 1.7 billion counter drone budget. And the key focus for South America tend to be fixed site systems, our drone DroneSentrys, which provide protection for the whole facility. I'll likely skip through the Safer Skies Act except to say that this is significantly increasing our U.S. law enforcement demand. On the products, again, I will skim and maybe refer back to it during the Q&A session, but a reminder that we do a complete range of dismounted and on-the-move and fixed-site products. So we are a radio frequency AI-enabled drone detector and defeat maker, but we are also an integrator. So integrator of third-party detectors and third-party effectors. And this is quite important, especially when it comes to fixed sites. I want to spend a little bit of time talking about the software strategy. So today, software is a small, about 5% part of the total revenue. We plan to have it as close to 30% over the next several years as possible. And this will be achieved by every new product that will be released going forward, having one or multiple SaaS streams on top of that product. DroneSentry-X is a good example. So today, when you buy DroneSentry-X, you have RFAI, which is our AI-enabled engine that runs as a SaaS product on that. But then you're also probably going to have it deployed as part of your site. And within that, our C2 is also the other SaaS product that will be applicable to you. If now you happen to run multiple sites, our enterprise SaaS, so DroneSentry-C2 Enterprise kicks in, which gives you a region or a country-wide awareness and that is an additional product again. Now if you're having a multisensor solution, chances are, you have cameras, so our DroneOptID SaaS, you probably have radars where there's SaaS attached to it as well. And we'll continue releasing new SaaS families, optimizing for more and more of the SaaS offerings on top of the hardware that we sell. I think selling as hardware and software positions us really well competitively. I would not want to be a pure software business in the world of ChatGPTs, et cetera, today, where you're worried that the big AI is going to eat your lunch. And I think hardware, which is highly customized, high IP sort of product, we have a lot of effort that we've been putting in, in terms of designing that circuitry, designing those antennas, how it all sits together. And having AI that works on that hardware, not in the cloud, it's not large server farms, but on the device, AI on the device, is making us a truly unique proposition that is very difficult for somebody to replicate. And I don't believe we have any competitors that are doing anything quite like we are in terms of our deployment of AI to sense and take down drones. And so this is our strategy to then grow our SaaS to 30%. But then importantly, selling to militaries and government agencies is recurring by nature. So in the world of counter drone where you really need new hardware every 3 or 4 years, whatever the customers are buying today in terms of hardware, they'll be fully replacing in about 3 or 4 years. In fact, some of our customers are already seeing the trend and they're asking us, and I think this is potentially where the industry is moving, towards Counter-Drone-as-a-Service. So instead of paying us x dollars for hardware and then continuing to pay SaaS, it's basically becoming one giant SaaS and the hardware refreshes are baked into that. Now this is not going to be done by everybody. And this will enable us to continue receiving those bigger one-offs in the short term from the hardware purchases as well. But I think in the long term, so over the next 5 to 10 years, I think a lot of the industry will move towards Counter-Drone-as-a-Service, which will further smooth out our cash flows. Number of differentiators, so technical and commercial, I've talked to many of you about this before. On the technical front, the AI. So our enormous database of drone signals, the largest proprietary database of its kind in the world, we believe, which is collecting drone signal data from 70-odd countries in which we operate. And this is one of our also key advantages compared to, say, North American or European competitors, a lot of whom focus on their regions because the markets are big enough. Coming out of Australia, we always had to be a global export business because the market here doesn't support a business of our size, and that enabled us the global reach as well as building those enormous databases. And then we have data engineers in Australia, cleaning, tagging the data and enabling them the dedicated hardware with an AI engine to perform against drones. Now we're super excited and we can talk more about it in the Q&A if people are interested on this call about the next generation of AI engine that we are planning to release later this year, which we really think will be the game changer in the performance of the drone detection as well as the defeat. So as a result, our gear can detect, further defeat, further be lighter, smaller and be in various form factors. So on-the-move, fixed-site or both. On the commercial front, we are one of the most global counter drone businesses. Now we don't supply to the likes of Russia, China and North Korea, Iran and so on, but within the Western and Western allied countries, I don't believe there is a counter drone company with a wider deployment than DroneShield is. And over the last 10-plus years, and we've truly been a pioneer in this business, and there are a lot of people in this company with very significant longevity. We've seen the whole cycle, both from the commercial and technology experience. We have this think tank capability of understanding where the threat is moving, what the drones are likely to do, how to direct our road map, what makes sense, and this is also our competitive advantage. In the world where you have to have understanding, not just with military technology, drone technology, but also the acquisition cycles and how various customers like. On the competitive positioning, we have 1 or 2 competitors usually across most of our product lines, but we are aiming and I believe we are today the leader in every product segment in which we operate. Traditional defense primes, we see more as our customers rather than competitors just due to the requirement to rapidly evolve like 3 to 4 years hardware cycles, quarterly software updates and also be cost competitive. Live defense primes are not positioned for that kind of performance. Theirs are more like, if you want to build a tank or a missile with very different sort of competitive moat. And I believe that we remain the only publicly listed pure counter drone company in the world. There are other publicly listed companies that do lots of things as well as counter drone being a relatively small part of what they do. But we are the only pure-play counter drone listed company in the world. And on the manufacturing capacity expansion and maybe in the interest of time, I'll stop on this slide, we are on track to expand to $2.4 billion by end of the year. We are -- we're just in the process of completing the move now to our 8x. Beside the facility expansion in Sydney, we are setting up manufacturing in Europe and in the U.S. So the idea is for smallish orders up to maybe $5 million, we can usually deliver really rapidly. So for example, the order that we announced on the 30th of December last year, about a month ago, we delivered the following day, and this was in Europe. And for larger orders like the $62 million order we received in the middle of last year, we delivered that within 2 months. And the idea is that if we receive an order in hundreds of millions of dollars, we can still deliver that within, say, 2 quarters. So that's the goal of manufacturing capacity and how we look at the inventory. I'll stop there and see if there are any questions in the function. Just give me one moment. Oleg Vornik: So the first question is why did the pipeline move from $2.5 billion to $2.1 billion? So this was what I was alluding to earlier about in the U.S. when it comes to the civilian sector, we had more bullish assumptions that we have today in terms of follow-on projects. So some of those non-military, non-law enforcement, more nascent industry type situations, where I still think there's going to be an enormous business to be done in data centers and airports and energy infrastructure. But a bit like what we've been seeing with the military sector, say, 5 years ago, those customers are still struggling, given it's their very first time buying counter drone equipment. They need to figure out how much they want to spend, how they want to lay it out. So we have significantly trimmed and made more conservative our near-term forecast for the U.S. non-law enforcement, non-military sector in terms of what we presented in the pipeline. So in the very near term, I still expect defense to be the majority driver of business in this company, except in the U.S. where I think law enforcement will be a very significant contributor. And I think over the next 3 years or so, the civilian sector would really start picking up to the point where if you think about the total addressable market, the USD 30 billion for the military and USD 30 billion for the civilian sector, I'd see in the long term, this business being 50-50 military and non-military. Any guidance or TAM for SentryCiv? So SentryCiv is our commercially focused more affordable product that we released several months ago. We already started having early sales to customers. And this is focused on civilian customers who are budget conscious and they want to be spending hundreds of thousands of dollars or in the low millions for their deployment, but rather they want to be spending tens of thousands of dollars a year. And it's a little bit too early to tell. And I think a lot of that adoption will drive as the civilian market starts to take on. So we're talking potentially farms concerned about activists, and we've already been seeing purchases on that front, some energy infrastructure, stadiums and so on. The next question is when or how would we consider a U.S. listing to increase exposure to U.S. investors? I think there will be a time when that makes sense. However, my view is that you need to be significantly larger. So today, we're about AUD 4 billion market cap or US, call it, USD 2.5 billion. But while that is significant. So we are probably halfway on the ASX200. That is truly a micro cap by the U.S. standards, and I believe that it's going to be a disservice for our shareholders if we list on the U.S. market now. But say if we are 2x or 3x the size, which given the growth we achieved, we more than tripled just last year alone in terms of the share price and the size, that could start making sense. So I think this is a regular thought that we're having. But right now, my personal opinion, a bit too early in terms of diluting from our primary listing in Australia. The next question is, when are we expecting to start manufacturing products in European Union and in the U.S.? This half year. So in Europe, this quarter, and in the U.S., the following quarter. Are we finding any challenges to slow this down? No, I mean, there's obviously the usual process, nothing simple in terms of the supply chains and whatnot, but we're not seeing an issue. The next question is how do we counter fiber optic drones? So there's actually a slide in the appendix of the investor presentation that I will draw those of you who are interested in this question, but I'll give you a short summary. So radio frequency and drones are very closely linked. I see this a bit like wheels and cars because there's been so much invested in road infrastructure, whatever cars will look like in 50 years, they'll probably have wheels on, whatever they'll look like. So similarly, radio frequency is so core to the drone technology that the reason why fiber optic and attempts at AI exist is to try to circumvent what we do, but we are still dealing with the vast ramp of what drones are. And fiber optics have very severe limitations like you think practically, right, flying a drone with 10 kilometers of a fishing line attached to it and snagging at other things or snagging the line itself, very, very difficult. You can't fly quickly. And a lot of the images by the way, coming from Ukraine, I wouldn't necessarily trust what you see. Information warfare is prevalent. They say in war the first casualty is off on the truth. So -- but if you are really looking to make sure you can counter them, remember we're an integrator as well. So we build in radars and cameras that can track fiber optics, and we can integrate, and we already have, in fact, integrated things that can effectively count current electronic systems inside of our DroneSentry that can deal with that as well. But frankly, our customers are not seeing a lot of concern based on everything I'm observing on fiber optics, and it's more of a media thing. The next question I may pass to Angus about RFAI and our next generation and what it means. I'm personally really excited by that. So Angus, over to you. Angus Bean: Thanks, Oleg. Good morning, everyone. Thank you again for attending this morning and your continued support and interest in DroneShield. Yes, very keen to talk about our next-generation AI technologies. As many of you know, we have been a pioneer in the counter drone space. We're also a pioneer in utilizing what we call micro AIs. So these AIs are run on the edge. As Oleg mentioned, these are not cloud-based, big server farm, big GPU-based systems. These are very low power, very high throughput AI systems that run essentially on the edge. And that strategy that we developed over 8 years ago has proved to be incredibly accurate as our detection performance often, as you can see in the results of '25, has been really good, and there's been a large adoption of these systems. And the other thing that it allows us to do is attach a software and service license arrangement to the products as well to get those recurring revenues. The AI, the next generation is coming through, and we're really excited about the developments. So we -- our current models, RFAI-ATK and RFAI V2 are doing really well in the market. We are working on both RFAI-3 and RFAI-ATK-2 that will be reduced -- sorry, will be released onto the existing products but also, as Oleg alluded to, our next-generation platforms later this year. And there will be a slow rollout through the different products that are appropriate over time. One last point I'd make on here is the key thing you need to understand about building an AI business is the algorithms that you develop are important and they're difficult. But once you get through that, it really becomes a race for information or a race for data. DroneShield has more data available on drones than almost any company in the world and we're utilizing that as the core foundation to both sustain our current generation AI models. But more importantly, that's also the bedrock of our next-generation AI models, which will be much more open and much more applicable to the new varieties of drone technology that we're seeing in the future. So a bit of color on that one on to you. Oleg? Oleg Vornik: Thanks, Angus. The next question is, do our products -- I'm paraphrasing the question slightly. Do our products have any familiarity to systems developed by Palantir? So Palantir develops more broader software only based battle space awareness systems. This is quite a bit different to us. We are focusing specifically on counter drone, we're doing a fusion of hardware and software. And in fact, I believe that going forward that fusion, that working together of software, the C2 and the hardware will become increasingly more important. So no, I don't quite see us competing with Palantir, which I think is a great company. The next question is, do we think that any of our customers are delaying purchasing our current generation of products for the next generation? Look, I doubt it. So the next generation of products will come in batches through to and probably from the end of the year onwards. I mean it's probably a bit of an analogy. Would you not buy an iPhone and wait for another year for another iPhone. Look, you probably would wait except if your life depended on it, you'll probably buy the current iPhone as it stands and then you'll buy the next one when that is released. So I don't believe there's any way. There's expectation, in fact, that military see working with DroneShield as a long-term partnership, which is also how the 65% gross margins are justified, in that we're doing significant ongoing investment in R&D, which means we will be releasing new hardware every several years, software every quarter. And they will be having to upgrade and also that's where counter-UAS, the service idea comes in. Next question is, can we talk to the new product road map and any changes in the mix of potential uplift? So there's not everything that I can speak about. But the general comment I would make is that the average sales price would be higher. So we're pricing our product to the gross margin, which we -- on the hardware front in -- are planning to keep at 65%. But the extra product cost is likely to be close to triple just due to the more advanced chips, circuitry and so on. But essentially, it would mean that the revenue should continue to rise, I believe, as low market situation and customers are looking to still have counter drone products where they often have very little by way of the civilian sector hasn't been started, for example. And so larger dollar numbers, but similar margins. And hopefully, as SaaS continues to increase as a percentage, that will, in time, increase the gross margins across the business. The next question -- sorry, it's a bit of a long one. I'm trying to read it as I go. So maybe I'll turn this one to Angus as well. So the person is asking about the -- us previously talking about the ongoing cat and mouse dynamic in the technology. Can we give an update on how the landscape is evolving? So what are the drone makers doing to make our life difficult essentially? And how are we responding? And then a follow-up, what are the fundamental shifts in the underlying technology that we're seeing and how we're positioned with those changes? So Angus, over to you. Angus Bean: Thanks, Oleg. Great question. So yes, we are definitely in counter drone 2.0, and we talk about that a lot on DroneShield where we really are in the second era of counter drone warfare, whereby the big shift here is that the drone manufacturers are actively building systems and technologies to mitigate previously deployed counter drone solutions. And so we are seeing a really large uptick in that. And we've spoken about this before. This is the reason why we invest so much of our time and energy and financial resources into R&D. We have, as Oleg mentioned, the largest R&D team specifically to meet the needs of this emerging market. So to give you some examples of what we're seeing and drone manufacturers use, we are seeing really wideband RF communications. We're seeing mesh networking in drones. We're seeing obviously the fiber optic, which we still feel is a very niche use case, technology becoming into play, and we are responding accordingly. But we're responding with solutions that our customers can actually purchase and field. There's a lot of solutions out there, particularly once you get into kinetic and high energy and laser systems that either financially or operationally are not really something that a lot of our customers can deploy easily to the level that we basically expect from DroneShield. So we're responding with solutions that are going to work for our customers, most importantly. The thing -- and going back to the point forward, we've been looking at this for 10 years now. But the thing that we really understand is the core principles of the drone technology. We've watched this technology evolve over time. We have some pretty good understanding of where the evolution is going and it really is going back to first principles. There are physical limitations on what you can do with the radio system, there are physical limitations on the airframes and once you understand those first principles, then you can build technology to meet those changing needs. And as Oleg mentioned, what are we doing about it? We are looking at integrations of a number of different technologies that we don't plan to build ourselves. I think a good example of that is the interceptor drone category, but we are currently doing test evaluation, and we are in very close communication with a number of interceptor drone companies around the world that market itself very competitive, no clear owner and winner. So we plan to take a strategic view and just partner with best-in-breed. We are doing that work now to work out who those partners are and pushing those integrations. Oleg, did you want to talk to anything on the M&A front on that side? Oleg Vornik: On the M&A front, our goal is to ensure that we continue being best of breed in anything that we buy. So you'd notice we have $200 million in the bank. Obviously, we have ability to use our stock as well, but we do not want to buy one of many. And I think there have been cases in the counter-drone industry where people went out and purchased companies that were not best of breed basically just for the sake of making transaction. We are very disciplined, which is why in our 10-plus year history, we haven't done an opportunity yet, but that's not to say that we're not actively looking. And in fact, we have hired [ Josh Bollo ] to start with us this week and one of his explicit focus areas is assisting us to identify M&A targets for us. And so we -- this is something that we're actively thinking about, but it has to be a success for the company. I often find that, and as you guys may well know, I come from M&A background myself. In a transaction situation, the target benefits much more than an acquirer. And obviously, here as being an acquirer, I want to make sure that it is value add to the shareholders. So we're being very careful. But I believe the opportunity is there in terms of acquiring best-of-breed capability, otherwise, we'll just keep developing things organically. The next question is around the Golden Dome. So the SHIELD IDIQ, the USD 151 billion program that we are now a part of. And the question is, has the U.S. given any context to the time lines and when we're going to see pipeline from SHIELD IQ (sic) [ SHIELD IDIQ ]. So there is no pipeline from SHIELD IDIQ in our sales pipeline right now because it's a little bit too early. On the timing, it's really difficult to tell. There have been, as you probably know, a large number of companies included in that IDIQ, but it's also a very large program. So I'm hoping to get some news over the next 6 to 12 months on this. And I'm glad we're included. And like I said, all of these missile protection sites will need to have a counter drone program attached to it. And so I believe we're well positioned. So the next question is -- I'm trying to summarize it, is that basically, I think, the asker is wanting to get some more background around me selling the stock of the performance options in the business back in November last year. So look, the background is as follows: myself as well as a number of senior executives in the business get rewarded when we hit revenue thresholds. Those are exceptionally ambitious thresholds. When we had no revenue to speak of, it was $10 million. When we hit $10 million, the next threshold was $50 million. When we had $50 million, the next threshold was $200 million, which is the one that was achieved in November last year. And now the next threshold we communicated, which is more of an industry best standard, is a number of those thresholds rather than what you call cliff vesting, which is what we've been operating in a more elegant way up to now, where you have $300 million, $400 million and $500 million in revenue as your threshold and for each one of these numbers being reached, you have some vesting of the options immediately and some the other half 12 months later. So it's a very, very staggered fashion. So once those performance options have vested and I've chosen to exercise them, that essentially crystallized immediately half of that as a tax bill, regardless whether I would have sold them or not and regardless where the share price would have gone. So essentially for me to immediately crystallize $25 million in tax liability regardless where the DroneShield share price is, which is a huge burden. So clearly, anybody looking at this now would have said, okay, well, Oleg is looking to sell at least $25 million worth of stock to pay the bill to the ATO. And then the rest, look, I grew up in a fairly poor condition as some of you who followed me would know in social housing and so on. So this was an opportunity for me to secure my financial future. I had a mortgage, a fairly significant renovation bill, unfortunately, that went out of control, but more generally secured the financial future. Look, unlike what some of the articles reported, I did not sell everything. I still have a multimillion dollar equity position through the stock options and obviously continue to care about the business. And I would also say that while the price has reduced a bit before, like from about $6 plus to about $4, it was completely unrelated to selling. It was before the selling. And this was in line with the general listed market slide down after a hard run up a couple of months before. And in terms of impact from misselling, well, the price now is higher than what it was before I started selling. So those that would have held on. I'll be seeing the money. And I would say that we are #1 performing stock in terms of 3x plus growth out of the ASX200 in 2025. And I hope as we continue to keep goals, the share price will continue to perform. And maybe the last thing I would say is that while obviously I was in the news as a director and my filings are public, there are a number of employees in the company that also benefited from this, and I'm really glad for them because life at DroneShield is not simple. In order to achieve those revenue targets, the amount of effort and the sacrifice on people's family life and so on is very, very significant. We're not just posting these results because we're lucky. So I'm glad that all of these employees, they've been around for many years and have prioritized the company over anything else in their lives, have been rewarded and continue to be rewarded as part of the stock structure and this is aligning with obviously investor interest. And then ultimately, as we'll continue to keep goals in terms of our financial performance, the stock price follows that as we've seen through '25. I think the next question I might pass to Angus in terms of the other current supply shortages across semiconductor industry expected to impact 2026 revenue. And maybe more generally, Angus, if we talk about our supply chain and how we deal with that. Angus Bean: Sure. So one thing we're really proud of at DroneShield is we've never missed a delivery. So in all of our history, when we have been working with our customers, many of those had been urgent requests for equipment, we've been able to supply generally into the time line in which the customer needed that equipment. That's something we're really proud of, and that's the sort of thing that gives many of our end users and our customers the confidence to go with DroneShield and -- so that they can place significantly larger orders with DroneShield and know that we'll meet their demands. I mean the great example we had last year was the very large European order, over AUD 60 million, which we essentially was able to turn around in just over 2 months which is an incredible feat of our operations team, working very closely with our various supply chain partners. In terms of the supply chain, we are investing a lot of capital into ensuring that we can meet those long lead time items, we can build confidence in our supply chain partners, and we can secure the stock that we need. And obviously, the much larger facilities that we already have in Sydney at the moment are supporting that as well, having additional warehousing and just logistics support to do much larger orders and turn them around very rapidly. So we're not experiencing any delays that are material to us in delivering on orders at this time. And so we're in a relatively good position there. Oleg Vornik: Thanks, Angus. The next question is around whether DroneShield is being affected by the Trump tariffs. So we have revised our pricing and fully passed on the tariffs when they were introduced last year. So no, we are not affected. The next question is slightly long, so I'm trying to summarize it. It's around how do we continue to innovate in response to new drone technologies such as fiber optics. So to kind of reiterate what me and Angus said before, DroneShield at the heart is an engineering organization. We have 350 engineers, but not just slabbed together over the last month, but a lot of these people have been in the organization, especially in the senior roles in the last 5, 7 years, right? I've been in this company now for more than 10 years. Angus has been here for a very similar amount of time. Even outside of the engineering functions, Carla, our CFO, has been here for about 8 years. So there's a lot of longevity in the business and understanding of the trends and where things might go, right? And the drone makers are a clever bunch, but physics is physics and there are natural limitations of what those guys can do. And I guess, further up the curve you go, the more difficult it gets and where they are waiting for them as they're making their technologies more sophisticated. So to me, innovation in drones is a very positive thing. If the drone makers stopped innovating, the counter drone industry would commoditize and our gross margins would collapse. So that rapid engineering mindset and deep experience in anything to do with counter drone is our key competitive advantage, and we actually want the drone makers to keep innovating. Our customers do not want us to be -- what -- they're not expecting us to be 100%, nobody is, but they want us to be materially better than competition, which I believe we are, and to continue to innovate. The next question is whether we can give an update on the Homeland Security World Cup. So this is the June, July event and how we're positioned. So there was a grant from FEMA, a U.S. government agency for about $0.5 billion. And there are a number of U.S. law enforcement agencies that have been applying for these grants at various degrees of that process. There's only so much I can share. And obviously, under the Safer Skies Act, a lot of these guys once they go through their Huntsville, Alabama FBI range training school are able to use jammers as well. So we are well positioned. Obviously, the urgency is there. So I'm pretty optimistic, but I can't give solid update in terms of the dollar numbers that we're currently associating with the program in part because I think there's just going to be so much movement over the next several months. There are next couple of questions, which are essentially asking us for revenue forecast for '26. Look, I'd love to have a crystal ball. So we don't give guidance. The reason why we don't is because you're in a nascent industry and it will just be irresponsible for us to give a number. We're not a toll road, we're not an airport. I can tell you that my internal direction to the sales team is to have a very meaningful increase like we're talking multiple increase over '25 sales. And obviously, we'll update the market as we continue to push towards the target. And I would notice that we already started the year with essentially $100 million in the bank in terms of the revenues, which is by far the strongest where we had in any of the years in the past. The next one, I'll pass to Angus. Does DroneShield have concerns with the emergence of microwave-based drone defense technology? How we differentiate ourselves from the company's focus on that technology, specifically combating drone swarm defense? Angus? Angus Bean: Thanks, Oleg. So yes, high-powered microwave solutions are emerging as a counter drone technology. We -- many of you would remember, we do have a strategic relationship with a company out of the U.S. called Epirus, who are, in our opinion, the leader globally in that space. The technology is incredibly impressive. However, it has very large limitations around cost. We are talking multiple tens of millions of dollars per panel, which is a price point significantly higher, many pages higher above where many of our solutions are priced. So it's a very different price point. So often we don't compete directly with these types of companies, and we see them more as a strategic partner for those customers, and those customers have a very limited subset of the core defense customers that we have who are interested in that technology. We have ways to partner with various companies to provide that should we be requested. So a very different price point, very different technology and very complex to deploy, very complex to sustain. So incredible technology, and we think we've got some great partnerships there, but it's a very different strategy than the much more broader, larger piece of the pie that DroneShield is going after. Oleg Vornik: Thanks, Angus. And to reinforce what Angus just said, I firmly believe that for counter drone solution to work, it has to be cost effective. So drones are costing a few thousand dollars a piece. You can't have a $10 million, $20 million piece of equipment unless you're protecting only what will be effectively, a couple of sites in a nation where you basically throw anything at that in a counter drone solution. So if you want to be selling more than 5 or 10 of something, you can't be costing $10 million or $20 million in the counter drone land, which is also why we don't really see defense primes in this situation. The next question is about dividends. Also a topic we get periodically. When will the dividends be payable given -- well, the question was also saying, given performance options are taking priority? So firstly, I wouldn't see dividends and performance options as a trade-off. They're related to entirely different things. Performance options related to basically motivating the staff to achieve the results that shareholders are looking for. And the dividends are about capital allocation in saying, are we wanting to invest the capital for rapid growth? Or do we want to return the excess capital that we don't have deployment for to achieve the growth to shareholders. And right now, we're seeing an immense amount of opportunity as we continue to post these record results. And so dividends are not a priority at this time, but this is something that the Board regularly reconsiders. But I would see this, frankly, more of a consideration when we finish the growth rate at the incredible levels that we are doing now. The next one is thoughts of being part of ASX100? So we got into ASX300 in September '24, into ASX200 in September '25, if my memory serves me right, or I could be slightly off. And we are, today, I believe, sitting somewhere around a number, depending on how you count 120 or 130 but in order to get into the ASX100 , you can't be #99 and you need to be more like further up. So there's a significant jump from where we are to get to ASX100. But hey, if we tripled in the share price last year, depending on where we get to this year, this is all in the realm of possible and obviously, that opens additional angles in terms of further funds investing into the company. The next question is, can we give some context into the $800 million opportunity that we're working on? What stage of the sales cycle are we in this deal? So it's a European countrywide deployment where this is a part of a much bigger deployment, but our share of it is about $800 million. It's the same customer that we had the $62 million order with in the middle of last year. I hope to see the project awarded in the second half of the year. But as you'd expect of mega projects of this size, there's a lot of political angles to it, budgetary locations at the national level. So there are a lot of moving parts. But I'm hopeful to have the order in the second half of the year. And then the question is, how soon do they want it fielded? So whether it's ASAP or whether it will be staged over a period, over a year or a couple of years, perhaps, and also what are the payment terms? So obviously, we'll be seeking payment terms to ensure that we either have no or absolutely minimal cash drag. And remember, 65% gross margin means that you don't need to have enormously favorable payment terms not to have cash drag or on an order of that size. So the next question, I think this is the last question that we currently see in the line. So if you have more, please feel free to ask now. Can we talk -- can we speak -- sorry, I'm just trying to summarize this. So -- can we talk to market-sensitive contracts, which are now under $20 million threshold. For example, would LAND 156 or other Australian government contracts always be market sensitive? So I think the question is, for contracts, which are not quite $20 million. So $20 million is a dollar threshold over which we will always announce. If it's under $20 million, but it has some kind of a deep strategic element, would we announce it? And the answer is, if there is a deep strategic element, meaning it has a clear pathway towards larger sales, the fact that we got a particular contract, then we would be looking to consider announcing, but there needs to be that strategic element for us to do so. So you wouldn't be expecting a lot less cadence in the amount of sales announcements we do, but obviously each one is going to be a lot more material than what people have seen in the past. The next question is about the expense. So do we expect to increase our fixed expenditure line? So maybe I'll pass this one to Carla, our CFO. Carla Balanco: Thank you, Oleg. So on the question, it asked specifically if the $800 million would increase our fixed expenses? And the answer to that is no. So it would not significantly increase it because we are currently putting structures in place so that we can increase our manufacturing to way above that level. So therefore, everything that we are currently doing in terms of uplifting all the internal structures, focusing on our manufacturing capability, we will not need to significantly increase our fixed cash costs. Oleg Vornik: Thanks, Carla. And in terms of our base costs, so as we said in the investor presentation, there is about $150 million in run rate cash cost. This is not what the question was asking, but I'm just expanding on that. As of December, and this is based on about 500 people head count plus the on cost, like the spaces we lease and so on. So that will increase a bit as we get from 500 to 600, but at the revenue growth that we're expecting, our aim is to continue being operating cash flow positive as, in fact, we have been in the December quarter, as you can see from the 4C quarterly. Then the next one is, do we have any update on Mission Syracuse? No, we do not. And if there is an update, chances are you will hear it from the Commonwealth before you hear it from us. That's usually how the nature of the Australian defense announcement works, you have to let the customer make the announcement first. The partnerships question. So maybe I'll pass it to Angus. So, is DroneShield considering partnerships with specialist connectivity providers such as Elsight to enhance resilience and stability of RF communications, avoid signal loss, tight integration, it sounds like an outside shareholder asking this question, and enabling tighter integration across different platforms, assets and operating environments. Angus, over to you. Angus Bean: Thanks, Oleg. Look, we have a number of partnerships, some of which we do talk about it, a lot of them we don't. And that is for supply chain resiliency, but also just for commercial reasons, we don't always announce our partners. Look, we are open to partner where it make sense. But also, I think one of the hard lessons we've learned over the last 10 years is your core capabilities, core technologies, if you don't have them in-house, you don't control the destiny of those technologies, it's very hard to keep pace with where the market is going. And so we do have a strong tenancy for core technologies, particularly those 2 right now -- or sorry, those 3 are the RF detection, and RF defeat and the C2 layer. These are our core technologies, we remain in-house. And then we look to partner with the integrators and different technology providers to layer on top of those 3 and equip the units. And the story behind that strategy is those are the 3 elements that most of our customers need first. So DroneShield is generally the first partner that -- or first supplier that most of our customers come to. They're the first 3 layers that they look to put in place, then we can work with those end customers to layer additional partners and technology. So we want to control that relationship. We want to supply the intelligence and our understanding of the industry to those customers, and that's why we focus again on those 3 layers. And then we had those additional ways where it makes sense. Oleg Vornik: Thanks. A question that just came through, have any major European and North American institutional investors already discovered DroneShield? If so, which ones? In terms of public information, you would see that Fidelity has been a substantial shareholder, so over 5%. I think they're currently sitting at about 7% according to their substantial shareholder notices. So that's obviously a sort of a pan, call it, Boston, London, huge investment giant, and now they've been with us for quite some time. I want to say probably over a year, if I remember correctly. And then we can't really comment on the registered composition, but we see a $4 billion market cap and quite deep liquidity and inclusion in a bunch of indices. We're now getting to the press piece of being on the screen for a lot of the funds. And we are starting to do an active outreach using opportunities like quarterly release and annual report that we're releasing in a month to market to those institutions. We still remain a majority retail-held stock, and I think it just reflects our heritage, having grown very quickly from a tiny company to a fairly big one. But I think in the long term, this would be a majority institutionally held company as you'd expect. I believe that concludes all of the questions. So we'll stop there. Thank you for your time. And if you think of anything else, please feel free to email us with your question at investors@droneshield.com. Thanks for your time.
Operator: Welcome to the Crane Company Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Allison Poliniak, Vice President of Investor Relations. Allison Ann Poliniak-Cusic: Thank you, Madison, and good day, everyone. Welcome to our Fourth Quarter 2025 Earnings Release Conference Call. I'm Allison Poliniak, Vice President of Investor Relations. On our call this morning, we have Max Mitchell, our Chairman, President and Chief Executive Officer; Alex Alcala, Executive Vice President and Chief Operating Officer and incoming CEO; and Rich Maue, our Executive Vice President and Chief Financial Officer; along with Jason Feldman, Senior Vice President, Treasury, Tax and Investor Relations, who is on for Q&A. We will start off our call with a few prepared remarks from Max, Alex and Rich, after which we will respond to your questions. Just a reminder, the comments we make on this call will include some forward-looking statements. We refer you to the cautionary language at the bottom of our earnings release and also in our annual report, 10-K and subsequent filings pertaining to forward-looking statements. Also during the call, we will be using some non-GAAP numbers, which are reconciled to the comparable GAAP numbers in tables at the end of our press release and accompanying slide presentation, both of which are available on our website at www.craneco.com in the Investor Relations section. Now let me turn the call over to Max. Max Mitchell: Thank you, Allison. Thanks, everyone, for joining the call today. While we've got many exciting things to discuss today as we exit the fourth quarter, and we're already off to a fantastic start for 2026. Our performance last year and our initial guidance for 2026 show that we are consistently and reliably delivering on our commitments and our long-term value creation thesis. 4% to 6% core sales growth, and we were just at the high end of that last year, 35% to 40% core operating leverage and upside from capital deployment. And that's just the baseline. We're always working to over-deliver. All aspects of this thesis have continued to play out as expected and will continue. For the quarter, once again, we exceeded even our high expectations, underscoring the strength of our team's strategy, excellence in execution and a relentless commitment to delivering shareholder value. Adjusted EPS of $1.53 was up 21% over the prior year, driven by an impressive 5.4% core sales growth, reflecting broad-based strength at Aerospace & Advanced Technologies, and continued strong execution of process flow technologies. For the full year, adjusted EPS increased by 24%, driven by our outstanding teams delivering on customer expectations enabled by our sustained investments in advanced technologies and innovative solutions. In 2025 we also continued building on our strong track record of enhancing and shaping our portfolio by adding technologies and capabilities inorganically that will drive growth and support both existing and new customers. Having previously announced the signing with Baker Hughes on June 9th last year, we are excited to formally welcome the Druck, Panametrics and Reuter-Stokes brands to the Crane portfolio. Having closed on the acquisition of these brands on January 1st. As a reminder, Reuter-Stokes doubles the size of our nuclear business, adding industry-leading radiation sensing and detecting technologies for nuclear plant operations as well as for Homeland Security applications. Nuclear is an exciting market space today, and we see additional applications for the core Reuter-Stokes technology and a number of other high-growth adjacent markets. This business is being integrated into our Crane Nuclear business, which Chris Mitchell has successfully run for us over the last 6 years. Panametrics will operate as a stand-alone business unit in our Process Flow Technology segment reporting directly to SVP [indiscernible]. This business adds advanced ultrasonic flow meters and precision moisture analyzers, a really incredible portfolio of solutions that enables accurate measurement of liquids and gases across applications such as cryogenic gas storage, LNG transportation, wastewater treatment, chemical and petrochemical production. And lastly, Druck will be maintained as a stand-alone business unit reporting to SVP J. Higgs under the newly renamed Aerospace & Advanced Technologies segment. This new name better captures who we are today and our future strategic direction for this segment than the prior Aerospace & Electronics name. Still the same focus on proprietary, highly differentiated technologies with primarily sole-sourced positions, but continuing to expand our range of technologies and offerings and looking at adjacent end markets where our capabilities are similarly valued. We expect to selectively and carefully widen our aperture in this segment without losing focus on what differentiates us. Specifically the addition of Druck's complementary product line meaningfully strengthens our critical applications, including aircraft engine monitoring and hydraulics with strong positions in both single-aisle and widebody aircraft platforms as well as environmental control. Also expands our presence into ground-based test and calibration equipment for aerospace and certain other end markets, leveraging the same best-in-class pressure sensing technology. Another exciting news in addition to Druck, Panametrics and Reuter-Stokes business is closing January 1st. At the start of the year, we also closed on the acquisition of optek-Danulat, headquartered in Essen, Germany. Optek is the leader in in-line process control, optical sensing measurement solutions for biopharma, pharma and other demanding markets with annual sales of approximately $40 million. Optek is a perfect complement to our growing instrumentation business, my personal thanks to Jurgen Danulat for his trust in Crane as stewards of his legacy moving forward and to the outstanding team at optek. Just really a fantastic addition. The teams have hit the ground running across all businesses. The integration process is well underway, and the machine is fully in motion. Further, M&A activity is robust, and we continue to execute and cultivate accelerated opportunities. We see many opportunities progressing through 2026, but at this time, nothing additional is imminent in Q1. Alex will provide more detail on our core businesses as well as the recent acquisition shortly, but let me touch on the planned succession time line that we announced last night. I want to congratulate Alex for being appointed as Crane's next CEO, and effective April 27th, 2026, at our next Annual Shareholder Meeting. And at that time, at the request of the Board, I will move to serve as Executive Chairman for a transitionary period expected to be no more than 2 years. Having partnered with Alex for more than a decade, I can confidently say he is the right leader to accelerate Crane's strong momentum. His deep operational expertise, proven ability to develop and execute complex strategic initiatives and unwavering commitment to our high-performance culture have been critical in shaping Crane into the market leader it is today and our proven performance across PFT and AAT. In my new role as Executive Chairman, I look forward to supporting Alex and the leadership team. As we continue driving strategic growth and long-term value creation. Coming off the incredibly strong performance in 2005 and turning to 2026, I remain highly confident in the strength and resilience of Crane's team and portfolio. Moving to 2026 guidance. I'd like to highlight that our guidance for '26 includes a change to our non-GAAP presentation of adjusted EPS, which now excludes noncash tax-effected acquisition-related intangible amortization. Rich will provide more on this during his remarks. By using this new convention for both '25 and '26, I'm pleased to announce our initial 2026 adjusted EPS guidance, $6.55 to $6.75. A solid 10% adjusted EPS growth at the midpoint. When excluding the $0.16 benefit of onetime hurricane-related insurance recoveries that we received in 2025. As well as after-tax acquisition-related intangible amortization in both years. Importantly, I'm excited to share that we estimate that the acquisitions will be slightly accretive to 2026 earnings results. As I started with, many exciting developments across the company and our investment thesis is stronger than ever. Now let me pass it over to our Chief Operating Officer and incoming Chief Executive Officer; Mr. Alex Alcala to provide some color on the current environment, segment performance and recent acquisitions. Alex? Alejandro Alcala: Thank you, Max. I'm truly honored to have been appointed the next Chief Executive Officer of Crane. I'm enormously grateful for the Board and in particular, to Max for his trust and support over the years. I'm also thrilled that Max will continue as Executive Chairman, allowing me to keep benefiting from his tremendous experience and leadership. But this is not about me. It's about our leadership team and the 8,500 associates who execute every day, leaving the Crane culture of incredible intensity, focus and accountability. I've been fortunate to be part of the Crane journey for the past 13 years. We've transformed our portfolio, substantially improved our margins and our growth profile, and delivered significant shareholder value under Max's leadership. But I can tell you, I've never been more excited about our future and the progress we will continue to make for our customers, our associates our communities and our shareholders. Looking ahead, we will stay true to our journey, driving the Crane business system to deliver strong organic growth while also pursuing our strategy of accelerated inorganic growth. Over the years, I have literally traveled more than 1 million miles as part of this incredible journey with Crane, and I'm ready for the next million with this extraordinary team. Now some thoughts on the segments in the quarter as we look to 2026. Let me start with Aerospace & Advanced Technologies. These markets remained very strong. The backlog we built, along with the new programs and opportunities, our Aerospace & Electronics teams have secured continues to provide us with great visibility into 2026 and beyond. On the commercial side, Things continue to look healthy. Boeing and Airbus continue to ramp up production and aftermarket demand is still running at elevated levels, although the year-over-year comparisons have become increasingly challenging. On the defense side, a lot of activity and interesting industry announcements over the past few weeks. Procurement spending remained solid, and there's a continued focus on strengthening the product defense industrial base given the heightened global uncertainty we continue to see. Given the level of activity we are seeing for 2026, we expect core sales growth for the year to be up at the high end of our [indiscernible]. assumption. And importantly, that growth should leverage at about 35% to 40% for the full year despite the less favorable mix, which is moving back to normal levels. Our guidance assumes OE sales will grow double digits year-over-year, partially offset by decelerating growth rate in commercial aftermarket. We are excited for Druck to join the AAT segment and expect over the next few years that it will be incremental to both the segment's growth and margin profile. However, while it will be incremental to growth in 2026, we expect Druck to be diluted to overall segment margin in the near term. Overall, we are on track for another outstanding year. And beyond this, we continue to develop new technologies, win new business and pursue additional opportunities across the segment. That gives us confidence we'll deliver above-market growth for the rest of the decade. A few highlights for the quarter in AAT. First, in our Defense Power business, we remain actively engaged and solidly positioned with defense vehicle OEMs collaborate on the common technical truck and new combat vehicle programs. Second, Crane also continues to win funded next-generation military demonstrator programs for our brake control systems. We will also begin production for the F-16 brake control project in 2026 and received two more follow-on orders, one from the United States Air Force and the other from a foreign military customer. And last, with elevated interest around air defense systems, we are actively tracking and pursuing new high-power AESA radar opportunities. Overall, our Aerospace & Advanced Technology segment is positioned to significantly outperform its markets over the next decade. We're extremely proud of what this team has accomplished and the momentum they've built. At Process Flow Technologies, we remain well positioned to outgrow the cycle. Over the past decade, we have deliberately repositioned our portfolio towards technologies and end markets that are higher growth and where we maintain leading competitive advantages and clear differentiation, positioning enough to deliver consistent, sustainable growth ahead of the market. And the latest acquisition enable us to continue that journey. Similar to Q3, we continue to see strength in segments such as pharmaceuticals, cryogenic power generation and water while chemical markets remain subdued at trough levels. Our disciplined approach and sharp focus enabled us to maintain leadership in this segment, as evidenced by our Q4 performance even given today's macro backdrop. A few highlights from PFT in the quarter. Our cryogenic business had another strong Q4, securing orders for a number of space launch customers. We continue to win and expand our share in this important vertical due to our excellence in engineering solutions, along with our ability to rapidly execute orders. Additionally, we continue to drive solid wins in pharma, securing another large order supporting capacity expansion to manufacture GLP-1 drugs. Our ability to deliver high-performance solutions for our critical pharmaceutical applications continues to set us apart in a competitive market and positions us for sustained growth in this segment. And lastly, despite the sluggish chemical industry, our teams continue to secure targeted opportunities within chemicals, securing key new project wins in the Middle East. Looking ahead to 2026 for PFT, given our fourth quarter orders remain sluggish, we are adopting a cautious view of 2026 demand levels to start the year and expect that core growth to be flat to low single digit for 2026. However, we do expect core leverage to still be within our targeted range of 30% to 35%, with the additions of Panametrics, Reuter-Stokes and optek-Danulat joining the PFT family, we fully expect over the next couple of years that they will be incremental to both segment growth and margins. In 2026, while there will be incremental to growth near term, we expect them to be [ dilutive ] margin. Overall, both businesses are strongly positioned for sustained success with the resilience and strategic foundation needed to deliver outstanding results in 2026 and beyond. Before I wrap up, I want to provide additional color on the acquisitions of Panametrics, Druck and Reuter-Stokes. The integration process is off to a strong start, and our outlook for these businesses is already exceeding our initial expectations. As Max mentioned, we now anticipate these businesses to be slightly accretive to earnings in 2026. Compared to our original expectation of no accretion in year 1. We have been preparing for the last 6 months, and I personally spent a significant portion of this month visiting all these teams. And the CBS machine is already being deployed. I'm extremely confident that these businesses will become some of our best performing and most profitable businesses within Crane in the years ahead. As I think about the levers of focused improvement, the cost synergies will come from 3 major areas, all driven by CBS. Organizational simplification and focus. By operating these businesses as three independent entities, we're eliminating the top management cost layer. Product Line Simplification or 80/20, reducing complexity and eliminating work with limited return on investment; and traditional productivity improvements, driving efficiency through supply chain and lean tools and processes. In addition, all growth synergies are fully incremental upside to our financial model. We have dedicated teams in place and are off to a great start. I'm very confident we will meet or exceed our targets. Now let me turn the call over to our CFO, Mr. Rich Maue for more specifics on the quarter. Richard Maue: Thank you, Alex. I really look forward to having as much fun with you as I've had with Max over the last decade. And Alex, I gave Max this same advice when he became CEO, borrowed from Michael Caine as Charlie Croker in the timeless movie classic, The Italian Job. It's a difficult job and the only way to get through it is if we all work together as a team. And that means you do everything I say. I'm kidding, of course. I don't -- not really. And to Max, borrowing Humphrey's Bogart ever famous line as Rick Blaine, in the Academy Award-winning drama Casablanca, We'll always have Paris. Max Mitchell: I'm going to get choked up. Richard Maue: Good morning, everyone. Let me start off with total company results. We drove 5.4% Core Sales growth in the quarter, reflecting the ongoing strength within the Aerospace & Advanced Technologies segment. Adjusted operating profit increased 16%, reflecting the impact of higher productivity and favorable pricing net of inflation. In the quarter, core FX-neutral backlog was up 14% compared to last year, again, continued strength at Aerospace & Advanced Technologies and core FX control orders were up 2%, from a balance sheet perspective, with the close of the acquisition of Druck, Panametrics and Reuter-Stokes, we ended the year with net leverage of 1.1x, which reflected 102% adjusted free cash conversion in 2025 and outstanding performance by our teams globally. And as Max noted earlier in January, we also closed on the acquisition of optek-Danulat, that brought our net leverage to 1.4x, leaving us well positioned for further M&A. A few more details on the segments in the quarter. Starting with Aerospace & Advanced Technologies. Sales of $272 million increased 15% in the quarter, nearly all of that growth organic. And even with the continued high level of core sales growth, our record backlog of just over $1 billion was up 25% year-over-year and was up slightly sequentially. Core orders were up 8%. Again, no surprises and continued strong demand broadly. Total aftermarket sales increased 1% with commercial aftermarket sales up 3% and military aftermarket down 3%. And OEM sales increased 23% in the quarter with commercial sales up 27% and military sales up 18%, all in line with our expectations. Adjusted segment margin of 23.6% expanding 50 basis points from 23.1% last year, primarily due to strong productivity, higher volumes and higher price net of inflation. At Process Flow Technologies. In Q4, we delivered sales of $309 million, flat relative to a year ago with core sales down 1.5% as we anticipated, offset by a slight benefit from the Technifab acquisition and 1.6 points of favorable FX. Compared to the prior year, core FX-neutral backlog at PFT decreased 7% and core FX-neutral orders remained soft, down 3% driven by the weaker chemical end markets as expected. However, adjusted operating margin of 22% expanded again and in the quarter was 170 basis points higher. Despite the headwinds on the top line, productivity is reading through as well as price. Moving to the nonoperational items below the segments, along with some additional 2026 guidance matters. The start, as Max mentioned, beginning in 2026, we are excluding intangible amortization from our non-GAAP presentation of adjusted EPS. Following the significant increase in intangible amortization related to this month's acquisition activity, we believe that excluding it from adjusted EPS gives investors a better picture of Crane's free cash flow and also enables better comparison to the majority of our peer companies that use the same convention. Reconciliations recasting last year are in the slide presentation accompanying this call. Now moving on to a few nonoperational items. Corporate expense for the full year of 2025 was $87 million, modestly up above our prior view of $85 million due primarily to M&A activity. For 2026, we anticipate corporate expense to be in the range of $80 million to $85 million. In Q4, we received $5.2 million of insurance recoveries from the Hurricane Helene flood. We had at one of our PFT sites or a $0.07 benefit to results in the quarter. With this final payment, the matter is now fully resolved with our insurers. Remember that our full year 2025 guidance included $9 million of insurance recovery related to Hurricane Helene with $6.7 million received through Q3. So $2.3 million or about $0.03 of the fourth quarter's insurance recovery was in our latest October guidance. So the actual amount received was $2.9 million or $0.04 per share better than we had expected. Also keep in mind that for the full year, total insurance recoveries benefited adjusted results by $0.16, a benefit that will not repeat in 2026. Given the funding for the acquisitions of Panametrics, Druck, Reuter-Stokes, and optek-Danulat, we now anticipate full year 2026 interest expense of approximately $58 million. And lastly, we estimate our tax rate for 2026 to approximate 23%, slightly higher than [indiscernible]. Looking at the cadence of quarterly results for the year, we expect Q1 2026 to be seasonally softest quarter coming in roughly flat with the first quarter of 2025, lower than historical patterns given acquisition integration and increased interest expense. For the full year earnings split, we expect the first half of 2026 to represent about 45% of full year earnings with 55% weighted towards the second half. Overall another outstanding year at Crane planned for 2026. And with that, operator, we are now ready to take our first question. Operator: [Operator Instructions]. Our first question is coming from Scott Deuschle with Deutsche Bank. Scott Deuschle: Max, what are you going to do about your free time here? Max Mitchell: I'm going to remain busy, Scott, very, very busy. In addition to Executive Chair, I think you know, I've become a very popular Gen X influencer. I have my podcast that started and my only fan page is going well. It's going to be... Scott Deuschle: I'm looking to hire someone from my team if you're understood [indiscernible] I'll let you buy the Crane nuts. In all seriousness, Alex, I was wondering if you could speak to the pricing opportunity at drop in 2026 and 2027. And specifically, I was curious if there are any meaningful LTAs coming up for renewal this year or next? And what type of price increase might be possible there? Alejandro Alcala: Yes. Thanks, Scott. So I was just pulling back on all 3 businesses, right? Druck, Panametrics, Reuter-Stokes in our financial model, we assume significant opportunity. I've been working with this team for 6 months, spent most of the months with them. So definitely validate our hypothesis on opportunities potentially more than we even thought. So feeling very bullish about these acquisitions. All three businesses have a significant opportunity to drive the Crane Business System. I talked about the areas on product line simplification, restructuring, how the business model and just traditional operational excellence. As far as value pricing, as you know, in Crane, we do a good job standing for setting up for a value our differentiated technology. There's opportunity to do better in all 3 businesses and Druck, we would expect to see improvements starting this year, reading more into next year as it takes some time. Just like any aerospace visits, there are contracts some expire naturally that need to be renewed, renegotiated. So everything -- no real obstacles to achieve our goals in that area, Scott. Scott Deuschle: Okay. Rich, can you clarify what guidance contemplates as it relates to cost takeout at PSI. I think you've spoken about high single-digit million corporate cost takeout. And I wanted to clarify if that was in the guide or still on the comp. Richard Maue: Yes, I think no change to what we've previously discussed. There's a few buckets. I think they're the same buckets that Alex mentioned. So the cost element is going to -- is -- or productivity element, however you want to categorize it is clearly going to be one of them. On the commercial side being another and then leveraging the growth at rates that we would expect to leveraging our operating cadence. So across all 3, and I would say no difference versus what we previously had communicated. Operator: And our next question is coming from Myles Walton with Wolfe Research. Unknown Analyst: This is Greg Dahlberg on for Myles. First of all, I would like to say congrats to Max and Alex. So first one, I guess with the renaming of A&E to A&T, I think [ aperture ] of what you would look at there. Can you go into more details, I guess, in terms of what adjacent tech and strategic direction this is actually referring to? Alejandro Alcala: Yes, Greg, this is Alex. So just a reminder, our business unit, Aerospace & Electronics was both business unit name and segment name. So last year, we announced the promotion of J. Higgs, as Senior Vice President of the segment, and it's really positioning us to do more deals like Druck. So Druck would be a perfect example of the technologies that we would expand in, where it has a foot in traditional aerospace, but also gets us into lab-based calibration and even some high-growth industrial applications that are combined with the technology. So I think Druck would be a good reference of what you expect to see in that segment. And the model that we have right now in the structure allows us to keep adding not only bolt-ons, but stand-alone units to keep building out that segment similar to what we've done in PFT. You recall that when we changed the name to -- from fluid handling to process flow technologies, we were thinking about expanding our aperture moving up the technology stack, having more differentiated products, and those have been the acquisitions we've done on that side as well with the sensing applications and now optic as well adding to that. And that's what you would expect to see high technology differentiated, improving our growth and margin profiles on both sides of the segments, growing both segments, doubling the size here in the next coming years is our goal that continues to create shareholder value and also optionality for the future. Unknown Analyst: And then just quickly on PFT. I know backlog declined sequentially for the second quarter in a row, mostly due to the chem side. Can you just talk about what you're seeing? And I guess is there a time frame you'd expect that to start turning more specifically to the chemicals? And, I guess, more broadly your outlook for end markets in 2026 in PFT? Alejandro Alcala: Yes, Greg. So let me pull back just on PST because we have -- we service various segments, right? So first commenting on the areas and businesses markets that grew in 2025 strongly, and we expect to continue in 2026. So wastewater, which is primarily a North America-based businesses. We saw high single-digit growth, we expect strong growth also in 2026. Cryogenics as well, double-digit growth in '25. That will continue pharma. There's a global growth that we're seeing also, in particular, in North America, some increased investments and reshoring from pharma customers that we expect power. Again, North America-based power generation, where we've seen momentum in '25, expect that to move on to a lot of our segments and verticals of our businesses continue with strong momentum. You did mention chemical, which has been sluggish. Just to pull back also, we expect to see similar to what we saw in '25, which has been varied by region. You can't lump it all together. So Americas and Middle East, we saw growth year-over-year on orders in '25. We expect the sort of modest growth to continue in that area. Our team is doing an excellent job winning. Again, those 2 regions have this feedstock energy advantage. So customers see good return on investment on taking action on capacity expansions or increases brownfields in particular in the Middle East. So those will continue at a moderate pace on a negative or sluggish, Europe, China, the rest of Asia Pac, that's been down. We don't expect those to change. So on the net, our assumption for 2026 is continue to see working through the trough, not deteriorating, stable, but not planning for a strong uptick in the year, but we're ready for it. If it happens, we'll take advantage of it, but not built into our guidance right now. Operator: And Our next question is coming from Jeff Sprague with Vertical Research. Jeffrey Sprague: Congrats Max and Alex, exciting news for both of you. Just a couple from me. First, just back on the deals. You kind of laid out the cost reduction opportunity and plan I think there's also cost in to get these bedded down and integrated given that they were carve-out entities. Could you just maybe speak to that the interplay between kind of cost to integrate versus cost out? And I would assume those sort of flip as we look into '27, '28. Alejandro Alcala: Yes, Jeff. So I mean there is some cost in and cost out on a net basis, it will be a cost out. The improvements in the margins will increase in '27,'28 as a lot of our actions to materialize and read through to the P&L. I've mentioned before, Baker Hughes operated these businesses as PSI. So it has that high-level PSI headquarter structure, which we're dissolving, shared services and finance, HR and IT. So that goes away, replaced by stand-alone business unit resources that we're adding overall on that basis, we expect once we're done to operate leaner and more profitable with all these ins and outs from a cost standpoint and then driving improvements on top of that. Jeffrey Sprague: And then just thinking about what Rich shared on Q1, it sounds like the expenses could be heavy here in Q1. Maybe you could just give us a little bit of color on kind of the expected organic performance in Q1 versus kind of the deal impact in Q1 to get to kind of that relatively flat number. Richard Maue: So legacy Crane organic, we'll be clearly up in A&E and likely down a bit in PFT in Q1 would be part of that dynamic in addition to the incremental interest expense that we have compared to last year in the first quarter. Sort of the, I would say, the big drivers, Jeff. There's also within Druck, Panametrics, Reuter-Stokes, there is seasonality, and they tend to be stronger in the second half than the first half historically. Jeffrey Sprague: Okay. Great. Understood. And then maybe just kind of stepping back just on the deal activity. So a lot of bandwidth still on the balance sheet. It sounds like you feel pretty comfortable with just the internal bandwidth to kind of execute all this? Maybe kind of address that, the ability for the organization to take on something else of size this year? Or should we expect maybe sort of smaller bolt-ons as the year is progressing here? Alejandro Alcala: Yes, Jeff. So the machine is working, right? At CBS, our funnel. We're integrating these four different businesses very well with resources. We have bandwidth to do more, I expect to do more in '26. I can tell you that we're also building capabilities constantly. We improved our capabilities not only to integrate but also our strategic resources that are evaluating adjacent is proactively increasing the potential targets. So we're only getting stronger on the M&A front and expect to accelerate that going forward. So funnel strong, nothing imminent in Q1, but expect to continue the momentum as we move forward. Plenty of bandwidth on our side. Operator: And our next question is coming from Matt Summerville with D.A. Davidson. Matt Summerville: Thanks. Couple of questions. First, can you talk about 2026 with respect to the Aerospace segment, what you're expecting from an aftermarket volume standpoint for both OEM and military? And can you also sort of discuss whether there's any sort of government shutdown impact on any of the more material military programs for you guys? And then I have a follow-up. Alejandro Alcala: Yes. Thank you, Matt. I'll comment on it. Let me walk you through all the assumptions here on Aero in all the segments. So commercial OEM, as you would expect, will continue to be strong, high teens, Military OEM, mid-single digits then to your question of aftermarket. On the commercial side, we're anticipating mid-single digits and on the military side mid- to high single digits. So continued momentum on all those fronts. As far as the government shutdown the only thing that we've seen no change in orders or programs or funding, but we did see the flight test of the F-16 program get delayed a few months of being completed in January we expect that to be complete more in the early second quarter. So that will delay a few months, the start of the shipments for the F-16, but that's all baked and factored into the guidance we provided. No other real impact right now that we see related to government shutdown. Matt Summerville: So as it pertains to kind of that $30 million sort of per year beginning '26 kind of target you laid out for F '16, is the is that lower than in 2015, meaning is your guidance assuming you don't fully capture that 30%, yet there's an opportunity albeit over a more compressed time frame for you to ultimately deliver that. And then can you just clarify for the PSI group of businesses, what for your 3-year cost synergy target would be, if you can remind us? Alejandro Alcala: Yes. So Matt, on the F-16. Yes. In our guidance, we're thinking more on F-16,though the annual rate is 3% this year, more like in the 20s, low 20s of revenue. There is an opportunity and a more compressed time line. But in our guidance, we've pulled that back a bit due to the few months shifting to the right. Related to the cost synergies, right? So this year, as we're starting off, we're moving fast with the actions. The teams are actually impressed me with their ability to embrace the Crane Business System machine, but it takes some time to read through. So if you're trying to do the math, would expect like mid-single-digit growth and about 200 basis of improvement in the margin profile this year. And then in the coming years, It'll be a little bit higher than the 200 basis points on a CAGR basis that gets us in that 5-year mark to achieve or beat the 10% return on investor capital. So about 200 basis points and then a greater number in the years ahead. Operator: Our next question is coming from Amit Mehrotra with UBS. Amit Mehrotra: I wanted to ask about the power -- come back to the power generation market for a minute. I think you talked about Power Gen being 10% of the portfolio inside of PFT, but you're also adding nuclear exposure with PSI. And obviously, that's a pretty important place right now. So maybe you can just reset kind of the exposure to total power gen, and then I'll also talk about nuclear power gen and how that's changing. Alejandro Alcala: Yes. Thank you, Amit. So like you mentioned, the traditional power combined cycle power plants in our valve segment, that's what I've mentioned in '25, significant, as you know, amount of being built in the United States. So that's driving our growth. As far as nuclear, as you stated, we're basically doubling our exposure in the nuclear with Reuter-Stokes. So we have our core business, Legacy Crane Valve Services and then now Reuter-Stokes and then combined, we call it, Crane Nuclear now. So the growth exposure there is pretty attractive. Think about it 4 buckets you've got the restarts of the various nuclear plants like [ Polek ] or the Crane Clean Energy formally Three Mile. So that will drive upside. You have the new construction with AP1000, Westinghouse where we're very strong, have a very strong position with those reactors in our valve business, and there are some expected starts in Europe. The third area, really, which comes with Reuter-Stokes is we also have very good exposure now to the small module reactors. So -- we have a partnership with one of the leaders that's building the first SMR in Darlington, Canada. That's starting construction already or soon, one of the reactors. And there's three more on the plan depending on how this one goes. This is boiled water reactors that Reuter-Stokes has the neutron sensing technology, which is used to gauge the power that's being generated. And then we're also benefit on this fourth leg with the extension of licenses, right? So 5 years ago, nuclear plants were decreasing or shutting down. And now we're seeing licenses being extended 50 years or so, and that requires upgrades and investments. So pretty good tailwind that will keep getting stronger as the decade progresses. Amit Mehrotra: Okay. And just as a follow-up. I want to revisit that 55% back half, I guess, obviously, 45% first half. And then you've given us the first quarter. It looks like just the way the math works, there's not a lot of growth year-over-year in 2Q implied by those comments as well. I don't know if I'm doing my math wrong or maybe there's the hurricane dynamic in there in terms of the comp. But can you just talk about that. Richard Maue: Yes. Jason and Allison will catch up with you. But I would say that, yes, on the part of the headwind in Q1 and in Q2 clearly will be the insurance recovery. Those were included in our numbers, $0.16 on the year, and it was probably close to 50-50 in terms of first half, second half. Yes. But from a growth perspective, I'd rather hold off on commentary on individual quarters from a core growth perspective, frankly at this point. Amit Mehrotra: Fair. That's fair. Can I just ask 1 quick follow-up, if I don't mind, just on the synergies for PSI because you talked about PFT growth flat to up low single digits and then 35% to 40% incrementals. It doesn't feel in that number, there's a lot of synergies in there, but there's still 7, 8 points of margin gap. And so maybe this is just a timing thing or maybe it's conservatism but it would just be helpful to understand maybe if there's an opportunity for EBIT and PFT to grow disproportionately from revenue in 2016, just given maybe some of that margin gap that you can close? Or is that maybe more of a late '26,'27 thing? Richard Maue: Yes. I would probably err towards what you closed there with on your question. The 30% to 35% is on the legacy. And then as we continue to integrate the Druck, Panametrics Reuter-Stokes, we'll start to see some of that incremental coming in more so in the second half versus the first half. So that would be -- that would absolutely be the case for '26. Operator: Our next question is coming from Nathan Jones with Stifel. Nathan Jones: Everyone. Congratulations to Alex. And unfortunately, Max, I can't see you're on the fan page. Max Mitchell: I'm not taking your request any more. Nathan Jones: I guess, first on the acquisitions. I know you guys didn't include any revenue synergies in the deal model and in that kind of 10% ROIC target by year 5. But I also know that you anticipate getting some. So I'd be interested in getting some color around kind of where the most the most bright areas for you to generate revenue synergies are? If you can put any kind of financial framework around that of like would generate 100 basis points of revenue synergies or 200 or whatever the expectation might be over the next several years? Understanding that those are a little more squishy and maybe a little harder to track. But just any color you can give us on how you'll approach that? And if you can give any financial framework around affects. Alejandro Alcala: Yes, Nathan. So let me try to answer the first part of -- you're right, we expect some growth synergies in these areas, different for each of these businesses. For example, in Druck very strong, very strong position on the commercial side, not as much on the military side. So with our legacy core A&E, as you know, we have an outstanding position there. So there will be some synergies opportunities to grow the businesses there. Traditional CBS commercial excellence and driving key accounts, channel management, project pursuit funnel management, et cetera, that will drive as well within the core business, improved performance similar for Panametrics, Reuter-Stokes incredible position in the power generation. We're looking at these adjacencies where they also play in homeland security, on the other industrial applications where there's a lot of room for growth with the right focus. So none of that is baked into our model, our guidance. I'm not yet ready to provide you with the financial numbers as much as I would like on what those growth opportunities would be. but they'll be there and you'll see them eventually read-through in the P&L need. Richard Maue: Yes. I think the confidence in -- I forget if it was Max's comments or Alex's is on the the 4% to 6% and these businesses taking us towards the higher end of that range, part of that confidence level comes from these adjacencies and other opportunities that we already see. So I think we expect to be at that high end or even slightly above it when you look out a couple of years. Nathan Jones: And this is probably just a housekeeping one. I think it was maybe Jeff earlier on was talking about integration costs and the impact that might have on your reported numbers. Are you eating those in the reported results? Or are they adjusted out of the reported results. Richard Maue: Yes. So I think in our response to Jeff's question, clearly, if they are directly associated with the integration, we will be excluding them and keeping them visible for everybody. But there are other investments that we'll be needing to make just part of bringing the business to where -- in the certain areas where we need to be. So in finance, for example, if I have to hire people or an HR have to hire people in IT, those are continuing costs of the business, and I can't exclude those. So that's really what we were referring to in the response to Jeff's question. Nathan Jones: Yes, I understand. Can you just give us an idea of what the impact to free cash flow will be in 2026 from these expenses, not from the hiring, but from the costs to achieve synergies just to level set that for us. Richard Maue: Yes. I don't have that off the top of my head here, Nathan. So we'll look to provide more color on that at the right time. I would expect our free cash flow, though, overall. Just stepping back, we had an outstanding performance here in 2025 in our business 102% on an adjusted basis. If we didn't adjust for it, for certain items, we were at 98%. So it's not like we pulled the whole heck of a lot out to adjust. Our core business will continue in that 100% range is our view right now. In next year, I would say, including the acquisitions, it will be down a little bit, but we'll be within that 90% to 100% range without a doubt. If that helps. Operator: Our next question is coming from Justin Ages with CJS Securities. Justin Ages: Congrats to Max and Alex on this new chapter. A question on the F-16. You know you noted that some of the win additional in the U.S. and international partners. Is that layered on top? Or is the international -- after the U.S. orders get built to maybe not into '27 where we see the benefit of the F-16 from international orders. Alejandro Alcala: Yes, Justin. So on F-16, the way we think about it is this $30 million annual sales doesn't really change much what -- as we get more of these foreign orders, what it does is it extends the whole program link. So it goes out further that we'll continue to see the benefit. We will ship first to the United States Air Force and then complement that with foreign military sales. At that $30 million or so rate per year. Richard Maue: We have orders that are in excess of that annual rate today. So it's not like we have to wait for the orders. It's -- we have them in backlog today, Justin. So anything incremental to that, just to Alex's point extends. Justin Ages: All right. That's helpful. And then you guys have done a bunch of acquisitions. You talked about your M&A capacity. You're levered now at 1.4. Can you discuss a little more what your target leverage is? What would you would be willing to go to if the right acquisition is out there? Richard Maue: Yes. So with the right acquisition, we don't have a problem going to 3x even strategically, if it made a lot of sense even going beyond as long as there was a path to come back down within a pretty short period of time to be in between, I'll call it, 2x, 2.5x, something like that on a -- from a target perspective. But we have no problem going up as high as 3x or even above that for the right deal. Operator: And our next question is coming from Jordan Lyonnais with Bank of America. Jordan Lyonnais: On Aero and the name change, how are you thinking about adjacencies or opportunities into IGT or Aeroderivatives. And then two, [indiscernible] on the military side, is there any changes to your thinking on CCA's with the new group of on select on Tranche 2. Max Mitchell: You're breaking up just a little bit, Jordan, if you can say that again. Jordan Lyonnais: Apologies. Yes. Sorry, is this better? Max Mitchell: That's much better is better. Jordan Lyonnais: On CCAs, has that opportunity changed at all for how you're thinking about the program with Tranche 2 now coming online with a batch of 9 new contractors? Max Mitchell: And you're opening as well because it was -- repeat it again, that would be great. Jordan Lyonnais: Yes. For Aero & Advanced Tech now with the name change, the adjacencies that you're looking into, are you thinking about opportunities in IGT or Aeroderivatives. Alejandro Alcala: I think on the first piece of the question on the AAT, again, we are exploring many different types of adjacencies. Traditionally, right, our core business has been in improved power control. So expanding beyond that in aerospace, just like we did in sensing, many different avenues, land-based. We're thinking about -- I don't want to call out specific adjacencies at this point, but many, many other adjacencies that complement both military and aerospace technologies and also play in other high-growth markets at the same time. And on the second part of your question, with CCA, do you mean collaborative combat aircraft? So I mean we're definitely playing in that space. We think we're very, very well positioned both with the, I guess, the traditional primes and the new entrants. In fact, in prior quarters, Jordan, you may recall that we have this great position in one of the new program Fury to call it out where we expect significant growth in the future. So in this different cycle, different sales cycle, different type of speed that is required, but all the demonstrators we have won our position there. And also with the new entrants, we have excellent content. So we feel very, very bullish about that segment and our ability to benefit from that. Operator: [Operator Instructions]. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Max Mitchell for closing remarks. Max Mitchell: Fantastic. Alex, congratulations again. Alejandro Alcala: Thank you. Max Mitchell: Thank you all for joining us today. Great call, great team, great performance. There's a great deal of momentum here at Crane. We delivered an exceptional 2025, and I couldn't be proud of our teams. We continue to innovate, win critical projects and execute and deliver exceptional results. We also accelerated and delivered on our M&A efforts, adding differentiated technologies that further strengthen the Crane portfolio, and we're set up for an even stronger 2026 with a leadership transition that will drive a continued focus on transformation, execution and the relentless pursuit of improvement, relentlessly driving towards perfection while accepting the reality we will always fall short that is what pushes us forward driving change as a late great performer, Diane Keaton once said, What is perfection, anyway? It's the death of creativity, that's what I think, while change on the other hand, is the cornerstone of new ideas. As always, change Crane is constant, and it remains the catalyst for fresh ideas, strategic evolution and continued outperformance with our excellent strategy, exceptional talent, strong momentum, our progress speaks for itself, and truly, there's no limit to what we will accomplish in 2026 and beyond. Under Alex's leadership and the team. Thank you all for your interest in Crane and your time and attention this morning. Have a great day. Operator: Thank you. This concludes today's Crane Company Fourth Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.
David Boshoff: Good morning, everyone, and welcome. I'm David Boshoff, and with me is our CFO, Steve Fewster. We're pleased to be joining you today for this December 2025 quarterly update. You'll notice that we're both in our harness today as we'll be traveling to site directly after this call. Before we get underway, I'd like to mention that today's presentation should be read in conjunction with our December quarterly report, which is available on our website. As we move through today's session, please feel free to add your questions to the live Q&A tab on the right side of the screen. I will be responding to these questions at the end of the session. As we step into the new year, it's a good moment to reflect on the December quarter, not just on what we've achieved, but on how we've achieved it. The quarterly -- this quarter delivered solid progress with strong tangible momentum across operations, construction and financial performance. And that progress is underpinned by our values, which guide our decisions, shape our culture and influence the way we work with our partners and contractors. That brings me to our find a way value. I'd like to recognize one individual who truly embodied it. Thomas Huckstadt is an application specialist in our IT team. Tom delivered the first phase of our Mardie operating system on time, on budget and to scope. He successfully managed key contractors to implement the Mardie production reporting system and our laboratory information management system. When traditional delivery models threatened time lines, Tom adopted an agile approach to accelerate implementation. And in fact, the contractor has confirmed that this was likely one of the fastest implementation in their history. I'll speak more about the Mardie operation system shortly, but I want to begin by acknowledging Tom and recognize the values-driven approach of our people. And that values-driven approach is exactly what underpins the business we are building at Mardie. Mardie is already Australia's largest solar salt operation and the third largest globally. Our focus is clear: Delivering salt to our customers later this year and providing -- and proving up SOP as a next major revenue stream. Salt is now in operation and is set to ramp up to 5.35 million tonnes per annum. With its scale, coastal location and integrated port infrastructure, Mardie is exceptionally well positioned to meet rising demand across Asia. Our SOP pilot work is also progressing well and remains on track to support a production pathway targeting around 140,000 tonnes per annum. This represents an opportunity to leverage our investment in the salt business to produce made in WA value-add products. The port provides us connectivity to our customers, along with additional upside through its spare capacity, creating potential for third party revenue and strategic partnerships over time. Now I'd like to walk you through the highlights for this quarter. In safety, we continue to strengthen key fatality prevention controls and maintained our focus on field leadership, completing more than 400 Leadership in the Field safety interactions. We also completed 290 critical control verifications, and our 12-month rolling average total recordable injury frequency rate was 3.9. We continue to actively manage the complexity of concurrent activities and project activities on site for operations and projects. As mentioned earlier, we deployed the mine production reporting system and the laboratory information management system as part of the Mardie operating system. This, along with our digital twin that we call Poseidon enhances operational visibility and control, enabling us to make timely, data-driven decisions. Brine levels across ponds 1 to 9 remained in line with our operational targets. The pond brine density continued to increase as we have forecasted. Construction is also progressing well. With the project now 77% complete, we commence seeding the primary crystallizers, and progress is tracking to plan. Major earthworks for the salt wash plant, stockyard and nonprocess infrastructure were also completed during the quarter, readying us for construction of these 3 assets over the next 3 quarters. Significantly, another reflection on our Find a Way value, we secured all our primary approvals for the offshore placement of material from the dredging program at the Port of Cape Preston West. This is a key milestone for our port infrastructure, which also significantly derisks achieving our construction budget. Finally, we commissioned all the KTMS trial crystallizers as part of our SOP piloting work, achieving steady-state operations and performance in line with our expectations. I'll now hand over to Steve who will walk us through the corporate highlights. Steve Fewster: Yes. Thanks, David. With construction remaining within budget, BCI continues to be in a strong financial position. During the quarter, we drew $99.8 million from the syndicated debt facility. That takes total debt drawn at the end of December to $446.8 million. We also issued over 50 million new shares following the conversion of the Series 1 convertible note held by AustralianSuper Pty Ltd. And consequently, that reduced our borrowings by $29.1 million. We'd like to thank AustralianSuper for their ongoing support. On the corporate front, we formalized the 2-year capacity building program with Wirrawandi Aboriginal Corporation, and Dave will share more about that later on. I shall share more on cash flow shortly, but Dave will provide a more detailed update on our operations. David Boshoff: Thanks, Steve. Operational performance remained strong this quarter with ponds running at 96% utilization across more than 9,300 hours. All pond levels continue towards operational height, and brine density continues to increase in line with forecast. As you can see on the chart, we are -- we've got a marker there for 31st of December, and it's within the range that we predicted 2 quarters ago. Our focus is now on balancing density across the pond network as we progress towards crystallizer readiness. Key technical milestones were also achieved, including calcium carbonate ceiling in pond 6, gypsum formation across the ponds, that is, pond 7, 8 and 9. This process materially improves water retention, remove contaminants and are critical to achieving steady-state brine flow and high-quality salt production. We also welcomed the arrival of brine shrimp in pond 7. Brine shrimp helps to naturally clear nutrients and support salt quality. Looking ahead, Poseidon, our model, indicates that pond 9 is expected to reach target density in February, and this keeps us on track for first salt on ship in the December 2026 quarter. We're continuing to make good progress towards our construction milestones with cumulative expenditure totaling $1.043 billion. As we stated in September quarterly, activity during December was relatively lower, reflecting the completion of several large packages. We expect activity to pick up again this quarter as we now work on the salt wash plant, crystallizer sealing and dredging packages. Seeding of the primary crystallizer has also commenced with liners creating a safer, more predictable harvest environment and eliminating seepage. Brining began in November and remains on track with the first crystallizer cell scheduled for completion in February. 3 crystallizers lift stations were also completed during the December quarter, ready for commissioning of the transfer of high density brine from pond 9. Major earthworks for the salt wash plant, stockyard and nonprocess infrastructure were also completed, enabling concrete works to commence early this year. Engineering and design for the salt wash plant continues with major procurement items in the fabrication phase. The nonprocess infrastructure contract was awarded in December, and design work is now underway. Approval has also been received for the remaining section of the Pilbara Port, and that construction has also commenced. At the Port of Cape Preston West, construction of the marine packages progressed with electrical and mechanical installations advancing, and the overall completion is now 94%. Now that BCI has secured our primary approvals for offshore placement of dredging material in December, dredging of the berth pocket and navigation channel is expected to begin in April 2026. Steve will now take us through the financial highlights. Steve Fewster: Thanks, David. Total construction costs now sit at just over $1 billion, having spent $41 million during this quarter. The largest packages of work remaining include dredging, the balance of the crystallizer lining and the salt wash plant. Other than long lead items that have been ordered for the salt wash plant, these packages will be funded from the $351 million in uncommitted funds that we have. The progress made on these 3 major construction areas supports our confidence of remaining on budget. As mentioned earlier, we drew $99.8 million from our syndicated debt facility during the quarter. At the end of the quarter, BCI had available liquidity totaling $601 million. With construction costs at just over $1 billion and our pre-revenue operating expenditure of around $255 million, BCI has invested almost $1.3 billion in the Mardie salt operation. With approximately $400 million required to complete construction and available funding of $601 million, we remain fully funded to complete construction as well as meeting the working capital needs through ramp-up. To date, we have also successfully completed 8 drawdowns totaling $446.8 million. I'll now provide an overview of what we're seeing in salt market. The market fundamentals remain strong. While some Chinese chlor-alkali producers are seeing softer short-term demand due largely to a slowing in the real estate growth and domestic consumption, the medium-term outlook across Asia remains positive. India is the largest exporter of lower-grade industrial salt to China. And across the last 5 years, we've seen India export volumes expand from 12 million tonnes to a peak of 28 million tonnes in 2024. In 2025, however, Indian export volumes have pulled back to 26 million tonnes. Our expectation is these volumes will further reduce as the Indian chemical industries expand to supply their local market. The reason we remain confident about the outlook for high-grade industrial salt is that between now and the end of 2028, there are 16 new chlor-alkali and soda ash plants under construction in India, China and Indonesia. A proportion of this new Asian production is replacing chemical plants that are closing throughout Europe. These 16 new plants are forecast to increase demand for high-grade industrial salt by 10.2 million tonnes per annum. And this timing coincides nicely with the ramp-up at Mardie. So across the period, there is only 6 million tonnes per annum of new supply coming into the market, and that includes Mardie. The Port of Cape Preston West is a strategically valuable asset for BCI and the region. This is a multiuser port designed to expand and to export around 20 million tonnes per annum of bulk commodities such as salt, SOP and iron ore. At nameplate capacity, Mardie salt-only operational needs of around 5.5 million tonnes per annum, leaving approximately 14.5 million tonnes of surplus capacity. This presents a real opportunity to support other proponents in the West Pilbara who require access to port infrastructure. Pleasingly, BCI has received inquiries from potential third-party users in the region. By the end of 2025, construction of the marine package have progressed well with electrical, mechanic and the mechanical installations advancing. Remaining works now include the final piles and [ cat walk ] which is scheduled for completion in September 2026. During late September, BCI secured all primary approvals from the Commonwealth and state governments enabling offshore placement of material from our dredging program in line with the optimized dredging methodology. Subject to final approvals, including management plans and contracting -- contract finalization, dredging is expected to commence in April 2026. Thank you, and I'll hand you back to Dave to talk about SOP. David Boshoff: Thank you, Steve. SOP, or sulphate of potash, is a key product of our salt operation, an important revenue stream for BCI in the future. SOP is a high-value premium fertilizer. This is different to the more common muriate of potash, or MOP. Unlike MOP, SOP contains sulphur as well as potassium, making it ideal for high-value crops such as fruits, vegetables and nuts. It plays a key role in improving crop quality, yield and food security, particularly in regions with nutrient-depleted soils. During the December quarter, all KTMS trial crystallizers were fully commissioned, achieving steady-state operation and performing in line with expectations. This work is a key part of BCI's piloting approach, enabling us to refine processes, validate operational performance and derisk full-scale SOP production. Batch plant testing completed during the quarter has allowed us to finalize the pilot plant scope, and preparations are now underway to award the design package in this current quarter. This marks a major step towards construction and delivery of that facility, positioning BCI to unlock the value of SOP production alongside our salt operations. While our focus remains on safety -- safely ramping up our operations and completing construction, we continue to prioritize sustainability. This included -- in this quarter, this included monitoring our mangroves, sandfire and algal mats, marine turtle monitoring and migratory shorebird surveys to name just a few. We convened a co-designed workshop with the Wirrawandi Aboriginal Corporation to update our indigenous engagement strategy, ensuring alignment with their strategic priorities. We also formalized a 2-year capacity building program with Wirrawandi, providing $480,000 to strengthen governance, systems, financial management, leadership development and succession planning. On the community front, we established a new partnership with the Karratha Kangaroos Junior Rugby League. As a big rugby fan myself, this is especially exciting opportunity supporting youth sport and well-being in our region. As we close out this quarter, we do so by consistently applying our values and finding a way. We are well positioned to respond to forecast salt supply shortfalls in face of rising global demand, while creating sustainable multigenerational benefits for our shareholders, local communities and the broader Australian economy. This brings us to the end of our presentation, and we'll move to questions now. If you haven't already, please submit your questions in the live Q&A tab on the right side of your screen. Thank you. Unknown Executive: Thank you, David and Steve. Now I'll take the first question and pose this one potentially to you, David. Besides salt and SOP, are there any additional minerals that can be extracted from Mardie? David Boshoff: Yes. Thank you for that question. There are certainly numerous other products that are being extracted by other producers that uses sea brine as their primary source. We visited facilities that produces bromine. Actually numerous facilities use bromine as one of the products. We've also seen magnesium being produced in various areas. There's also a very good data that indicates pharmaceutical salt is a good potential to produce from seawater salt. So certainly, multiple other streams that provides a revenue upside for BCI and where we've already invested significant capital in our infrastructure at our site. Unknown Executive: Thank you, David. And just building on that, you mentioned earlier our progress on SOP. How confident are you in SOP based on the batch testing data received? And are there any learnings you can take away that can feed into the design of the pilot plant? David Boshoff: Yes, certainly. The -- as I mentioned during the presentation, the KTMS testing results so far has been exactly as to expectations. The key thing that we have to manage is on the trial ponds. We, of course, manage the chemistry. The laboratory information management system that I mentioned earlier is a very important ingredient, and we spend a lot of effort in setting up the lab to be able to test for chemistry properly. This is a key input that we've taken from some of the design partners that's helped us to set it up. And I'm very comfortable with where we are with the results. We have now also received test results back from our high temperature tests, both in China as well as here in Perth. And it's pleasing to see that the particular collectors that we are selecting to be able to do so performs well at temperatures well above 50 degrees Celsius. This is a key thing that I wanted to be sure of before we start into design phase for the pilot pond. Unknown Executive: Thank you, David. Now Steve, I've got one here for you about the port. Are you in a position to talk to the level of interest in the surplus port capacity? And if so, can you tell us a bit more about the revenue potential from this asset? Steve Fewster: Yes, thanks. So as I mentioned earlier, we certainly received interest in accessing the port. Those parties are looking at developing iron ore projects in the region. Our port is relatively close to where they're proposing to build their iron ore operations. And certainly, on a distance -- from a distance perspective, we're a lot closer to, say, the Ashburton Port and certainly a lot closer to their -- where they propose to have the operations compared to Port Hedland, if they can even get capacity or access at Port Hedland. So there's a couple of steps that they'll need to go through. They'll need to get their approvals in place, get their funding in place. So the interest is there, but I think that the critical part is without a port solution, they don't have a project. And the ability to get the product from the Pilbara, be able to mine it and then get it out through a port, we will play a critical role in opening up that area of the Pilbara where there's still a lot of high-grade, high-value iron ore deposits that are sitting with some of those junior players. So I think what we'll see is we'll have, probably not in the short term, probably not over the next 1 or 2 years, but as we look a bit further out, as companies are finalizing FID, we'll become much greater part of those conversations. In terms of revenue stream, we still need to work through what our pricing will look like. And in the past, what I've suggested is the Port of Ashburton, their [ considered ] rate is around [ $9, $10 ] for a tonne of bulk commodities to go through their port. That's one data point. We would need to look at the size of the investment we've made and make sure we get a reasonable return on that investment before we sort of set any pricing targets. Unknown Executive: Thank you, Steve. I've got a question here on BCI's longer-term plan. So does BCI have any plans to add additional salt ponds in the tenements held by BCI to the north of the current site? Steve Fewster: Thank you for the question. We have a number of leases that is available that we've already established in the last 12 to 28 months. Most of these leases are to the south, so between us and the Ashburton Port. There's some area to the north, but we are bordering up with an iron ore proponent just north of us. So there are certainly options available very close to as part of the Mardie project. These areas will require additional environmental approvals and will require, therefore, additional management plans such as groundwater management plans to be approved. So while this will be in our future thinking, what I would caution is that these things do have a long lead time as we've seen with the actual Mardie port so far -- Mardie operation so far. Unknown Executive: Thank you, David. Now back to construction progress. Can you talk to the build package for the salt wash plant? Tell us a bit about the complexity of this work package? And what's the time range for build and commissioning? David Boshoff: Well, so the salt wash plant, as I mentioned in one of the slides, we have completed all the earthworks that has started late last year. That's all done. We've already awarded the concrete package. So that's for all our concreting works for footings, floors, blinding work, all of that has already been commissioned, it has already been awarded. Fabrication is currently underway for all the rebar and reinforcement, and we expect batch plant and other works to be established in the coming weeks on site. At the same time, design has progressed really well on the main, what we call SMP works, the structural, mechanical and piping. We are expecting to award the fabrication of the actual main structure in the coming month or so. And then that will go into construction. And then eventually, of course, E&I, that's electrical and instrumentation, that will be the back end of that process. That package will be -- that package is still a fair few months away. Expectation is that we will start commissioning in perhaps late October. That will depend, of course, on when our salt is available to be able to go through into November and be ready for production in November for shipments in December. So all of those time lines are lining up, and the progress on the salt wash plant construction package is very much on track. Unknown Executive: Thanks, David. Now talking about on track. I've got a question here about operations. So over the recent years, the area generally experiences a fair bit of rain during March and -- through March to May. Assuming Mardie does experience rain during this period this year, are there any potential impacts to brine density, particularly in pond 9? And then if there are, is there any impacts to the FSOS, that time line? David Boshoff: Yes, certainly, the area experience cyclones. Our model, I mentioned earlier Poseidon, actually integrates the weather model and has used the last 45 years of actual weather data to model what the likelihood is of rainfall or cyclones in the near future, and it actually has included a cyclone in that ramp-up period. So I'm quite confident that our modeling in terms of salt ramp-up and salt production includes the expected weather from our region. To the question whether it impacts FSOS if we have a big rain event in this period between now and end of December. Well, good thing is so far, this particular season, we haven't had any cyclones. Of course, it doesn't mean there's not going to be a cyclone. Even if we have a cyclone, we have considered that in the process, and there is buffer in our schedule to still be able to deliver first shipment for revenue before December is out this calendar year. I would also say is we've experienced 2 cyclones not long ago, and some of those on the line might recall that. Not long ago, we had Cyclone Sean in that region. That had actually quite a significant impact in our area. And the good thing is that it validated that our design prevents overland flow water to enter into the ponds, and only the water you only receive in that area is falling on the ponds. Now we have a specific design feature to accommodate that. So once the ponds reach operational height, we have areas where this water discharges as natural process into the ocean. And as you can imagine, when you have water density very high and you've got rainfall at lower density, the lower density water is lighter, it stays on top. So you have this effect of laminating effect of the fresher water on top and that then discharge into the ocean while minimizing the dilution of our high-density brine in pond 9 particularly. Unknown Executive: Thank you, David. We might finish on one last question for you, Steve. You shared a really interesting insight onto the market. Can you tell us because Mardie is expected to deliver a significant volume of salt to the market, do you expect this will flood the market and push the price down? Steve Fewster: No, I think the timing of when we ramp up aligns very nicely with the -- the new chlor-alkali and new soda ash plants that are being constructed at the moment. So as I mentioned, about 10.2 million tonnes of new salt requirements in the Asian region at the same time as we're ramping up. So I think, firstly, that certainly supports our confidence. A lot of that production, new production that's coming into the region is actually, as I mentioned, is replacing production that's occurring in Europe. And over the last couple of years, we've certainly talked about the demand for salt largely reflects global GDP. So the global GDP still holds. There's still a high correlation between demand for salt and that growth. But that shift, that structural change with plant, chlor-alkali plants shutting down in Europe, relocating and building that capacity in the Asian region is certainly very helpful. The question earlier around rainfall is -- equally applies to other regions. And what we're seeing, particularly in India and the Gujarat region, is their rainfall, on an annual basis, has been increasing steadily. So the net evaporation rate is consequently reducing, which is also reducing the amount of salt that they're able to produce. So the yield that's coming out of India certainly been affected over the last 3, 4 years is the weather is affecting that yield. The other thing that's happening in India, though, is 2 of the world's largest chlor-alkali plants under construction there. So one has been constructed by Adani. The other is being constructed by Reliance Group. So those 2 plants are being set up specifically for the plastics industry or the PVC industry in India, and that is to build plumbing supplies and household -- for household construction. And so it's very new demand that's coming in the market. We expect that about 8 million tonnes per annum of salt that's being exported will need to be redirected into that Indian market. Modi has also set some policy -- put some policies in place, restricting the expansion of salt production in India. So at Gujarat region, they're not allowing any more permits to be issued for new salt projects. So we think in the medium term, certainly, there are a number of factors that support our enthusiasm and confidence where the salt market, the high-grade industrial salt market is heading. Unknown Executive: Great. Thanks so much, Steve, and thank you, David, for your time as well. And thank you to everyone who have dialed in today. That's a wrap. Steve Fewster: Thank you. David Boshoff: Thank you.
Operator: Good day, and welcome to the Enova International Fourth Quarter and Full Year 2025 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Lindsay Savarese, Investor Relations for Enova. Please go ahead. Lindsay Savarese: Thank you, operator, and good afternoon, everyone. Enova released results for the fourth quarter and full year 2025 ended December 31, 2025, this afternoon after market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com. With me on today's call are David Fisher, Executive Chairman of the Board of Directors; Steve Cunningham, Chief Executive Officer; and Scott Cornelis, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I'd like to note that today's discussion will contain forward-looking statements, and as such, is subject to risks and uncertainties. Actual results may differ materially as a result from various important risk factors, including those discussed in our earnings press release and in our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Please note that any forward-looking statements that are made on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, Enova reports certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I'd like to turn the call over to David. David Fisher: Thanks, and good afternoon, everyone. I appreciate you joining our call today. Also with me today are Steve Cunningham and Scott Cornelis. As I'm sure most of you know, effective January 1, Steve became CEO of Enova and Scott became CFO as I transitioned to the Executive Chairman role, have committed to remain as an executive chair for at least 2 years. With the full support of the Board, this move was thoroughly, thoughtfully and deliberately planned over more than a year and having worked closely with both Steve and Scott for many years, I'm confident that they are the right leaders to see Enova through its next phase of growth. And the timing has worked out even better than we had hoped. As Steve and Scott will discuss in more detail, Q4 was another very strong quarter, wrapping up a record year for Enova. And as announced in December, with our pending acquisition of Grasshopper Bank. We believe we have found the perfect partner at the perfect time to take Enova to the next level by simplifying our regulatory structure, opening up additional markets for our consumer products adding additional low-cost funding sources, providing a platform for new product opportunities. When I first joined Enova, I never anticipated staying for more than a few years. But this role unexpectedly grew into the longest, most challenging and most rewarding of my career. I unequivocally attribute that to the extraordinary people and the culture at Enova and due in large part to that team, the future of Enova is bright. Steve and I share a common vision that our focused growth strategy will steer our path forward. We will continue to adapt and innovate and remain committed to producing sustainable and profitable growth, while meeting the needs of our customers and driving shareholder value. With that, I would like to turn the call over to Steve. Steven Cunningham: Thank you, David, and good afternoon, everyone. I appreciate you joining our call today. Our fourth quarter results capped off another exceptional year for Enova. Strong originations growth and solid credit across our portfolio once again drove strong financial performance. For the full year 2025, originations grew 27%, leading to revenue growth of nearly 20% which when combined with stable credit and the significant operating leverage in our business model drove adjusted EPS growth of 42%. 2025 was our second consecutive year of adjusted EPS growth in excess of 30%, demonstrating the resiliency of our balanced growth strategy, and the ability of our experienced team to deliver consistent and differentiated performance by leveraging our diversified product offerings, flexible online-only model and world-class risk management and technology. Turning to the quarter. We're pleased to deliver fourth quarter results that were in line or better than our expectations. Fourth quarter originations increased 32% year-over-year to $2.3 billion. As a result of the strong originations growth, our portfolio increased 23% year-over-year to a record $4.9 billion. Small Business products represented 68% of our portfolio at the end of the year, while consumer accounted for 32%. Strong demand and solid credit performance enabled us to be more aggressive with our marketing during the quarter as we leveraged our sophisticated technology and analytics to capture this demand at attractive unit economics. Marketing expense was 23% of our total revenue during the fourth quarter, driving record quarterly originations. We expect marketing spend to revert back to more typical levels although we'll continue to opportunistically lean into marketing to meet demand with attractive unit economics. The strong quarterly portfolio growth revenue increased to the top of our expected range, growing 15% year-over-year to $839 million in the fourth quarter and profitability metrics grew even faster as adjusted EPS increased 33%, driven by strong credit and our significant operating leverage. SMB revenue accelerated to 34% year-over-year to $383 million and our consumer revenue increased 3% year-over-year to $446 million, both quarterly records. In addition to our strong growth this quarter, our fourth quarter credit results also demonstrate that both our small business and consumer customers remain on solid footing. The consolidated net charge-off ratio for the fourth quarter of 8.3% was down both sequentially and compared to the fourth quarter of 2024. External data highlighted that the U.S. economy ended 2025 on a good note. The Federal Reserve's recent wage book pointed to economic gains across most of the country. In addition, the unemployment rate ticked down to 4.4% in December, with recent unemployment claims status underscoring that the labor market remains relatively stable and resilient. Further, real wage growth continues to be positive, with average hourly earnings rising 3.8% year-over-year in December after rising 3.6% during November. In early reads indicate December consumer spending grew moderately and continues to support economic activity. Looking at our consumer business. This constructive economic backdrop supported the reacceleration of growth and improvement in credit metrics that we discussed last quarter. With the strong early default performance we were seeing at that time, we leaned into boosting consumer originations, which accelerated as we moved through the fourth quarter. And as we expected, credit metrics for the consumer portfolio improved both sequentially and compared to the year ago quarter. Turning to small business. Our SMB business continues its stream of outstanding performance. Our leading brand presence, scale and competitive landscape again resulted in significant growth in remarkably stable credit performance. Fourth quarter originations for SMB increased 20% sequentially and 48% year-over-year to $1.6 billion, marking the eighth consecutive quarter of year-over-year originations growth of 20% or more. Credit metrics for the small business portfolio continue to be very stable as they have been for the past 2 years. Our internal and external beta highlight that SMBs continue to express confidence in the economy and expect favorable operating conditions during 2026. In conjunction with Ocrolus, we released the nonfederation of our small business cash flow trend report, which offers key insights into the state of small businesses and highlights ongoing trends observed over the past year. Consistent with previous findings, the survey found that small business is still optimistic about future growth. Overall, growth expectations massed an all-time high with 94% of small businesses projecting growth over the next 12 months. Nearly 75% of small business owners reported bypassing traditional banks in favor of alternative lenders like Enova. Of those that went to a traditional bank first, 46% of those reported being denied alone. External data also supports these findings as the NFIB Small Business Optimism Index rose to 99.5% in December and remained above its 52-year average of 98%. NFIB's Chief Economist pointed out that while Main Street business owners remain concerned about taxes, they anticipate favorable economic conditions in 2026 due to waning cost pressures, easing labor challenges in an increase in capital investments. While these surveys and external economic data provide useful context, our proprietary data offers more real time and granular views into trends in the operating environment and the conditions of our customers. This data allows us to react quickly and nimbly as the operating environment is changing. Our deep experience serving non-prime consumers and small businesses, meaningful diversification, powerful technology and analytics and our disciplined unit economics approach have been key to our ability to navigate varying operating environments, while generating consistently strong financial results. And as we've demonstrated for many years, we believe our business is resilient across a wide range of macroeconomic environments. Before I wrap up, I'd like to spend a few moments discussing our strategy and outlook for 2026. We've demonstrated a long track record of consistency between stated priorities and execution and we remain committed to this approach. Our balanced growth strategy works, and we expect to generate sustainable and profitable growth, while delivering on our commitment to driving long-term shareholder value and on our mission of helping hardworking people get access to fast, trustworthy credit. Another key focus for 2026 will be closing the acquisition of Grasshopper branch that we announced last month. We're excited about this powerful combination by uniting Enova's sophisticated online lending platform with Grasshoppers national charter and deposit gathering capabilities, we'll be able to expand access to more consumers and small businesses, who've been traditionally underserved by banks. In addition, this combination simplifies our product and operational model under a national bank charter, providing significant opportunities to accelerate the growth of our existing products with an enhanced ability to serve our customers in more states and an ability to expand into new complementary products. Since our announcement of the energy and excitement from the teams for both companies have been tremendous. As together, we recognize the opportunities in our complementary capabilities, cultural alignment and significant synergies. As a reminder, we expect net synergies related to the transaction to increase adjusted net income by $125 million to $220 million annually within the first 2 years post closing. Driving adjusted EPS accretion of more than 25% once the synergies are fully realized. We filed our regulatory applications earlier this month, seeking approval from the Federal Reserve and the OCC and we continue to make great progress on integration planning in anticipation of closing during the second half of 2026. Overall, we're pleased to end the year with another strong quarter of solid revenue and profit growth. We have considerable momentum heading into 2026. And while it's still very early in the year, we're off to a great start with solid originations growth across our businesses. As Scott will discuss in more detail, and based on what we're seeing today, we expect 2026 to be another year of significant origination revenue and adjusted EPS growth. Before turning the call over to Scott, I'd like to sincerely thank the entire Enova team for all their hard work and dedication. You all are the force behind our success. We're thrilled to celebrate our 13-year streak on Computerworld's 2026 Best Places to Work in IT list, reflecting the creativity, collaboration and passion that fuel our technology teams. We're looking forward to another great year ahead. Thank you. And with that, I'd like to turn the call over to Scott Cornelis, our CFO, and who will discuss our financial results and outlook in more detail. And following Scott's remarks, we'll be happy to answer any questions you may have. Scott? Scott Cornelis: Thank you, Steve, and good afternoon, everyone. We're pleased to close 2025 with solid fourth quarter financial results that once again met or exceeded our expectations. Our strong financial performance in the fourth quarter and the full year 2025 continues to demonstrate how the powerful combination of our diversified product offerings, scalable operating model, world-class risk management capabilities and balance sheet flexibility allow us to consistently deliver strong top and bottom line results. Turning to our fourth quarter results. Total company revenue of $839 million increased 15% from the fourth quarter of 2024 at the top end of our expectations as total company combined loan and finance receivable balances on an amortized basis increased 23% from the end of the fourth quarter of 2024. Total company originations during the fourth quarter rose 32% from the fourth quarter of 2024 to $2.3 billion. Revenue from small business lending increased 34% from the fourth quarter of 2024 to $383 million as small business receivables on an amortized basis ended the quarter at $3.3 billion or 34% higher than the end of the fourth quarter of 2024. Small business originations rose 48% year-over-year to $1.6 billion. Revenue from our consumer businesses increased approximately 3% from the fourth quarter of 2024 to $446 million as consumer receivables on an amortized basis ended the fourth quarter at $1.6 billion or approximately 6% higher than the end of the fourth quarter of 2024. Consumer originations grew 2% from the fourth quarter of 2024, to $613 million. As Steve mentioned earlier, we successfully reaccelerated our consumer originations as we move through the quarter, particularly in December, thanks to strong demand and credit. For the first quarter of 2026, we expect total company revenue to be flat to slightly higher sequentially. This expectation will depend on the level, timing and mix of originations growth during the quarter. Now turning to credit, which is the most significant driver of net revenue and portfolio fair value. The consolidated net revenue margin of 60% for the fourth quarter was also at the higher end of our expected range and reflects continued strong credit performance across our portfolios. The consolidated net charge-off ratio in the fourth quarter declined 60 basis points from the fourth quarter a year ago to 8.3%. As we expected, the consumer net charge-off ratio improved to 16%, which was flat sequentially and compared to the year-over-year quarter. The small business net charge-off ratio was 4.6% which was within our expected range. And as Steve noted, has been remarkably stable over the past 2 years. Expectations for our future credit performance remains solid. As reflected by sequential and year-over-year stability or improvement in the 30-plus day delinquency rates and fair value premiums for the consolidated consumer and small business portfolios. The consolidated 30-plus day delinquency ratio at the end of the fourth quarter declined 70 basis points from the end of the fourth quarter a year ago to 6.7% and the consolidated fair value premium of 115% remains stable and consistent with levels we have reported over the past 2 years. Looking ahead, we expect the total company net revenue margin for the first quarter of 2026 to be between 55% to 60% as the impact of lower consolidated originations from our typical consumer seasonality is offset by the sequential improvement in the consolidated net charge-off rate we typically see in the first quarter. This expectation will depend upon portfolio payment performance and the level, timing and mix of originations growth during the first quarter. Now turning to expenses. Total operating expenses for the fourth quarter, including marketing, were 36% of revenue compared to 34% of revenue in the fourth quarter of 2024. As Steve noted, we leaned into our efficient marketing spend to meet demand with strong unit economics, resulting in record originations growth. Fourth quarter marketing increased to $192 million or 23% of revenue compared to $151 million or 21% of revenue in the fourth quarter of 2024. With the seasonality we typically experienced during the first quarter of the year, we expect marketing expenses as a percentage of revenue to range in the upper teens for the first quarter and will depend upon the growth and mix of originations. Operations and technology expenses for the fourth quarter increased to $68 million or 8% of revenue compared to $58 million or 8% of revenue in the fourth quarter of 2024, driven by growth in receivables and originations over the past year. Given the significant variable component of this expense category, sequential increases in O&T costs should be expected in an environment, where originations and receivables are growing and should be around 8% of total revenue. Our fixed costs continue to scale as we focus on operating efficiencies and thoughtful of expense management. General and administrative expenses for the fourth quarter were $47 million or 5.6% of revenue compared to $38 million or 5.2% of revenue in the fourth quarter of 2024. The current quarter included $6.7 million of onetime deal-related expenses associated with the pending Grasshopper acquisition. Excluding these items, G&A expenses were $41 million or 4.8% of revenue, reflecting continued operating leverage and disciplined expense management. While there may be slight variations from quarter-to-quarter, we expect G&A expenses in the near term will be between 5% and 5.5% of total revenue, excluding any onetime costs. Our balance sheet and liquidity position remain strong and give us financial flexibility to successfully navigate a range of operating environments, while delivering on our commitment to drive long-term shareholder value through continued investment in our business and disciplined capital allocation. During the fourth quarter, we acquired approximately 278,000 shares at a cost of $35 million. And we started 2026 with share repurchase capacity of approximately $106 million available under our senior note covenants. We were pleased to see the improvement in our valuation during 2025. Though we believe there remains additional upside given our track record of consistent growth and earnings, our expectations for 2026 and the significant future opportunities associated with the Grasshopper acquisition. With that in mind, we will continue stock repurchases opportunistically, while ensuring we are well prepared to close the Grasshopper Bank acquisition and transition to a bank holding company later this year. We ended the fourth quarter with approximately $1.1 billion of liquidity, including $422 million of cash and marketable securities and $649 million of available capacity on our debt facilities, providing us with flexibility to support our strategic objectives. Our cost of funds for the fourth quarter was 8.3% down from 8.6% in the third quarter, reflecting lower SOFR rates and strong execution on recent financing transactions. Even with no additional rate cuts by the Fed, we expect some reduction in our cost of funds during 2026. But the level will depend upon credit spreads on new financing transactions, our funding mix and the level of timing and mix of originations growth. Our effective tax rate for the fourth quarter was 20%. The sequential decline was driven by favorable state changes, a decrease in our uncertain tax position reserve and related interest and tax benefits resulting from share price increases on stock options exercised during the fourth quarter. While there may be variations from quarter-to-quarter, we expect our normalized annual effective tax rate to remain in the mid-20% range. Finally, we continue to deliver solid profitability this quarter. Compared to the fourth quarter of 2024, adjusted EPS, a non-GAAP measure, increased 33% to $3.46 per diluted share and adjusted EBITDA a non-GAAP measure increased 21% to $211 million. To wrap up, let me summarize our first quarter and full year 2026 expectations. For the first quarter, we expect revenue to follow our typical seasonality and to be flat to slightly higher sequentially. We expect net revenue margin of 55% to 60% on a consolidated basis as seasonally lower originations are offset by an improvement in the net charge-off rate. In addition, we expect marketing expenses as a percentage of revenue to be in the upper teens. O&T costs of around 8% of revenue and G&A costs of between 5% and 5.5% of revenue. Interest expense as a percentage of revenue is expected to be around 10.5% with a more normalized tax rate, these expectations should lead to adjusted EPS for the first quarter of 2026, that is 20% to 25% higher than the first quarter of 2025. Our first quarter expectations will depend upon customer payment rates and the level, timing and mix of originations growth. Now turning to our expectations for the full year of 2026. Assuming a stable macroeconomic environment with no material changes in the employment situation and a largely unchanged interest rate environment, we would expect growth in originations for the full year 2026 compared to the full year of 2025 to increase by around 15%. The resulting growth in receivables with stable credit continued operating leverage and a reduced cost of funds should result in full year 2026 revenue growth similar to originations growth and adjusted EPS growth of at least 20%. Our expectations for 2026 will depend on the macroeconomic environment and the resulting impact on demand, customer payment rates and the level timing and mix of originations growth. As a reminder, our 2026 financial expectations do not assume any contribution from the pending acquisition of Grasshopper Bank, which we expect to close in the second half of 2026. Our results in 2025 reinforce the flexibility and scalability of our business model. As we move into 2026, we are well positioned to drive meaningful financial results supported by a diversified product set, a continued focus on unit economics, favorable competitive positioning and balance sheet flexibility. And with that, we'd be happy to take your questions. Operator? Operator: [Operator Instructions] The first question comes from Moshe Orenbuch with TD Cohen. Moshe Orenbuch: Great. And congrats, David, Steve and Scott on all of the management changes and promotions. I'm hoping, Steve, if you could talk a little bit about the consumer business. You talked about the growth having slowed and then accelerated. How much faster kind of is the exit rate? How should we think about it? And are there impacts that we should be aware of given this upcoming tax season and new withholding types of patterns? Steven Cunningham: Moshe, thanks for the question. So as I mentioned in my comments and as we expected after seeing really remarkably good credit last quarter, we did accelerate the growth in the consumer business. And that growth rate accelerated as we went through the quarter. Similar to last year, we saw December exceptionally strong. So sometimes the seasonal pattern of consumer growth in the fourth quarter can vary depending on the timing of the holidays, but really for the second year in a row, we saw a significant amount of the growth coming in, in December. So we were really pleased with that. And as you can see, our nimble and efficient marketing allowed us to continue to kind of lean into that. I think we learned from last year, where we saw sort of a similar pattern and new -- if that demand sort of showed up the same way, we could take more of that down. So we're really pleased with that. When you look forward to the first quarter, similarly, we're seeing some of that strength continue into early January, similar to what we saw last year. And so we'll continue to meet that demand, where it is. It tends to fall off fairly quickly once it does fall off as you move through later January and into the -- further into the first quarter. With the tax refund season, I mean I would -- based on what we know today, it sounds like there's potential for some larger refunds this year, which would be great for credit for us. And so a lot of the originations that we put on should perform very, very well. And what we've tended to see over time is that can just shift around the demand curve a little bit in terms of when the demand timing restarts. But typically, it's just a matter of weeks. So -- we have a lot of experience with different tax refund seasons over our history, and our guidance reflects sort of our expectations, and we're feeling really good about how the fourth quarter wrapped up for consumer and how the 2026 consumer business is starting. Moshe Orenbuch: Great. And good to hear that you're moving, I'm sorry -- is it good to hear that you're moving forward with all the steps for Grasshopper. Are there things that you're going to do differently in your core portfolio prior to closing or maybe talk a little bit about what the early kind of earliest impacts that you might see starting in the second half of the year after closing? Steven Cunningham: I mean until we close the transactions -- the transaction, both companies are business as usual. So the outlook that Scott gave you is our expectation of continuing that track record of strong growth in our business and being opportunistic as we see demand and following our balanced growth approach. So you should expect more of that. And as we talked about on the Grasshopper call, I think once we're beyond the close of that transaction, step #1 is really with the product set that we have today, expanding our footprint to continue to serve more customers. And that's really the basis for the revenue synergies that we laid out and that I discussed on the call as well. Operator: The next question comes from Bill Ryan with Seaport Research Partners. William Ryan: Following Moshe, I'd like to say congratulations to everybody. A couple of questions. I mean you talked about mix of origination -- or the origination growth being about 15% in 2026. If you can maybe elaborate on kind of what you're expecting in terms of the mix between consumer and small business? Steven Cunningham: Yes. Bill. So yes, we feel like we're in a pretty good position with what we know today to grow around 15% for the year. With the resumption of the consumer growth that we just talked about, we think we'll settle in at more typical levels than maybe what we saw for some quarters in 2025. We think we'll continue a pattern that you've seen with SMB. Obviously, some of the growth rates that we've seen have been really, really strong, but we've had a track record of growing that business now at 20%-plus now for quite a while. So you may see what we've seen over the past couple of years, which is a slow tilt in our portfolio towards SMB, just in terms of where the demand has been, but we'll continue to be opportunistic. And then in prior years, we've seen sometimes where there's more opportunity in the consumer business, and it's grown faster. And we've seen in recent times, the SMB portfolio is growing a bit faster. We'll continue to follow that approach that we follow with the balanced growth approach to make sure that we're meeting the demand in both that makes sense to follow our unit economics and so that's what we expect from where we sit today. William Ryan: Okay. And just 1 follow-up. I know you guys can continue to make adjustments on your underwriting -- if you can maybe talk about that, any changes that you made on the consumer side in the fourth quarter? And specific to small businesses, was there any change in industry focus. Anything you dialed back on, anything you kind of opened back up a little bit? Steven Cunningham: Yes. As you know, Bill, we are making credit adjustments all the time. We talked an awful lot about that in 2025. So we continue to follow that same approach continue to be very nimble. So as we see -- sometimes there's always adjustments that we're going to make in both of the portfolios. In consumer, in particular, after we saw sort of the exceptionally strong credit in the third quarter we did try to move back to more typical levels of credit. And you can see that the consumer net charge-off ratio settled in as sort of the middle of the expected range we would have had that we would have expected for the fourth quarter. So we're really pleased about how that landed. And so I feel like we are sort of back to that making adjustments as we need sometimes opportunistic, sometimes pulling it back where we see things we don't like. I think on the small business side, it's been remarkably stable. I think our industry focus, we've talked about over time. We continue to keep a close eye on things like construction and transportation as well as some of those industries that we had felt could be most impacted by tariff and the trade policies. But we've been pleased to see that those have fell in really well. And it's business as usual in our credit space there, similar to consumer. We're always always making adjustments to make sure that we're serving as many customers as we can, while generating the returns that our shareholders expect. Operator: [Operator Instructions] The next question comes from David Scharf with Citizens Capital Markets. David Scharf: Great. I'll echo the congrats to the new team or new physicians actually. Steve, I wanted to switch just to sort of the post Grasshopper operations, and you may have discussed this when you first announced the transaction. But can you remind us post close, how we ought to think about regulatory capital ratios, you're going to adhere to and whether or not existing levels of buybacks are likely to continue under the new structure? Steven Cunningham: Yes. David, thanks for the question. So we did talk about regulatory capital a bit on that call. I think where we sit today, we're sitting at around 17%, 18% tangible capital ratio, which feels that's sort of analogous to the Tier 1 leverage ratio. We would expect to sort of be in that same ZIP code. So I would not expect us to be changing our leverage position dramatically 1 way or the other. And as we've done, with that said, then we get back to as we get post close, there should be opportunities with the strong ROEs that we expect to generate versus the strong asset growth to have some opportunity to return capital. But I think our focus early on will be investing in the opportunities that the new structure will present to us and the combination in making sure, as you know, our rank ordering on our capital allocation is organic opportunities that generate really strong returns in our unit economic model. Share buybacks and then inorganic is sort of down the list at [ 1/3 ]. We have the capital to do all of those things. But I think we will be most focused on all the opportunities that are in front of us with the new structure after we get past the close. David Scharf: Got it. No, that's helpful. And maybe just a follow-up on the consumer products. It's been quite a while. I mean as we look at sort of the quarterly disclosures that you provide in sort of the company schedules. It's been quite a while since line of credit volumes have materially eclipsed installment. And can you just speak to maybe not just today where we sit, but as you think about the risk-adjusted returns of those 2 products going forward, is there anything on the installment side that would lead us to believe that, that's going to kind of regain maybe its position is half the consumer sort of product suite? Or is there just something about either the credit profile or anything else structurally that is going to continue to kind of lean into a line of credit? Because it seems like there's less competition in line of credit, certainly. Steven Cunningham: Well, as you know, David, we're pretty agnostic across our products in terms of the growth. What we try to do is meet the demand that meets our unit economic hurdle rates. And so I think if you look back in our supplement, I think you can probably see that LOC sometimes is leading the way. We've had some opportunities in 2025 with our consumer installment products, particularly as it relates to refinance, which I spoke about last quarter. And so I don't think we're sitting back thinking we're going to grow 1 faster necessarily than the other. We let the demand kind of push us there, and we follow our unit economic approach and our ROEs to take down, we think the demand that's going to, again, meet as many customers as we can while generating really strong returns. So I think from time to time, you're going to see variations just like you have over time where you might see 1 quarter or 2, 1 product might be growing more strongly than the other and not just with consumer but across SMB and consumer as well. Operator: The next question comes from John Hecht with Jefferies. John Hecht: Again, congratulations on all the movement at the executive level. You definitely a testament to the long success of the company. I guess most of my questions have been asked. I guess when it comes to Grasshopper. Are there -- and forgive me if you mentioned this, are there certain geographies that you know you can go into that are not approachable by you or limited access at this point in time that would be somewhat meaningful? Steven Cunningham: John, thanks. So when we talked about some of that expansion last month on the call, -- there definitely are some states with our NetCredit brand that we would like to take on that perhaps we could with our current licensing and partnerships today, but we just haven't chosen to do so that a national bank charter will make it easier for us to do that. So there definitely are specific states that we have in mind when you think about states like California, Pennsylvania, Ohio, which we're in, but not to the extent that we might otherwise if we were a bank, just to kind of give you some flavor. So we definitely have a hit list and a plan for where we want to go first. John Hecht: Okay. And then I know this gives you some benefits from a regulatory perspective, just because you'll be able to centralize some of that that's within the bank. But then you'll have some stuff still outside the bank and the CFPB has really become less active -- so question is, can you just give me the quick description of how the regulatory framework and reporting mechanisms will look? And then are you observing any activity at the state level at this point in time that's worth pointing out? Steven Cunningham: So starting with that last question, it's relatively quiet at the state level. There's not really any -- outside of some of the noise that you've heard in the political arena, we haven't really heard any real policy or regulatory changes at the state level that we're particularly concerned about. As it relates to post-close structure, we will -- we expect to have CashNet in Brazil sitting outside of the National Bank as part of our nonbank affiliates under the holding company. The Federal Reserve will have some oversight of that. And obviously, -- we've talked to them for many years about that plan. In terms of reporting, I mean, I think we'll continue there'll be some transparency, obviously, continue with our SEC filings, that we call reports at the National Bank and then the Federal Reserve suite of filings for holding companies as well. So that's the -- that's our plan that we're working against today, and we hope to get that done here later this year. Operator: The next question comes from Vincent Caintic with BTIG. Vincent Caintic: Actually, another regulatory question, and it's kind of a broader topic, but when I was getting a lot from investors earlier in January about kind of broader consumer finance, and it was specifically, when the government started contemplating rate caps, and that was specifically on credit cards. But I wanted to get your thoughts, if you had any on this push for affordability and maybe how rate caps might have a potential positive or negative benefits to Enova and the industry beyond just the credit cards? Steven Cunningham: Yes. So I think the cap that's been discussed very specific to credit cards for 1 year. I think there's been a lot of commentary from the card banks on that and not just from them but from a lot of others, I think if that was to happen, that actually would probably be a positive for us, particularly for I think that there's a lot of studies that have shown rate caps tend to reduce availability for the very folks who need it the most, which tend to be those that are less served and so to the extent that some of those credit card customers are not able to access credit, we would be an alternative for them. So we would view that positively. And Vincent, you know over the years, I think 17, 18 years in a row that Congress or a member of Congress has introduced a federal rate cap. It tends to revolve around election time. It's a very popular topic around affordability, but hasn't really had any meat to it. And I think -- if anything, this ongoing conversation is probably highlighted how irrational rate caps can be as it tends to hurt again, the very people that you're trying to help. So while the probability is likely not exactly 0, it's very, very low. And obviously, from a policy point of view, we're not supportive of any actions that reduce the ability to provide credit to those who need it the most. Vincent Caintic: Okay. Great. That's super helpful and clear. And then switching over to small business. So you gave helpful color earlier about the kind of the improvement to consumer loan growth. But consumer loan growth that accelerated quite a bit beyond your run rate. So it was up 34% year-over-year and you highlighted some of the surveys in your prepared remarks, but maybe you could talk about what you're seeing on the ground, how the environment is for small business and kind of what you think is sustainable for 2026 and the health of that's a small business customer. Steven Cunningham: Yes, you bet. So I mean, clearly, the numbers kind of speak for themselves. SMB is a -- now has a long track record of successful growth. And the credit profile has been remarkably stable in sort of a very narrow range that we've expected. So I think that reflects the strength of our ability to underwrite those customers, but it also reflects the stability of the customer base that we're serving. So there's been a lot of noise over the year of 2025 around the impacts of tariffs and the macro economy and where we are. But I think what I wanted to highlight in my commentary is that it's not quite as gloomy it seems on the ground. It seems that small businesses are looking forward positively. And I think it's reflecting in the demand that we're seeing. And clearly, our brands and our scale are allowing us to win competitively and grow very quickly. Sustaining 30%, 40% growth rates is not something that I would just be planning on. that would be fantastic. But I think we're expecting to continue a strong growth rate with the guide that Scott gave and continue to have a successful credit profile for 2026. Operator: Next question comes from Kyle Joseph with Stephens. . Kyle Joseph: You've had some solid year and reiterate all the congratulations on promotions, et cetera. Yes, most of my questions have been taken, but just kind of wanted to get your perspective. We talked a bit about the expected changes in tax refunds on the consumer side of things. Anything we should be thinking about on the SMB side from changes to the -- as a result of the BBB and any sort of implications for seasonality on that business for '26? Steven Cunningham: No, I don't anticipate any big changes in seasonality for 2026. And I think to the extent that customers, again, have a larger refund. It's good for our credit profile, but it also probably means they're going to spend it, which is going to be good for the economy, and that tends to be very good for our small business customers as well. So I think we're not expecting any disruption for our small business customers in 2026. If anything, it should be a positive. Kyle Joseph: Great. And then on the expense side, I appreciate the guidance you gave for the first quarter. And then obviously, we know what your EPS expectations are for the year, but kind of just walk us through maybe a little bit more color in terms of how you're thinking about the scalability of the business in '26, obviously, because first quarter has some seasonal impacts on marketing and whatnot? Steven Cunningham: Yes. Well, we think we're going to continue to generate that operating leverage and scale that you've seen. I mean, listen, the marketing, I think last quarter, we were remarking that we hadn't been quite at our 20% level of marketing spend. I think this quarter, we showed that when the market presents itself, we will lean into it to drive profitable growth. And I think you should continue to expect, as Scott laid out some of those numbers, you're going to continue to see a grind lower in some of those expense categories as we continue to grow overall. So you should continue to expect us to scale the OpEx and invest in marketing, where we see the demand, and we know we can generate the unit economics that we need. Operator: This concludes our question and other session. I would like to turn the conference back over to Steve Cunningham for any closing remarks. Please go ahead. Steven Cunningham: We thank you all for joining our call today, and we look forward to updating you next quarter. Have a good night. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the West African Resources Investor Webinar and Conference Call.[Operator Instructions] I'll now hand over to West African Executive Chairman and CEO, Richard Hyde. Thank you, Richard. Richard Hyde: Thanks, Nathan. Good morning, and welcome to the December 2025 Investor Conference Call for West African Resources, and thanks for joining us today. Joining me on the call today, we have our Chief Financial Officer, Padraig O'Donoghue; and our General Manager of Finance, Todd Giltay; our Chief Operating Officer, Lyndon Hopkins, is on site at the moment in Burkina. The December 2025 quarter delivered another strong period of gold production across both our Sanbrado and Kiaka gold operations in Burkina Faso with just over 112,000 ounces of gold produced across the operations, delivering an operating run rate that bodes well for our gold production in calendar year 2026. Our total gold production for calendar year 2025 was a touch over 300,000 ounces of gold with Kiaka stepping up in Q4. This was well within our production guidance for the year. What's more is that we completed this achievement with no significant health, safety or social incidents, which is especially important to us and demonstrates our commitment to operating in a safe and responsible manner at all times. We sold 105,995 ounces of gold at an average price of USD 4,058 per ounce for the quarter, and we remain fully unhedged, therefore, allowing WAF to take full advantage of the record gold prices we are currently seeing. With all our sustaining costs -- sorry, with our all-in sustaining costs averaging USD 1,561 per ounce across the two operations, we've been able to deliver AUD 389 million of cash -- sorry, cash flow in the quarter, and that's after making income tax payments of AUD 48 million. Our cash balance at 31 December 2025 is AUD 584 million, plus we still held another AUD 177 million worth of unsold gold bullion, and that's just due to timing of shipments. Looking at our sites, the Kiaka ramp-up has been excellent since its second quarter start-up. And its performance in Q4 really demonstrated that. This is the first full quarter of operations for the site. It produced 62,287 ounces of gold for the quarter, surpassing production at Sanbrado for the first time. Kiaka's costs continue to improve as production has increased, which was what we expected, and it's pleasing to see this panning out. We expect costs to further reduce as our reliance on diesel generated power reduces over the coming quarters. Kiaka produced just over 95,000 ounces of gold for the year after commencing operations in Q2 and having a shortened operational phase in Q3. Open pit mining continues to ramp up as more equipment is commissioned for use. At Sanbrado, our steady production continued, and we produced just under 50,000 ounces of gold for the quarter, bringing our total for the year to 205,228 ounces. Sanbrado performed well against production guidance, achieving the upper end of our 190,000 to 210,000 ounces production range. Open pit recommenced in the quarter under our new owner mining operating model. Open pit mill feed in Q4 was sourced from both the M5 North pit and previously mined ore stockpiles. Mined ounces for the quarter from M1 South underground was 37,955 ounces, which was 16% below the previous quarter. This was due to a 14% drop in mined grade as well as slightly lower ore tonnes mined. With that overview of our production, I'll hand over to Padraig to discuss our financial details for the quarter. Padraig O'Donoghue: Thank you, Richard. WAF, as Richard mentioned, WAF has benefited tremendously from being unhedged and generated AUD 662 million of gold sales revenue in the quarter at an average realized price of USD 4,058 per ounce. For the full year 2025, WAF generated more than AUD 1.5 billion of revenue. As Richard mentioned already also, we generated AUD 389 million of operating cash flow in Q4 and ended the year with a very strong cash balance of AUD 584 million. Our capital investing activities in Q4 used AUD 113 million of cash, which included AUD 89 million for Kiaka and AUD 23 million for Toega. Financing activities used AUD 23 million of cash in Q4 with payments for loan interest, principal and financing expenses offsetting cash received from the drawdown of equipment finance facilities. I now hand back to Richard. Richard Hyde: Thanks, Padraig. So on the exploration front this quarter, diamond drilling beneath the M5 open pit ore reserve has confirmed potential for us to extend open pit mining at Sanbrado. Gold mineralization was confirmed more than 300 meters below the current ore reserve and mineralization remains open at depth. And this is really the first substantial drilling we've done at M5 North since about 2017. So it's no surprise that we can see that this mineralization being extended and then we're considering our options there, but most likely, updated ore reserve would consider cutting back the northern part of the M5 open pit. So some of the drilling results included 16 meters at 11.2 grams per tonne as well as more typical broad intersections such as 45 meters at 1.9 grams per tonne gold. Diamond drilling at M5 North will continue through 2026 and we look forward to further results from the program to help us better plan for the future mining at Sanbrado. But the future looks very good. Our last ore reserve estimate was completed at a much more conservative gold price of USD 1,400 an ounce. So recalculating today we would expect to use a higher gold price and obviously deliver more ounces into reserve. We also have drilling underway at underground for Toega. We continue to develop a satellite operation for Sanbrado, which we continue to develop as a satellite operation for Sanbrado. We're currently completing a 13,500 meter infill drilling program, which is infilling the underground resource and we'll have more results over the coming quarters. Grade control drilling also confirmed during the quarter with -- commenced during the quarter with 6,600 meters completed. This program is expected to be completed in early Q1 2026 with results to follow. In other developments at Toega, earthworks for the mine services area were completed and the construction of mobile maintenance workshop office and ancillary infrastructure has commenced. The haul road construction is well advanced and remains on schedule to enable order delivery to the Sanbrado process plant in early Q3 2026. Toega open pit mining operations will be owned and operated by WAF, similar to Sanbrado. Mining equipment continued to arrive on site during the quarter with commissioning activities underway. All mining equipment is expected to be fully operational by the end of this quarter. Pre-stripping of open pit mining of the open pit commenced during the quarter with a total of 250,000 BCMs moved to date. Material movement is expected to ramp up to steady-state production by the end of Q1 2026. Across other aspects of our business, we continue to invest heavily in social programs, including education, health, economic development, including providing scholarships to high school students from the area, upgrading our community health centers and constructing a new primary school and refurbishing an existing school near Kiaka, which will also be used for community events outside school hours. In relation to discussions with the Burkina Faso government regarding Kiaka, we continue to engage constructively with the government on these matters. But at this stage, there are no material updates on that matter. Overall, I'm really happy with our performance and progress throughout Q4, particularly with our ramp-up at Kiaka. We're looking forward to releasing our 2026 annual production guidance and outlining our capital management strategy later in Q1 2026. I'll now hand back to Nathan for the Q&A. Operator: [Operator Instructions] Your first question comes from Mike Millikan at Euroz Hartleys. Mike Millikan: Just a couple from me. Firstly, talking about obviously, very strong cash generation at the moment. Debt service, are you going to accelerate some of those payments? Richard Hyde: Yes. So that will be a focus throughout this year and get debt down to a management -- a manageable level. That's our first focus. And then we're having active discussions in the office now and amongst our Board about capital management, which will take us past 2026 whether that's buying back shares or paying dividends, that's the discussion that we're having at the moment. Mike Millikan: Yes. Is that the plan, certainly a buyback probably makes a lot of sense. Richard Hyde: Yes. Look, they both make sense. We just really need to gauge the market and really from -- I'm a follower of Berkshire Hathaway, and they've always bought shares back and they've never paid a dividend though. So -- but it's either/or, I think it's going to be a good outcome for shareholders if we do either. But that's certainly our focus at the moment is to pay down debt and then either buy back shares or pay a dividend. Mike Millikan: Yes. Awesome. Just looking at, obviously, the royalty rates currently in country, obviously pretty high. Is there any sort of changes expected there? I mean just it's obviously on a slowing scale and obviously, gold price is very high. Has some of your discussions also been centered around royalties? Richard Hyde: No, not at this stage. I mean the gold price has risen so quickly. I think we're an average sale price of about USD 3,500 in Q3, and we've sold an average over USD 4,000 an ounce in U.S. Q4. So -- and already, we're well over USD 5,000 an ounce as we speak now. So really, the action has been pretty recent, and we'll be back in country in a few months' time and definitely raise that with the administration. Mike Millikan: Yes, cool. And finally for me, just on Kiaka grid power, has it all been going? Has it been stable? What's your expectations for calendar '26 in regards to reliability? And what do you factor in some of your forecast? Richard Hyde: So that will be kind of -- I think we can explain more of that later in the quarter when we put our guidance out. We had 2 or 3 weeks of stability or stable grid in December, and that allowed us really to ramp up production. And we consistently hit 30,000 to 35,000 tonnes a day in production at Kiaka, which was really, really good. So clearly, the last piece of the puzzle for Kiaka is stable power. We're also looking at installing a full HFO power station, which would allow us to have full production. So we'll have more information on that in our annual guidance. We've also increased the diesel capacity on site. So there's another 5 gensets arrived overnight on site. So they'll be plugged straight in, and that should give us about 30 megawatts of diesel on site. The last week has been pretty unstable with the grid, but there has been work being done by SONABEL, which is the government's energy provider in country. So we should be back on the grid in the coming days. And then we've also got some other equipment arriving on site, which will help stabilize the grid on our side. So look, it's early days with the grid. Long term, it's definitely the right option. In the short term, we've made provisions for additional diesel power and we're making a plan to have full backup with HFO, which is much cheaper to run in diesel. So that's kind of the summary at the moment, but I think the takeaway is that with full power, Kiaka is capable of producing of processing more than 10 million tonnes per annum without any capital -- without any material infrastructure changes. So does that answer your question, Mike? Mike Millikan: Yes, it did. And congrats on a very good quarter. I will hand it on. Operator: Your next question comes from Richard Knights at Barrenjoey. Richard Knights: Just wanted to see if I could get you to give us a little bit more detail on the discussions with the government regarding the Kiaka stake. Just anything relating to time frames or whether or not you've made any progress on those discussions with potential co-investments in other projects? Just any more detail you can give on that? Richard Hyde: Yes. Thanks, Richard. Look, there isn't a lot of detail to give, unfortunately. We responded late last year to SOPAMIB, and we provided them with a lot of information about Kiaka, our construction costs and economic models. And again, the gold price has moved significantly since then. So I mean the discussions have been quite good and cordial. They've made it quite clear that they believe in paying market price for additional share in Kiaka. And we did counter with a proposal saying that if you have a look at our current quarter, I think we paid indirect taxes and royalties, USD 90 million in one quarter. So clearly, we're a very good partner to the government. And probably in our view, that's the best model is that the government already gets a significant proportion of cash flow from mining operations in Burkina, which is getting close to 60% of cash flow at the current gold price. So -- and with obviously, the escalating royalty as well. So that's a significant proportion of cash flow now. So really, there's not a lot of detail to add. We're currently waiting on a response to our most recent correspondence. And we'll update the market as soon as we've got something back. But we've given them an alternative proposal, which we showed demonstrates much higher returns on investment, given that there are assets the government already owns that aren't generating any cash flow. So clearly, that would grow the government's share of revenue much more quickly than an incremental investment in Kiaka. But it's a discussion that we're having with them, and we're doing that in a transparent and polite way. Operator: Thank you. There are no further questions at this time. So I'll now hand back to Richard for closing remarks. Richard Hyde: Thanks, Nathan. Look, I guess, closing remarks, we've got a number of activities underway at the moment, including our resource reserve update. Our new 10-year plan will be coming out in late March. The 10-year plan will include drilling from M5 North and M5 South as well as extensions at M1 South underground. So I'd expect that to be a positive increase on the 10-year plan that we issued last year, which was very close to 10 years at 500,000 ounces per annum, which has been a target of mine for a long time. So obviously, we'll keep the market updated with our discussions with the government around the ownership of Kiaka and also with the stability of the grid as it improves. So thanks very much for dialing in today, and we look forward to keeping the market updated over the coming weeks regarding our activities.
Operator: Good afternoon and good evening. Welcome to Logitech's video call to discuss our financial results for the third quarter of our fiscal year 2026. Joining us today are Hanneke Faber, our CEO; and Matteo Anversa, our CFO. During this call, we will make forward-looking statements, including discussions of our outlook strategy and guidance. We're making these statements based on our views only as of today. Our actual results could differ materially as a result of many factors. Additional information concerning those factors is available in our most recent annual report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K which you can find on the SEC's website and the Investor Relations section of our website. We undertake no obligation to update or revise any of these forward-looking statements, except as required by law. We will also discuss non-GAAP financial results. You can find a reconciliation between GAAP and non-GAAP results and information about our use of non-GAAP measures and factors that could impact our financial results and forward-looking statements in our press release and in our filings with the SEC. These materials as well as the shareholder letter and a webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, references to net sales growth are in constant currency and comparisons between periods are year-over-year. This call is being recorded and will be available for a replay on our website. I will now turn the call over to Hanneke. Johanna Faber: Thank you, Nate, and welcome, everyone. During the third quarter, we delivered another period of very strong financial performance. With the exception of pandemic peaks, we drove record non-GAAP operating income and earnings per share. Very strong non-GAAP gross margins once again underscore the quality of our portfolio, the strength of our brand and innovation and our unique operating discipline and top line growth of plus 6% in U.S. dollars and 4% in constant currency was broad-based across regions, channels and categories. The strong third quarter results were driven by our strategic priorities. First, superior products and innovation. At the end of September, we launched the MX Master 4, the next generation of our flagship mouse. It is selling at record levels. It sold more units in the first month following launch than any other personal workspace mouse in Logitech's history. In gaming, we delivered winning news across price bands. The premium Pro X Superlight 2 mouse was a top-performing new product in the quarter, boosting the Pro line. We also had strong demand for the new entry-level, China-for-China G3116 gaming keyboard, which helped drive market share gains in China. And AI now plays a pretty critical role when it comes to superior video and audio innovation. We are well beyond AI proofs of concepts and experiments. We are shipping AI products globally at scale. In the third quarter, those included both AI-powered devices like the Rally Board 65, the site video conferencing camera and its own 2 wireless headsets and AI-enabling devices like the spot sensor. And just last week, we announced a Rally AI camera and Rally AI Pro, our smart new video conferencing solutions for large rooms, like board rooms, auditoriums and classrooms. None of those products are AI for the sake of AI. These are products that solve real user needs, and that shows in their popularity in the market. Our second strategic priority driving results was doubling down on B2B. Logitech for business demand significantly outpaced B2C demand in the third quarter driven by strength in video collaboration and our education vertical. Third, we executed with excellence around the world. The December quarter was the first in fiscal year '26 with positive year-over-year net sales growth and increased demand across all 3 of our major geographies. Around the world, it was great to see our teams [ excel ] with great holiday in-store execution and terrific social-first digital brand building campaigns. Finally, our performance underscores our unique operational excellence. Product cost reduction, targeted pricing actions and FX offset tariff headwinds and strategic promotions and drove a very strong non-GAAP gross margin of 43.5%. Importantly, we continue to drive manufacturing diversification. As we committed, we successfully reduced the percentage of U.S. products manufactured in China from 40% last April to less than 10% by the end of December 2025. And we maintained strong cost discipline across the company, highlighted by non-GAAP general and administrative expenses which were down 7% in the absolute year-over-year. Now looking ahead, we live in a dynamic world, but there is still so much opportunity for Logitech to grow. One of the opportunities I am excited about lies in leveraging the existing global PC footprint to drive continued growth. Consider that of the 1.5 billion plus PCs in use today around the world, less than half of those have a mouse attached and less than 30% of existing PCs have an external keyboard. Taken together, that PC installed base represents over 1.8 billion opportunities to add peripherals and upgrade users to enjoy vastly superior productivity and comfort. We warmly welcome obviously the tens of millions of new PCs that are sold each quarter but we believe the existing base remains the far greater price. So with that, Matteo, I'll hand it over to you to cover the financials in a bit more detail. Matteo Anversa: Okay. Thank you, Hanneke, and thank you all for joining us on the call today. So the team delivered a another solid quarter, demonstrating continued focus on profitability and growth. Non-GAAP operating income reached $312 million, reflecting a 17% year-over-year increase alongside a 220 basis point expansion in profitability. . Our strong P&L performance, combined with disciplined management of working capital, resulted in an exceptional cash flow generation of approximately $500 million a 30% year-over-year increase. Now let me walk you through the key financial highlights for the third quarter. So net sales were $1.4 billion, up 4% year-over-year in constant currency, and this growth was driven by strong demand and represents our eighth quarter of consecutive top line growth. Now more specifically, personal workspace net sales increased 7%, with 9% growth in pointing devices, fueled by the launch of our MX Master 4 as well as double-digit growth in tablet accessories. Video collaboration net sales grew 8% with double-digit growth in EMEA and Asia Pacific driven by continued sales strength of our AI-enabled Rally Board 65. And as we indicated in the past, the B2B nature of this business tends to be lumpy quarter-to-quarter. But the long-term trajectory of the business is very strong momentum. Gaming net sales grew 2%, driven by double-digit growth in Asia Pacific while Americas and EMEA declined single digits due to the market contraction. Geographically, Asia Pacific led the way with a 15% year-over-year growth driven by double-digit growth in gaming, video collaboration and tablet accessories. EMEA grew 2% due to double-digit growth in video conferencing as well as solid growth in keyboards and combos. And the Americas reversed the negative trend of the past couple of quarters with the U.S. returning to modest growth with pointing devices up double digits, offset by gaming. On the profitability side, our non-GAAP gross margin rate was 43.5% and up 30 basis points from the prior year. We were able to expand the gross margin rate despite a challenging tariff environment. And similar to last quarter, the negative impact of tariffs was entirely offset by our pricing actions and continued manufacturing diversification efforts. Product cost reduction and favorable foreign exchange more than offset increased promotional activity in the quarter. We also maintained strong operating expense discipline. Non-GAAP operating expense was $306 million, a decline of 2% year-over-year, and this decrease was primarily driven by a reduction in G&A as a result of the measures that we implemented to mitigate the impact of tariffs. Now it is important to note that if we normalize for the bad debt expense we recorded in the prior year period, non-GAAP operating expenses would have increased approximately 2% and while delivering 70 basis points of leverage. And finally, cash flow. Cash flow was extremely strong in the third quarter. We generated approximately $500 million of operating cash flow 1.5x operating income, thanks to efficient inventory management, strong collections and profitable growth. Our cash conversion cycle improved by 18% down to a highly efficient 27 days. We maintained a very strong balance sheet, ending the quarter with a cash balance of $1.8 billion. Now as we look ahead, we are closely monitoring external dynamics, including geopolitics, tariffs and the consumer confidence. While the backdrop is mixed, we believe Logitech is exceptionally well positioned, and this confidence is reflected in the outlook that we are providing for the coming fiscal quarter. Net sales in the fourth quarter are expected to grow 3% to 5% year-over-year in constant currency with a gross margin rate of approximately 43% to 44%, and non-GAAP operating income is expected to be between $155 million and $165 million, up 20% year-over-year at the midpoint. As a result, we expect to close fiscal year '26 above the long-term model targets for non-GAAP gross margin and non-GAAP operating margin that we outlined at our Analyst and Investor Day last year. Our performance underscores the durability of our model and our consistent ability to convert profit into cash and generate compelling returns on invested capital. As we transition into the new calendar year, we remain confident in our ability to execute at a high level as the environment evolves. I want to thank all our teams across the globe for their dedication and flexibility. And with that, we can open the call to questions. Operator: Thank you, Matteo. [Operator Instructions] Our first question comes from Asiya with Citi. Asiya Merchant: Great. Both well, there's just so much macro factors. I mean, obviously, memory affecting PC demand. Hanneke, you talked about the installed base. Just if you can walk us through what gives you this confidence relative to your long-term target model that you guys have laid out about the growth looking ahead, not just through March, but you're not approaching the end of fiscal '26 into fiscal '27. Just some commentary that you could share on that. And 1 for Matteo while I can. Just on the gross margins, I mean, they just continue to upside representing really strong execution here. Just as you think ahead, given the macro backdrop and concerns around consumer spending, how should we think about gross margins going forward? Johanna Faber: Yes. Thank you so much. Overall, it's too early to discuss fiscal '27. But I would say we're really encouraged by the momentum of the business around the world. This year, as Matteo said, we're going to deliver at the high end of our long-term model. And we're expecting that our team will continue to deliver with excellence. This is a company for all seasons. A lot of things were thrown at us this year, we expect that we can continue to work well in the year ahead. Let's -- let us touch actually on memory and on PC potential. So overall, what I would say is we don't believe we will be materially affected by both of those factors and let us unpeel that a little bit. In terms of memory availability, the vast majority of our portfolio is not impacted by the current tight memory availability. We simply don't use those chips in most of our portfolio. Only our video conferencing products and only a portion of our video conferencing products are impacted by the memory availability issues. And we believe we are mitigating those impacts in fact. So from a supply point of view, we've seen this coming, and we've taken proactive steps to ensure supply. So we don't foresee a supply impact in Q4 nor in the first half of our next fiscal year from the memory availability issues. There may be a modest cost impact. But as you've seen, we're really good at mitigating cost impacts through cost reductions and through targeted pricing if needed. So that's on memory. On PCs, you've seen our great personal workspace results in this quarter, high single-digit growth. We grew share 120 basis points in PWS, and we believe our peripherals business, in general, continues to have excellent growth opportunities, whatever the environment. Our data shows that if you take out the 2 years of COVID, which were crazy. Over a 10-year period, we grow 300 to 500 basis points ahead of PC sales. And why is that? It's because the peripheral market is relatively immature around the world on that big installed base of 1.5 billion PCs plus less than half of people use a mouse, less than 30% use an external keyboard. And they're basically leaving productivity and comfort on the table. And so that installed base opportunity, combined with trading up, people who are in the category is a far bigger opportunity, like far bigger opportunity for us than just attaching to new PCs, which, of course, we'll continue to do, but our growth over the years has come from penetrating that installed base of PCs. So that's what we will continue to do, and we're confident that we can continue to grow the peripheral business as we have. Sorry, it's a bit of a lengthy answer, but I know it's on many people's minds. So thanks for asking. Matteo Anversa: Maybe Asiya I will address your gross margin question. So first of all, let me say, I appreciate your comments also on behalf of the team because I really agree with you. I think the team has done a fantastic job. If you take a step back and we use just the midpoint of the outlook that we provided today for the fourth quarter, that implies that we will close the year with a gross margin rate around 43.5%, which is pretty much flat to fiscal year '25. And so the ability of the team to deliver this outstanding result in spite of all the tariff environment that we discussed throughout the fiscal year, I think it's pretty remarkable. And so I think the -- it's way too early to talk about fiscal year '27, but I think the foundation of this gross margin and our ability to maintain the gross margin to this level, I think the foundation is there. And what I mean for foundation, really, I'm referring to a couple of key aspects. Number one, our fantastic brand and the pricing power that this gives us. Number two, the continuous work that the team has been doing on innovation. We'll talk a little bit in the prepared remarks, another tremendously successful launch with the MX Master 4, just as an example. So that's really the engine of the company. And third, the continuous work that we are doing every year on product cost reduction through value engineering and supplier negotiation. So that's really, to me, is the foundation of what we are doing, and that's here to stay. Now, with that being said, obviously, we are all seeing commodity prices going up. We are seeing cost of components going up. So we will have to factor all these components when we discuss in the next earnings call about '27, but I think the foundation and the execution of the team is there, and that's what you can count on us on deliver also next year. Operator: Okay. Our next question comes from Yorn from UBS. Joern Iffert: And hello, everybody. I would ask 2 questions if it's okay, and then I go back in the queue. The first one is, I mean, you elaborated on your resilience and more volatile PC markets. But do you have some data for the attachment rates on mice and keyboards, where this has stood 5 to 10 years ago? . Just to compare a little bit the trend changes of rising attachment rates, which potentially was helpful for the PC unit outperformance? And the second question would be, please, on gaming. Isn't this a little bit concerning that the U.S. and Europe is now seeing decline in gaming markets. Gaming is one of your key growth drivers. What are you doing against the strategic fee for the next 12 months to bring this back to growth and also, if you somewhat detailed was PC gaming down or all the manager [indiscernible] and headsets. So some more details here would be appreciated. Johanna Faber: Let me take the gaming question first and then maybe you take the attach question Matteo, if that's okay. So on gaming, First of all, another quarter of good global Logitech Gaming growth, 2% up. Demand was higher than that. And as you saw, that's really driven by our outstanding performance in the world's biggest gaming market, China. We gained past 3 months share across gaming mice and keyboards in China. That's the first time since I can remember and since I've been here. So that's great. We delivered strong double-digit gaming growth there in terms of net sales. And I think what's important, and that's important for the rest of the world as well is we're winning at the top end with Pro and we're winning at the entry level. With the China-for-China innovation, the most important one that came out this quarter was the G316 keyboard, mechanical keyboard for gaming. That's doing very well as well. So it's important that we cover both ends of the market. In the U.S. and Europe, we held share in a declining market indeed in the quarter. What's good to see there is that our U.S. share stabilize after a couple of quarters where share was a little soft as we took pricing, first implementing it and then getting the consumer to get used to it. So it's good to see it stabilize. And the other good thing there is that we're seeing great growth on the top end of our business, so both Pro and SIM growing double digits in the U.S. and Europe. Now to your question on the gaming market, the markets in the U.S. and Europe have been pretty soft. We believe that's temporary and we can discuss the causes, but they're probably part economics part game release related. And in that context, we think we've prepared ourselves really well for the year ahead. So when it comes to economics, there clearly is a bit of a K-shaped economy. When I meet gamers in the U.S. and Europe, they are a little more choiceful in terms of what they spend money on. So what we've done for the year ahead is really thoughtfully designed our portfolio to win at the top end because there's a lot of gamers who do have money, but also to win at the entry level. Just like we've done in China already. So that is one. And then second, in terms of gaming title releases, again, they've been a bit more muted in the West than they have been in China and gamers in the U.S. and Europe that I speak to are saying, well, I'll just wait and see a little bit till GTA 6 and some other new releases come out. So they're sitting on their money. But fortunately, our business, again, doesn't depend on a single game alone. And for big existing games, whether it's Call of Duty or League of Legends or Valorant. You need the best gear. So we're excited. SUPERSTRIKE is coming out, start shipping here in a couple of weeks. That is a step change in competitive performance for FPS games, existing FPS games. And again, I think that will position us really well to continue to gain share whatever the market does in gaming. Again, sorry, a bit lengthy, but I know it's on many people's minds. Matteo Anversa: So Yorn, the -- so let me start. Overall, if we look at take about 10 years' worth of data and you normalize for COVID, generally, the sale of our peripherals outpace PC sales by about 300 to 500 basis points on average. So with that being said, though, I go back to Hanneke's point, the biggest opportunity for us is really on the installed base, where of all the PC out there, less than half have a mouse and less than 1/3 have a keyboard. And that's really where in a way, the focus has been. And actually, if you go back in history. The vast majority of our sales really comes from the increase in the attach rate to the installed base versus new PCs to Hanneke's point in her prepared remarks, we also like, obviously, the new PC sales, but that's where the focus is. Johanna Faber: And I think Jorn you were asking, do we know attach rates to new PCs in the past. We know what they are today. they're actually fairly low, somewhere between 9% and 14% depending on the type of master keyboards. So they're relatively low. We don't have that historical data. But given how low they are, there was opportunity, obviously, going forward to go up, but they cannot have been that much lower in the past. Operator: Okay. Our next question will come from Erik Woodring with Morgan Stanley. Erik? Erik Woodring: Can you hear me okay? Matteo Anversa: Yes. Erik Woodring: Just I wanted to circle back on just a PC question, Hanneke. The 300 to 500 basis points of outperformance versus PC sales. Just a clarification, is that versus PC revenue or PC units. And the only reason I ask is, if you look at, for example, IDC forecast, the variability between PC sales may be flattish versus PC units potentially down 5% to 10%. What make you difference between -- again, if we use that kind of historical context. The business growing versus declining? So just a clarification on that point. And if it is attached to PC sales, just how do we think about the attach to revenue when we think about its kind of like an attached to the unit. I just want to get a better understanding of that. And then just a quick follow-up for you Matteo. Matteo Anversa: Yes, sure. Erik, it's -- what we refer to is unit sales. So that's the way we think about it. So that's all I can tell you. Erik Woodring: Okay. Totally fair. And then maybe Hanneke, just again, on the PC peripheral kind of attached to the PC base. So I think that makes a ton of sense. On one hand, I guess I would say, perhaps we can assume these devices might not have a peripheral for a reason. -- whatever that may be. So how do you convince that user that's underpenetrated to get that mouse or to get that keyboard. What is it that Logitech will say or it can do, whether that's incentivization, promotions, et cetera, that gets that easier to say, you know what, I do need this. This is an awesome product I need to buy it. . Johanna Faber: yes. What a great question. And it comes down to product superiority and real benefit for the user. So let me take the MX Master 4 as an example, which again is off to a fabulous start in terms of creating both new trial and up-trading existing mouse users. Why is that? It's a very premium, it is $120 mouse is an expensive mouse. But consumers, including in the U.S. and Europe, where they're being more choiceful absolutely doesn't hesitate to go and buy one because, A, it clearly is superior versus what's out there in the market, the haptic feedback, the actions during the new software, the beautiful design the aesthetics, clearly superior. It clearly answers the user need in terms of productivity. So -- we are -- when you use that MX Master 4, you're going to be faster, you're going to be more accurate and more productive. That's important both for users, by the way, and for B2B choosers. So the procurement people in businesses that are buying mice for their employees. And then marketing, of course, plays an important role as well. We did up marketing in the quarter. We're measuring that very tightly. The return on investment there is excellent. And I think we have a lot more opportunity to do more social first digital marketing for our top superior products to drive that penetration. So it all starts from the superior product that really answers the user needs in the case of MX, the user need is productivity. In the case of gaming, it's performance, you're going to win that game. And in the case of a line like ERGO, it is comfort. You're not going to have that pain in your arm. So really important in any marketing. We're seeing really great results. There's opportunity there going forward. Operator: Okay. Our next question comes from Ananda with Loop Capital. . Ananda Baruah: Two, if I could. So let me just ask another, this is a PC-related one. Do you think people are obviously interested in the PC, the PC attached because of the dynamics going on with memory in the PC market and the impacts we've already begun to see there. Do you think that this is one of those years where the company could see sort of growth above the average sort of few hundred basis points range that you guys typically have. I know in past years, when you've seen amplified growth above the PC market, there are times you've been a thought process maybe people aren't buying a PC, but they can do something to make their PC experience more enjoyable dress up their PC experience. So I just want to ask that question. And then I have a quick follow-up as well. Johanna Faber: Yes. So it's too early for me to speculate on the year ahead. But I think you're right, historically, again, this is a company for all seasons. We can win in any environment. And in an environment where I say gaming, the price of gaming PCs is definitely up. But when I don't have money to get a faster CPU, I can buy a SUPERSTRIKE mouse and improve my gaming speed and performance that way. So we've definitely seen that in the past, and we're going to make a plan to do that going forward as well. Matteo Anversa: Maybe Ananda, for whatever is worth, too early to talk about next year, but if you look at the quarter we just printed, if you look at personal workspace, actually in its totality, the growth in personal workspace in constant currency outpaced the growth of the company. So it was faster. Ananda Baruah: Good context. And the follow-up, this might be more for Matteo. But although you guys don't have material exposure to some of the components that are -- that we're seeing the meaningful price increases in the memory chain is others as well. Do you think you could have seen some pull-forward sales from folks who might not necessarily understand that you don't have material exposure to those components? Matteo Anversa: Not, I wouldn't -- if your question, Ananda, is on the video conferencing being up 8% year-over-year in the quarter, I would not attribute that to the hoarding or anticipated by due to the memory -- due to the memory situation. I think we're all deals that the team has been tracking for quite some time. We are building the muscles as we discussed during Investor Day. And I think through the growth that we had in videoconferencing. By the way, the fact that overall, B2B outpaced, B2C in the quarter in terms of strength, thanks to education vertical that has been doing very well for us also this quarter. I think it's really execution by the team. Johanna Faber: Yes, I see a lot of customers. I didn't get a sense that they we're hoarding ahead of any memory shortages in our video conferencing portfolio. Videoconferencing because it's 100% B2B, basically is a little choppier net sales-wise, just because there's big deals one quarter that may not necessarily be in the next one. So I would look at that business over a little longer period than just quarter-by-quarter, but this was a really good one. But take a little bit longer perspective on VC to really look at the health of it. Operator: Okay. Our next question comes from Joe Cardoso with JPMorgan. Joseph Cardoso: Maybe first one here, I just wanted to follow-up on the last comment and maybe just not specific to videoconferencing, but broad-based across the portfolio, just because we're hearing some maybe more downstream from a PC perspective, talking about pull forward of demand in the backdrop of kind of this rising memory cost environment. Just curious as it relates to Logitech's portfolio, and once again, broad-based, maybe not specific to videoconferencing and maybe your attach here. Are you guys seeing any of the benefits from potential pull forward either this past quarter or the quarter that we're in itself? And then I have a follow-up. Johanna Faber: No. I mean, again, about 60% of our business is B2C. So the consumer is definitely not pulling things forward. But also on the B2B side, where we're kind of half personal workspace half videoconferencing, we really -- I have not seen or heard of any pull forwards in our business. Joseph Cardoso: Got it. Very clear. And then maybe just a follow-up. You talked about the reaching the 10% of U.S. products originating from China or less than 10%, I think, was the exact comments, which seems a bit better than what you guys were targeting. So now that we've reached that point, maybe can you touch on whether there's further headroom to reduce that? And as we think about the combination of ramping those other manufacturing sites, those processes potentially maturing and the pricing actions you've already taken, any new thoughts on how you're thinking about the implications to margins from those actions? Matteo Anversa: Yes. So first part of your question, at this point, I think we are happy where we are. The team has done a fantastic job. Our target was to limit the import from China into the U.S. to 10% by the end of December. And we are, as you correctly so pointed out a little better than that. At this point, I think we are happy with the current landscape. We also -- as always, want and cherish the flexibility because the tariff environment is pretty fluid. So we want to make sure that we have the appropriate flexibility to move things around, and that's the beauty of the [ China Plus 5 ] strategy that [ Sri ] and the team implemented now for quite some time. I think on the gross margin side, if we look at what we have done in the second quarter, what we've done in the third and also the outlook that we indicated today for the fourth, we are really happy where things played out. Basically, the positive impact of the price actions that we took in April in the U.S. combined with the diversification action that you just mentioned, we're able to allow us to offset entirely the tariff impact. And I think we're in a good spot. And then we'll see, we'll talk more once we close the year. Operator: [Operator Instructions] And with that, our next question goes to Didier with Bank of America. Didier Scemama: Yes. A couple of quick ones, if I may. So I think can you give us a sense of the components of the personal workspace organic growth. So how much of that is volume versus price? Because the reason why I'm asking is because I think the question has been asked multiple times in different ways. If you got a PC market next year, tablets down 10% because of higher memory prices, you're going to face like very tough comps, effectively having raised prices this year to offset the tariff impact. So I guess the question is if we've got a very tough PC market outlook in terms of '27 big decline in volumes, would you be happy to just take down pricing? Or would you be happy to just keep pricing to maintain your margins and potentially lose share? Johanna Faber: So we don't break out the exact units versus price versus mix for the company or for PWS. But what I am comfortable in telling you is that the great PWS growth that we saw in the quarter was a combination of all 3. So positive units, positive premiumization around the world, people trading up to the MX Master 4 and other premium products and U.S. pricing. So it was a combination of all 3. And in terms of -- I'm never happy to lose share. So we're going to put the right plans in place to continue to grow and defend share. And I think you see that in the quarter as well. We're very intentional and strategic on when we need to promote on certain parts of the portfolio and very surgical. We're not just throwing promotions and deals across the market but there's places in the quarter where we need a little more, and we do that intentionally and strategically. Matteo Anversa: To this point, the -- if you look at where we closed the quarter in terms of gross margin rate versus what we were discussing 3 months ago, we are in the higher end of the range. And this is really thanks to the diligent and very surgical promotional approach that Queen and the commercial team around the world are having to Hanneke's point. So. Operator: Okay. And that looks like our final question will come from Martin with BMP . Unknown Analyst: Yes. On my side. Just 2 follow-up is First one is can you just walk us through what the main strength factors for the Q3 constant currency guidance to reach the high end or the low end? Is that still mainly the U.S. consumer? Is there any on the China sustainability, is it gaming or the PC market slowdown. And then maybe attached to that, the sell-through was pretty strong, but it's a sell-in, and that was primarily in APAC and EMEA. Was that difference mainly due to promotional activity? Or was there also some in terms of restocking in the channel? That was my 2 questions. Matteo Anversa: So let me take them then, Hanneke, so let me start with the first one, the fourth quarter outlook. So our outlook contemplates a couple of things. So if you look at the midpoint, right, pretty much performance is in line with what we've done in the third quarter. And this applies in totality and this applies also by the 3 different regions. So AP -- we are expecting AP to continue to grow in the mid-teens like we did in the third quarter, low single-digit growth in EMEA, and flat to low single-digit growth in AMR. So that's the midpoint. On the high end, pretty much AP, EMEA remains the same as we did in the third quarter. So the swing factor is, to your point, AMR. We have seen during the third quarter, an acceleration of the momentum, particularly in the United States and mostly towards the end of the third quarter. So the high end assumes that this momentum continues into the fourth and AMR grows into the mid-single digit. So that's really the difference between the two. On your question on the sell-through, sell-in. So -- you have to keep in mind that sell-through is a gross number, right? So it does not include the impact of foreign exchange, and it does not include the impact of promotion, right? So when you look at the total company, sell-through was up 10% year-over-year in the third quarter. We have a couple of points of foreign exchange, so call it 8% in constant currency. And then you have a couple of points coming from higher -- slightly higher promotional spend as we anticipated getting into the holiday season, which is pretty normal. And then a slightly negative mix coming particularly from the high sales on tablet accessories, which is tied to some of the work that we have done on the education vertical. But that's your walk. Unknown Analyst: Okay. Great. So there's no bigger inventory. Matteo Anversa: No big selling, sell through. Yes, correct. No. We're pretty happy at... Johanna Faber: Yes, we're really happy with the inventory. So really healthy channel inventory levels as we exit the holiday season and excellent own inventory turns. So all of that looks pretty good. . Operator: This concludes the Q&A portion of the call. I would now like to turn things back to Hanneke for closing remarks. Johanna Faber: Great. Well, thank you all. It's great to see you. We look forward to seeing you in the follow-ups and thank you for being with us for today. Have a great week.
Operator: Thank you for standing by, and welcome to the Syrah Resources Q4 Quarterly Report Update. [Operator Instructions] I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead. Shaun Verner: Thank you. Good morning, and thanks for joining us on the call today. With me is our CFO, Steve Wells, and our EGM of Strategy and Business Development, Viren Hira. I'm pleased to report our Balama operations delivered a solid quarter of campaign production and closed the year out with real momentum. Our commercial team had a busy fourth quarter, meeting good ex-China demand for breakbulk shipments of our Balama fines, and solid sales of coarse products into the global industrial markets. At the same time, the policy and market backdrop is moving into a pivotal period for support of the growth and potential development of our Vidalia anode material business, a period in which there is potential for acceleration of qualification and further commercial activity. Today, we'll work through the presentation provided with a quarterly report and update you on the key developments in the quarter, then we'll be happy to answer any questions at the conclusion of the call. So turning to Slide 3, and I wanted to remind everyone of our clear and differentiated investment proposition. Syrah is the leading integrated natural graphite and active anode material producer outside China, having deployed significant investment into infrastructure and operating capability with readiness to immediately increase upstream and downstream supply, providing significant lead times over the following projects. Vertical integration from mine through anode delivery to end customer offers a secure source of high-quality, critical graphite material supply outside China. Our unique asset base can be OpEx competitive with China and leading ex-China, and we are well placed to generate strong margins over the long term as operating capacity utilization increases. Our leading sustainability and governance position, including broad-ranging external assessment and low emissions intensity compared with Chinese products provides full auditability and traceability from raw material to finished anode. And finally, in response to expected continued growth and regionally specific requirements in our end markets, we have clear expansion opportunities that we can execute in line with the needs of our customers and government stakeholders with support from capital providers. Moving on to Slide 4 now, our critical underpinning values at Syrah are safety and sustainability. And as we continue to develop as a leading ex-China critical minerals producer, we're guided by 3 core objectives: being positive for the communities in which we operate, being sustainable for the environment, and providing secure high-quality supply for our customers. In the fourth quarter, performance against our key safety and sustainability metrics was very strong. We continue to demonstrate how our people and our local communities are critical to our success. The health and safety and security of employees and contractors will always remain Syrah's highest priority. As we strive for 0 harm in our operations, we saw our total reportable injury frequency rate remained very low at 0.9 incidents per million hours worked, a result which any operation globally would be proud of. Our safety focus is underpinned by our work on critical risk hazard management and infield leadership interactions, which are a daily priority for the leadership teams. For the full year, we saw continuing improvement trends in our injury frequency rates across both operations and further refinement of our asset risk profile. I'm also happy to report that in December 2025, we finalized a new community development agreement with Balama host community and district government representatives. The new agreement extends our community development framework that's been in place since 2017, and commits a further USD 5 million from Syrah to important social and economic initiatives focused on infrastructure, essential services and sustainable income generation programs. Importantly, the priorities for these projects are determined in conjunction with our local host communities in Cabo Delgado. Syrah's operations are clearly aligned with leading global sustainability and governance standards. Last year, Balama became the first graphite operation globally in the first mining operation in Mozambique to achieve the Initiative for Responsible Mining Assurance or IRMA 50 level of performance for sustainability. This achievement highlights nearly a decade of strengthening our differentiated performance, including a strong safety record, investment in training and developing a highly skilled workforce, ongoing community interaction and development and human rights due diligence. Along with our ISO certifications and external auditing required under our U.S. government funding arrangements, we continue to prioritize health and safety and environmental management systems, confirming our commitment to operating sustainably and driving continuous improvement. Final point I wanted to reiterate here is the independent life cycle assessment or LCA of Syrah's integrated operations conducted by [ Minderoo ] on global warming potential. From Balama origin to Vidalia customer gate, our global warming potential is estimated at 7.3 kilograms of CO2 equivalent per 1 kilogram of anode material produced, which is around 50% lower than equivalent natural graphite from the benchmark supply route in Heilongjiang province in China and 70% below the synthetic graphite benchmark in China. This whole sustainability focus, along with the lower global warming potential with our integrated natural graphite anode product relative to other suppliers should provide Syrah competitive advantage on these parameters as the most sustainable source of integrated natural graphite anode material available at scale today. On Slide 5, turning to a more detailed look at our performance in the fourth quarter. Total production at Balama was up 34% on the prior quarter to 34,000 tonnes. This result was in part driven by a clear improvement in recovery rates to 76% and good plant availability. It's worth making a specific mention of the operational performance in the most recent production campaign through December, where we produced 16,000 tonnes at 83% recovery whilst maintaining high product quality. This is in line with our best prior operational performance, and the team is confident that further improvement at higher throughput for greater cost efficiency is achievable. Since recommencing production after the nonoperating period through most of the first half of 2025, it's been great to see the Balama operational team delivering high performance and closing out the year on a strong note. As you'll recall, we restarted operations in mid-June '25 and in July, we recommenced shipments from Balama and subsequently lifted the force majeure declaration that has been in place since December 2024. As a result of campaigns from restart comparisons with the prior 2 quarterly periods are less meaningful here, given that we're still ramping up operations after an extended outage but we are demonstrating clear and continuous improvement and operating comparisons will be more relevant over future quarters. Natural graphite sales of 29,000 tonnes were up 21% on the prior quarter. We continue to have demand to drive our operating campaigns and product inventory requirements, and we essentially sold everything we produced in the quarter, noting the lead time required to port and shipments. This included 2 further breakbulk shipments to Indonesia in the quarter, with solid demand evident for ex-China feedstock into the anode market. Our weighted average sales price for the quarter of USD 577 per tonne CIF was up 2% on the same quarter last year, but down quarter-on-quarter on the customer and product mix. Our C1 cost was USD 535 FOB per tonne during the operating period and freight averaged $74 per tonne. Importantly, this all provides a good basis for lower C1 costs as we can lift capacity utilization and increase volumes. Along with indications of better than historical pricing as ex-China differentials are embedded, positive future cash flow opportunity is clear, subject to demand continuing to increase. Balama has always had potential to generate good margins of greater than 50% capacity utilization and the price premium is being achieved for ex-China sales compared to domestic and FOB China prices. At Vidalia, the operations team continues to build significant operating experience through small batch production periods and qualification interactions. We continue to work through the highly detailed and extensive qualification requirements, and we are making positive progress, albeit obviously slower for conversion to sales than we would like. We're also responding to continuing refinements that have been requested by customers as their own processes and requirements mature in newly developing battery operations and product mixes in the U.S. Our product quality and performance is excellent as per the key technical performance outlined on Slide 13 in the appendix of today's slides. There is no issue with our product specification or performance, and we continue to deal constructively with a highly complex mix of policy, commercial and technical factors. We remain singularly focused on achieving sales as early as possible, but it's clear that greater certainty in the policy and result in pricing and supply environment, which is expected in the first quarter of 2026 will be critical for the next steps in commercial progress. The removal of the Section 30D consumer tax credit in September 2025 saw a marked reduction in U.S. EV demand in Q4, given sales have been brought forward prior to the change. The growth profile is expected to normalize from there. And as the broader policy and AD/CVD or antidumping and countervailing duties case position crystallizes throughout this year. This will be important not just for Vidalia but also for Balama's continuing sales growth. So we emphasize that the extensive work of our operating and commercial teams will pay off with our investment and development experience demonstrating considerable time and capital required for others to follow, creating a sustainable lead time advantage for Balama and Vidalia. I'll hand over to Steve now to talk about the current financial position and interaction with our U.S. government lenders. Steve? Stephen Wells: Thanks, Shaun, and I'll turn your attention to Slide 6 to cover the cash flow for the group. We started the quarter with USD 87 million in total cash, the cost -- restricted and unrestricted cash balances. Our cash flow from operations during the quarter of negative $18 million included receipts from sales of natural graphite product shipments of USD 13 million. Cash outflow was higher than the September 2025 quarter, mainly due to a $4 million partial payment for a breakbulk shipment being delayed into January for a December shipment and higher adviser costs associated with DOE and DFC loans. In addition, the prior quarter's operating cash flow was also positively affected by the receipt of a $12 million Section 45X U.S. tax credit for Vidalia. We experienced some working capital buildup at Balama, ongoing working capital draw from Vidalia through this low production qualification period, and increased adviser cost associated with the loans, also noting that we continue to draw on the DFC loan in the quarter. Our clear focus remains on increasing sales from Balama to facilitate further improvement in the quarters ahead, and to bring Balama to operational cash flow breakeven as soon as possible, as well as completing the qualification process of Vidalia to expedite ramp-up in sales. Through this period, we are highly focused on managing the cost position of both assets. Other movements to call out in this quarter were the $8.5 million disbursement from the DFC loan to fund working and sustaining capital at Balama, which netted USD 1.1 million of financing repayments and transaction costs, led to the $7 million net proceeds from financing amount. At the end of December, the group had a closing cash balance of USD 77 million. Of this closing balance, there is $18 million of unrestricted cash and $59 million of restricted cash under both loans. Of that restricted cash, $10 million is available to fund Balama operating and capital costs and restricted cash of $17 million is available to fund the Vidalia costs. In addition to sales, of course, further liquidity of $7 million is available under the current DFC facility for TSF funding purposes and subject to meeting loan terms and conditions. Interest payments on the DFC loan are currently deferred to May 2026, while debt service obligations on the DOE loan are deferred to 2027 under the Forbearance Agreement Syrah has with the Department of Energy. We continue to work with both lenders given the market dynamics as a result of the geopolitical and policy landscape, which Shaun has referred to, and to the clear strategic nature of the assets and Syrah's market conditions as well as the specific loan requirements, which include various event default and a requirement for further funding by March 1. This also forms part of the overall strategic advisory process we have previously announced with Macquarie. And with that, I'll hand you back to Shaun. Shaun Verner: Thanks, Steve, and I'll spend some time now providing an update and our perspectives on various market developments and the evolution of government policy through the last quarter of 2025, and implications for our business in 2026. On Slide 7, you can see on the left-hand chart, the global EV demand remained strong, though volatile month to month. In 2025, global EV sales were up approximately 24% on 2024 with strongest growth in China, positive developments in Europe, and a spike in demand in the U.S. in Q3 prior to the expiring of the Section 30D consumer tax credit. As noted earlier, we expect the U.S. demand growth profile to normalize over the coming months. And whilst still positive, we expect the growth rate to moderate from prior forecasts. Anode production in China continues to grow, approaching almost 3 million tonnes in 2025, reflecting not only the EV market, but also the rapid rise of battery energy storage systems or BESS requirements for data centers and other stationary storage applications. Synthetic graphite anode material production overcapacity in China has resulted in intense competition for market share and destructive pricing behavior in the domestic market. Although the addition of BESS demand is starting to see some improvement in utilization in conjunction with some early evidence of capacity rationalization. Prices for synthetic graphite anode material, especially lower-grade products remain below estimated production costs in many cases. Synthetic graphite anode margins have also been impacted by higher coke feedstock costs, maintaining pressure on Chinese producers as only 2 or 3 major producers have significant export market share. These elements are now indicating that prices may be coming off historical sustained flows. In the natural graphite space and anode material production, low overall anode material prices have kept precursor margins and upstream feedstock margins very low over successive periods. Below a few of the larger Chinese anode material producers remain profitable, an increasing number of Chinese natural graphite feedstock and precursor suppliers are not operating due to poor margins and low demand driven by domestic market price substitution, seeing Chinese anode material supply at around 85% synthetic graphite. In the ex-China market, which is more balanced between products, natural graphite anode material demand was lower in Q4, largely due to the U.S. consumer tax credit removal. But through further development in 2026, we expect to see continuing structural shift driven by policy. U.S. government tariff policies and preliminary AD/CVD investigation outcomes have already seen transition to lower Chinese exports evident in the chart on the right-hand side of this page, replaced by supply from Indonesia into the U.S. and Chinese owned facilities. This has been positive for Balama supplying Indonesia, and there is potential future demand in other ex-China production capacity. As the antidumping and countervailing duty investigation is expected to finalize in this first quarter of 2026, the potential for implementation of minimum 5-year antidumping tariffs and countervailing duties may support Vidalia further through increasing demand for ex-China supply and potentially underpin capacity expansion. There are continuing deep market challenges and financial pressures across the global battery and input materials sectors arising from the dominance of incumbent Chinese producers in both cell production and feedstock and precursor supply. Policy decisions will be key to the evolution of both demand and pricing for ex-China supply, and we do expect to see support for diversification decisions and positive developments from a more level playing field for ex-China production. Slide 8 sets out the current position on a number of these government policy settings, which deliver potential support to Syrah's strategy to be the leading ex-China integrated natural graphite and anode material producer. Over the course of 2025, we saw key U.S. government policy changes, in particular, the antidumping and countervailing duties investigation and combined preliminary tariff imposition of at least 105% and various other import tariffs and policy instruments, including the definition of prohibited foreign entities impacting future availability of the 45X tax credit to battery and auto manufacturers, credit, which is very important to their profitability. The ever-present specter of trade tensions also keeps concerns arising from China's export license controls alive for graphite anode and processing equipment similar to those restrictions imposed on rare earth exports. This remains a key driver of ex-China purchasing diversification considerations for potential customers. The combination of these factors should level the playing field for ex-China supply through this year and Syrah's major investment and capability build will allow us to capitalize on both the competitiveness and value of Balama feedstock and our anode material from Vidalia for OEMs and lithium-ion battery manufacturers in the U.S. Turning now to Slide 9, and a summary of our key strategic priorities and milestones over the coming 6 to 12 months. In the first half of 2026, we'll target campaign production to support increasing natural graphite shipments to ex-China anode material customers with a particular target on breakbulk shipments for efficiency. This will continue to generate important revenue for the company as we progress our technical and process qualification steps with the data customers to progress sales from there, concurrent with the near-term evolution of commercial and policy positions. At an industry level, we're awaiting the final determinations for the antidumping and countervailing duties investigation in the U.S., which are due by the end of the first quarter. If the preliminary duties are finalized, they will be in place for a minimum of 5 years, providing important stability and a marked leveling of the competitive position for Syrah relative to Chinese exports to the U.S. Geopolitical developments, including government focus on addressing the vulnerabilities caused by the concentrated structure of graphite supply and anticipated demand growth, particularly outside of China, underpin our loan restructuring efforts and pursuit of further strategic transaction opportunities. We're advancing a process advised by Macquarie to review strategic partnering and funding options to enable strengthened position in which to pursue developing market opportunities. At Vidalia, we expect to further progress technical and process qualification with the high-quality products with customers' immediate purchasing decisions informed by policy developments. Concurrent with driving our Vidalia operations into commercial sales, we're targeting additional customer and financing commitments to facilitate potential expansion steps through 2026. We're optimistic about improving market and policy positions soon, and we see a number of clear positive catalysts ahead that have the potential to create significant value. We strive to deliver against these objectives safely and rapidly, and we look forward to communicating further progress as we move through. We're now happy to move across to questions. Thank you. Operator: [Operator Instructions] Your first question comes from Austin Yun with Macquarie. Austin Yun: Steve, good to see continued production ramp-up at Balama. The first 1 is more around the market color. I know you touched on that briefly. I'm keen to understand the current market dynamics from the pricing front, like we see that lithium market is flying with a strong BESS demand where half of the BESS battery requires graphite. Just trying to understand, are you observing any customer behavior changes for the ones you're engaging with or new markets emerging and also the pricing changes into the March quarter. I'll come back with the second one. Shaun Verner: Thanks, Austin. I think we are seeing an ex-China pricing differential, call natural graphite. I think differently to the lithium market, the graphite market is still dominated globally by synthetic graphite anode material, and that is seeing a weight on the overall pricing for graphite. But the growth of ex-China manufacturing capacity, particularly in the natural graphite space, starting to create a bifurcation in that pricing between China domestic and ex-China pricing for the natural graphite feedstock. I think more broadly on anode material, the regionally specific policy matters that I mentioned during the course of the call, will be the greatest determinant on pricing. But assuming that the policy conditions continue to evolve in a positive and supportive manner, there's strong underpinning potential for improvement in prices for both anode material and demand for Balama feedstock. Austin Yun: Second question is on the balance sheet and the cash flow. Just keen to understand your liquidity requirements given that Balama is up and running again, which I assume requires a bit more working capital, also assuming you would need to tap into the $10 million restricted cash for Balama in the March quarter. Is that the right understanding? Shaun Verner: Yes, I'll hand over to Steve to make some comments there, Austin. Stephen Wells: Yes. Thanks, Shaun. So within our sort of cash balances, you'll see we have restricted cash as well as unrestricted cash. So within the restricted cash we have funds at Balama of $10 million that can be used for working capital, plus obviously, receipts from sales and Shaun has talked about some of the positive direction there. And we also have $7 million available under the DFC loan that can be used to fund the TSF, which is probably not a Q1 expense but more spread out over the year. So we have that available. Obviously, the key swing factor is -- does relates to sales. And then at the end of the year, we also had that $18 million of unrestricted cash also. So very much dependent on the production side of things as well as the receipts that we get from sales during the quarter. I just kind of highlight as well, as I talked about in my comments that a $4 million partial payment for the breakbulk that we did in December was also received in early January as well. So that's part of our cash consideration for the quarter. Operator: [Operator Instructions] Your next question comes from Mark Fichera with Foster Stockbroking. Mark Fichera: Shaun, just a couple of questions. Firstly, you've guided regarding production of no less than 30,000 tonnes of graphite in the March quarter. I just -- I assume that in terms of sales, which you're looking at least 30,000 tonnes as well, just given you've built up your inventory now at Balama. Shaun Verner: Yes. Thanks, Mark. Yes, we've been very clear that we're using our sales forecast to drive our production decisions. And we are seeing a more consistent and stable demand outlook. So that is supporting that view. Should that change, we have capability to produce further through the quarter, but that's the view at this stage. The coarse flake markets relatively stable, and we watch very carefully what the supply-demand balance looks like in those markets as well. But it will really be that ex-China anode material demand profile that drives our production and sales position for the quarter. Mark Fichera: Right. Okay. And a second one, regarding the battery energy storage systems market, you mentioned that the future market for the company. I was just wondering, yes, can you elaborate a bit on that in terms of how you would approach entering that market in terms of what potential impact on Balama and Vidalia in terms of the operations to enter that market? Shaun Verner: Thanks, Mark. I think it's still very early stage to talk through that. The vast majority of battery energy storage system cell supply and battery supply is coming from China at this stage. And therefore, the majority of anode material supply is obviously domestically procured in China and synthetic graphite. One of the key requirements of that segment is long warranty periods and cycle life performance is key. And you might recall from other discussions that we've had that natural graphite anode material has a higher energy density than synthetic graphite, but synthetic graphite tends to have a longer cycle life performance than natural graphite. So it's certainly something that we need to take into account. But what will be driven by is the development decisions of the battery manufacturers, primarily in the U.S. in the requirements or specifications that they need, and it's pretty early stage in terms of their thoughts on that front because most of the capacity in the U.S. is currently geared towards EV. Operator: [Operator Instructions] There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Oleg Vornik: Good morning, and welcome to the DroneShield December Quarterly Investor Presentation. I'm Oleg Vornik, the Chief Executive Officer of DroneShield, and with me is Carla Balanco, our Chief Financial Officer; and Angus Bean, our Chief Product Officer. I will aim to speak for about 20 to 30 minutes, and then we'll turn to Q&A, which will be the majority of this session. I encourage everybody on this call to submit your questions as you go as opposed to wait until the end of my presentation, so we can commence the responses to Q&A as soon as we're done. I'm going to skip the basics of DroneShield as I assume most who have dialed into this call [Audio Gap] in revenues as well as about $202 million in cash receipts. This is a truly outstanding result and approximately just under 4x the increase from the top line of last year. But importantly also, we have started really strongly on the 2026. And a reminder that we are going in calendar year-end. So roughly this time last year, we would have begun the year with maybe $5 million or $10 million in locked in cash receipts and revenues while today, we're essentially $100 million that we have carried over from the end of last year, and that will be reflected in the next 1 or 2 quarters, plus any additional business that we're currently working on. The SaaS revenue similarly has continued to climb. So we have gone from just under $3 million in '24 to just under $12 million in '25, and we have already locked in over $18 million for 2026. And again, this we anticipate to continue to climb as we secure more sales with SaaS attached to it, but more on that as we speak about our SaaS strategy. In terms of the profit before or after tax, we're going to be releasing this in about a month from now as part of our annual results, and that is what our finance team are busily working on. The next slide gives roughly a quarter-on-quarter and a year-on-year comparison. So across all top line metrics, the revenues, the customer cash receipts, the SaaS revenue and the operating cash flows, we are seeing significant increases. The revenue from customers and the secured revenues is not the only metric. The pipeline remains strong at about $2.1 billion, and that is a small reduction from the $2.4 billion roughly that we had about 3 months ago. And a lot of it is driven by a -- us essentially being slightly more conservative when it comes to the civilian revenues in the U.S. We're seeing still a lot of momentum in those non-military opportunities in the U.S., and I'll talk more about it. But essentially as part of us being more strict in how we apply those metrics and also remembering that U.S. civilian sector is a very nascent industry and much like what military used to be several years ago when you had the early stages, you are not always seeing that progression. And if you go -- just give me one second. I have received and know that I need to reshare the slide deck, so I will do so now. [Technical Difficulty] Okay. Now you should be able to start seeing the screen again. Apologies for the IT issue. So $2.1 billion pipeline, which is an exceptionally strong pipeline that I will talk more to in the next couple of slides. But ballpark, we're talking 300 deals diversified across products, geographies, stages of maturity and so on. Underpinning all this is about 350 world-class hardware and software engineers here in Sydney that has taken a decade for us to build. There is no team of this sophistication and quantum in the market that we're aware of. And this is what's leading to the highly differentiated nature of our products, both the current products, which I believe, are the best out there, but also the next generation of products that we'll be commencing release of in the second half of the year, which we think will completely transform how our customers think about counter-drone solutions. The $70 million plus R&D spend and we expect that to continue, slightly increase, but not a lot. So we expect to go from about 500 to 600 people, assuming our recruitment program goes on track by end of '26. Most of those would be engineers as well as ops and salespeople. And this will continue building on our highly -- basically high gross margin products, so 65% gross margin as well as a healthy cash balance. So let's talk about the individual geographies. U.S. has, for a long time, been the engine of growth of the business, so 70% revenues. Last year, Europe has taken that title and Europe will continue driving a lot of our momentum as we're seeing a number of countries really ramp up their defense, realizing they cannot just rely on the U.S., they need to be self-reliant, and increasing their defense expenditures significantly. And within that, we're really well positioned, including setting up manufacturing in Europe. We have a number of well-credentialed distributors that we trained and are deeply ingrained with our military but also critical infrastructure and customers through Europe and set up our office in Amsterdam led by Louis Gamarra, our Global Chief Commercial Officer, who is then managing those distributors around Europe. In the U.S., after a relatively quiet '25, we expect to have a very strong '26 once the current U.S. congressional '26 budgetary discussions are concluding. And hopefully, that will be all in the next month or so. And that is across several verticals. The defense budget, which is already at the record of USD 1 trillion in '26 is proposed to be USD 1.5 trillion in '27 and we believe we're well positioned as JIATF 401, which is the centralized procurement office for counter drone in the U.S. will start kicking in. Outside of the defense, the Department of Homeland Security has set up a dedicated team, the Program Executive Office with USD 1.5 billion contract vehicle. And that's also linked into the FIFA World Cup in June, July where you need significant security, including counter drone. And Safer Skies Act in a nutshell enables police and majority of police in the U.S., state and local, not federal, enables states and local police to be able to jam on our product, if you think DroneGuns, RfPatrols, DroneSentry-X, on-car sensors and effectors are perfectly suited for police deployment. And also, we have been included in the Golden Dome, the $151 billion SHIELD IDIQ. Now those are primarily missile protection sites, but all of them will need counter drone protection. So that's where we intend to play. In the U.K., those of you following me on social media would have seen that I shared a picture in Hereford about a day ago where there was a U.K. Minister of Defense visiting the SAS HQ facility, and that was our RfPatrol basically being demonstrated as part of the visit, and that is not a stage marketing opportunity. This was a genuine visit unrelated to DroneShield and this shows how deeply embedded DroneShield is within the various arms of the Ministry of Defense. And we believe that the actual opportunity is much more than just $17 million or 5 projects. This is what we are actively tracking. But I think the U.K. will be spending significantly on counter drone, and I believe we are, by far, the best positioned business there. In Australia, we've recently been included into a Line of Effort 3 panel for LAND 156, which is saying to be the managing contractor on specific sites. And we expect that work to commence as in the participants on those panel will start getting those roles sometime this year as well as us being part of Line of Effort 2, which is purchases of portables like DroneGun and RfPatrol and where we received initial small couple of orders totaling $6 million last year, and we expect to get more off the back of that. In Asia, a lot of our efforts are driven off Japan and the rest of Chinese neighbors, and we expect that to continue ramping up significantly. Outside of all these geographies, South America is probably the key driver where we're very active in both Colombia and Mexico, and Colombia has announced USD 1.7 billion counter drone budget. And the key focus for South America tend to be fixed site systems, our drone DroneSentrys, which provide protection for the whole facility. I'll likely skip through the Safer Skies Act except to say that this is significantly increasing our U.S. law enforcement demand. On the products, again, I will skim and maybe refer back to it during the Q&A session, but a reminder that we do a complete range of dismounted and on-the-move and fixed-site products. So we are a radio frequency AI-enabled drone detector and defeat maker, but we are also an integrator. So integrator of third-party detectors and third-party effectors. And this is quite important, especially when it comes to fixed sites. I want to spend a little bit of time talking about the software strategy. So today, software is a small, about 5% part of the total revenue. We plan to have it as close to 30% over the next several years as possible. And this will be achieved by every new product that will be released going forward, having one or multiple SaaS streams on top of that product. DroneSentry-X is a good example. So today, when you buy DroneSentry-X, you have RFAI, which is our AI-enabled engine that runs as a SaaS product on that. But then you're also probably going to have it deployed as part of your site. And within that, our C2 is also the other SaaS product that will be applicable to you. If now you happen to run multiple sites, our enterprise SaaS, so DroneSentry-C2 Enterprise kicks in, which gives you a region or a country-wide awareness and that is an additional product again. Now if you're having a multisensor solution, chances are, you have cameras, so our DroneOptID SaaS, you probably have radars where there's SaaS attached to it as well. And we'll continue releasing new SaaS families, optimizing for more and more of the SaaS offerings on top of the hardware that we sell. I think selling as hardware and software positions us really well competitively. I would not want to be a pure software business in the world of ChatGPTs, et cetera, today, where you're worried that the big AI is going to eat your lunch. And I think hardware, which is highly customized, high IP sort of product, we have a lot of effort that we've been putting in, in terms of designing that circuitry, designing those antennas, how it all sits together. And having AI that works on that hardware, not in the cloud, it's not large server farms, but on the device, AI on the device, is making us a truly unique proposition that is very difficult for somebody to replicate. And I don't believe we have any competitors that are doing anything quite like we are in terms of our deployment of AI to sense and take down drones. And so this is our strategy to then grow our SaaS to 30%. But then importantly, selling to militaries and government agencies is recurring by nature. So in the world of counter drone where you really need new hardware every 3 or 4 years, whatever the customers are buying today in terms of hardware, they'll be fully replacing in about 3 or 4 years. In fact, some of our customers are already seeing the trend and they're asking us, and I think this is potentially where the industry is moving, towards Counter-Drone-as-a-Service. So instead of paying us x dollars for hardware and then continuing to pay SaaS, it's basically becoming one giant SaaS and the hardware refreshes are baked into that. Now this is not going to be done by everybody. And this will enable us to continue receiving those bigger one-offs in the short term from the hardware purchases as well. But I think in the long term, so over the next 5 to 10 years, I think a lot of the industry will move towards Counter-Drone-as-a-Service, which will further smooth out our cash flows. Number of differentiators, so technical and commercial, I've talked to many of you about this before. On the technical front, the AI. So our enormous database of drone signals, the largest proprietary database of its kind in the world, we believe, which is collecting drone signal data from 70-odd countries in which we operate. And this is one of our also key advantages compared to, say, North American or European competitors, a lot of whom focus on their regions because the markets are big enough. Coming out of Australia, we always had to be a global export business because the market here doesn't support a business of our size, and that enabled us the global reach as well as building those enormous databases. And then we have data engineers in Australia, cleaning, tagging the data and enabling them the dedicated hardware with an AI engine to perform against drones. Now we're super excited and we can talk more about it in the Q&A if people are interested on this call about the next generation of AI engine that we are planning to release later this year, which we really think will be the game changer in the performance of the drone detection as well as the defeat. So as a result, our gear can detect, further defeat, further be lighter, smaller and be in various form factors. So on-the-move, fixed-site or both. On the commercial front, we are one of the most global counter drone businesses. Now we don't supply to the likes of Russia, China and North Korea, Iran and so on, but within the Western and Western allied countries, I don't believe there is a counter drone company with a wider deployment than DroneShield is. And over the last 10-plus years, and we've truly been a pioneer in this business, and there are a lot of people in this company with very significant longevity. We've seen the whole cycle, both from the commercial and technology experience. We have this think tank capability of understanding where the threat is moving, what the drones are likely to do, how to direct our road map, what makes sense, and this is also our competitive advantage. In the world where you have to have understanding, not just with military technology, drone technology, but also the acquisition cycles and how various customers like. On the competitive positioning, we have 1 or 2 competitors usually across most of our product lines, but we are aiming and I believe we are today the leader in every product segment in which we operate. Traditional defense primes, we see more as our customers rather than competitors just due to the requirement to rapidly evolve like 3 to 4 years hardware cycles, quarterly software updates and also be cost competitive. Live defense primes are not positioned for that kind of performance. Theirs are more like, if you want to build a tank or a missile with very different sort of competitive moat. And I believe that we remain the only publicly listed pure counter drone company in the world. There are other publicly listed companies that do lots of things as well as counter drone being a relatively small part of what they do. But we are the only pure-play counter drone listed company in the world. And on the manufacturing capacity expansion and maybe in the interest of time, I'll stop on this slide, we are on track to expand to $2.4 billion by end of the year. We are -- we're just in the process of completing the move now to our 8x. Beside the facility expansion in Sydney, we are setting up manufacturing in Europe and in the U.S. So the idea is for smallish orders up to maybe $5 million, we can usually deliver really rapidly. So for example, the order that we announced on the 30th of December last year, about a month ago, we delivered the following day, and this was in Europe. And for larger orders like the $62 million order we received in the middle of last year, we delivered that within 2 months. And the idea is that if we receive an order in hundreds of millions of dollars, we can still deliver that within, say, 2 quarters. So that's the goal of manufacturing capacity and how we look at the inventory. I'll stop there and see if there are any questions in the function. Just give me one moment. Oleg Vornik: So the first question is why did the pipeline move from $2.5 billion to $2.1 billion? So this was what I was alluding to earlier about in the U.S. when it comes to the civilian sector, we had more bullish assumptions that we have today in terms of follow-on projects. So some of those non-military, non-law enforcement, more nascent industry type situations, where I still think there's going to be an enormous business to be done in data centers and airports and energy infrastructure. But a bit like what we've been seeing with the military sector, say, 5 years ago, those customers are still struggling, given it's their very first time buying counter drone equipment. They need to figure out how much they want to spend, how they want to lay it out. So we have significantly trimmed and made more conservative our near-term forecast for the U.S. non-law enforcement, non-military sector in terms of what we presented in the pipeline. So in the very near term, I still expect defense to be the majority driver of business in this company, except in the U.S. where I think law enforcement will be a very significant contributor. And I think over the next 3 years or so, the civilian sector would really start picking up to the point where if you think about the total addressable market, the USD 30 billion for the military and USD 30 billion for the civilian sector, I'd see in the long term, this business being 50-50 military and non-military. Any guidance or TAM for SentryCiv? So SentryCiv is our commercially focused more affordable product that we released several months ago. We already started having early sales to customers. And this is focused on civilian customers who are budget conscious and they want to be spending hundreds of thousands of dollars or in the low millions for their deployment, but rather they want to be spending tens of thousands of dollars a year. And it's a little bit too early to tell. And I think a lot of that adoption will drive as the civilian market starts to take on. So we're talking potentially farms concerned about activists, and we've already been seeing purchases on that front, some energy infrastructure, stadiums and so on. The next question is when or how would we consider a U.S. listing to increase exposure to U.S. investors? I think there will be a time when that makes sense. However, my view is that you need to be significantly larger. So today, we're about AUD 4 billion market cap or US, call it, USD 2.5 billion. But while that is significant. So we are probably halfway on the ASX200. That is truly a micro cap by the U.S. standards, and I believe that it's going to be a disservice for our shareholders if we list on the U.S. market now. But say if we are 2x or 3x the size, which given the growth we achieved, we more than tripled just last year alone in terms of the share price and the size, that could start making sense. So I think this is a regular thought that we're having. But right now, my personal opinion, a bit too early in terms of diluting from our primary listing in Australia. The next question is, when are we expecting to start manufacturing products in European Union and in the U.S.? This half year. So in Europe, this quarter, and in the U.S., the following quarter. Are we finding any challenges to slow this down? No, I mean, there's obviously the usual process, nothing simple in terms of the supply chains and whatnot, but we're not seeing an issue. The next question is how do we counter fiber optic drones? So there's actually a slide in the appendix of the investor presentation that I will draw those of you who are interested in this question, but I'll give you a short summary. So radio frequency and drones are very closely linked. I see this a bit like wheels and cars because there's been so much invested in road infrastructure, whatever cars will look like in 50 years, they'll probably have wheels on, whatever they'll look like. So similarly, radio frequency is so core to the drone technology that the reason why fiber optic and attempts at AI exist is to try to circumvent what we do, but we are still dealing with the vast ramp of what drones are. And fiber optics have very severe limitations like you think practically, right, flying a drone with 10 kilometers of a fishing line attached to it and snagging at other things or snagging the line itself, very, very difficult. You can't fly quickly. And a lot of the images by the way, coming from Ukraine, I wouldn't necessarily trust what you see. Information warfare is prevalent. They say in war the first casualty is off on the truth. So -- but if you are really looking to make sure you can counter them, remember we're an integrator as well. So we build in radars and cameras that can track fiber optics, and we can integrate, and we already have, in fact, integrated things that can effectively count current electronic systems inside of our DroneSentry that can deal with that as well. But frankly, our customers are not seeing a lot of concern based on everything I'm observing on fiber optics, and it's more of a media thing. The next question I may pass to Angus about RFAI and our next generation and what it means. I'm personally really excited by that. So Angus, over to you. Angus Bean: Thanks, Oleg. Good morning, everyone. Thank you again for attending this morning and your continued support and interest in DroneShield. Yes, very keen to talk about our next-generation AI technologies. As many of you know, we have been a pioneer in the counter drone space. We're also a pioneer in utilizing what we call micro AIs. So these AIs are run on the edge. As Oleg mentioned, these are not cloud-based, big server farm, big GPU-based systems. These are very low power, very high throughput AI systems that run essentially on the edge. And that strategy that we developed over 8 years ago has proved to be incredibly accurate as our detection performance often, as you can see in the results of '25, has been really good, and there's been a large adoption of these systems. And the other thing that it allows us to do is attach a software and service license arrangement to the products as well to get those recurring revenues. The AI, the next generation is coming through, and we're really excited about the developments. So we -- our current models, RFAI-ATK and RFAI V2 are doing really well in the market. We are working on both RFAI-3 and RFAI-ATK-2 that will be reduced -- sorry, will be released onto the existing products but also, as Oleg alluded to, our next-generation platforms later this year. And there will be a slow rollout through the different products that are appropriate over time. One last point I'd make on here is the key thing you need to understand about building an AI business is the algorithms that you develop are important and they're difficult. But once you get through that, it really becomes a race for information or a race for data. DroneShield has more data available on drones than almost any company in the world and we're utilizing that as the core foundation to both sustain our current generation AI models. But more importantly, that's also the bedrock of our next-generation AI models, which will be much more open and much more applicable to the new varieties of drone technology that we're seeing in the future. So a bit of color on that one on to you. Oleg? Oleg Vornik: Thanks, Angus. The next question is, do our products -- I'm paraphrasing the question slightly. Do our products have any familiarity to systems developed by Palantir? So Palantir develops more broader software only based battle space awareness systems. This is quite a bit different to us. We are focusing specifically on counter drone, we're doing a fusion of hardware and software. And in fact, I believe that going forward that fusion, that working together of software, the C2 and the hardware will become increasingly more important. So no, I don't quite see us competing with Palantir, which I think is a great company. The next question is, do we think that any of our customers are delaying purchasing our current generation of products for the next generation? Look, I doubt it. So the next generation of products will come in batches through to and probably from the end of the year onwards. I mean it's probably a bit of an analogy. Would you not buy an iPhone and wait for another year for another iPhone. Look, you probably would wait except if your life depended on it, you'll probably buy the current iPhone as it stands and then you'll buy the next one when that is released. So I don't believe there's any way. There's expectation, in fact, that military see working with DroneShield as a long-term partnership, which is also how the 65% gross margins are justified, in that we're doing significant ongoing investment in R&D, which means we will be releasing new hardware every several years, software every quarter. And they will be having to upgrade and also that's where counter-UAS, the service idea comes in. Next question is, can we talk to the new product road map and any changes in the mix of potential uplift? So there's not everything that I can speak about. But the general comment I would make is that the average sales price would be higher. So we're pricing our product to the gross margin, which we -- on the hardware front in -- are planning to keep at 65%. But the extra product cost is likely to be close to triple just due to the more advanced chips, circuitry and so on. But essentially, it would mean that the revenue should continue to rise, I believe, as low market situation and customers are looking to still have counter drone products where they often have very little by way of the civilian sector hasn't been started, for example. And so larger dollar numbers, but similar margins. And hopefully, as SaaS continues to increase as a percentage, that will, in time, increase the gross margins across the business. The next question -- sorry, it's a bit of a long one. I'm trying to read it as I go. So maybe I'll turn this one to Angus as well. So the person is asking about the -- us previously talking about the ongoing cat and mouse dynamic in the technology. Can we give an update on how the landscape is evolving? So what are the drone makers doing to make our life difficult essentially? And how are we responding? And then a follow-up, what are the fundamental shifts in the underlying technology that we're seeing and how we're positioned with those changes? So Angus, over to you. Angus Bean: Thanks, Oleg. Great question. So yes, we are definitely in counter drone 2.0, and we talk about that a lot on DroneShield where we really are in the second era of counter drone warfare, whereby the big shift here is that the drone manufacturers are actively building systems and technologies to mitigate previously deployed counter drone solutions. And so we are seeing a really large uptick in that. And we've spoken about this before. This is the reason why we invest so much of our time and energy and financial resources into R&D. We have, as Oleg mentioned, the largest R&D team specifically to meet the needs of this emerging market. So to give you some examples of what we're seeing and drone manufacturers use, we are seeing really wideband RF communications. We're seeing mesh networking in drones. We're seeing obviously the fiber optic, which we still feel is a very niche use case, technology becoming into play, and we are responding accordingly. But we're responding with solutions that our customers can actually purchase and field. There's a lot of solutions out there, particularly once you get into kinetic and high energy and laser systems that either financially or operationally are not really something that a lot of our customers can deploy easily to the level that we basically expect from DroneShield. So we're responding with solutions that are going to work for our customers, most importantly. The thing -- and going back to the point forward, we've been looking at this for 10 years now. But the thing that we really understand is the core principles of the drone technology. We've watched this technology evolve over time. We have some pretty good understanding of where the evolution is going and it really is going back to first principles. There are physical limitations on what you can do with the radio system, there are physical limitations on the airframes and once you understand those first principles, then you can build technology to meet those changing needs. And as Oleg mentioned, what are we doing about it? We are looking at integrations of a number of different technologies that we don't plan to build ourselves. I think a good example of that is the interceptor drone category, but we are currently doing test evaluation, and we are in very close communication with a number of interceptor drone companies around the world that market itself very competitive, no clear owner and winner. So we plan to take a strategic view and just partner with best-in-breed. We are doing that work now to work out who those partners are and pushing those integrations. Oleg, did you want to talk to anything on the M&A front on that side? Oleg Vornik: On the M&A front, our goal is to ensure that we continue being best of breed in anything that we buy. So you'd notice we have $200 million in the bank. Obviously, we have ability to use our stock as well, but we do not want to buy one of many. And I think there have been cases in the counter-drone industry where people went out and purchased companies that were not best of breed basically just for the sake of making transaction. We are very disciplined, which is why in our 10-plus year history, we haven't done an opportunity yet, but that's not to say that we're not actively looking. And in fact, we have hired [ Josh Bollo ] to start with us this week and one of his explicit focus areas is assisting us to identify M&A targets for us. And so we -- this is something that we're actively thinking about, but it has to be a success for the company. I often find that, and as you guys may well know, I come from M&A background myself. In a transaction situation, the target benefits much more than an acquirer. And obviously, here as being an acquirer, I want to make sure that it is value add to the shareholders. So we're being very careful. But I believe the opportunity is there in terms of acquiring best-of-breed capability, otherwise, we'll just keep developing things organically. The next question is around the Golden Dome. So the SHIELD IDIQ, the USD 151 billion program that we are now a part of. And the question is, has the U.S. given any context to the time lines and when we're going to see pipeline from SHIELD IQ (sic) [ SHIELD IDIQ ]. So there is no pipeline from SHIELD IDIQ in our sales pipeline right now because it's a little bit too early. On the timing, it's really difficult to tell. There have been, as you probably know, a large number of companies included in that IDIQ, but it's also a very large program. So I'm hoping to get some news over the next 6 to 12 months on this. And I'm glad we're included. And like I said, all of these missile protection sites will need to have a counter drone program attached to it. And so I believe we're well positioned. So the next question is -- I'm trying to summarize it, is that basically, I think, the asker is wanting to get some more background around me selling the stock of the performance options in the business back in November last year. So look, the background is as follows: myself as well as a number of senior executives in the business get rewarded when we hit revenue thresholds. Those are exceptionally ambitious thresholds. When we had no revenue to speak of, it was $10 million. When we hit $10 million, the next threshold was $50 million. When we had $50 million, the next threshold was $200 million, which is the one that was achieved in November last year. And now the next threshold we communicated, which is more of an industry best standard, is a number of those thresholds rather than what you call cliff vesting, which is what we've been operating in a more elegant way up to now, where you have $300 million, $400 million and $500 million in revenue as your threshold and for each one of these numbers being reached, you have some vesting of the options immediately and some the other half 12 months later. So it's a very, very staggered fashion. So once those performance options have vested and I've chosen to exercise them, that essentially crystallized immediately half of that as a tax bill, regardless whether I would have sold them or not and regardless where the share price would have gone. So essentially for me to immediately crystallize $25 million in tax liability regardless where the DroneShield share price is, which is a huge burden. So clearly, anybody looking at this now would have said, okay, well, Oleg is looking to sell at least $25 million worth of stock to pay the bill to the ATO. And then the rest, look, I grew up in a fairly poor condition as some of you who followed me would know in social housing and so on. So this was an opportunity for me to secure my financial future. I had a mortgage, a fairly significant renovation bill, unfortunately, that went out of control, but more generally secured the financial future. Look, unlike what some of the articles reported, I did not sell everything. I still have a multimillion dollar equity position through the stock options and obviously continue to care about the business. And I would also say that while the price has reduced a bit before, like from about $6 plus to about $4, it was completely unrelated to selling. It was before the selling. And this was in line with the general listed market slide down after a hard run up a couple of months before. And in terms of impact from misselling, well, the price now is higher than what it was before I started selling. So those that would have held on. I'll be seeing the money. And I would say that we are #1 performing stock in terms of 3x plus growth out of the ASX200 in 2025. And I hope as we continue to keep goals, the share price will continue to perform. And maybe the last thing I would say is that while obviously I was in the news as a director and my filings are public, there are a number of employees in the company that also benefited from this, and I'm really glad for them because life at DroneShield is not simple. In order to achieve those revenue targets, the amount of effort and the sacrifice on people's family life and so on is very, very significant. We're not just posting these results because we're lucky. So I'm glad that all of these employees, they've been around for many years and have prioritized the company over anything else in their lives, have been rewarded and continue to be rewarded as part of the stock structure and this is aligning with obviously investor interest. And then ultimately, as we'll continue to keep goals in terms of our financial performance, the stock price follows that as we've seen through '25. I think the next question I might pass to Angus in terms of the other current supply shortages across semiconductor industry expected to impact 2026 revenue. And maybe more generally, Angus, if we talk about our supply chain and how we deal with that. Angus Bean: Sure. So one thing we're really proud of at DroneShield is we've never missed a delivery. So in all of our history, when we have been working with our customers, many of those had been urgent requests for equipment, we've been able to supply generally into the time line in which the customer needed that equipment. That's something we're really proud of, and that's the sort of thing that gives many of our end users and our customers the confidence to go with DroneShield and -- so that they can place significantly larger orders with DroneShield and know that we'll meet their demands. I mean the great example we had last year was the very large European order, over AUD 60 million, which we essentially was able to turn around in just over 2 months which is an incredible feat of our operations team, working very closely with our various supply chain partners. In terms of the supply chain, we are investing a lot of capital into ensuring that we can meet those long lead time items, we can build confidence in our supply chain partners, and we can secure the stock that we need. And obviously, the much larger facilities that we already have in Sydney at the moment are supporting that as well, having additional warehousing and just logistics support to do much larger orders and turn them around very rapidly. So we're not experiencing any delays that are material to us in delivering on orders at this time. And so we're in a relatively good position there. Oleg Vornik: Thanks, Angus. The next question is around whether DroneShield is being affected by the Trump tariffs. So we have revised our pricing and fully passed on the tariffs when they were introduced last year. So no, we are not affected. The next question is slightly long, so I'm trying to summarize it. It's around how do we continue to innovate in response to new drone technologies such as fiber optics. So to kind of reiterate what me and Angus said before, DroneShield at the heart is an engineering organization. We have 350 engineers, but not just slabbed together over the last month, but a lot of these people have been in the organization, especially in the senior roles in the last 5, 7 years, right? I've been in this company now for more than 10 years. Angus has been here for a very similar amount of time. Even outside of the engineering functions, Carla, our CFO, has been here for about 8 years. So there's a lot of longevity in the business and understanding of the trends and where things might go, right? And the drone makers are a clever bunch, but physics is physics and there are natural limitations of what those guys can do. And I guess, further up the curve you go, the more difficult it gets and where they are waiting for them as they're making their technologies more sophisticated. So to me, innovation in drones is a very positive thing. If the drone makers stopped innovating, the counter drone industry would commoditize and our gross margins would collapse. So that rapid engineering mindset and deep experience in anything to do with counter drone is our key competitive advantage, and we actually want the drone makers to keep innovating. Our customers do not want us to be -- what -- they're not expecting us to be 100%, nobody is, but they want us to be materially better than competition, which I believe we are, and to continue to innovate. The next question is whether we can give an update on the Homeland Security World Cup. So this is the June, July event and how we're positioned. So there was a grant from FEMA, a U.S. government agency for about $0.5 billion. And there are a number of U.S. law enforcement agencies that have been applying for these grants at various degrees of that process. There's only so much I can share. And obviously, under the Safer Skies Act, a lot of these guys once they go through their Huntsville, Alabama FBI range training school are able to use jammers as well. So we are well positioned. Obviously, the urgency is there. So I'm pretty optimistic, but I can't give solid update in terms of the dollar numbers that we're currently associating with the program in part because I think there's just going to be so much movement over the next several months. There are next couple of questions, which are essentially asking us for revenue forecast for '26. Look, I'd love to have a crystal ball. So we don't give guidance. The reason why we don't is because you're in a nascent industry and it will just be irresponsible for us to give a number. We're not a toll road, we're not an airport. I can tell you that my internal direction to the sales team is to have a very meaningful increase like we're talking multiple increase over '25 sales. And obviously, we'll update the market as we continue to push towards the target. And I would notice that we already started the year with essentially $100 million in the bank in terms of the revenues, which is by far the strongest where we had in any of the years in the past. The next one, I'll pass to Angus. Does DroneShield have concerns with the emergence of microwave-based drone defense technology? How we differentiate ourselves from the company's focus on that technology, specifically combating drone swarm defense? Angus? Angus Bean: Thanks, Oleg. So yes, high-powered microwave solutions are emerging as a counter drone technology. We -- many of you would remember, we do have a strategic relationship with a company out of the U.S. called Epirus, who are, in our opinion, the leader globally in that space. The technology is incredibly impressive. However, it has very large limitations around cost. We are talking multiple tens of millions of dollars per panel, which is a price point significantly higher, many pages higher above where many of our solutions are priced. So it's a very different price point. So often we don't compete directly with these types of companies, and we see them more as a strategic partner for those customers, and those customers have a very limited subset of the core defense customers that we have who are interested in that technology. We have ways to partner with various companies to provide that should we be requested. So a very different price point, very different technology and very complex to deploy, very complex to sustain. So incredible technology, and we think we've got some great partnerships there, but it's a very different strategy than the much more broader, larger piece of the pie that DroneShield is going after. Oleg Vornik: Thanks, Angus. And to reinforce what Angus just said, I firmly believe that for counter drone solution to work, it has to be cost effective. So drones are costing a few thousand dollars a piece. You can't have a $10 million, $20 million piece of equipment unless you're protecting only what will be effectively, a couple of sites in a nation where you basically throw anything at that in a counter drone solution. So if you want to be selling more than 5 or 10 of something, you can't be costing $10 million or $20 million in the counter drone land, which is also why we don't really see defense primes in this situation. The next question is about dividends. Also a topic we get periodically. When will the dividends be payable given -- well, the question was also saying, given performance options are taking priority? So firstly, I wouldn't see dividends and performance options as a trade-off. They're related to entirely different things. Performance options related to basically motivating the staff to achieve the results that shareholders are looking for. And the dividends are about capital allocation in saying, are we wanting to invest the capital for rapid growth? Or do we want to return the excess capital that we don't have deployment for to achieve the growth to shareholders. And right now, we're seeing an immense amount of opportunity as we continue to post these record results. And so dividends are not a priority at this time, but this is something that the Board regularly reconsiders. But I would see this, frankly, more of a consideration when we finish the growth rate at the incredible levels that we are doing now. The next one is thoughts of being part of ASX100? So we got into ASX300 in September '24, into ASX200 in September '25, if my memory serves me right, or I could be slightly off. And we are, today, I believe, sitting somewhere around a number, depending on how you count 120 or 130 but in order to get into the ASX100 , you can't be #99 and you need to be more like further up. So there's a significant jump from where we are to get to ASX100. But hey, if we tripled in the share price last year, depending on where we get to this year, this is all in the realm of possible and obviously, that opens additional angles in terms of further funds investing into the company. The next question is, can we give some context into the $800 million opportunity that we're working on? What stage of the sales cycle are we in this deal? So it's a European countrywide deployment where this is a part of a much bigger deployment, but our share of it is about $800 million. It's the same customer that we had the $62 million order with in the middle of last year. I hope to see the project awarded in the second half of the year. But as you'd expect of mega projects of this size, there's a lot of political angles to it, budgetary locations at the national level. So there are a lot of moving parts. But I'm hopeful to have the order in the second half of the year. And then the question is, how soon do they want it fielded? So whether it's ASAP or whether it will be staged over a period, over a year or a couple of years, perhaps, and also what are the payment terms? So obviously, we'll be seeking payment terms to ensure that we either have no or absolutely minimal cash drag. And remember, 65% gross margin means that you don't need to have enormously favorable payment terms not to have cash drag or on an order of that size. So the next question, I think this is the last question that we currently see in the line. So if you have more, please feel free to ask now. Can we talk -- can we speak -- sorry, I'm just trying to summarize this. So -- can we talk to market-sensitive contracts, which are now under $20 million threshold. For example, would LAND 156 or other Australian government contracts always be market sensitive? So I think the question is, for contracts, which are not quite $20 million. So $20 million is a dollar threshold over which we will always announce. If it's under $20 million, but it has some kind of a deep strategic element, would we announce it? And the answer is, if there is a deep strategic element, meaning it has a clear pathway towards larger sales, the fact that we got a particular contract, then we would be looking to consider announcing, but there needs to be that strategic element for us to do so. So you wouldn't be expecting a lot less cadence in the amount of sales announcements we do, but obviously each one is going to be a lot more material than what people have seen in the past. The next question is about the expense. So do we expect to increase our fixed expenditure line? So maybe I'll pass this one to Carla, our CFO. Carla Balanco: Thank you, Oleg. So on the question, it asked specifically if the $800 million would increase our fixed expenses? And the answer to that is no. So it would not significantly increase it because we are currently putting structures in place so that we can increase our manufacturing to way above that level. So therefore, everything that we are currently doing in terms of uplifting all the internal structures, focusing on our manufacturing capability, we will not need to significantly increase our fixed cash costs. Oleg Vornik: Thanks, Carla. And in terms of our base costs, so as we said in the investor presentation, there is about $150 million in run rate cash cost. This is not what the question was asking, but I'm just expanding on that. As of December, and this is based on about 500 people head count plus the on cost, like the spaces we lease and so on. So that will increase a bit as we get from 500 to 600, but at the revenue growth that we're expecting, our aim is to continue being operating cash flow positive as, in fact, we have been in the December quarter, as you can see from the 4C quarterly. Then the next one is, do we have any update on Mission Syracuse? No, we do not. And if there is an update, chances are you will hear it from the Commonwealth before you hear it from us. That's usually how the nature of the Australian defense announcement works, you have to let the customer make the announcement first. The partnerships question. So maybe I'll pass it to Angus. So, is DroneShield considering partnerships with specialist connectivity providers such as Elsight to enhance resilience and stability of RF communications, avoid signal loss, tight integration, it sounds like an outside shareholder asking this question, and enabling tighter integration across different platforms, assets and operating environments. Angus, over to you. Angus Bean: Thanks, Oleg. Look, we have a number of partnerships, some of which we do talk about it, a lot of them we don't. And that is for supply chain resiliency, but also just for commercial reasons, we don't always announce our partners. Look, we are open to partner where it make sense. But also, I think one of the hard lessons we've learned over the last 10 years is your core capabilities, core technologies, if you don't have them in-house, you don't control the destiny of those technologies, it's very hard to keep pace with where the market is going. And so we do have a strong tenancy for core technologies, particularly those 2 right now -- or sorry, those 3 are the RF detection, and RF defeat and the C2 layer. These are our core technologies, we remain in-house. And then we look to partner with the integrators and different technology providers to layer on top of those 3 and equip the units. And the story behind that strategy is those are the 3 elements that most of our customers need first. So DroneShield is generally the first partner that -- or first supplier that most of our customers come to. They're the first 3 layers that they look to put in place, then we can work with those end customers to layer additional partners and technology. So we want to control that relationship. We want to supply the intelligence and our understanding of the industry to those customers, and that's why we focus again on those 3 layers. And then we had those additional ways where it makes sense. Oleg Vornik: Thanks. A question that just came through, have any major European and North American institutional investors already discovered DroneShield? If so, which ones? In terms of public information, you would see that Fidelity has been a substantial shareholder, so over 5%. I think they're currently sitting at about 7% according to their substantial shareholder notices. So that's obviously a sort of a pan, call it, Boston, London, huge investment giant, and now they've been with us for quite some time. I want to say probably over a year, if I remember correctly. And then we can't really comment on the registered composition, but we see a $4 billion market cap and quite deep liquidity and inclusion in a bunch of indices. We're now getting to the press piece of being on the screen for a lot of the funds. And we are starting to do an active outreach using opportunities like quarterly release and annual report that we're releasing in a month to market to those institutions. We still remain a majority retail-held stock, and I think it just reflects our heritage, having grown very quickly from a tiny company to a fairly big one. But I think in the long term, this would be a majority institutionally held company as you'd expect. I believe that concludes all of the questions. So we'll stop there. Thank you for your time. And if you think of anything else, please feel free to email us with your question at investors@droneshield.com. Thanks for your time.
Matthew Bellizia: Good morning, and welcome to the Dubber Corporation Quarter 2 FY '26 4C Presentation. The presentation will be done by today, myself, Matthew Bellizia, the CEO of Dubber; as well as Prasad Kasi, the acting CFO of Dubber. Prasad, please move forward to the key messages, if you can. So obviously, following the loss last year that we've talked enough about, we're targeting back to run rate breakeven in FY '26. So we're making progress back towards that, as you'll see through the financial slides. We're continuing a big investment in our [ AI R&D ]. That is going to be the future of the business. We're continually building out our call recording customer base, and that's a massive asset in that we have call recordings all over the world. But to really capitalize on that asset is to build really smart AI solutions and more and more AI solutions across the top that don't just do AI for AI's sake but actually help end customers improve revenue -- increase revenue, reduce costs or improve compliance, and I continue to talk about that. I see one of our shareholders on today, [ Chris Bellers ], who gave us a very good idea a few months ago, which we've also got into R&D at the moment. So that's going to -- we're really starting to work into really practical solutions for the end marketplace to take -- to capitalize on the asset we have, which is call recordings all over the world. We announced just prior to Christmas, a large North America CSP signing. This is significant, and they'll be paying us close to -- subject to exchange rate close to $4.6 million in this quarter, which will boost it. It's a 5-year network connection fee. And following that, we'll have subscriptions, which I'll talk to on the next slide. The reason we haven't named that partner as yet is it's up to them to come up with a press announcement, which they're currently working on. In fact, we only had a call with them half an hour ago, and they will be doing a joint press announcement soon. But being a substantial business, they want to lead the announcement and they're launching their product, which is incorporating Dubber to market, so we can't get ahead of them naturally. Some of the Q2 FY '26 financial highlights. Recurring revenue of $7.8 million compared to $8.2 million and total cash costs, again, reduced by 12%, and we're continually getting costs trending down. So we've done some pretty steady headway on costs. A lot of stuff is contracted, so it takes a while to roll off, and we're continually driving our cost base down, and that program will continue throughout the year. Nick obviously, our pivot now is, hopefully, the revenue shocks that we've had as [indiscernible] a consequences of some of the stuff that happened before us and did take a while. Hopefully, that's coming to a level, and we can start focusing heavily on product direction, sales, marketing. So that's going to be the future and the focus as we move into 2026, the year. Our CSPs are substantially unchanged and the recovery of funds is continuing, and we will talk about that in later slides. Next slide, please, Prasad. In fact, [indiscernible] into the CEO presentation. Yes, so the large CSP in North America, it is going to be -- it is a connection to their mobile phone network. We have hooked up to their mobile phone network. We've been working with this partner for about 8 to 10 months. We are in production in their network. So we're in production before we signed the contract. So we are getting close to a market launch. So the money we're receiving that now is for a 5-year network connectivity fee and complying with SLAs and other related services to make sure the product stays on the network and reliable. Additional to that is subscription revenue, and they should be launching their product and again, not getting ahead of them, but they should be launching their product at the back end of this quarter. And then we should see upside recurring -- sorry, recurring revenue upside coming after that. The other probably big thing it does, it gives us pretty good validation in market that despite what happened in 2024, which is now 2 years behind us, that if these guys are prepared to back us, why wouldn't everyone else? So that's going to be a good thing that we hope to leverage as 2026 goes forward that if one of the best brands in the world comes on board, well, it gives us a good story into the rest of the people. Next slide, if I can, please, Prasad. So some of the current operational priorities and updates. We continue to focus on revenue growth. So that's going to be so important in our product marketing revenue. We're still going to continue to drive costs, but this is -- we've got to pivot into growth, growth, growth into this year. We're always looking for operational efficiencies. We're still working on automating billing in this place. In theory, you add a license into here. We add a license that should automatically go into NetSuite and invoice the customer. We should be able to get that streamlined entirely over time. We have 3 products in the business now through acquisition. We have Dubber, we have the Aeriandi product in the U.K., and we have [indiscernible] . We are continually working on integrating those all into Dubber. I believe they should have been done post acquisition, but we're currently working on these programs now. Once we do integrate all these products, we get down to one platform, we drive a lot of cost out of the U.K. data center, which is probably going to be around the middle of this year. So we currently got Vodafone, who's currently our largest partner in the world, currently migrating their customers each week from Aeriandi to Dubber. So that's a positive move. That product -- that partner is moving their customers across Dubber every week so -- and they're selling our product out to new customers constantly now. So as we move up the data center, we'll do that and the call-in program, and then we'll get down to one product, a streamlined set of IP that we continue to invest in and get growth through. And I've talked about the recurring revenue focus, continually building the asset, which is voice recording and you think about the wealth and knowledge we've got sitting in voice recordings. Right now, I think our product forces you to go into our portal and drill down to find that data. I want to start to pivot our product direction to start sending that data to you. People are busy. Do people really want to log into a platform and drill down to find this wealth of data? Or should we just send it to their e-mails and say, if you're a sales manager, this is what you ought to know this month. If you're a customer support manager, you should want to know that. If you're a compliance manager, if you're HR manager, what all do you know that's going on in your business that we should bring immediately to your attention to drive deeper value into your business. So a little bit of pivot into more proactive reporting through our product direction. Next slide, if I can, please, Prasad. We're rebranding our business, not the legal entities, but you'll see all of our branding changing to [ Dubber AI ] -- the slogan unlocking the power of conversations because we -- there is a wealth of information in people's businesses in their conversations, staff talking to staff, staff talking to customers, staff talking to suppliers to know what's going on in your business, and we've got all that buried in data all through our systems. So if we can pull that out and automatically drive to people outcomes that this is what's going in your business. This is what you ought to know, this is what you ought to act on. So we're going to rename ourselves [ Dubber AI ] with this slogan, a little voice bubble at the end, unlocking the power of conversations. There's 2 core purposes of why we would do a rebrand. One, people believe that we are just call recording. Dubber in 2021, 2022, probably spent $20 million or $30 million on marketing around the world, crazy money, crazy spends. But one thing they did do is get the Dubber name well known globally. All over the world, people know Dubber as a call recording product. We want people to know that we're not just call recording. People walk up to our booth, yes, you're a call recording company. Well, we were just -- we are call recording, but we're also substantially AI now. So -- and real business solution AI. So we want people to understand we're no longer just call recording. We are call recording and AI. It also gives us a little bit of divorce from the past. The Dubber that does have a little bit of tarnish from what happened a year or 2 ago, 2026 with [ Dubber AI ] is a new Board, it's a new management. We're a clean business. We're moving forward in a positive and constructive manner. Next slide, please, Prasad. Our go-to-market strategy. We've hired a new Head of Marketing, Rob Weese, who we're pleased to get on. There's going to be a lot more marketing, a lot more exciting marketing through our business. Marketing should drive 50% of our leads into a channel-based business if we get it right. So we're looking to be a lot more strategic and a lot smarter with our marketing. So Rob has now joined us. He's in head office with me every day. We'll be driving what we do there. We're going deeper into verticals. We're going to target some certain verticals and actually drive real business solutions and own those verticals. The Microsoft call recording, the WebEx call recording, they're just a general mid-market product. If we go deep into verticals and drive real value to those verticals, we want verticals to start to understand that you can't operate without Dubber because we're driving solutions that help you drive sales, reduce costs or improve compliance in certain verticals. We continue to drive more CSPs as more ways to market, particularly recording as a service where they make it a joint product with other products that the company is offering. We're also trying to demonstrate more value to people. We are a feature-rich product. We are going to build more products that come with that, things that compete with other larger products in the world and bring more value to our customers by proactively doing -- I don't want to release all our product ideas now because we're in the public domain. But certainly, we're investing heavy in R&D to get smarter with driving AI solutions and bringing more value to our SKUs and optimizing the sales motions, driving more promotions, differentiating through high value in AI and upselling through different tiers through the SKUs stepping forward. I'll now hand over to Prasad to handle our financial update. Prasad Kasinadhuni: Good morning, everyone. Reported revenue by quarter. So the reporting revenue for quarter Q2 FY '26 was $9.3 million, broadly stable, down only 1% compared to the prior quarter. Recurring revenue was $7.8 million compared to $8.2 million in the prior quarter. The reduction is reflecting mainly the residual impact of change in Cisco invoicing. But the underlying customer base remains stable, and we are focused on stabilizing recurring revenues by retention initiatives and targeted customer engagement. Operating cash flow run rate. So the operating cash flow run rate has improved substantially compared to the prior quarter. So the current operating Q2 cash-based cost is $9.5 million, which is 12% down compared to the Q1 FY '26. And the total annualized cash-based costs are at $38 million. This is like $5 million saving compared to Q2, and this is mainly due to the exit of surplus U.K. property lease, workforce optimization, automation and SaaS vendor rationalization. The cash flow is also further improved by additional AUD 4.6 million, which we're going to receive in Q3 from the Tier 1 North American CSP. So this will make our cash position really strong for Q3 and further. And as you can see the trend, both the lines are getting very close to us, the cost and the share revenue. So the direct costs. As you can see, the gross margin for Q2 has come up to 70%, which is a 1% increase compared to Q1. This is due to the ongoing reduction in underlying platform costs like our AWS and Azure costs, which are coming down. So this also includes the cloud platform and AI service consumption across the board and then the cost offset decreased by revenue in the quarter. So the operating costs continue to decline. Operating cost is the total cost less the direct costs. So this is now at $26.8 million annualized for Q2. This has come down by 15% when compared to Q1. So Q1 was $7.9 million, Q2 is $6.7 million now. So the group has begun to realize the cash savings due to the exit of leases, workforce optimization and other cost optimization initiatives, which we continue to focus and tightly manage our cost base. So the cost program is going to continue further into Q3 and Q4, and we're going to see more benefits through it. So the actual cash flow for the quarter. So the receipts we have is $8.6 million for Q2, which is a little bit less than Q1. This is mainly due to the timing difference of receipts due to the customer shutdown during the holiday period. The total operating cash outflow for the quarter is $11.2 million compared to $13.1 million in Q1, which is 15% down. And this is due to the cost saving measures put in place and reduction in one-off payments, which were made in Q1. So the overall cash outflow for the quarter is $2.6 million. And once we normalize this, this has come down to almost like nil. And the cash inflow was due to the directors' capital raise, which is around $765,000 for the quarter. We also have further $5 million loan facility, which has been undrawn as of 31st December 2025. So the normalized cash outflow, the $2.6 million, if you normalize it, we have like $1 million, which is like abnormal items, which are like term legal cost for term deposit recovery and also once-off restructure cost, which is around $920,000. And we also have working capital timing differences of about $1.6 million, where the payments were received during the first week of Jan because of holiday shutdown. So if we normalize these cash outflows, the normal items, the net cash was like nil for the quarter. Okay. Matt, I hand back to you. Matthew Bellizia: Okay. Thank you, Prasad. The legal cases in going -- so the ASIC investigation, which we provide assistance when required. We don't really know where that's up to. That's ASIC's business as to how they're going and who they're pursuing. What was certainly interesting in December, I'm sure everyone is aware that we have taken action against BDO Audit [indiscernible] Pursuing them for $26.6 million based on their failure of audit, which is in the public record. ASIC has also proceeded action in December against BDO Audit over failing audit processes for Dubber. It probably tells me that it reaffirms our case that ASIC also believe we have a strong case against BDO Audit for not detecting that. So I think it gives us further confirmation that we'll do that. But as per the disclaimer, all proceedings and recoveries remain highly uncertain. We also have a claim against the Victorian Legal Services Board Fidelity Fund for the loss of monies. There -- I think some of the things in the ASIC case probably further support our claim there as well, to be honest. So there's a number of things going on in the recovery efforts and under the Board subcommittee, which is managing that. And I don't really have any further updates because we can't talk about that substantially. Moving forward to the focus areas of FY '26, and then we'll go to questions. So again, we're targeting the underlying cash flow breakeven of FY '26. So you can see that the lines are coming close together. Just reiterating moving customers to AI, driving increased ARPU per customers, improved marketing and growing sales, continually driving business automation and streamlining the internal part of our business, rationalizing 3 systems to 1. Our product evolution, focusing on end customers and really bringing value to end customers, bringing information to their table and driving deeper into verticals. So that's the focus as we go forward to finish this financial year. That's all we have. I'll throw open to any questions now. Matthew Bellizia: So do you see the commencement of ASIC separate proceedings against BDO is a good sign validation for Dubber's proceedings against BDO? Yes, I do. And I also think there's potential that they might fight some of the costs that might even drive some of the case for us. So I believe it's a good sign and further validation that they've launched separate action on BDO and ASIC have obviously got more information available to them to us than us because they've got more powers to go and ask more questions and do further investigations. Next question. Can you comment on the status of your new current contract pipeline? My issue with pipeline in an indirect channel is it's often very large, but it's not very well qualified because we are not selling. It's the indirect channels that qualify. So my issue really is whilst we see these big pipelines all the time in sales force, it's not as well qualified when you have a direct channel that a direct sales force as opposed to indirect because we're reliant on what partners tell us as a potential prospect. So I can't really give you a strong answer on that. Are there any further questions? How much more revenue from VMO2 to still roll off? -- still -- there is still some revenues from VMO2 to roll off. Obviously, they thought they'd roll off in a month. They still have revenues on us. And we're still having conversations with VMO2 about potentially what we can -- whether we can retain some. And there's obviously no guarantee to those. I don't really want to quantify that as to how much more is to roll off because it's confidential information, but there are still some revenues to roll off. Just with the timing of cash payments, fair to say next quarter should be particularly strong with catch-up payments and receipt of North America contract type. Contract payment, yes, providing that contract payments made in this quarter, which it should be, and there's no reason it wouldn't be. It will be very, very strong, probably a record -- what should be an absolute record for the company's history in terms of cash payments in this quarter. And we did get a very big payment in week 1 of January, which it had been paid a week earlier, obviously, due to the Christmas break, it would have normalized last month's cash payments. Are you planning to stay as CEO and drive the company forward as it appears you are? Yes, I've actually invested a substantial amount myself, so -- which I think people could see my shareholding near on just under 5%. So yes, I am planning to be CEO, unless the shareholders have a different opinion. Are there any further questions? If not, we might wrap up in 30 seconds if there's no further questions. What are the key trends in regards to competitive landscape for recording as a service? Obviously, we have competitors in the market. We took some hits during last financial year, both on the loss of VMO2 and Cisco putting out their product. That should settle because what the pain we've seen should start to settle down that we had to withstand. There are other products often recording as a service. I think we're going to be in a good place. And I'll certainly be getting -- trying to get a lot of leverage off this one once we announce who the one we've signed up is around the world for other people to say, well, if they're going to buy it, why wouldn't you? So it's -- I think it should give us a fairly good strength and to continue to grow our position in the new brand and a new way forward with this recording as a service. Does Dubber foresee any further capital raising before the positive cash flow position? No, I don't, and I hope we don't have to capital raise again. I'm pretty keen on retaining cash. You can see what are we now 7-something, whatever Prasad gave us. We're going to obviously get a big influx again this quarter. We -- my intention is to run the place in the profit. I don't like running not for profits, I don't like running not profits. So the best we can, I want to run this pace breakeven and then growing into positive EBIT and then net profit whilst retaining a strong cash position is the focus of what a good business does. In terms of gross margins, where should we expect this to trend over the next few years? I think around constant in that 70s mark. We are driving cost out of our gross margins. We're constantly renegotiating some legacy contracts that we're dealing with as they come up. We've obviously got the cost of the data center, which we're going to get some direct cost savings when we bring that -- close that midyear. So combined with direct cost savings and some renegotiations, we should be holding where we are for the gross margin perspective. How close are you to announcing a new CFO ongoing. So I don't have anything particularly to give you right now other than we're in good hands still with Prasad doing a good job and our former CFO is still in the wings helping us out. Are there any -- here we go. What's the update on the money stolen by the last CEO? That was a question, not a statement from me. I gave you an update on the -- on where the recoveries were at. Obviously, the ASIC investigation of where that money went is between ASIC and whomever and whatever happened to those monies. I've provided an update already on the fact that the BDO recovery, Victoria Legal Services Board Avenue. And obviously, we've got action against Mr. Madafferi and Mr. McGovern. The last one is less hopeful, of course, because of the ability to recover those amount of monies out of individuals. But obviously, BDO -- ASIC pursuing BDO would -- you would suggest would give you some endorsement. They have a similar view to us that there is a case to answer. Any further questions? I think we're getting to the end. We're conscious not to keep running these past 30 minutes because people are giving up their valuable time. So on that basis, we might conclude now. Thank you, everyone, for attending. I hope we gave you some information about your investment and where you're taking your company. Thank you for your support, and good luck. Prasad Kasinadhuni: Thank you.
Operator: Good afternoon and good evening. Welcome to Logitech's video call to discuss our financial results for the third quarter of our fiscal year 2026. Joining us today are Hanneke Faber, our CEO; and Matteo Anversa, our CFO. During this call, we will make forward-looking statements, including discussions of our outlook strategy and guidance. We're making these statements based on our views only as of today. Our actual results could differ materially as a result of many factors. Additional information concerning those factors is available in our most recent annual report on Form 10-K and any subsequent reports on Forms 10-Q and 8-K which you can find on the SEC's website and the Investor Relations section of our website. We undertake no obligation to update or revise any of these forward-looking statements, except as required by law. We will also discuss non-GAAP financial results. You can find a reconciliation between GAAP and non-GAAP results and information about our use of non-GAAP measures and factors that could impact our financial results and forward-looking statements in our press release and in our filings with the SEC. These materials as well as the shareholder letter and a webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, references to net sales growth are in constant currency and comparisons between periods are year-over-year. This call is being recorded and will be available for a replay on our website. I will now turn the call over to Hanneke. Johanna Faber: Thank you, Nate, and welcome, everyone. During the third quarter, we delivered another period of very strong financial performance. With the exception of pandemic peaks, we drove record non-GAAP operating income and earnings per share. Very strong non-GAAP gross margins once again underscore the quality of our portfolio, the strength of our brand and innovation and our unique operating discipline and top line growth of plus 6% in U.S. dollars and 4% in constant currency was broad-based across regions, channels and categories. The strong third quarter results were driven by our strategic priorities. First, superior products and innovation. At the end of September, we launched the MX Master 4, the next generation of our flagship mouse. It is selling at record levels. It sold more units in the first month following launch than any other personal workspace mouse in Logitech's history. In gaming, we delivered winning news across price bands. The premium Pro X Superlight 2 mouse was a top-performing new product in the quarter, boosting the Pro line. We also had strong demand for the new entry-level, China-for-China G3116 gaming keyboard, which helped drive market share gains in China. And AI now plays a pretty critical role when it comes to superior video and audio innovation. We are well beyond AI proofs of concepts and experiments. We are shipping AI products globally at scale. In the third quarter, those included both AI-powered devices like the Rally Board 65, the site video conferencing camera and its own 2 wireless headsets and AI-enabling devices like the spot sensor. And just last week, we announced a Rally AI camera and Rally AI Pro, our smart new video conferencing solutions for large rooms, like board rooms, auditoriums and classrooms. None of those products are AI for the sake of AI. These are products that solve real user needs, and that shows in their popularity in the market. Our second strategic priority driving results was doubling down on B2B. Logitech for business demand significantly outpaced B2C demand in the third quarter driven by strength in video collaboration and our education vertical. Third, we executed with excellence around the world. The December quarter was the first in fiscal year '26 with positive year-over-year net sales growth and increased demand across all 3 of our major geographies. Around the world, it was great to see our teams [ excel ] with great holiday in-store execution and terrific social-first digital brand building campaigns. Finally, our performance underscores our unique operational excellence. Product cost reduction, targeted pricing actions and FX offset tariff headwinds and strategic promotions and drove a very strong non-GAAP gross margin of 43.5%. Importantly, we continue to drive manufacturing diversification. As we committed, we successfully reduced the percentage of U.S. products manufactured in China from 40% last April to less than 10% by the end of December 2025. And we maintained strong cost discipline across the company, highlighted by non-GAAP general and administrative expenses which were down 7% in the absolute year-over-year. Now looking ahead, we live in a dynamic world, but there is still so much opportunity for Logitech to grow. One of the opportunities I am excited about lies in leveraging the existing global PC footprint to drive continued growth. Consider that of the 1.5 billion plus PCs in use today around the world, less than half of those have a mouse attached and less than 30% of existing PCs have an external keyboard. Taken together, that PC installed base represents over 1.8 billion opportunities to add peripherals and upgrade users to enjoy vastly superior productivity and comfort. We warmly welcome obviously the tens of millions of new PCs that are sold each quarter but we believe the existing base remains the far greater price. So with that, Matteo, I'll hand it over to you to cover the financials in a bit more detail. Matteo Anversa: Okay. Thank you, Hanneke, and thank you all for joining us on the call today. So the team delivered a another solid quarter, demonstrating continued focus on profitability and growth. Non-GAAP operating income reached $312 million, reflecting a 17% year-over-year increase alongside a 220 basis point expansion in profitability. . Our strong P&L performance, combined with disciplined management of working capital, resulted in an exceptional cash flow generation of approximately $500 million a 30% year-over-year increase. Now let me walk you through the key financial highlights for the third quarter. So net sales were $1.4 billion, up 4% year-over-year in constant currency, and this growth was driven by strong demand and represents our eighth quarter of consecutive top line growth. Now more specifically, personal workspace net sales increased 7%, with 9% growth in pointing devices, fueled by the launch of our MX Master 4 as well as double-digit growth in tablet accessories. Video collaboration net sales grew 8% with double-digit growth in EMEA and Asia Pacific driven by continued sales strength of our AI-enabled Rally Board 65. And as we indicated in the past, the B2B nature of this business tends to be lumpy quarter-to-quarter. But the long-term trajectory of the business is very strong momentum. Gaming net sales grew 2%, driven by double-digit growth in Asia Pacific while Americas and EMEA declined single digits due to the market contraction. Geographically, Asia Pacific led the way with a 15% year-over-year growth driven by double-digit growth in gaming, video collaboration and tablet accessories. EMEA grew 2% due to double-digit growth in video conferencing as well as solid growth in keyboards and combos. And the Americas reversed the negative trend of the past couple of quarters with the U.S. returning to modest growth with pointing devices up double digits, offset by gaming. On the profitability side, our non-GAAP gross margin rate was 43.5% and up 30 basis points from the prior year. We were able to expand the gross margin rate despite a challenging tariff environment. And similar to last quarter, the negative impact of tariffs was entirely offset by our pricing actions and continued manufacturing diversification efforts. Product cost reduction and favorable foreign exchange more than offset increased promotional activity in the quarter. We also maintained strong operating expense discipline. Non-GAAP operating expense was $306 million, a decline of 2% year-over-year, and this decrease was primarily driven by a reduction in G&A as a result of the measures that we implemented to mitigate the impact of tariffs. Now it is important to note that if we normalize for the bad debt expense we recorded in the prior year period, non-GAAP operating expenses would have increased approximately 2% and while delivering 70 basis points of leverage. And finally, cash flow. Cash flow was extremely strong in the third quarter. We generated approximately $500 million of operating cash flow 1.5x operating income, thanks to efficient inventory management, strong collections and profitable growth. Our cash conversion cycle improved by 18% down to a highly efficient 27 days. We maintained a very strong balance sheet, ending the quarter with a cash balance of $1.8 billion. Now as we look ahead, we are closely monitoring external dynamics, including geopolitics, tariffs and the consumer confidence. While the backdrop is mixed, we believe Logitech is exceptionally well positioned, and this confidence is reflected in the outlook that we are providing for the coming fiscal quarter. Net sales in the fourth quarter are expected to grow 3% to 5% year-over-year in constant currency with a gross margin rate of approximately 43% to 44%, and non-GAAP operating income is expected to be between $155 million and $165 million, up 20% year-over-year at the midpoint. As a result, we expect to close fiscal year '26 above the long-term model targets for non-GAAP gross margin and non-GAAP operating margin that we outlined at our Analyst and Investor Day last year. Our performance underscores the durability of our model and our consistent ability to convert profit into cash and generate compelling returns on invested capital. As we transition into the new calendar year, we remain confident in our ability to execute at a high level as the environment evolves. I want to thank all our teams across the globe for their dedication and flexibility. And with that, we can open the call to questions. Operator: Thank you, Matteo. [Operator Instructions] Our first question comes from Asiya with Citi. Asiya Merchant: Great. Both well, there's just so much macro factors. I mean, obviously, memory affecting PC demand. Hanneke, you talked about the installed base. Just if you can walk us through what gives you this confidence relative to your long-term target model that you guys have laid out about the growth looking ahead, not just through March, but you're not approaching the end of fiscal '26 into fiscal '27. Just some commentary that you could share on that. And 1 for Matteo while I can. Just on the gross margins, I mean, they just continue to upside representing really strong execution here. Just as you think ahead, given the macro backdrop and concerns around consumer spending, how should we think about gross margins going forward? Johanna Faber: Yes. Thank you so much. Overall, it's too early to discuss fiscal '27. But I would say we're really encouraged by the momentum of the business around the world. This year, as Matteo said, we're going to deliver at the high end of our long-term model. And we're expecting that our team will continue to deliver with excellence. This is a company for all seasons. A lot of things were thrown at us this year, we expect that we can continue to work well in the year ahead. Let's -- let us touch actually on memory and on PC potential. So overall, what I would say is we don't believe we will be materially affected by both of those factors and let us unpeel that a little bit. In terms of memory availability, the vast majority of our portfolio is not impacted by the current tight memory availability. We simply don't use those chips in most of our portfolio. Only our video conferencing products and only a portion of our video conferencing products are impacted by the memory availability issues. And we believe we are mitigating those impacts in fact. So from a supply point of view, we've seen this coming, and we've taken proactive steps to ensure supply. So we don't foresee a supply impact in Q4 nor in the first half of our next fiscal year from the memory availability issues. There may be a modest cost impact. But as you've seen, we're really good at mitigating cost impacts through cost reductions and through targeted pricing if needed. So that's on memory. On PCs, you've seen our great personal workspace results in this quarter, high single-digit growth. We grew share 120 basis points in PWS, and we believe our peripherals business, in general, continues to have excellent growth opportunities, whatever the environment. Our data shows that if you take out the 2 years of COVID, which were crazy. Over a 10-year period, we grow 300 to 500 basis points ahead of PC sales. And why is that? It's because the peripheral market is relatively immature around the world on that big installed base of 1.5 billion PCs plus less than half of people use a mouse, less than 30% use an external keyboard. And they're basically leaving productivity and comfort on the table. And so that installed base opportunity, combined with trading up, people who are in the category is a far bigger opportunity, like far bigger opportunity for us than just attaching to new PCs, which, of course, we'll continue to do, but our growth over the years has come from penetrating that installed base of PCs. So that's what we will continue to do, and we're confident that we can continue to grow the peripheral business as we have. Sorry, it's a bit of a lengthy answer, but I know it's on many people's minds. So thanks for asking. Matteo Anversa: Maybe Asiya I will address your gross margin question. So first of all, let me say, I appreciate your comments also on behalf of the team because I really agree with you. I think the team has done a fantastic job. If you take a step back and we use just the midpoint of the outlook that we provided today for the fourth quarter, that implies that we will close the year with a gross margin rate around 43.5%, which is pretty much flat to fiscal year '25. And so the ability of the team to deliver this outstanding result in spite of all the tariff environment that we discussed throughout the fiscal year, I think it's pretty remarkable. And so I think the -- it's way too early to talk about fiscal year '27, but I think the foundation of this gross margin and our ability to maintain the gross margin to this level, I think the foundation is there. And what I mean for foundation, really, I'm referring to a couple of key aspects. Number one, our fantastic brand and the pricing power that this gives us. Number two, the continuous work that the team has been doing on innovation. We'll talk a little bit in the prepared remarks, another tremendously successful launch with the MX Master 4, just as an example. So that's really the engine of the company. And third, the continuous work that we are doing every year on product cost reduction through value engineering and supplier negotiation. So that's really, to me, is the foundation of what we are doing, and that's here to stay. Now, with that being said, obviously, we are all seeing commodity prices going up. We are seeing cost of components going up. So we will have to factor all these components when we discuss in the next earnings call about '27, but I think the foundation and the execution of the team is there, and that's what you can count on us on deliver also next year. Operator: Okay. Our next question comes from Yorn from UBS. Joern Iffert: And hello, everybody. I would ask 2 questions if it's okay, and then I go back in the queue. The first one is, I mean, you elaborated on your resilience and more volatile PC markets. But do you have some data for the attachment rates on mice and keyboards, where this has stood 5 to 10 years ago? . Just to compare a little bit the trend changes of rising attachment rates, which potentially was helpful for the PC unit outperformance? And the second question would be, please, on gaming. Isn't this a little bit concerning that the U.S. and Europe is now seeing decline in gaming markets. Gaming is one of your key growth drivers. What are you doing against the strategic fee for the next 12 months to bring this back to growth and also, if you somewhat detailed was PC gaming down or all the manager [indiscernible] and headsets. So some more details here would be appreciated. Johanna Faber: Let me take the gaming question first and then maybe you take the attach question Matteo, if that's okay. So on gaming, First of all, another quarter of good global Logitech Gaming growth, 2% up. Demand was higher than that. And as you saw, that's really driven by our outstanding performance in the world's biggest gaming market, China. We gained past 3 months share across gaming mice and keyboards in China. That's the first time since I can remember and since I've been here. So that's great. We delivered strong double-digit gaming growth there in terms of net sales. And I think what's important, and that's important for the rest of the world as well is we're winning at the top end with Pro and we're winning at the entry level. With the China-for-China innovation, the most important one that came out this quarter was the G316 keyboard, mechanical keyboard for gaming. That's doing very well as well. So it's important that we cover both ends of the market. In the U.S. and Europe, we held share in a declining market indeed in the quarter. What's good to see there is that our U.S. share stabilize after a couple of quarters where share was a little soft as we took pricing, first implementing it and then getting the consumer to get used to it. So it's good to see it stabilize. And the other good thing there is that we're seeing great growth on the top end of our business, so both Pro and SIM growing double digits in the U.S. and Europe. Now to your question on the gaming market, the markets in the U.S. and Europe have been pretty soft. We believe that's temporary and we can discuss the causes, but they're probably part economics part game release related. And in that context, we think we've prepared ourselves really well for the year ahead. So when it comes to economics, there clearly is a bit of a K-shaped economy. When I meet gamers in the U.S. and Europe, they are a little more choiceful in terms of what they spend money on. So what we've done for the year ahead is really thoughtfully designed our portfolio to win at the top end because there's a lot of gamers who do have money, but also to win at the entry level. Just like we've done in China already. So that is one. And then second, in terms of gaming title releases, again, they've been a bit more muted in the West than they have been in China and gamers in the U.S. and Europe that I speak to are saying, well, I'll just wait and see a little bit till GTA 6 and some other new releases come out. So they're sitting on their money. But fortunately, our business, again, doesn't depend on a single game alone. And for big existing games, whether it's Call of Duty or League of Legends or Valorant. You need the best gear. So we're excited. SUPERSTRIKE is coming out, start shipping here in a couple of weeks. That is a step change in competitive performance for FPS games, existing FPS games. And again, I think that will position us really well to continue to gain share whatever the market does in gaming. Again, sorry, a bit lengthy, but I know it's on many people's minds. Matteo Anversa: So Yorn, the -- so let me start. Overall, if we look at take about 10 years' worth of data and you normalize for COVID, generally, the sale of our peripherals outpace PC sales by about 300 to 500 basis points on average. So with that being said, though, I go back to Hanneke's point, the biggest opportunity for us is really on the installed base, where of all the PC out there, less than half have a mouse and less than 1/3 have a keyboard. And that's really where in a way, the focus has been. And actually, if you go back in history. The vast majority of our sales really comes from the increase in the attach rate to the installed base versus new PCs to Hanneke's point in her prepared remarks, we also like, obviously, the new PC sales, but that's where the focus is. Johanna Faber: And I think Jorn you were asking, do we know attach rates to new PCs in the past. We know what they are today. they're actually fairly low, somewhere between 9% and 14% depending on the type of master keyboards. So they're relatively low. We don't have that historical data. But given how low they are, there was opportunity, obviously, going forward to go up, but they cannot have been that much lower in the past. Operator: Okay. Our next question will come from Erik Woodring with Morgan Stanley. Erik? Erik Woodring: Can you hear me okay? Matteo Anversa: Yes. Erik Woodring: Just I wanted to circle back on just a PC question, Hanneke. The 300 to 500 basis points of outperformance versus PC sales. Just a clarification, is that versus PC revenue or PC units. And the only reason I ask is, if you look at, for example, IDC forecast, the variability between PC sales may be flattish versus PC units potentially down 5% to 10%. What make you difference between -- again, if we use that kind of historical context. The business growing versus declining? So just a clarification on that point. And if it is attached to PC sales, just how do we think about the attach to revenue when we think about its kind of like an attached to the unit. I just want to get a better understanding of that. And then just a quick follow-up for you Matteo. Matteo Anversa: Yes, sure. Erik, it's -- what we refer to is unit sales. So that's the way we think about it. So that's all I can tell you. Erik Woodring: Okay. Totally fair. And then maybe Hanneke, just again, on the PC peripheral kind of attached to the PC base. So I think that makes a ton of sense. On one hand, I guess I would say, perhaps we can assume these devices might not have a peripheral for a reason. -- whatever that may be. So how do you convince that user that's underpenetrated to get that mouse or to get that keyboard. What is it that Logitech will say or it can do, whether that's incentivization, promotions, et cetera, that gets that easier to say, you know what, I do need this. This is an awesome product I need to buy it. . Johanna Faber: yes. What a great question. And it comes down to product superiority and real benefit for the user. So let me take the MX Master 4 as an example, which again is off to a fabulous start in terms of creating both new trial and up-trading existing mouse users. Why is that? It's a very premium, it is $120 mouse is an expensive mouse. But consumers, including in the U.S. and Europe, where they're being more choiceful absolutely doesn't hesitate to go and buy one because, A, it clearly is superior versus what's out there in the market, the haptic feedback, the actions during the new software, the beautiful design the aesthetics, clearly superior. It clearly answers the user need in terms of productivity. So -- we are -- when you use that MX Master 4, you're going to be faster, you're going to be more accurate and more productive. That's important both for users, by the way, and for B2B choosers. So the procurement people in businesses that are buying mice for their employees. And then marketing, of course, plays an important role as well. We did up marketing in the quarter. We're measuring that very tightly. The return on investment there is excellent. And I think we have a lot more opportunity to do more social first digital marketing for our top superior products to drive that penetration. So it all starts from the superior product that really answers the user needs in the case of MX, the user need is productivity. In the case of gaming, it's performance, you're going to win that game. And in the case of a line like ERGO, it is comfort. You're not going to have that pain in your arm. So really important in any marketing. We're seeing really great results. There's opportunity there going forward. Operator: Okay. Our next question comes from Ananda with Loop Capital. . Ananda Baruah: Two, if I could. So let me just ask another, this is a PC-related one. Do you think people are obviously interested in the PC, the PC attached because of the dynamics going on with memory in the PC market and the impacts we've already begun to see there. Do you think that this is one of those years where the company could see sort of growth above the average sort of few hundred basis points range that you guys typically have. I know in past years, when you've seen amplified growth above the PC market, there are times you've been a thought process maybe people aren't buying a PC, but they can do something to make their PC experience more enjoyable dress up their PC experience. So I just want to ask that question. And then I have a quick follow-up as well. Johanna Faber: Yes. So it's too early for me to speculate on the year ahead. But I think you're right, historically, again, this is a company for all seasons. We can win in any environment. And in an environment where I say gaming, the price of gaming PCs is definitely up. But when I don't have money to get a faster CPU, I can buy a SUPERSTRIKE mouse and improve my gaming speed and performance that way. So we've definitely seen that in the past, and we're going to make a plan to do that going forward as well. Matteo Anversa: Maybe Ananda, for whatever is worth, too early to talk about next year, but if you look at the quarter we just printed, if you look at personal workspace, actually in its totality, the growth in personal workspace in constant currency outpaced the growth of the company. So it was faster. Ananda Baruah: Good context. And the follow-up, this might be more for Matteo. But although you guys don't have material exposure to some of the components that are -- that we're seeing the meaningful price increases in the memory chain is others as well. Do you think you could have seen some pull-forward sales from folks who might not necessarily understand that you don't have material exposure to those components? Matteo Anversa: Not, I wouldn't -- if your question, Ananda, is on the video conferencing being up 8% year-over-year in the quarter, I would not attribute that to the hoarding or anticipated by due to the memory -- due to the memory situation. I think we're all deals that the team has been tracking for quite some time. We are building the muscles as we discussed during Investor Day. And I think through the growth that we had in videoconferencing. By the way, the fact that overall, B2B outpaced, B2C in the quarter in terms of strength, thanks to education vertical that has been doing very well for us also this quarter. I think it's really execution by the team. Johanna Faber: Yes, I see a lot of customers. I didn't get a sense that they we're hoarding ahead of any memory shortages in our video conferencing portfolio. Videoconferencing because it's 100% B2B, basically is a little choppier net sales-wise, just because there's big deals one quarter that may not necessarily be in the next one. So I would look at that business over a little longer period than just quarter-by-quarter, but this was a really good one. But take a little bit longer perspective on VC to really look at the health of it. Operator: Okay. Our next question comes from Joe Cardoso with JPMorgan. Joseph Cardoso: Maybe first one here, I just wanted to follow-up on the last comment and maybe just not specific to videoconferencing, but broad-based across the portfolio, just because we're hearing some maybe more downstream from a PC perspective, talking about pull forward of demand in the backdrop of kind of this rising memory cost environment. Just curious as it relates to Logitech's portfolio, and once again, broad-based, maybe not specific to videoconferencing and maybe your attach here. Are you guys seeing any of the benefits from potential pull forward either this past quarter or the quarter that we're in itself? And then I have a follow-up. Johanna Faber: No. I mean, again, about 60% of our business is B2C. So the consumer is definitely not pulling things forward. But also on the B2B side, where we're kind of half personal workspace half videoconferencing, we really -- I have not seen or heard of any pull forwards in our business. Joseph Cardoso: Got it. Very clear. And then maybe just a follow-up. You talked about the reaching the 10% of U.S. products originating from China or less than 10%, I think, was the exact comments, which seems a bit better than what you guys were targeting. So now that we've reached that point, maybe can you touch on whether there's further headroom to reduce that? And as we think about the combination of ramping those other manufacturing sites, those processes potentially maturing and the pricing actions you've already taken, any new thoughts on how you're thinking about the implications to margins from those actions? Matteo Anversa: Yes. So first part of your question, at this point, I think we are happy where we are. The team has done a fantastic job. Our target was to limit the import from China into the U.S. to 10% by the end of December. And we are, as you correctly so pointed out a little better than that. At this point, I think we are happy with the current landscape. We also -- as always, want and cherish the flexibility because the tariff environment is pretty fluid. So we want to make sure that we have the appropriate flexibility to move things around, and that's the beauty of the [ China Plus 5 ] strategy that [ Sri ] and the team implemented now for quite some time. I think on the gross margin side, if we look at what we have done in the second quarter, what we've done in the third and also the outlook that we indicated today for the fourth, we are really happy where things played out. Basically, the positive impact of the price actions that we took in April in the U.S. combined with the diversification action that you just mentioned, we're able to allow us to offset entirely the tariff impact. And I think we're in a good spot. And then we'll see, we'll talk more once we close the year. Operator: [Operator Instructions] And with that, our next question goes to Didier with Bank of America. Didier Scemama: Yes. A couple of quick ones, if I may. So I think can you give us a sense of the components of the personal workspace organic growth. So how much of that is volume versus price? Because the reason why I'm asking is because I think the question has been asked multiple times in different ways. If you got a PC market next year, tablets down 10% because of higher memory prices, you're going to face like very tough comps, effectively having raised prices this year to offset the tariff impact. So I guess the question is if we've got a very tough PC market outlook in terms of '27 big decline in volumes, would you be happy to just take down pricing? Or would you be happy to just keep pricing to maintain your margins and potentially lose share? Johanna Faber: So we don't break out the exact units versus price versus mix for the company or for PWS. But what I am comfortable in telling you is that the great PWS growth that we saw in the quarter was a combination of all 3. So positive units, positive premiumization around the world, people trading up to the MX Master 4 and other premium products and U.S. pricing. So it was a combination of all 3. And in terms of -- I'm never happy to lose share. So we're going to put the right plans in place to continue to grow and defend share. And I think you see that in the quarter as well. We're very intentional and strategic on when we need to promote on certain parts of the portfolio and very surgical. We're not just throwing promotions and deals across the market but there's places in the quarter where we need a little more, and we do that intentionally and strategically. Matteo Anversa: To this point, the -- if you look at where we closed the quarter in terms of gross margin rate versus what we were discussing 3 months ago, we are in the higher end of the range. And this is really thanks to the diligent and very surgical promotional approach that Queen and the commercial team around the world are having to Hanneke's point. So. Operator: Okay. And that looks like our final question will come from Martin with BMP . Unknown Analyst: Yes. On my side. Just 2 follow-up is First one is can you just walk us through what the main strength factors for the Q3 constant currency guidance to reach the high end or the low end? Is that still mainly the U.S. consumer? Is there any on the China sustainability, is it gaming or the PC market slowdown. And then maybe attached to that, the sell-through was pretty strong, but it's a sell-in, and that was primarily in APAC and EMEA. Was that difference mainly due to promotional activity? Or was there also some in terms of restocking in the channel? That was my 2 questions. Matteo Anversa: So let me take them then, Hanneke, so let me start with the first one, the fourth quarter outlook. So our outlook contemplates a couple of things. So if you look at the midpoint, right, pretty much performance is in line with what we've done in the third quarter. And this applies in totality and this applies also by the 3 different regions. So AP -- we are expecting AP to continue to grow in the mid-teens like we did in the third quarter, low single-digit growth in EMEA, and flat to low single-digit growth in AMR. So that's the midpoint. On the high end, pretty much AP, EMEA remains the same as we did in the third quarter. So the swing factor is, to your point, AMR. We have seen during the third quarter, an acceleration of the momentum, particularly in the United States and mostly towards the end of the third quarter. So the high end assumes that this momentum continues into the fourth and AMR grows into the mid-single digit. So that's really the difference between the two. On your question on the sell-through, sell-in. So -- you have to keep in mind that sell-through is a gross number, right? So it does not include the impact of foreign exchange, and it does not include the impact of promotion, right? So when you look at the total company, sell-through was up 10% year-over-year in the third quarter. We have a couple of points of foreign exchange, so call it 8% in constant currency. And then you have a couple of points coming from higher -- slightly higher promotional spend as we anticipated getting into the holiday season, which is pretty normal. And then a slightly negative mix coming particularly from the high sales on tablet accessories, which is tied to some of the work that we have done on the education vertical. But that's your walk. Unknown Analyst: Okay. Great. So there's no bigger inventory. Matteo Anversa: No big selling, sell through. Yes, correct. No. We're pretty happy at... Johanna Faber: Yes, we're really happy with the inventory. So really healthy channel inventory levels as we exit the holiday season and excellent own inventory turns. So all of that looks pretty good. . Operator: This concludes the Q&A portion of the call. I would now like to turn things back to Hanneke for closing remarks. Johanna Faber: Great. Well, thank you all. It's great to see you. We look forward to seeing you in the follow-ups and thank you for being with us for today. Have a great week.
Matthew Bellizia: Good morning, and welcome to the Dubber Corporation Quarter 2 FY '26 4C Presentation. The presentation will be done by today, myself, Matthew Bellizia, the CEO of Dubber; as well as Prasad Kasi, the acting CFO of Dubber. Prasad, please move forward to the key messages, if you can. So obviously, following the loss last year that we've talked enough about, we're targeting back to run rate breakeven in FY '26. So we're making progress back towards that, as you'll see through the financial slides. We're continuing a big investment in our [ AI R&D ]. That is going to be the future of the business. We're continually building out our call recording customer base, and that's a massive asset in that we have call recordings all over the world. But to really capitalize on that asset is to build really smart AI solutions and more and more AI solutions across the top that don't just do AI for AI's sake but actually help end customers improve revenue -- increase revenue, reduce costs or improve compliance, and I continue to talk about that. I see one of our shareholders on today, [ Chris Bellers ], who gave us a very good idea a few months ago, which we've also got into R&D at the moment. So that's going to -- we're really starting to work into really practical solutions for the end marketplace to take -- to capitalize on the asset we have, which is call recordings all over the world. We announced just prior to Christmas, a large North America CSP signing. This is significant, and they'll be paying us close to -- subject to exchange rate close to $4.6 million in this quarter, which will boost it. It's a 5-year network connection fee. And following that, we'll have subscriptions, which I'll talk to on the next slide. The reason we haven't named that partner as yet is it's up to them to come up with a press announcement, which they're currently working on. In fact, we only had a call with them half an hour ago, and they will be doing a joint press announcement soon. But being a substantial business, they want to lead the announcement and they're launching their product, which is incorporating Dubber to market, so we can't get ahead of them naturally. Some of the Q2 FY '26 financial highlights. Recurring revenue of $7.8 million compared to $8.2 million and total cash costs, again, reduced by 12%, and we're continually getting costs trending down. So we've done some pretty steady headway on costs. A lot of stuff is contracted, so it takes a while to roll off, and we're continually driving our cost base down, and that program will continue throughout the year. Nick obviously, our pivot now is, hopefully, the revenue shocks that we've had as [indiscernible] a consequences of some of the stuff that happened before us and did take a while. Hopefully, that's coming to a level, and we can start focusing heavily on product direction, sales, marketing. So that's going to be the future and the focus as we move into 2026, the year. Our CSPs are substantially unchanged and the recovery of funds is continuing, and we will talk about that in later slides. Next slide, please, Prasad. In fact, [indiscernible] into the CEO presentation. Yes, so the large CSP in North America, it is going to be -- it is a connection to their mobile phone network. We have hooked up to their mobile phone network. We've been working with this partner for about 8 to 10 months. We are in production in their network. So we're in production before we signed the contract. So we are getting close to a market launch. So the money we're receiving that now is for a 5-year network connectivity fee and complying with SLAs and other related services to make sure the product stays on the network and reliable. Additional to that is subscription revenue, and they should be launching their product and again, not getting ahead of them, but they should be launching their product at the back end of this quarter. And then we should see upside recurring -- sorry, recurring revenue upside coming after that. The other probably big thing it does, it gives us pretty good validation in market that despite what happened in 2024, which is now 2 years behind us, that if these guys are prepared to back us, why wouldn't everyone else? So that's going to be a good thing that we hope to leverage as 2026 goes forward that if one of the best brands in the world comes on board, well, it gives us a good story into the rest of the people. Next slide, if I can, please, Prasad. So some of the current operational priorities and updates. We continue to focus on revenue growth. So that's going to be so important in our product marketing revenue. We're still going to continue to drive costs, but this is -- we've got to pivot into growth, growth, growth into this year. We're always looking for operational efficiencies. We're still working on automating billing in this place. In theory, you add a license into here. We add a license that should automatically go into NetSuite and invoice the customer. We should be able to get that streamlined entirely over time. We have 3 products in the business now through acquisition. We have Dubber, we have the Aeriandi product in the U.K., and we have [indiscernible] . We are continually working on integrating those all into Dubber. I believe they should have been done post acquisition, but we're currently working on these programs now. Once we do integrate all these products, we get down to one platform, we drive a lot of cost out of the U.K. data center, which is probably going to be around the middle of this year. So we currently got Vodafone, who's currently our largest partner in the world, currently migrating their customers each week from Aeriandi to Dubber. So that's a positive move. That product -- that partner is moving their customers across Dubber every week so -- and they're selling our product out to new customers constantly now. So as we move up the data center, we'll do that and the call-in program, and then we'll get down to one product, a streamlined set of IP that we continue to invest in and get growth through. And I've talked about the recurring revenue focus, continually building the asset, which is voice recording and you think about the wealth and knowledge we've got sitting in voice recordings. Right now, I think our product forces you to go into our portal and drill down to find that data. I want to start to pivot our product direction to start sending that data to you. People are busy. Do people really want to log into a platform and drill down to find this wealth of data? Or should we just send it to their e-mails and say, if you're a sales manager, this is what you ought to know this month. If you're a customer support manager, you should want to know that. If you're a compliance manager, if you're HR manager, what all do you know that's going on in your business that we should bring immediately to your attention to drive deeper value into your business. So a little bit of pivot into more proactive reporting through our product direction. Next slide, if I can, please, Prasad. We're rebranding our business, not the legal entities, but you'll see all of our branding changing to [ Dubber AI ] -- the slogan unlocking the power of conversations because we -- there is a wealth of information in people's businesses in their conversations, staff talking to staff, staff talking to customers, staff talking to suppliers to know what's going on in your business, and we've got all that buried in data all through our systems. So if we can pull that out and automatically drive to people outcomes that this is what's going in your business. This is what you ought to know, this is what you ought to act on. So we're going to rename ourselves [ Dubber AI ] with this slogan, a little voice bubble at the end, unlocking the power of conversations. There's 2 core purposes of why we would do a rebrand. One, people believe that we are just call recording. Dubber in 2021, 2022, probably spent $20 million or $30 million on marketing around the world, crazy money, crazy spends. But one thing they did do is get the Dubber name well known globally. All over the world, people know Dubber as a call recording product. We want people to know that we're not just call recording. People walk up to our booth, yes, you're a call recording company. Well, we were just -- we are call recording, but we're also substantially AI now. So -- and real business solution AI. So we want people to understand we're no longer just call recording. We are call recording and AI. It also gives us a little bit of divorce from the past. The Dubber that does have a little bit of tarnish from what happened a year or 2 ago, 2026 with [ Dubber AI ] is a new Board, it's a new management. We're a clean business. We're moving forward in a positive and constructive manner. Next slide, please, Prasad. Our go-to-market strategy. We've hired a new Head of Marketing, Rob Weese, who we're pleased to get on. There's going to be a lot more marketing, a lot more exciting marketing through our business. Marketing should drive 50% of our leads into a channel-based business if we get it right. So we're looking to be a lot more strategic and a lot smarter with our marketing. So Rob has now joined us. He's in head office with me every day. We'll be driving what we do there. We're going deeper into verticals. We're going to target some certain verticals and actually drive real business solutions and own those verticals. The Microsoft call recording, the WebEx call recording, they're just a general mid-market product. If we go deep into verticals and drive real value to those verticals, we want verticals to start to understand that you can't operate without Dubber because we're driving solutions that help you drive sales, reduce costs or improve compliance in certain verticals. We continue to drive more CSPs as more ways to market, particularly recording as a service where they make it a joint product with other products that the company is offering. We're also trying to demonstrate more value to people. We are a feature-rich product. We are going to build more products that come with that, things that compete with other larger products in the world and bring more value to our customers by proactively doing -- I don't want to release all our product ideas now because we're in the public domain. But certainly, we're investing heavy in R&D to get smarter with driving AI solutions and bringing more value to our SKUs and optimizing the sales motions, driving more promotions, differentiating through high value in AI and upselling through different tiers through the SKUs stepping forward. I'll now hand over to Prasad to handle our financial update. Prasad Kasinadhuni: Good morning, everyone. Reported revenue by quarter. So the reporting revenue for quarter Q2 FY '26 was $9.3 million, broadly stable, down only 1% compared to the prior quarter. Recurring revenue was $7.8 million compared to $8.2 million in the prior quarter. The reduction is reflecting mainly the residual impact of change in Cisco invoicing. But the underlying customer base remains stable, and we are focused on stabilizing recurring revenues by retention initiatives and targeted customer engagement. Operating cash flow run rate. So the operating cash flow run rate has improved substantially compared to the prior quarter. So the current operating Q2 cash-based cost is $9.5 million, which is 12% down compared to the Q1 FY '26. And the total annualized cash-based costs are at $38 million. This is like $5 million saving compared to Q2, and this is mainly due to the exit of surplus U.K. property lease, workforce optimization, automation and SaaS vendor rationalization. The cash flow is also further improved by additional AUD 4.6 million, which we're going to receive in Q3 from the Tier 1 North American CSP. So this will make our cash position really strong for Q3 and further. And as you can see the trend, both the lines are getting very close to us, the cost and the share revenue. So the direct costs. As you can see, the gross margin for Q2 has come up to 70%, which is a 1% increase compared to Q1. This is due to the ongoing reduction in underlying platform costs like our AWS and Azure costs, which are coming down. So this also includes the cloud platform and AI service consumption across the board and then the cost offset decreased by revenue in the quarter. So the operating costs continue to decline. Operating cost is the total cost less the direct costs. So this is now at $26.8 million annualized for Q2. This has come down by 15% when compared to Q1. So Q1 was $7.9 million, Q2 is $6.7 million now. So the group has begun to realize the cash savings due to the exit of leases, workforce optimization and other cost optimization initiatives, which we continue to focus and tightly manage our cost base. So the cost program is going to continue further into Q3 and Q4, and we're going to see more benefits through it. So the actual cash flow for the quarter. So the receipts we have is $8.6 million for Q2, which is a little bit less than Q1. This is mainly due to the timing difference of receipts due to the customer shutdown during the holiday period. The total operating cash outflow for the quarter is $11.2 million compared to $13.1 million in Q1, which is 15% down. And this is due to the cost saving measures put in place and reduction in one-off payments, which were made in Q1. So the overall cash outflow for the quarter is $2.6 million. And once we normalize this, this has come down to almost like nil. And the cash inflow was due to the directors' capital raise, which is around $765,000 for the quarter. We also have further $5 million loan facility, which has been undrawn as of 31st December 2025. So the normalized cash outflow, the $2.6 million, if you normalize it, we have like $1 million, which is like abnormal items, which are like term legal cost for term deposit recovery and also once-off restructure cost, which is around $920,000. And we also have working capital timing differences of about $1.6 million, where the payments were received during the first week of Jan because of holiday shutdown. So if we normalize these cash outflows, the normal items, the net cash was like nil for the quarter. Okay. Matt, I hand back to you. Matthew Bellizia: Okay. Thank you, Prasad. The legal cases in going -- so the ASIC investigation, which we provide assistance when required. We don't really know where that's up to. That's ASIC's business as to how they're going and who they're pursuing. What was certainly interesting in December, I'm sure everyone is aware that we have taken action against BDO Audit [indiscernible] Pursuing them for $26.6 million based on their failure of audit, which is in the public record. ASIC has also proceeded action in December against BDO Audit over failing audit processes for Dubber. It probably tells me that it reaffirms our case that ASIC also believe we have a strong case against BDO Audit for not detecting that. So I think it gives us further confirmation that we'll do that. But as per the disclaimer, all proceedings and recoveries remain highly uncertain. We also have a claim against the Victorian Legal Services Board Fidelity Fund for the loss of monies. There -- I think some of the things in the ASIC case probably further support our claim there as well, to be honest. So there's a number of things going on in the recovery efforts and under the Board subcommittee, which is managing that. And I don't really have any further updates because we can't talk about that substantially. Moving forward to the focus areas of FY '26, and then we'll go to questions. So again, we're targeting the underlying cash flow breakeven of FY '26. So you can see that the lines are coming close together. Just reiterating moving customers to AI, driving increased ARPU per customers, improved marketing and growing sales, continually driving business automation and streamlining the internal part of our business, rationalizing 3 systems to 1. Our product evolution, focusing on end customers and really bringing value to end customers, bringing information to their table and driving deeper into verticals. So that's the focus as we go forward to finish this financial year. That's all we have. I'll throw open to any questions now. Matthew Bellizia: So do you see the commencement of ASIC separate proceedings against BDO is a good sign validation for Dubber's proceedings against BDO? Yes, I do. And I also think there's potential that they might fight some of the costs that might even drive some of the case for us. So I believe it's a good sign and further validation that they've launched separate action on BDO and ASIC have obviously got more information available to them to us than us because they've got more powers to go and ask more questions and do further investigations. Next question. Can you comment on the status of your new current contract pipeline? My issue with pipeline in an indirect channel is it's often very large, but it's not very well qualified because we are not selling. It's the indirect channels that qualify. So my issue really is whilst we see these big pipelines all the time in sales force, it's not as well qualified when you have a direct channel that a direct sales force as opposed to indirect because we're reliant on what partners tell us as a potential prospect. So I can't really give you a strong answer on that. Are there any further questions? How much more revenue from VMO2 to still roll off? -- still -- there is still some revenues from VMO2 to roll off. Obviously, they thought they'd roll off in a month. They still have revenues on us. And we're still having conversations with VMO2 about potentially what we can -- whether we can retain some. And there's obviously no guarantee to those. I don't really want to quantify that as to how much more is to roll off because it's confidential information, but there are still some revenues to roll off. Just with the timing of cash payments, fair to say next quarter should be particularly strong with catch-up payments and receipt of North America contract type. Contract payment, yes, providing that contract payments made in this quarter, which it should be, and there's no reason it wouldn't be. It will be very, very strong, probably a record -- what should be an absolute record for the company's history in terms of cash payments in this quarter. And we did get a very big payment in week 1 of January, which it had been paid a week earlier, obviously, due to the Christmas break, it would have normalized last month's cash payments. Are you planning to stay as CEO and drive the company forward as it appears you are? Yes, I've actually invested a substantial amount myself, so -- which I think people could see my shareholding near on just under 5%. So yes, I am planning to be CEO, unless the shareholders have a different opinion. Are there any further questions? If not, we might wrap up in 30 seconds if there's no further questions. What are the key trends in regards to competitive landscape for recording as a service? Obviously, we have competitors in the market. We took some hits during last financial year, both on the loss of VMO2 and Cisco putting out their product. That should settle because what the pain we've seen should start to settle down that we had to withstand. There are other products often recording as a service. I think we're going to be in a good place. And I'll certainly be getting -- trying to get a lot of leverage off this one once we announce who the one we've signed up is around the world for other people to say, well, if they're going to buy it, why wouldn't you? So it's -- I think it should give us a fairly good strength and to continue to grow our position in the new brand and a new way forward with this recording as a service. Does Dubber foresee any further capital raising before the positive cash flow position? No, I don't, and I hope we don't have to capital raise again. I'm pretty keen on retaining cash. You can see what are we now 7-something, whatever Prasad gave us. We're going to obviously get a big influx again this quarter. We -- my intention is to run the place in the profit. I don't like running not for profits, I don't like running not profits. So the best we can, I want to run this pace breakeven and then growing into positive EBIT and then net profit whilst retaining a strong cash position is the focus of what a good business does. In terms of gross margins, where should we expect this to trend over the next few years? I think around constant in that 70s mark. We are driving cost out of our gross margins. We're constantly renegotiating some legacy contracts that we're dealing with as they come up. We've obviously got the cost of the data center, which we're going to get some direct cost savings when we bring that -- close that midyear. So combined with direct cost savings and some renegotiations, we should be holding where we are for the gross margin perspective. How close are you to announcing a new CFO ongoing. So I don't have anything particularly to give you right now other than we're in good hands still with Prasad doing a good job and our former CFO is still in the wings helping us out. Are there any -- here we go. What's the update on the money stolen by the last CEO? That was a question, not a statement from me. I gave you an update on the -- on where the recoveries were at. Obviously, the ASIC investigation of where that money went is between ASIC and whomever and whatever happened to those monies. I've provided an update already on the fact that the BDO recovery, Victoria Legal Services Board Avenue. And obviously, we've got action against Mr. Madafferi and Mr. McGovern. The last one is less hopeful, of course, because of the ability to recover those amount of monies out of individuals. But obviously, BDO -- ASIC pursuing BDO would -- you would suggest would give you some endorsement. They have a similar view to us that there is a case to answer. Any further questions? I think we're getting to the end. We're conscious not to keep running these past 30 minutes because people are giving up their valuable time. So on that basis, we might conclude now. Thank you, everyone, for attending. I hope we gave you some information about your investment and where you're taking your company. Thank you for your support, and good luck. Prasad Kasinadhuni: Thank you.
Operator: Thank you for standing by, and welcome to the Boss Energy Investor Conference Call December quarter 2025. [Operator Instructions] If we run out of time and do not have time for your question, we ask that you please call our office on 086263-4494 or e-mail boss@bossenergy.com and speak to our team. I would now like to hand the conference over to Mr. Matt Dusci, Managing Director and Chief Executive Officer. Please go ahead. Matthew Dusci: Thank you, Ashley. Good morning, everyone. Thank you for dialing into the Boss Energy December quarterly conference call. Joining me on the call this morning is Justin Laird, our CFO We will be both happy to take questions at the end of this call. Turning to Slide 2, there's been another significant quarter for the company, which I'll talk through during the call. Some of the key highlights include: we delivered record quarterly production of 456,000 pounds of uranium drummed, up 18% from the prior quarter. C1 cash costs for the quarter were $30 per pound, down 12% from the prior quarter; with all-in sustaining costs of $49 per pound, down 3%. Average price of $112 per pound or USD 74 per pound was realized with sales of $39.3 million. Alta Mesa produced 143,000 pounds of uranium drummed, of which Boss received 68,000 pounds during the quarter. We continue to build drummed inventory to 1.62 million pounds, up 175,000 pounds or 12% on the prior quarter. The balance sheet remains strong with $208 million of cash and liquid assets, including $53 million of cash. We remain on track to deliver FY '26 production guidance of 1.6 million pounds and are pleased to announce downward revision of guidance of C1 and all-in sustaining cost. On the 18th of December, we announced the conclusion of the Honeymoon Review and outlined a clear pathway forward for Honeymoon asset with a new feasibility study initiated. This fundamental change to our wellfield design will enable an increase in residence time at lixiviant, reduce our cost structure, unlock lower grade mineralization, improve the production profile and extend the life of mine. Now turning to Slide 3. As noted, this was a quarter of record drummed production at Honeymoon with production of 456,000 pounds of uranium drummed. This is up 18% on the prior quarter, reflecting a continued run on quarter-on-quarter growth since Boss commenced production in April 2024. IX production was up 8% from the prior quarter with 406,000 pounds produced with increased flow achieved from 4 wellfields B1 to B4, being online for the whole quarter. Key activities for the upcoming quarter will include the completion of the commissioning of NIMCIX columns 4 and 5. Flushing for wellfields B5 is underway and expected to begin production in the coming few days. We are expecting production in the third quarter to be softer than in the current quarter before lifting gain in quarter 4 to deliver the 1.6 million pounds production guidance for the full financial year. The pullback in the coming quarter is due to phasing of wellfields with an expected decline in average tenor. This quarter, we'll also have a major shut associated with the tie-ins of columns 4 and 5 along with power upgrades. In quarter 4, we expect an increase in production as Wellfield B5 will be running for the full quarter, and we'll also bring in Wellfield B6 coming online at the very back end of the quarter. This Wellfield B6 will be the first of the wellfield to operate for Far East Kalkaroo. Turning to Slide 4. As noted earlier, C1 cash cost for the quarter was $30 per pound. This was lower than both the original guidance of $41 to $45 per pound in the prior quarter of $34 per pound. This was a great achievement as we continue to see positive results from lixiviant optimization programs, reagent optimization in the plant and other cost reduction programs, driving cost savings and productivity improvements. The all-in sustaining cost for the quarter was $49 per pound, below original guidance of $64 to $70 per pound. The main variance relates to lower C1 cash cost and the phasing of new wellfield sustaining capital spend. Where there is an opportunity to delay wellfield capital expenditure under the existing plan, we are taking this decision while we execute the new feasibility study. We do not want to be spending capital on the nonoptimal plan. Project and Supporting Infrastructure capital costs increased in the quarter to $11 million from $9 million in the prior quarter. Of the $11 million spent in the current quarter, $4.5 million of related to ongoing completion of the NIMCIX columns, $6.5 million of the $11 million related to wellfield supporting infrastructure for East Kalkaroo, with $4 million spent on the trunkline, monitoring wells and high-voltage power upgrades and $2 million spent on delineation drilling. In terms of guidance for the remainder of FY '26, we continue to reconcile production guidance of -- to reconfirm production guidance of 1.6 million pounds of drum uranium. We are also pleased to revise downwards our C1 cash costs and all-in sustaining cost guidance. Our new C1 cash cost guidance is $36 to $40 per pound, down from the previous guidance of $41 to $45 per pound. All-in sustaining cost guidance has also been reduced from $64 to $70 per pound to a new revised guidance for FY '26 of $60 to $64 per pound. This is largely driven by the team's efforts to increase productivity and efficiencies while reducing costs for the business. This is an area that we'll continue to focus on. Sustaining costs remains mostly consistent as we balance this potential transition from existing plan to a new wide space wellfield design. Where possible, we do not want to spend capital on executing a suboptimal plan. It is in the shareholder interest that we defer as much of this capital as possible in parallel to the execution of the new feasibility study. Project and Supporting Infrastructure capital has been increased by $3 million from $27 million to $30 million to a new guidance of $30 million to $33 million for the full financial year. This increase is primarily due to the inclusion of the Honeymoon delineation drill program. Turning to Slide 5, the company is in a strong financial position, and I continue to reinforce that we are very well positioned to fund what we need to do as a business to drive value. We closed the quarter with no debt and $208 million of cash and liquid assets. Cash increased from $47.8 million to $52.9 million at the end of the quarter. There's a slight decline in the total cash and liquid assets quarter-on-quarter due to mark-to-market decline in fair value for our strategic equity shareholdings. Drummed uranium inventory increased during the quarter from 1.44 million pounds to 1.62 million pounds. We continue to view this inventory as strategic for the company as we continue to see tightening of the uranium market. Sales during the quarter consisted of 350,000 pounds at an average realized price of USD 74 per pound or AUD 112 per pound. First delivery into a legacy contract will occur in Q3 and will continue in Q4. This contract is linked to the Honeymoon Mining license from when Boss originally acquired the asset. The contract is for a maximum of 1.7 million pounds linked to either 20% of the previous calendar year's production or a maximum quantity of 250,000 pounds per year. This contracted material 250,000 pounds will reflect a realized price of approximately 65% to 70% of the spot price for those pounds. Moving to Slide 6. In terms of our 30% stake in Alta Mesa, a joint venture with enCore, production for the quarter totaled 143,000 pounds on a 100% basis during the quarter. Boss received 68,000 pounds of drummed production during the quarter. The production decline was associated with the timing of bringing new wellfields online. Additional modules are currently being installed at Wellfield 7 and Wellfield 3. Drilling at Alta Mesa East continued to confirm the potential extensions of mineralization from Alta Mesa West. Turning to Slide 7. As noted, on the 18th of December, we released the findings of the Honeymoon Review and have identified a clear pathway forward, a pathway that we are generally excited about. It's a pathway that has the potential to unlock significant value for the company. We have commenced work on the new feasibility study centered around the alternative wellfield design which has the potential to reduce operating cost and sustaining costs, unlock lower-grade mineralization, improve our production profile and extend the life-of-mine plan. Successful delivery of this new wellfield design at Honeymoon would also have a positive impact on our satellite deposits. This significant per work has been initiated as we work toward delivery of the new feasibility study, including continuation of the resource delineation, additional sample collection to improve geology, geometallurgy and hydrological characterization has commenced. Additional reactive transport simulations have also been completed. We've continued to advance the updated mineral resource model, and we have completed planning for trial test work patterns, with drilling also commenced on establishing these trial wide space patterns. Turning to Slide 8, work progressed during the quarter on advancing the technical and baseline studies at Gould's and Jason's satellite deposit. An updated mineral resource statement and timeline of work required to provide the permitting pathway will be provided in this coming quarter. It is worth noting that the wide space wellfield design that is being dot as part of the new feasibility study could potentially significantly improve the recoverable uranium metal and reduced capital intensity in C1 costs, both at Jason's and Gould's Dam. Turning to Slide 9, I'll provide a quick summary of the quarter and our priorities. We delivered record quarter production at Honeymoon, which is a credit to the team. Production was our highest ever quarter with 456,000 uranium produced. This was at a C1 cost of $30 per pound and an all-in sustaining cost of $49 a pound. Given the results of optimization, productivity and cost reductions, we have revised our guidance downwards for both C1 and all-in sustaining cost while maintaining our production guidance of 1.6 million pounds for FY '26. The company's financial position continues to strengthen in the quarter with cash of $53 million and total cash and liquid assets of $208 million as we continue to build inventory, which is now at 1.62 million pounds of uranium. Work has commenced on the new feasibility study, which defines a clear pathway forward to unlock significant value, both to the Honeymoon deposit, but also to Gould's and Jason's. Before moving to Q&A, I'd also note that during the quarter, Wyatt Buck, our Chairman, has informed the Board of his intention to step down as Chair. Upon a pointing out of a new Chair, Wyatt will continue to apply his extensive uranium operational and technical expertise as a Nonexecutive Director on the Board. I'm grateful to Wyatt, who has supported me and stepped into the CEO and MD role, and him wanting to continue to assist the company as a Non-Executive Director. With that, I'll hand back to Ashley, the operator, for questions and answers. Operator: [Operator Instructions] Your first question today comes from Alistair Rankin with RBC Capital Markets. Alistair Rankin: First question just on the contract -- the legacy contract that you've called out. So you mentioned it's 65% to 70% of the spot price, is going to be the realized price for that. Just wondering, is that implying that you're going to have part of that as fixed contract and you're estimating that it will be about 65% to 70% of the prevailing spot price? Or is it still a spot price mechanism and it's just at a lower percentage of the spot price? I'm just looking for a bit more color on how that pricing mechanism works. Justin Laird: Thanks for your question. It's Justin here. So the precise terms of that contract are commercially sensitive. It is a -- it does have a couple of different tranches for that contract and has different pricing mechanisms for those tranches. Given that commercial sensitivity, what we have done is tried to simplify it for you with noting that it would be 65% to 70% of the spot price at the time of delivery. Alistair Rankin: Okay. Justin. I appreciate that. Second question, just about the outlook for quarterly production. So you flagged that it's going to be declining in the third quarter for FY '26. And then lifting again in the fourth quarter with the connection of some additional wellfields. So included in those well fields is the East Kalkaroo, I think, B6. That's your first wellfield coming in from East Kalkaroo. Can you just remind me, are you still anticipating that East Kalkaroo production levels to boost your production at the mine? And sort of what are your expectations for production performance from the East Kalkaroo wellfields? Matthew Dusci: Yes. Okay. Yes. So we -- next quarter will be a little bit softer compared to the current quarter, but reminding ourselves that we'll finish the final actual year at 1.6. B6 from Far East Kalkaroo will come into production at the back end of that quarter. Production, it's not heavily weighted in terms of delivery of the 1.6 of that B6 production profile. B6 will provide production profile into FY '27. One of the things we're also considering is just balancing between delivery of this new feasibility study and continuing to support sustaining capital into that future production profile. What we're wanting to do is make sure that we don't -- if we can, we're deferring capital going into existing plan while we complete the new feasibility study. Operator: Your next question comes from Henry Meyer with Goldman Sachs. Henry Meyer: Just hoping you can share a bit more detail on plans to test the new wellfield design. Any color on what areas are currently being developed with that strategy? How long could you need to test it and get confidence in effectiveness? Matthew Dusci: Yes. Henry, so it's Matt. Yes. So as I noted in the commentary, we've planned those test work patterns associated with wide spacing. They vary. So they actually vary in spacing and location. Initial programs have actually has commenced in terms of establishing some of those test work patterns around the Honeymoon Resource as we currently have defined it, so extension to Honeymoon B1 to B5. Some of that spacing in that area varies. We are going up, one of the patents will be up to 100-meter spacing. We also plan as part of the feasibility study to also test Far East Kalkaroo minor wide spacing. B6 becomes quite an important part to this new feasibility study because it's also B6 is on that original plan of close spacing. So we're wanting to compare B6 production with wide spacing program production at the Far East Kalkaroo. In terms of time frame, that will all fit into that delivery of the new feasibility study due in Q3. Henry Meyer: Perfect. And second one for me. Any other detail you could share on recent drilling performance, I guess, over the last month since we got the update late last year? Grade thickness sort of in line with results being observed before or a bit of an improvement or perhaps not as good as the block model suggested? Matthew Dusci: Yes. Good question. The results can generally confirm what we're expecting. We are seeing some mineralization to the south of Far East Kalkaroo. So we are opening up some exploration areas that will come up, hitting some high-grade mineralization outside of design but holistically continue to confirm what we're seeing -- where we're seeing continuity of lower-grade mineralization with high-grade mineralization, but not necessarily as continuous as we previously thought. Operator: Your next question comes from Daniel Roden with Jefferies. Daniel Roden: Just wanted to ask on the contract that you've disclosed. And I just wanted to get some clarity on maybe some of the other contracts under your book that you've got several that you've signed over the past few years. Are you in a position to be able to provide, I guess, a sensitivity on -- at various price points that those various contracts and mechanisms might influence on your realized pricing? Like how should we think about that? And maybe something you can probably answer right now, but what volume of your production expectations for FY '26 and '27 are contracted? Matthew Dusci: Yes. I'll jump in, and then I'll hand across to Justin. I mean ultimately, as a business, we'll try and provide as much transparency as we can. We -- it's one of the things we are talking about is how do we continue to provide that transparency on those contracts and potentially look at doing that at some point as we work through the business. In terms of this contract, it represents about 15% of production at 1.6 million pounds. We still -- what's important to note as a company, we remain significantly uncontracted. I mean our contract book represents about 3 million pounds out to early 2030. So it hasn't changed -- it doesn't change that position in terms of us being relatively uncontracted. What we try to do in this is just provide a little bit of look through on realized pricing that you'll probably see in -- you'll see in Q3 and Q4 as a result of that legacy contract. So still highly exposed to uranium price as we see uranium price tighten both through our contracting strategy and the inventory that we do hold. Daniel Roden: Yes, sure. So that 15% for FY '26 -- in '26, that's the only contract that is applicable for FY '26. Is that 15% or the 250,000? Justin Laird: There are additional contracts that we will be delivering into in calendar year 2026. Those contracts have a mix of base escalated and market related with floors and ceilings. For Q3 of this financial year, most of those pounds have already been executed in terms of the forward sale or delivery into this legacy contract from Q4 onwards of this financial year. So then coming into Q1 and Q2 of the next financial year to complete calendar year 2026, we are mostly under contracted for that period. If you were to look further ahead in terms of calendar year 2027 onwards, our current contract book would get you a realized price that's probably around mid-80s to low 90% in terms of a correlation to the spot price at the time of delivery. Daniel Roden: Perfect. That's very helpful. And just a last one from me, but you kind of -- as you go through the process of building and designing a white space wellfields patents, obviously, there's some lead time into that. And I noted B6 is going to be under the original, I guess, design and plan. At what point do you start needing to, I guess, allocate some of the capital changes and capital spend? I imagine it's FY '27. But I guess from my perspective, that would seem like it would be, I guess, front running or pre the final study results release. So I guess, how do you think about deferring some of that CapEx? What's the amount of CapEx that, I guess, you would need to commit pre the final results of the study? Matthew Dusci: Yes. So this is where we're working that balance while we're completing the new feasibility study and also having to ensure that we can -- sustaining capital to provide that production profile going forward. Ultimately, from a market perspective, we'll be able to provide all that transparency with the new feasibility study to give an understanding of total capital and sustaining capital over that life with that study. Having said that, we are managing our -- within what we're saying with our guidance, both on a sustaining and total capital for execution of these trial patterns. So what you're seeing is we haven't changed sustaining and/or total capital projects only by that $1 million and $3 million, respectively. That includes the trial patterns that we're doing as part of the new feasibility study. Those patents include uranium pounds, which we haven't yet allocated either to any production profile. Justin Laird: I would just add to that as well. And so it is a balance, but there is a lot of wellfield capital that will still be relevant regardless of the wellfield design. So examples of that would be the wellhouse, the pumps, some of the surface infrastructure pipes, cables. A lot of that would be relevant regardless of the spacing of the wellfield. And so we're continuing to invest in that type of wellfield infrastructure, where we are holding back a little bit is in terms of drilling production wells as that could materially change, depending on the spacing of the wellfield. Daniel Roden: Yes. Got it. And so just a clarification, everyone understanding it correctly, but I suppose the findings of the white space drilling don't -- they won't change the pre-committed capital spend for these studies and projects and you're not going to have to go in and rework some of the infrastructure the study findings, I guess, something different. So there's not really going to be a change in, I guess, capital expenditure expectations from yourselves, depending on the study outcomes? Justin Laird: Yes. No, we don't expect any changes, Daniel, and the updated guidance that we've provided today reflects our latest view, and we don't expect any changes to that view for the financial year. Operator: Your next question comes from Regan Burrows with Bell Potter. Regan Burrows: Just on commissioning of Column 4, it looks like it's a little bit delayed there. I would have thought that you would have wanted to have that up and running as you saw the leach tenors coming off to sort of balance that production. So I guess are we -- is there something that's intentional there? Or is there something else that sort of hiccups that? Matthew Dusci: Yes. It is a little bit delayed in terms of that original schedule, but it's not really the key driver. The key driver actually is the flushing of B5, and that will increase flow. So although you see it as a delay here, one of the drivers to where we are probably is about a month on B5 relatively. Regan Burrows: Okay. So it's driven by the wellfields rather than -- platforms themselves... Matthew Dusci: Correct. So it's all linked together. Regan Burrows: Yes. Okay. And then just on, obviously, the results from the white space patent from, I guess, the original call, you said it would take up to sort of 90 days to get some initial results coming through. Curious, I guess, you're still targeting sort of Q3 feasibility study time frame to release those results from the white space patent. Are we going to get an update before then on whether or not this is successful? Matthew Dusci: Yes. Regan, as we're trying to do, we'll provide as much transparency and inform the market as we get data. What we -- how we've designed the feasibility study is to ensure that happens by breaking up into components. So yes, the answer is yes, we're happy to try and give as much clarity as we work through it. Regan Burrows: Okay. Great. And if I could just squeeze one in. Any sort of driver why Alta Mesa performance dropped so materially quarter-on-quarter? Matthew Dusci: Yes. So you saw that drop in production. Again, timing on wellfields really becomes critical in these ISRs. And that's a reflection at Alta Mesa as well as they look at bringing in new additional wellfields and extending wellfields onto -- and prospectivity onto Alta Mesa East project. Operator: The next question comes from Milan Tomic with JPMorgan. Milan Tomic: Just one from me. How should we be thinking about sales over the second half? Is it going to be broadly consistent with what we've seen in this quarter? Or should we be expecting it to move higher? Justin Laird: I'll take that question. So in terms of sales quantities, as we said, we will continue to see sales quantities roughly in line with production. In terms of realized price for quarter 3 this financial year, we'll obviously have the 125,000 pounds of the legacy contract. And then the remainder of the Q3 sales were largely executed in the prior quarter. So they will be based on a forward sales price from the prior quarter. For Q4 in this financial year, we'll have 125,000 pounds of the legacy contract. Again, we will be in that range of 65% to 70% of the spot price. And then we're still yet to execute the forward sales for Q4 of this financial year. So that remains uncontracted. Milan Tomic: Yes. Just in terms of delivering sales into those legacy contracts, how should we be thinking about that? I mean, are you kind of going to be looking to maximize those sales at 250,000 per quarter or so? Or would you be looking to kind of extend it out a little bit further? Justin Laird: The exact timing of the 250,000 pounds is out of our hands. That's the -- based on the terms of the contract, the utility advises a delivery date which is consistent with other utility contracts. And we would then deliver into that contract at the date advised by the utility. Operator: Your next question comes from Branko Skocic with E&P. Branko Skocic: Just on the topic of royalties, I just want to confirm if Honeymoon is now in a position that they're required to pay royalties moving forward. I guess my understanding was you weren't required to pay royalties across the first 1.25 million pounds. Can you just click over that in terms of sales? Matthew Dusci: Yes. So we are commencing to start to pay royalties, Branko. And we'll see that in this half. Branko Skocic: And the other question I had was just on the topic of fixed costs. I know you're not disclosing anymore in your quarterly, but it incurred about AUD 7 million per quarter in the second half of FY '25. I just was wondering if that was kind of a sensible run rate to be assuming over the next 12 or so months. Justin Laird: Branko, yes, we haven't disclosed the fixed cost. It's largely consistent. The fixed cost proportion is largely consistent with what we've previously disclosed. Operator: The next question comes from James Bullen with CGF. James Bullen: Congrats on the results in the core area. Just a question around that legacy contract. So you're saying the counterpart is a utility there. But is there any chance that you could buy your way out of that contract at all? Matthew Dusci: I think it's something that we'll probably look at whether we want to or not. Probably the ideal position would have been to do that earlier than we were at. But ultimately, it becomes a small part of the production profile as we go forward, too. James Bullen: Great. And I guess -- apologies if I've missed it, but this is the first time that this has been disclosed. Have you now gone through and checked pretty much everything? And is there any other artifacts here which could come back and bite you? Matthew Dusci: I feel comfortable that from a sales and contracting perspective, it's all there. Like I said previously, we'll try and provide a little bit more transparency. We can try and provide a little bit more transparency on some of that. We talked about that and when's the right catalyst and the time going forward is. But I mean it's a contracting position 3 million pounds out through 2030, again, relatively deleveraged from contracting. James Bullen: Understood. And just around the PLS, the tenor, there you're telling us not to extrapolate that because it is performing better than the previous feasibility study. Do you have any guidance around the profile it's going to have from the core area? How will it trend downwards? Matthew Dusci: Yes. So we do. We haven't disclosed that, but PLS head grade will come down as we see some of the life of those wellfields continuing to drop. And then with B5 coming back online, PLS tenor will jump again. And it's just -- it's all got to do with that sequencing of wellfields with the tenor. Having B5 come in line enables us to continue to increase flow, and that's with Column 4 also coming back coming into production profile. Operator: Your next question comes from Glyn Lawcock with Barrenjoey. Glyn Lawcock: Sorry, I just wanted to clarify the legacy contract again. So it's the maximum of 250,000 pounds each delivery year. Is that a calendar year? I mean, obviously, you said it's at the discretion of the utility. So does that mean there's nothing in the first half of fiscal '27? Matthew Dusci: It's calendar year, correct? So it's calendar year 250,000 pounds per year, up to a maximum of 1.7 million pounds capped, discretion to the utility on where in that calendar year. Glyn Lawcock: Yes. So there will be no deliveries in the first half of fiscal '27 then as a result? Matthew Dusci: Correct. Glyn Lawcock: And then just the second one, another way, just to think about the dollar spend because I know looking at your waterfall quarter-on-quarter, Honeymoon costs are up 30% from sort of $12.4 million spend in Q1 to just over $16 million. You've got more well fields coming on, more columns coming online to obviously lift production as well. Like where do you feel that dollar spend caps out? I mean I know you've got wellfield design coming as well, which didn't change it. But is that -- are we still going to see increasing dollar spend quarter-on-quarter, you think, into the second half? Matthew Dusci: You're seeing that increase because ultimately, production profile is also increasing quarter-on-quarter from a total dollar perspective, once production profiles level, then that dollar spend would also level approximately. The only variance then would be head grade. Glyn Lawcock: Alright. So if you take the first half total dollar spend in first-half production, you're sort of sitting at the top end of your guidance range, I guess. So -- but you look for more production in the back half? Justin Laird: Yes. I mean, Glyn, for the operating costs in there are some working capital movements. So probably the primary driver or difference between that. And the C1 cost we purchased some resin during the quarter, that will be amortized over quite a few years. We do have some capital accruals that you will have seen in the difference between our CapEx spend for the half compared to the cash flow waterfall. And we expect that CapEx accrual to unwind from a cash perspective over the next 2 quarters. And then other than that, kind of those kind of working capital overhangs from the current quarter, we've given you the cash costs and CapEx for the remainder of the half. So that's the best indication in terms of CapEx or cash spend for the remainder of the half as well. Glyn Lawcock: Okay. So the cost of production will sort of start to match the cash, you think, as opposed to the sort of the inventory movements, accruals, et cetera? Justin Laird: Yes, that's right. Operator: There are no further questions at this time. I'll now hand back to Mr. Dusci for closing remarks. Matthew Dusci: Thank you, everyone, for joining the call this morning. As noted on the call, it's been a record quarter, record production and below guidance cost. And as a result, we've downward -- decreased our cost guidance for C1 and all-in sustaining costs. We're also very clear about the pathway forward on how we drive value for both honeymoon and satellite deposits, which is the delivery of this new feasibility study. So with that, I thank everyone for joining the call. Thank you, Ashley. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Syrah Resources Q4 Quarterly Report Update. [Operator Instructions] I would now like to hand the conference over to Mr. Shaun Verner, Managing Director and CEO. Please go ahead. Shaun Verner: Thank you. Good morning, and thanks for joining us on the call today. With me is our CFO, Steve Wells, and our EGM of Strategy and Business Development, Viren Hira. I'm pleased to report our Balama operations delivered a solid quarter of campaign production and closed the year out with real momentum. Our commercial team had a busy fourth quarter, meeting good ex-China demand for breakbulk shipments of our Balama fines, and solid sales of coarse products into the global industrial markets. At the same time, the policy and market backdrop is moving into a pivotal period for support of the growth and potential development of our Vidalia anode material business, a period in which there is potential for acceleration of qualification and further commercial activity. Today, we'll work through the presentation provided with a quarterly report and update you on the key developments in the quarter, then we'll be happy to answer any questions at the conclusion of the call. So turning to Slide 3, and I wanted to remind everyone of our clear and differentiated investment proposition. Syrah is the leading integrated natural graphite and active anode material producer outside China, having deployed significant investment into infrastructure and operating capability with readiness to immediately increase upstream and downstream supply, providing significant lead times over the following projects. Vertical integration from mine through anode delivery to end customer offers a secure source of high-quality, critical graphite material supply outside China. Our unique asset base can be OpEx competitive with China and leading ex-China, and we are well placed to generate strong margins over the long term as operating capacity utilization increases. Our leading sustainability and governance position, including broad-ranging external assessment and low emissions intensity compared with Chinese products provides full auditability and traceability from raw material to finished anode. And finally, in response to expected continued growth and regionally specific requirements in our end markets, we have clear expansion opportunities that we can execute in line with the needs of our customers and government stakeholders with support from capital providers. Moving on to Slide 4 now, our critical underpinning values at Syrah are safety and sustainability. And as we continue to develop as a leading ex-China critical minerals producer, we're guided by 3 core objectives: being positive for the communities in which we operate, being sustainable for the environment, and providing secure high-quality supply for our customers. In the fourth quarter, performance against our key safety and sustainability metrics was very strong. We continue to demonstrate how our people and our local communities are critical to our success. The health and safety and security of employees and contractors will always remain Syrah's highest priority. As we strive for 0 harm in our operations, we saw our total reportable injury frequency rate remained very low at 0.9 incidents per million hours worked, a result which any operation globally would be proud of. Our safety focus is underpinned by our work on critical risk hazard management and infield leadership interactions, which are a daily priority for the leadership teams. For the full year, we saw continuing improvement trends in our injury frequency rates across both operations and further refinement of our asset risk profile. I'm also happy to report that in December 2025, we finalized a new community development agreement with Balama host community and district government representatives. The new agreement extends our community development framework that's been in place since 2017, and commits a further USD 5 million from Syrah to important social and economic initiatives focused on infrastructure, essential services and sustainable income generation programs. Importantly, the priorities for these projects are determined in conjunction with our local host communities in Cabo Delgado. Syrah's operations are clearly aligned with leading global sustainability and governance standards. Last year, Balama became the first graphite operation globally in the first mining operation in Mozambique to achieve the Initiative for Responsible Mining Assurance or IRMA 50 level of performance for sustainability. This achievement highlights nearly a decade of strengthening our differentiated performance, including a strong safety record, investment in training and developing a highly skilled workforce, ongoing community interaction and development and human rights due diligence. Along with our ISO certifications and external auditing required under our U.S. government funding arrangements, we continue to prioritize health and safety and environmental management systems, confirming our commitment to operating sustainably and driving continuous improvement. Final point I wanted to reiterate here is the independent life cycle assessment or LCA of Syrah's integrated operations conducted by [ Minderoo ] on global warming potential. From Balama origin to Vidalia customer gate, our global warming potential is estimated at 7.3 kilograms of CO2 equivalent per 1 kilogram of anode material produced, which is around 50% lower than equivalent natural graphite from the benchmark supply route in Heilongjiang province in China and 70% below the synthetic graphite benchmark in China. This whole sustainability focus, along with the lower global warming potential with our integrated natural graphite anode product relative to other suppliers should provide Syrah competitive advantage on these parameters as the most sustainable source of integrated natural graphite anode material available at scale today. On Slide 5, turning to a more detailed look at our performance in the fourth quarter. Total production at Balama was up 34% on the prior quarter to 34,000 tonnes. This result was in part driven by a clear improvement in recovery rates to 76% and good plant availability. It's worth making a specific mention of the operational performance in the most recent production campaign through December, where we produced 16,000 tonnes at 83% recovery whilst maintaining high product quality. This is in line with our best prior operational performance, and the team is confident that further improvement at higher throughput for greater cost efficiency is achievable. Since recommencing production after the nonoperating period through most of the first half of 2025, it's been great to see the Balama operational team delivering high performance and closing out the year on a strong note. As you'll recall, we restarted operations in mid-June '25 and in July, we recommenced shipments from Balama and subsequently lifted the force majeure declaration that has been in place since December 2024. As a result of campaigns from restart comparisons with the prior 2 quarterly periods are less meaningful here, given that we're still ramping up operations after an extended outage but we are demonstrating clear and continuous improvement and operating comparisons will be more relevant over future quarters. Natural graphite sales of 29,000 tonnes were up 21% on the prior quarter. We continue to have demand to drive our operating campaigns and product inventory requirements, and we essentially sold everything we produced in the quarter, noting the lead time required to port and shipments. This included 2 further breakbulk shipments to Indonesia in the quarter, with solid demand evident for ex-China feedstock into the anode market. Our weighted average sales price for the quarter of USD 577 per tonne CIF was up 2% on the same quarter last year, but down quarter-on-quarter on the customer and product mix. Our C1 cost was USD 535 FOB per tonne during the operating period and freight averaged $74 per tonne. Importantly, this all provides a good basis for lower C1 costs as we can lift capacity utilization and increase volumes. Along with indications of better than historical pricing as ex-China differentials are embedded, positive future cash flow opportunity is clear, subject to demand continuing to increase. Balama has always had potential to generate good margins of greater than 50% capacity utilization and the price premium is being achieved for ex-China sales compared to domestic and FOB China prices. At Vidalia, the operations team continues to build significant operating experience through small batch production periods and qualification interactions. We continue to work through the highly detailed and extensive qualification requirements, and we are making positive progress, albeit obviously slower for conversion to sales than we would like. We're also responding to continuing refinements that have been requested by customers as their own processes and requirements mature in newly developing battery operations and product mixes in the U.S. Our product quality and performance is excellent as per the key technical performance outlined on Slide 13 in the appendix of today's slides. There is no issue with our product specification or performance, and we continue to deal constructively with a highly complex mix of policy, commercial and technical factors. We remain singularly focused on achieving sales as early as possible, but it's clear that greater certainty in the policy and result in pricing and supply environment, which is expected in the first quarter of 2026 will be critical for the next steps in commercial progress. The removal of the Section 30D consumer tax credit in September 2025 saw a marked reduction in U.S. EV demand in Q4, given sales have been brought forward prior to the change. The growth profile is expected to normalize from there. And as the broader policy and AD/CVD or antidumping and countervailing duties case position crystallizes throughout this year. This will be important not just for Vidalia but also for Balama's continuing sales growth. So we emphasize that the extensive work of our operating and commercial teams will pay off with our investment and development experience demonstrating considerable time and capital required for others to follow, creating a sustainable lead time advantage for Balama and Vidalia. I'll hand over to Steve now to talk about the current financial position and interaction with our U.S. government lenders. Steve? Stephen Wells: Thanks, Shaun, and I'll turn your attention to Slide 6 to cover the cash flow for the group. We started the quarter with USD 87 million in total cash, the cost -- restricted and unrestricted cash balances. Our cash flow from operations during the quarter of negative $18 million included receipts from sales of natural graphite product shipments of USD 13 million. Cash outflow was higher than the September 2025 quarter, mainly due to a $4 million partial payment for a breakbulk shipment being delayed into January for a December shipment and higher adviser costs associated with DOE and DFC loans. In addition, the prior quarter's operating cash flow was also positively affected by the receipt of a $12 million Section 45X U.S. tax credit for Vidalia. We experienced some working capital buildup at Balama, ongoing working capital draw from Vidalia through this low production qualification period, and increased adviser cost associated with the loans, also noting that we continue to draw on the DFC loan in the quarter. Our clear focus remains on increasing sales from Balama to facilitate further improvement in the quarters ahead, and to bring Balama to operational cash flow breakeven as soon as possible, as well as completing the qualification process of Vidalia to expedite ramp-up in sales. Through this period, we are highly focused on managing the cost position of both assets. Other movements to call out in this quarter were the $8.5 million disbursement from the DFC loan to fund working and sustaining capital at Balama, which netted USD 1.1 million of financing repayments and transaction costs, led to the $7 million net proceeds from financing amount. At the end of December, the group had a closing cash balance of USD 77 million. Of this closing balance, there is $18 million of unrestricted cash and $59 million of restricted cash under both loans. Of that restricted cash, $10 million is available to fund Balama operating and capital costs and restricted cash of $17 million is available to fund the Vidalia costs. In addition to sales, of course, further liquidity of $7 million is available under the current DFC facility for TSF funding purposes and subject to meeting loan terms and conditions. Interest payments on the DFC loan are currently deferred to May 2026, while debt service obligations on the DOE loan are deferred to 2027 under the Forbearance Agreement Syrah has with the Department of Energy. We continue to work with both lenders given the market dynamics as a result of the geopolitical and policy landscape, which Shaun has referred to, and to the clear strategic nature of the assets and Syrah's market conditions as well as the specific loan requirements, which include various event default and a requirement for further funding by March 1. This also forms part of the overall strategic advisory process we have previously announced with Macquarie. And with that, I'll hand you back to Shaun. Shaun Verner: Thanks, Steve, and I'll spend some time now providing an update and our perspectives on various market developments and the evolution of government policy through the last quarter of 2025, and implications for our business in 2026. On Slide 7, you can see on the left-hand chart, the global EV demand remained strong, though volatile month to month. In 2025, global EV sales were up approximately 24% on 2024 with strongest growth in China, positive developments in Europe, and a spike in demand in the U.S. in Q3 prior to the expiring of the Section 30D consumer tax credit. As noted earlier, we expect the U.S. demand growth profile to normalize over the coming months. And whilst still positive, we expect the growth rate to moderate from prior forecasts. Anode production in China continues to grow, approaching almost 3 million tonnes in 2025, reflecting not only the EV market, but also the rapid rise of battery energy storage systems or BESS requirements for data centers and other stationary storage applications. Synthetic graphite anode material production overcapacity in China has resulted in intense competition for market share and destructive pricing behavior in the domestic market. Although the addition of BESS demand is starting to see some improvement in utilization in conjunction with some early evidence of capacity rationalization. Prices for synthetic graphite anode material, especially lower-grade products remain below estimated production costs in many cases. Synthetic graphite anode margins have also been impacted by higher coke feedstock costs, maintaining pressure on Chinese producers as only 2 or 3 major producers have significant export market share. These elements are now indicating that prices may be coming off historical sustained flows. In the natural graphite space and anode material production, low overall anode material prices have kept precursor margins and upstream feedstock margins very low over successive periods. Below a few of the larger Chinese anode material producers remain profitable, an increasing number of Chinese natural graphite feedstock and precursor suppliers are not operating due to poor margins and low demand driven by domestic market price substitution, seeing Chinese anode material supply at around 85% synthetic graphite. In the ex-China market, which is more balanced between products, natural graphite anode material demand was lower in Q4, largely due to the U.S. consumer tax credit removal. But through further development in 2026, we expect to see continuing structural shift driven by policy. U.S. government tariff policies and preliminary AD/CVD investigation outcomes have already seen transition to lower Chinese exports evident in the chart on the right-hand side of this page, replaced by supply from Indonesia into the U.S. and Chinese owned facilities. This has been positive for Balama supplying Indonesia, and there is potential future demand in other ex-China production capacity. As the antidumping and countervailing duty investigation is expected to finalize in this first quarter of 2026, the potential for implementation of minimum 5-year antidumping tariffs and countervailing duties may support Vidalia further through increasing demand for ex-China supply and potentially underpin capacity expansion. There are continuing deep market challenges and financial pressures across the global battery and input materials sectors arising from the dominance of incumbent Chinese producers in both cell production and feedstock and precursor supply. Policy decisions will be key to the evolution of both demand and pricing for ex-China supply, and we do expect to see support for diversification decisions and positive developments from a more level playing field for ex-China production. Slide 8 sets out the current position on a number of these government policy settings, which deliver potential support to Syrah's strategy to be the leading ex-China integrated natural graphite and anode material producer. Over the course of 2025, we saw key U.S. government policy changes, in particular, the antidumping and countervailing duties investigation and combined preliminary tariff imposition of at least 105% and various other import tariffs and policy instruments, including the definition of prohibited foreign entities impacting future availability of the 45X tax credit to battery and auto manufacturers, credit, which is very important to their profitability. The ever-present specter of trade tensions also keeps concerns arising from China's export license controls alive for graphite anode and processing equipment similar to those restrictions imposed on rare earth exports. This remains a key driver of ex-China purchasing diversification considerations for potential customers. The combination of these factors should level the playing field for ex-China supply through this year and Syrah's major investment and capability build will allow us to capitalize on both the competitiveness and value of Balama feedstock and our anode material from Vidalia for OEMs and lithium-ion battery manufacturers in the U.S. Turning now to Slide 9, and a summary of our key strategic priorities and milestones over the coming 6 to 12 months. In the first half of 2026, we'll target campaign production to support increasing natural graphite shipments to ex-China anode material customers with a particular target on breakbulk shipments for efficiency. This will continue to generate important revenue for the company as we progress our technical and process qualification steps with the data customers to progress sales from there, concurrent with the near-term evolution of commercial and policy positions. At an industry level, we're awaiting the final determinations for the antidumping and countervailing duties investigation in the U.S., which are due by the end of the first quarter. If the preliminary duties are finalized, they will be in place for a minimum of 5 years, providing important stability and a marked leveling of the competitive position for Syrah relative to Chinese exports to the U.S. Geopolitical developments, including government focus on addressing the vulnerabilities caused by the concentrated structure of graphite supply and anticipated demand growth, particularly outside of China, underpin our loan restructuring efforts and pursuit of further strategic transaction opportunities. We're advancing a process advised by Macquarie to review strategic partnering and funding options to enable strengthened position in which to pursue developing market opportunities. At Vidalia, we expect to further progress technical and process qualification with the high-quality products with customers' immediate purchasing decisions informed by policy developments. Concurrent with driving our Vidalia operations into commercial sales, we're targeting additional customer and financing commitments to facilitate potential expansion steps through 2026. We're optimistic about improving market and policy positions soon, and we see a number of clear positive catalysts ahead that have the potential to create significant value. We strive to deliver against these objectives safely and rapidly, and we look forward to communicating further progress as we move through. We're now happy to move across to questions. Thank you. Operator: [Operator Instructions] Your first question comes from Austin Yun with Macquarie. Austin Yun: Steve, good to see continued production ramp-up at Balama. The first 1 is more around the market color. I know you touched on that briefly. I'm keen to understand the current market dynamics from the pricing front, like we see that lithium market is flying with a strong BESS demand where half of the BESS battery requires graphite. Just trying to understand, are you observing any customer behavior changes for the ones you're engaging with or new markets emerging and also the pricing changes into the March quarter. I'll come back with the second one. Shaun Verner: Thanks, Austin. I think we are seeing an ex-China pricing differential, call natural graphite. I think differently to the lithium market, the graphite market is still dominated globally by synthetic graphite anode material, and that is seeing a weight on the overall pricing for graphite. But the growth of ex-China manufacturing capacity, particularly in the natural graphite space, starting to create a bifurcation in that pricing between China domestic and ex-China pricing for the natural graphite feedstock. I think more broadly on anode material, the regionally specific policy matters that I mentioned during the course of the call, will be the greatest determinant on pricing. But assuming that the policy conditions continue to evolve in a positive and supportive manner, there's strong underpinning potential for improvement in prices for both anode material and demand for Balama feedstock. Austin Yun: Second question is on the balance sheet and the cash flow. Just keen to understand your liquidity requirements given that Balama is up and running again, which I assume requires a bit more working capital, also assuming you would need to tap into the $10 million restricted cash for Balama in the March quarter. Is that the right understanding? Shaun Verner: Yes, I'll hand over to Steve to make some comments there, Austin. Stephen Wells: Yes. Thanks, Shaun. So within our sort of cash balances, you'll see we have restricted cash as well as unrestricted cash. So within the restricted cash we have funds at Balama of $10 million that can be used for working capital, plus obviously, receipts from sales and Shaun has talked about some of the positive direction there. And we also have $7 million available under the DFC loan that can be used to fund the TSF, which is probably not a Q1 expense but more spread out over the year. So we have that available. Obviously, the key swing factor is -- does relates to sales. And then at the end of the year, we also had that $18 million of unrestricted cash also. So very much dependent on the production side of things as well as the receipts that we get from sales during the quarter. I just kind of highlight as well, as I talked about in my comments that a $4 million partial payment for the breakbulk that we did in December was also received in early January as well. So that's part of our cash consideration for the quarter. Operator: [Operator Instructions] Your next question comes from Mark Fichera with Foster Stockbroking. Mark Fichera: Shaun, just a couple of questions. Firstly, you've guided regarding production of no less than 30,000 tonnes of graphite in the March quarter. I just -- I assume that in terms of sales, which you're looking at least 30,000 tonnes as well, just given you've built up your inventory now at Balama. Shaun Verner: Yes. Thanks, Mark. Yes, we've been very clear that we're using our sales forecast to drive our production decisions. And we are seeing a more consistent and stable demand outlook. So that is supporting that view. Should that change, we have capability to produce further through the quarter, but that's the view at this stage. The coarse flake markets relatively stable, and we watch very carefully what the supply-demand balance looks like in those markets as well. But it will really be that ex-China anode material demand profile that drives our production and sales position for the quarter. Mark Fichera: Right. Okay. And a second one, regarding the battery energy storage systems market, you mentioned that the future market for the company. I was just wondering, yes, can you elaborate a bit on that in terms of how you would approach entering that market in terms of what potential impact on Balama and Vidalia in terms of the operations to enter that market? Shaun Verner: Thanks, Mark. I think it's still very early stage to talk through that. The vast majority of battery energy storage system cell supply and battery supply is coming from China at this stage. And therefore, the majority of anode material supply is obviously domestically procured in China and synthetic graphite. One of the key requirements of that segment is long warranty periods and cycle life performance is key. And you might recall from other discussions that we've had that natural graphite anode material has a higher energy density than synthetic graphite, but synthetic graphite tends to have a longer cycle life performance than natural graphite. So it's certainly something that we need to take into account. But what will be driven by is the development decisions of the battery manufacturers, primarily in the U.S. in the requirements or specifications that they need, and it's pretty early stage in terms of their thoughts on that front because most of the capacity in the U.S. is currently geared towards EV. Operator: [Operator Instructions] There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
David Boshoff: Good morning, everyone, and welcome. I'm David Boshoff, and with me is our CFO, Steve Fewster. We're pleased to be joining you today for this December 2025 quarterly update. You'll notice that we're both in our harness today as we'll be traveling to site directly after this call. Before we get underway, I'd like to mention that today's presentation should be read in conjunction with our December quarterly report, which is available on our website. As we move through today's session, please feel free to add your questions to the live Q&A tab on the right side of the screen. I will be responding to these questions at the end of the session. As we step into the new year, it's a good moment to reflect on the December quarter, not just on what we've achieved, but on how we've achieved it. The quarterly -- this quarter delivered solid progress with strong tangible momentum across operations, construction and financial performance. And that progress is underpinned by our values, which guide our decisions, shape our culture and influence the way we work with our partners and contractors. That brings me to our find a way value. I'd like to recognize one individual who truly embodied it. Thomas Huckstadt is an application specialist in our IT team. Tom delivered the first phase of our Mardie operating system on time, on budget and to scope. He successfully managed key contractors to implement the Mardie production reporting system and our laboratory information management system. When traditional delivery models threatened time lines, Tom adopted an agile approach to accelerate implementation. And in fact, the contractor has confirmed that this was likely one of the fastest implementation in their history. I'll speak more about the Mardie operation system shortly, but I want to begin by acknowledging Tom and recognize the values-driven approach of our people. And that values-driven approach is exactly what underpins the business we are building at Mardie. Mardie is already Australia's largest solar salt operation and the third largest globally. Our focus is clear: Delivering salt to our customers later this year and providing -- and proving up SOP as a next major revenue stream. Salt is now in operation and is set to ramp up to 5.35 million tonnes per annum. With its scale, coastal location and integrated port infrastructure, Mardie is exceptionally well positioned to meet rising demand across Asia. Our SOP pilot work is also progressing well and remains on track to support a production pathway targeting around 140,000 tonnes per annum. This represents an opportunity to leverage our investment in the salt business to produce made in WA value-add products. The port provides us connectivity to our customers, along with additional upside through its spare capacity, creating potential for third party revenue and strategic partnerships over time. Now I'd like to walk you through the highlights for this quarter. In safety, we continue to strengthen key fatality prevention controls and maintained our focus on field leadership, completing more than 400 Leadership in the Field safety interactions. We also completed 290 critical control verifications, and our 12-month rolling average total recordable injury frequency rate was 3.9. We continue to actively manage the complexity of concurrent activities and project activities on site for operations and projects. As mentioned earlier, we deployed the mine production reporting system and the laboratory information management system as part of the Mardie operating system. This, along with our digital twin that we call Poseidon enhances operational visibility and control, enabling us to make timely, data-driven decisions. Brine levels across ponds 1 to 9 remained in line with our operational targets. The pond brine density continued to increase as we have forecasted. Construction is also progressing well. With the project now 77% complete, we commence seeding the primary crystallizers, and progress is tracking to plan. Major earthworks for the salt wash plant, stockyard and nonprocess infrastructure were also completed during the quarter, readying us for construction of these 3 assets over the next 3 quarters. Significantly, another reflection on our Find a Way value, we secured all our primary approvals for the offshore placement of material from the dredging program at the Port of Cape Preston West. This is a key milestone for our port infrastructure, which also significantly derisks achieving our construction budget. Finally, we commissioned all the KTMS trial crystallizers as part of our SOP piloting work, achieving steady-state operations and performance in line with our expectations. I'll now hand over to Steve who will walk us through the corporate highlights. Steve Fewster: Yes. Thanks, David. With construction remaining within budget, BCI continues to be in a strong financial position. During the quarter, we drew $99.8 million from the syndicated debt facility. That takes total debt drawn at the end of December to $446.8 million. We also issued over 50 million new shares following the conversion of the Series 1 convertible note held by AustralianSuper Pty Ltd. And consequently, that reduced our borrowings by $29.1 million. We'd like to thank AustralianSuper for their ongoing support. On the corporate front, we formalized the 2-year capacity building program with Wirrawandi Aboriginal Corporation, and Dave will share more about that later on. I shall share more on cash flow shortly, but Dave will provide a more detailed update on our operations. David Boshoff: Thanks, Steve. Operational performance remained strong this quarter with ponds running at 96% utilization across more than 9,300 hours. All pond levels continue towards operational height, and brine density continues to increase in line with forecast. As you can see on the chart, we are -- we've got a marker there for 31st of December, and it's within the range that we predicted 2 quarters ago. Our focus is now on balancing density across the pond network as we progress towards crystallizer readiness. Key technical milestones were also achieved, including calcium carbonate ceiling in pond 6, gypsum formation across the ponds, that is, pond 7, 8 and 9. This process materially improves water retention, remove contaminants and are critical to achieving steady-state brine flow and high-quality salt production. We also welcomed the arrival of brine shrimp in pond 7. Brine shrimp helps to naturally clear nutrients and support salt quality. Looking ahead, Poseidon, our model, indicates that pond 9 is expected to reach target density in February, and this keeps us on track for first salt on ship in the December 2026 quarter. We're continuing to make good progress towards our construction milestones with cumulative expenditure totaling $1.043 billion. As we stated in September quarterly, activity during December was relatively lower, reflecting the completion of several large packages. We expect activity to pick up again this quarter as we now work on the salt wash plant, crystallizer sealing and dredging packages. Seeding of the primary crystallizer has also commenced with liners creating a safer, more predictable harvest environment and eliminating seepage. Brining began in November and remains on track with the first crystallizer cell scheduled for completion in February. 3 crystallizers lift stations were also completed during the December quarter, ready for commissioning of the transfer of high density brine from pond 9. Major earthworks for the salt wash plant, stockyard and nonprocess infrastructure were also completed, enabling concrete works to commence early this year. Engineering and design for the salt wash plant continues with major procurement items in the fabrication phase. The nonprocess infrastructure contract was awarded in December, and design work is now underway. Approval has also been received for the remaining section of the Pilbara Port, and that construction has also commenced. At the Port of Cape Preston West, construction of the marine packages progressed with electrical and mechanical installations advancing, and the overall completion is now 94%. Now that BCI has secured our primary approvals for offshore placement of dredging material in December, dredging of the berth pocket and navigation channel is expected to begin in April 2026. Steve will now take us through the financial highlights. Steve Fewster: Thanks, David. Total construction costs now sit at just over $1 billion, having spent $41 million during this quarter. The largest packages of work remaining include dredging, the balance of the crystallizer lining and the salt wash plant. Other than long lead items that have been ordered for the salt wash plant, these packages will be funded from the $351 million in uncommitted funds that we have. The progress made on these 3 major construction areas supports our confidence of remaining on budget. As mentioned earlier, we drew $99.8 million from our syndicated debt facility during the quarter. At the end of the quarter, BCI had available liquidity totaling $601 million. With construction costs at just over $1 billion and our pre-revenue operating expenditure of around $255 million, BCI has invested almost $1.3 billion in the Mardie salt operation. With approximately $400 million required to complete construction and available funding of $601 million, we remain fully funded to complete construction as well as meeting the working capital needs through ramp-up. To date, we have also successfully completed 8 drawdowns totaling $446.8 million. I'll now provide an overview of what we're seeing in salt market. The market fundamentals remain strong. While some Chinese chlor-alkali producers are seeing softer short-term demand due largely to a slowing in the real estate growth and domestic consumption, the medium-term outlook across Asia remains positive. India is the largest exporter of lower-grade industrial salt to China. And across the last 5 years, we've seen India export volumes expand from 12 million tonnes to a peak of 28 million tonnes in 2024. In 2025, however, Indian export volumes have pulled back to 26 million tonnes. Our expectation is these volumes will further reduce as the Indian chemical industries expand to supply their local market. The reason we remain confident about the outlook for high-grade industrial salt is that between now and the end of 2028, there are 16 new chlor-alkali and soda ash plants under construction in India, China and Indonesia. A proportion of this new Asian production is replacing chemical plants that are closing throughout Europe. These 16 new plants are forecast to increase demand for high-grade industrial salt by 10.2 million tonnes per annum. And this timing coincides nicely with the ramp-up at Mardie. So across the period, there is only 6 million tonnes per annum of new supply coming into the market, and that includes Mardie. The Port of Cape Preston West is a strategically valuable asset for BCI and the region. This is a multiuser port designed to expand and to export around 20 million tonnes per annum of bulk commodities such as salt, SOP and iron ore. At nameplate capacity, Mardie salt-only operational needs of around 5.5 million tonnes per annum, leaving approximately 14.5 million tonnes of surplus capacity. This presents a real opportunity to support other proponents in the West Pilbara who require access to port infrastructure. Pleasingly, BCI has received inquiries from potential third-party users in the region. By the end of 2025, construction of the marine package have progressed well with electrical, mechanic and the mechanical installations advancing. Remaining works now include the final piles and [ cat walk ] which is scheduled for completion in September 2026. During late September, BCI secured all primary approvals from the Commonwealth and state governments enabling offshore placement of material from our dredging program in line with the optimized dredging methodology. Subject to final approvals, including management plans and contracting -- contract finalization, dredging is expected to commence in April 2026. Thank you, and I'll hand you back to Dave to talk about SOP. David Boshoff: Thank you, Steve. SOP, or sulphate of potash, is a key product of our salt operation, an important revenue stream for BCI in the future. SOP is a high-value premium fertilizer. This is different to the more common muriate of potash, or MOP. Unlike MOP, SOP contains sulphur as well as potassium, making it ideal for high-value crops such as fruits, vegetables and nuts. It plays a key role in improving crop quality, yield and food security, particularly in regions with nutrient-depleted soils. During the December quarter, all KTMS trial crystallizers were fully commissioned, achieving steady-state operation and performing in line with expectations. This work is a key part of BCI's piloting approach, enabling us to refine processes, validate operational performance and derisk full-scale SOP production. Batch plant testing completed during the quarter has allowed us to finalize the pilot plant scope, and preparations are now underway to award the design package in this current quarter. This marks a major step towards construction and delivery of that facility, positioning BCI to unlock the value of SOP production alongside our salt operations. While our focus remains on safety -- safely ramping up our operations and completing construction, we continue to prioritize sustainability. This included -- in this quarter, this included monitoring our mangroves, sandfire and algal mats, marine turtle monitoring and migratory shorebird surveys to name just a few. We convened a co-designed workshop with the Wirrawandi Aboriginal Corporation to update our indigenous engagement strategy, ensuring alignment with their strategic priorities. We also formalized a 2-year capacity building program with Wirrawandi, providing $480,000 to strengthen governance, systems, financial management, leadership development and succession planning. On the community front, we established a new partnership with the Karratha Kangaroos Junior Rugby League. As a big rugby fan myself, this is especially exciting opportunity supporting youth sport and well-being in our region. As we close out this quarter, we do so by consistently applying our values and finding a way. We are well positioned to respond to forecast salt supply shortfalls in face of rising global demand, while creating sustainable multigenerational benefits for our shareholders, local communities and the broader Australian economy. This brings us to the end of our presentation, and we'll move to questions now. If you haven't already, please submit your questions in the live Q&A tab on the right side of your screen. Thank you. Unknown Executive: Thank you, David and Steve. Now I'll take the first question and pose this one potentially to you, David. Besides salt and SOP, are there any additional minerals that can be extracted from Mardie? David Boshoff: Yes. Thank you for that question. There are certainly numerous other products that are being extracted by other producers that uses sea brine as their primary source. We visited facilities that produces bromine. Actually numerous facilities use bromine as one of the products. We've also seen magnesium being produced in various areas. There's also a very good data that indicates pharmaceutical salt is a good potential to produce from seawater salt. So certainly, multiple other streams that provides a revenue upside for BCI and where we've already invested significant capital in our infrastructure at our site. Unknown Executive: Thank you, David. And just building on that, you mentioned earlier our progress on SOP. How confident are you in SOP based on the batch testing data received? And are there any learnings you can take away that can feed into the design of the pilot plant? David Boshoff: Yes, certainly. The -- as I mentioned during the presentation, the KTMS testing results so far has been exactly as to expectations. The key thing that we have to manage is on the trial ponds. We, of course, manage the chemistry. The laboratory information management system that I mentioned earlier is a very important ingredient, and we spend a lot of effort in setting up the lab to be able to test for chemistry properly. This is a key input that we've taken from some of the design partners that's helped us to set it up. And I'm very comfortable with where we are with the results. We have now also received test results back from our high temperature tests, both in China as well as here in Perth. And it's pleasing to see that the particular collectors that we are selecting to be able to do so performs well at temperatures well above 50 degrees Celsius. This is a key thing that I wanted to be sure of before we start into design phase for the pilot pond. Unknown Executive: Thank you, David. Now Steve, I've got one here for you about the port. Are you in a position to talk to the level of interest in the surplus port capacity? And if so, can you tell us a bit more about the revenue potential from this asset? Steve Fewster: Yes, thanks. So as I mentioned earlier, we certainly received interest in accessing the port. Those parties are looking at developing iron ore projects in the region. Our port is relatively close to where they're proposing to build their iron ore operations. And certainly, on a distance -- from a distance perspective, we're a lot closer to, say, the Ashburton Port and certainly a lot closer to their -- where they propose to have the operations compared to Port Hedland, if they can even get capacity or access at Port Hedland. So there's a couple of steps that they'll need to go through. They'll need to get their approvals in place, get their funding in place. So the interest is there, but I think that the critical part is without a port solution, they don't have a project. And the ability to get the product from the Pilbara, be able to mine it and then get it out through a port, we will play a critical role in opening up that area of the Pilbara where there's still a lot of high-grade, high-value iron ore deposits that are sitting with some of those junior players. So I think what we'll see is we'll have, probably not in the short term, probably not over the next 1 or 2 years, but as we look a bit further out, as companies are finalizing FID, we'll become much greater part of those conversations. In terms of revenue stream, we still need to work through what our pricing will look like. And in the past, what I've suggested is the Port of Ashburton, their [ considered ] rate is around [ $9, $10 ] for a tonne of bulk commodities to go through their port. That's one data point. We would need to look at the size of the investment we've made and make sure we get a reasonable return on that investment before we sort of set any pricing targets. Unknown Executive: Thank you, Steve. I've got a question here on BCI's longer-term plan. So does BCI have any plans to add additional salt ponds in the tenements held by BCI to the north of the current site? Steve Fewster: Thank you for the question. We have a number of leases that is available that we've already established in the last 12 to 28 months. Most of these leases are to the south, so between us and the Ashburton Port. There's some area to the north, but we are bordering up with an iron ore proponent just north of us. So there are certainly options available very close to as part of the Mardie project. These areas will require additional environmental approvals and will require, therefore, additional management plans such as groundwater management plans to be approved. So while this will be in our future thinking, what I would caution is that these things do have a long lead time as we've seen with the actual Mardie port so far -- Mardie operation so far. Unknown Executive: Thank you, David. Now back to construction progress. Can you talk to the build package for the salt wash plant? Tell us a bit about the complexity of this work package? And what's the time range for build and commissioning? David Boshoff: Well, so the salt wash plant, as I mentioned in one of the slides, we have completed all the earthworks that has started late last year. That's all done. We've already awarded the concrete package. So that's for all our concreting works for footings, floors, blinding work, all of that has already been commissioned, it has already been awarded. Fabrication is currently underway for all the rebar and reinforcement, and we expect batch plant and other works to be established in the coming weeks on site. At the same time, design has progressed really well on the main, what we call SMP works, the structural, mechanical and piping. We are expecting to award the fabrication of the actual main structure in the coming month or so. And then that will go into construction. And then eventually, of course, E&I, that's electrical and instrumentation, that will be the back end of that process. That package will be -- that package is still a fair few months away. Expectation is that we will start commissioning in perhaps late October. That will depend, of course, on when our salt is available to be able to go through into November and be ready for production in November for shipments in December. So all of those time lines are lining up, and the progress on the salt wash plant construction package is very much on track. Unknown Executive: Thanks, David. Now talking about on track. I've got a question here about operations. So over the recent years, the area generally experiences a fair bit of rain during March and -- through March to May. Assuming Mardie does experience rain during this period this year, are there any potential impacts to brine density, particularly in pond 9? And then if there are, is there any impacts to the FSOS, that time line? David Boshoff: Yes, certainly, the area experience cyclones. Our model, I mentioned earlier Poseidon, actually integrates the weather model and has used the last 45 years of actual weather data to model what the likelihood is of rainfall or cyclones in the near future, and it actually has included a cyclone in that ramp-up period. So I'm quite confident that our modeling in terms of salt ramp-up and salt production includes the expected weather from our region. To the question whether it impacts FSOS if we have a big rain event in this period between now and end of December. Well, good thing is so far, this particular season, we haven't had any cyclones. Of course, it doesn't mean there's not going to be a cyclone. Even if we have a cyclone, we have considered that in the process, and there is buffer in our schedule to still be able to deliver first shipment for revenue before December is out this calendar year. I would also say is we've experienced 2 cyclones not long ago, and some of those on the line might recall that. Not long ago, we had Cyclone Sean in that region. That had actually quite a significant impact in our area. And the good thing is that it validated that our design prevents overland flow water to enter into the ponds, and only the water you only receive in that area is falling on the ponds. Now we have a specific design feature to accommodate that. So once the ponds reach operational height, we have areas where this water discharges as natural process into the ocean. And as you can imagine, when you have water density very high and you've got rainfall at lower density, the lower density water is lighter, it stays on top. So you have this effect of laminating effect of the fresher water on top and that then discharge into the ocean while minimizing the dilution of our high-density brine in pond 9 particularly. Unknown Executive: Thank you, David. We might finish on one last question for you, Steve. You shared a really interesting insight onto the market. Can you tell us because Mardie is expected to deliver a significant volume of salt to the market, do you expect this will flood the market and push the price down? Steve Fewster: No, I think the timing of when we ramp up aligns very nicely with the -- the new chlor-alkali and new soda ash plants that are being constructed at the moment. So as I mentioned, about 10.2 million tonnes of new salt requirements in the Asian region at the same time as we're ramping up. So I think, firstly, that certainly supports our confidence. A lot of that production, new production that's coming into the region is actually, as I mentioned, is replacing production that's occurring in Europe. And over the last couple of years, we've certainly talked about the demand for salt largely reflects global GDP. So the global GDP still holds. There's still a high correlation between demand for salt and that growth. But that shift, that structural change with plant, chlor-alkali plants shutting down in Europe, relocating and building that capacity in the Asian region is certainly very helpful. The question earlier around rainfall is -- equally applies to other regions. And what we're seeing, particularly in India and the Gujarat region, is their rainfall, on an annual basis, has been increasing steadily. So the net evaporation rate is consequently reducing, which is also reducing the amount of salt that they're able to produce. So the yield that's coming out of India certainly been affected over the last 3, 4 years is the weather is affecting that yield. The other thing that's happening in India, though, is 2 of the world's largest chlor-alkali plants under construction there. So one has been constructed by Adani. The other is being constructed by Reliance Group. So those 2 plants are being set up specifically for the plastics industry or the PVC industry in India, and that is to build plumbing supplies and household -- for household construction. And so it's very new demand that's coming in the market. We expect that about 8 million tonnes per annum of salt that's being exported will need to be redirected into that Indian market. Modi has also set some policy -- put some policies in place, restricting the expansion of salt production in India. So at Gujarat region, they're not allowing any more permits to be issued for new salt projects. So we think in the medium term, certainly, there are a number of factors that support our enthusiasm and confidence where the salt market, the high-grade industrial salt market is heading. Unknown Executive: Great. Thanks so much, Steve, and thank you, David, for your time as well. And thank you to everyone who have dialed in today. That's a wrap. Steve Fewster: Thank you. David Boshoff: Thank you.
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.
Gregory Ketron: Welcome to Invesco Ltd.'s Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode until the question and answer session. This call will last one hour. As a reminder, today's call is being recorded. Now I'd like to turn the call over to Gregory Ketron, Invesco Ltd.'s Head of Investor Relations. Gregory Ketron: All right. Thanks, Shirley, and to all of you joining us today. In addition to the press release, we have provided a presentation that covers the topics we plan to address. The press release and presentation are available on our website, invesco.com. This information can be found by going to the Investor Relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on Slide two, as well as the appendix for the appropriate reconciliations to GAAP. Finally, Invesco Ltd. is not responsible for the accuracy of our earnings transcripts provided by third parties. The only authorized webcasts are located on our website. Andrew Schlossberg, President and CEO, and Allison Dukes, Chief Financial Officer, will present our results this morning, and we will open up the call for questions. I'll now turn the call over to Andrew. Andrew Schlossberg: Okay. Thanks, Greg, and good morning to everyone. I am pleased to be speaking with you today. 2025 marked a year of significant milestones for Invesco Ltd. We focused on our clients, transformed key aspects of our business, unlocked value across the organization, and accelerated strategic priorities to position the firm for continued accelerated profitable growth in the global asset management market. Slide three of our presentation highlights several of our most impactful initiatives.