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Operator: Good afternoon. My name is Audra, and I will be your conference call operator today. I would like to welcome everyone to Solventum's Fourth Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. [Operator Instructions] I would now like to turn the program over to your host for today's conference, Amy Wakeham, Senior Vice President of Investor Relations and Finance Communications. Please proceed. Amy Wakeham: Thank you. Good afternoon, and welcome to Solventum's Fourth Quarter Fiscal Year 2025 Earnings Call. Joining me on today's call are Chief Executive Officer, Bryan Hanson; and Chief Financial Officer, Wayde McMillan. A replay of today's earnings call will be available later today on the Investor Relations section of our corporate website. The earnings press release and presentation are both available there now. During today's call, our discussion and any comments we make will be on a non-GAAP basis unless they are specifically called out as GAAP. The non-GAAP information discussed is not intended to be considered in isolation or as a substitute for the reported GAAP financial information. You are encouraged to review the supporting schedules in today's earnings press release to reconcile the non-GAAP measures with the GAAP reported numbers. Additionally, our discussion on today's call will include forward-looking statements, including, but not limited to, expectations about our future financial and operating performance. These statements are made based on reasonable assumptions. However, our actual results could differ. Please review our SEC filings for a complete discussion of the risk factors that could cause our actual results to differ from any forward-looking statements made today. Following our prepared remarks, we'll hold a Q&A session. [Operator Instructions] I'd like to now hand the call over to Bryan. Bryan Hanson: All right. Thanks, Amy, and to all of our shareholders and everyone else that's interested in the Solventum story. I just want to say thanks for joining us today as we review our fourth quarter and our full year results, along with our 2026 guidance. Well, we closed 2025 with solid momentum, making significant progress in our first full year as a stand-alone public company. Looking back at the year, I'm very proud of what we accomplished. We formally launched our long-range plan and prioritize 5 growth drivers that are expected to now deliver more than 80% of our future growth. We built an experienced leadership team with strong med tech experience but also strong transformation experience, solidified our mission and culture, revamped our innovation process, restructured our global sales organization and through our SKU rationalization program, sale of our Purification & Filtration business, and acquisition of Acera, we rapidly advanced our portfolio strategy as well, all while managing the separation process from 3M. And inside of that, throughout the year, we consistently delivered on our strategic, operational and financial commitments. We improved volume growth, outperformed expectations and tripled our annual sales growth from a year ago. I think it's clear that we are moving toward our long-range revenue targets faster than expected, and have programs in place to overcome external headwinds and execute against our margin targets as well. This team's capacity to deliver results while navigating ongoing separation efforts, ERP implementations and acquisitions and divestitures is a testament to the strong talent and culture we've already built. And building on the foundation of our sales force restructuring project, our revitalized innovation process has meaningfully increased our vitality index. And as a result, we now expect a solid cadence of new product launches in our growth driver areas to drive further momentum with this more optimized sales team. And as our separation progresses, we are gaining full ownership of our IT systems and freeing up needed resources to drive greater overall savings and efficiencies. Our Transform for the Future program was built to capture this opportunity and its impact is reflected in our 2026 operating margin outlook. Okay. Moving to our quarter results. Well, the fourth quarter reflects another quarter of progress and provides a solid foundation as we head into the new year. And during the quarter, we announced and closed our first tuck-in acquisition, Acera Surgical, which not only opens the door to the fast growth synthetic tissue market, it also very well complements our existing technology categories and our call points. And as we move forward, portfolio optimization will remain a key lever for value creation here at Solventum. In other words, we will continue evaluating attractive assets to acquire and assessing our current assets for go-forward fit, and our business performance and resulting healthy balance sheet now provide flexibility to return capital to shareholders. And during the quarter, we announced a $1 billion share repurchase program, which we began executing in January of this year. We see this as a clear and important step in achieving a more balanced capital plan. Okay. Moving to our business performance in the quarter. Overall, we delivered solid sales growth with Dental Solutions and MedSurg performing better than expected. Starting with MedSurg, we continue to leverage our existing brands, our new product innovation and newly specialized sales teams and are seeing traction in each of our growth driver areas, which, as you probably remember, our negative pressure wound therapy, IV site management and sterilization assurance. In our Advanced Wound Care business, we saw continued growth in negative pressure wound therapy, supported specifically by double-digit growth in Prevena and ongoing expansion of our innovative V.A.C. Peel and Place dressing. As mentioned earlier, we recently closed the Acera acquisition, which will now be a part of our Advanced Wound Care business. We're obviously very early in the integration process, but sales teams across our newly combined business will now have access to an expanded suite of technologies to offer our joint customers. And with our combined clinical differentiation, our robust DME and differentiated infrastructure and proprietary technology, we have a meaningful runway for growth acceleration in this business. In the Infection Prevention & Surgical Solutions business, we saw better-than-expected growth supported by our 2 growth driver areas: sterilization assurance and IV site management. Inside sterilization assurance, our strong brand equity continues to provide a solid foundation for our dedicated sales force and early momentum from our [ 3 ] Attest sterilization product launches will continue to support the team's momentum to drive growth going forward. In IV site management, demand for Tegaderm CHG remains strong and our global launch continues to gain momentum. We have meaningful clinical differentiation and our specialized sales teams are focused on converting customers from standard films to this high-value solution that reduces the risk of infection. Tegaderm CHG is still significantly underpenetrated, providing a clear runway for continued growth. And in our Dental Solutions business, our core restoratives growth driver was again a key component of our performance in the quarter. And was supported by our strong existing brands, recent new product launches and the sales force specialization that we put into place in 2025. From a new product launch perspective, we continue to see strong demand for products like ClinPro Clear and Filtek Easy Match, and overall new product sales are driving the majority of our underlying business growth. And building on last quarter service improvements, the Dental team once again significantly reduced back orders, which also contributed to growth in the quarter. Our Health Information Systems business delivered another solid quarter, supported by its growth driver, revenue cycle management, and we continue to see adoption of 360 Encompass progress against our international expansion efforts and gains in autonomous coding. And relative to autonomous coding, our strong automation and acceptance rates are further positioning us as the largest, and importantly, most capable autonomous coding vendor. Over decades, we've built deep rules and algorithms designed to ensure accurate and compliant reimbursement coding. This, combined with our vast data sets and proprietary workflows, uniquely positions us to leverage AI-driven autonomous coding, our customers can trust. And in summary, we finished the year building on the success and the momentum we achieved in the first 3 quarters. And it's clear to me that we have the right team and strategy and our momentum will continue into 2026 and beyond. And with that, I want to thank our global team for their hard work and ongoing commitment to our mission. It's you that are making a difference every single day by delivering for our patients, our customers and our shareholders. And with that, I'll turn the call over to Wayde to review our financial results and our 2026 guidance. Wayde, I'll just pass it to you. Wayde McMillan: Thanks, Bryan. We reported another solid quarter as we completed our first full year as an independent public company. We made progress across both our transformation phases and turning around the business. Our commercial improvements yielded a significant increase in our organic sales growth, putting us on an accelerated path to reach our long-range plan sales growth target. During the year, we were able to absorb tariff headwinds and expand operating margins off of the Q4 2024 baseline, while continuing to invest in commercial enhancements and innovation. We also moved quickly on portfolio optimization, resulting in accelerated execution of our capital plan to pay down debt. Our progress to date, combined with our planned strategies positions us well to deliver our long-range plan margin and free cash flow targets. I'll start with an update on our separation activities, status of portfolio moves and then transition to our quarterly and full year financial performance, concluding with the discussion of our 2026 full year guidance. Overall, our work to complete the separation from 3M is going very well. Thanks to the dedicated separation management teams at both 3M and at Solventum. We are progressing well on major milestones, as we have now exited over 40% of our transition service agreements from 3M and remain on track to exit approximately 90% by the end of 2026. The ERP deployments continue to roll out with a plan to be complete this year. We've just gone live with our latest ERP deployment earlier this month across Asia Pacific, including China, and additional countries in Europe. We have also transitioned approximately half of the more than 1,000 systems to gain system independence from 3M, which is a significant step in our separation. Regarding supply chain, we've taken further steps to separate from 3M and have now reduced our distribution center network to 55 locations, progressing towards our goal of 45. The P&F divestiture activity continues to progress as planned with the target completion at the end of 2027. There is close collaboration to ensure business continuity from Solventum to support the buyer's integration efforts across the nearly 200 transition service agreements. Shifting to our recent Acera acquisition. Our early integration efforts are off to a good start following the close at the end of December. Our main focus is sustaining and accelerating the momentum that the team has generated in recent years. Now turning to our Q4 results. Starting with top line performance. Sales of $2 billion, increased 3.5% on an organic basis compared to prior year and declined 3.7% on a reported basis, which reflects the first full quarter impact of the P&F divestiture following the sale in September 2025. Foreign exchange was a 170 basis point benefit to reported growth, while the net impact of the P&F divestiture and Acera acquisition represented an 890 basis point net impact on our reported growth. Overall, we had stronger-than-expected sales growth driven by MedSurg and Dental. Volume remains the main driver of growth, and pricing remains within the expected range of plus or minus 1%. Our SKU rationalization program also remains on track with 70 basis point impact in the quarter bringing the full year impact to 60 basis points. Moving to the segments. MedSurg delivered $1.2 billion in sales, an increase of 3.2% on an organic basis. Within MedSurg, the Advanced Wound Care business grew 1.7%. Solid performance in our negative pressure wound therapy growth driver was partially offset by headwinds in the separate advanced wound dressings category, which was impacted by SKU exits and back orders. Infection Prevention & Surgical Solutions continues to outpace our expectations, delivering 4.2% growth that was driven by strong business performance partially offset by the remaining reversal of first half volume timing and the SKU rationalization program. Our Dental Solutions segment delivered higher than expected $343 million in sales, an increase of 5.9% on an organic basis. Growth was driven by core restoratives, which benefited from further back order improvement. During 2025, the supply chain team led multiple efforts that helped reduce back orders to historic lows. On a normalized basis, Dental grew closer to 3%. Our HIS segment also contributed to our performance with $348 million in sales, an increase of 3.2% on an organic basis, driven by revenue cycle management software solutions and performance management solutions. Together, this growth more than offset expected declines in clinician productivity solutions. Looking down the P&L. Gross margins were 53.5% of sales, a 230 basis point sequential reduction, which reflects higher logistics costs and timing of manufacturing performance. Higher logistics costs were mainly driven by ERP and distribution center cutover mitigation efforts in the quarter. These headwinds were partially offset by the benefit of the P&F divestiture. On a normalized basis, gross margins were closer to 55%. Sequentially, operating expenses reduced to $672 million from $739 million, which reflects the P&F divestiture, timing of project spend and cost management. In total, we delivered adjusted operating income of $397 million, or an operating margin of 19.9%, below expectations due to gross margin headwinds, partially offset with lower operating expenses. Moving down the P&L to nonoperating items. Our net interest expense and other nonoperating spend improved versus Q3, driven by a $30 million reduction in interest expense and higher interest income. These improvements are due to the full quarter benefit of the P&F divestiture, which resulted in a $2.7 billion debt paydown and a higher cash balance. Lastly, our effective tax rate of 16.6% was favorable due to an end of year release of tax reserves and a regional tax provision in combination with favorable geographic mix. We delivered earnings per share of $1.57, driven by sales outperformance as headwinds in gross margin were partially offset with operating expense savings. Shifting to our balance sheet. We ended the quarter with just under $900 million in cash and equivalents and net debt of $4.2 billion. This includes funding the $725 million Acera acquisition, which closed on December 23rd. We're in a healthy position to accelerate our capital allocation strategy as indicated by our recent $1 billion share repurchase authorization and maintain flexibility to pursue tuck-in M&A. We generated cash flow of $33 million, below our expectations due to higher divestiture costs, the earlier than expected close of the Acera acquisition as well as higher costs to support the ERP and distribution center cutovers. Now moving to full year 2025. We delivered 3.3% organic sales growth ahead of our expectations of 2% to 3% when normalizing for SKU exit impact and mainly the benefit of backorder improvement in Dental, our growth was approximately 3.5%. Operating margins finished at 20.5% within our assumptions of 20% to 21%, while absorbing 65 basis points of tariff impacts that were not contemplated at the beginning of the year. We also completed the Solventum Way restructuring program, exceeding expectations and delivering annualized savings of approximately $125 million at a lower total cost of $90 million. Our adjusted tax rate of 19.1% was also better than our assumption of 20% to 21%. At the bottom line, we generated non-GAAP earnings per share of $6.11, also ahead of our expectations of $5.98 to $6.08. Free cash flow was negative $10 million, below our expectations of $150 million to $250 million due to higher Q4 costs to support portfolio moves and ERP cutovers. Excluding these, we were in line with our expectations. When adjusting for the P&F divestiture and separation costs during 2025, free cash flow would have been approximately $1 billion for the year. Now turning to our 2026 guidance. Starting with our top line. We are guiding to an organic sales growth range of 2% to 3%. This translates to 3% to 4% excluding the continued estimate of 100 basis point impact of SKU exits for '26. While not reflected in our organic sales growth outlook for 2026, we expect our recent Acera acquisition to contribute meaningfully to our reported growth going forward and will roll up as part of Advanced Wound Care sales. We also expect a modest 100 basis point tailwind for foreign exchange, mostly in the first half. Looking down the P&L. We estimate operating margins of 21% to 21.5% for the year, expanding from the 20.5% full year 2025. Underlying, the 50 to 100 basis points of margin expansion is a combination of sales leverage, programmatic savings for supply chain and our Transform for the Future program. We expect portfolio optimization for divestiture and acquisition activity to be neutral to operating margins. Regarding tariffs in place, before last week's Supreme Court ruling, we estimate full year impact of $100 million to $120 million. Given the evolving nature of the environment at this time, we are assuming the impact under any new tariffs will be within a similar range. For earnings per share, we are guiding to a range of $6.40 to $6.60. For free cash flow, we are expecting approximately $200 million in 2026, excluding mainly the impact of costs to separate from 3M as well as payments due to 3M and costs to support the recent divestiture, we would expect to be closer to $1 billion. As a reminder, separation costs reduced significantly in 2027 as we complete the separation from 3M. Other considerations for 2026, include capital expenditures of $400 million to $450 million, an effective tax rate between 19.5% to 20.5% and nonoperating expenses of $300 million primarily due to net interest expense of around $270 million. To provide some additional color related to our first quarter 2026, remember we had a tough comparison given the approximately 180 basis points of additional sales volume benefit in the prior year. And on gross margins, Q1 will reflect the typical sequential seasonal pressure while year-over-year will reflect the additional tariff impact headwinds. All in, we anticipate operating margins will again be the lowest of the year. In conclusion, we delivered another strong quarter to complete our first full year post separation. We're making great progress on our separation from 3M and on our portfolio moves to divest P&F and integrate Acera, and we're moving with urgency towards our long-range plan goals of accelerating sales growth to 4% to 5%, operating margins of 23% to 25%, growing earnings per share at a 10% CAGR, and free cash flow conversion rate above 80%. We want to extend our gratitude to all Solventum team members for their hard work and commitment to our values and mission, enabling better, smarter, safer health care to improve lives while consistently delivering or exceeding on our financial goals. With that, we'll hand it back to the operator for the Q&A portion of the call. Operator: [Operator Instructions] We'll take our first question from Travis Steed at Bank of America. Travis Steed: I guess first on margins. Wayde, I don't know if there's anything onetime in Q4. It was a little light versus the [ Street ] in the quarter. And then on 2026, if you can maybe elaborate a bit more on kind of what's assumed in that 50 to 100 basis points? How much of the $500 million cost savings is baked into that? And anything else that you kind of frame up for the margins in '26? Wayde McMillan: Sure, Travis. So margin is obviously an important part of our story. As we think about Q4 first, approximately 150 basis points of the cost in our gross margins was onetime in nature. So you'll see in our prepared remarks that we shared more normalized gross margin of 55% is more of what we would have expected. And we saw a lot of separation activity in Q4. So it ended up just costing us more. If we think about operating margins, certainly lower than we expected, but really just driven by that headwind in gross margins. We were able to offset it partially with some savings in our operating expenses. And then as we think about 2026, first of all, I'll just say we are committed to growing our sales as well as expanding operating margins each year. And so in that theme, we're now planning to expand operating margins 50 to 100 basis points in 2026, as you mentioned. A couple of things that are important here. Certainly, tariffs are a headwind for us again in 2026. People may recall that we have a very fast inventory turn. And so we had approximately 2 quarters of impact of tariffs in 2025, and so we'll annualize that in 2026. You'll see from our prepared remarks, it's about a doubling of the tariff headwinds for us. And so with that in mind, it's a pretty significant margin expansion. The drivers of that are sales, leverage, as we continue to drive sales on an accelerated basis as well as our programs within gross margin. We've talked about programmatic savings. We gave a lot of detail at our Investor Day. And we've got significant effort to drive favorable gross margins over time. And then as you mentioned, Travis, our more recently announced Transform for the Future restructuring project which is a longer-range project that is targeting several areas of efficiency, and we will start to see some of that in 2026, but it will benefit us more over the long term. So you put all that together, we do think we've got a nice operating margin expansion story again in '26 despite the tariff estimate that we have in the numbers at this time. Travis Steed: Okay. And I guess my follow-up question, since there's been more focus on the health care IT business and some of the AI stuff that's going on, just would kind of love to give you the opportunity to kind of maybe explain that and explain your business a bit more for investors. Bryan Hanson: Yes. Thanks, Travis. I'll probably answer that one. And I assume seeing your note that you might ask that question. So we're actually betting which question you would ask first and you asked both questions. Travis Steed: You know me well. Bryan Hanson: I know you pretty well. So I would just say, first of all, I think it's important to state right out of the gate. We actually see AI as an opportunity more than we do a threat. I think that's -- you could probably end the statement there, but I think that's a really important statement to make. And then there's probably 3 vectors to look at it, which I think could be helpful to people. Number one, I think we see artificial intelligence as a lever to drive autonomous coding. That's why we've been spending so much in that area, and that's what's driving us in autonomous coding. But we don't see it by itself as the answer to autonomous coding. I think that's important, by itself is not the answer. It's just a piece of the equation. And we really don't see AI again by itself as a competitor, we see it as a tool. We see it as a tool, a variable in the equation to solve for autonomous coding. Remember, autonomous reimbursement coding, not computer coding, right? And then three, and this is important because AI will be available to anybody who wants to use it in autonomous coding or revenue cycle management. We truly do believe that we're differentially capable of using AI because, number one, we've been in the market for decades. And as a result of that, we have vast number of proprietary. I'm going to call it algorithms and rules that we have around reimbursement coding, actually close to 1 million plus of those rules and algorithms, which is substantial. And of course, because we have been working at scale with the hospitals, we have very vast data sets as well. So we really believe that what we have available to us allows us to train AI in ways that others can't. So we actually look at this as an opportunity more than we do a threat. But I appreciate you asking the question because there's a lot of folks that may not see it that way. Operator: We'll move next to Jason Bednar at Piper Sandler. Jason Bednar: Wayde, I wanted to come back to some of the guidance points we're making. I appreciate all the color around the first quarter. Maybe I wanted to give you an opportunity to talk if there's any other sequential callout. Last year, '25 was lumpy. It was a good lumpy, but lumpy in that you had the ERP cutover, the DC cutovers that just created some volatility in the volumes. So anything else you'd call out as we try to model throughout the year? And then within that also in the first quarter, should we be considering any headwinds tied to just some of the weather dynamics that may or may not have impacted volumes for your businesses in the first quarter here? Wayde McMillan: Jason. Yes, I can certainly start that one for you. And I'm glad you picked up on the Q1 comments that we had in our prepared remarks because it is the one quarter for us that's a little more challenging. The other quarters in the year look more stable. So maybe I'll just summarize the information that we shared and it's really in the 3 areas: sales, gross margin and OpEx. So for sales, we had 180 basis points of tough comp, and that's put a lot of pressure on our Q1 sales here. And so if you just take the full year guide of 2% to 3% and you take the midpoint, 2.5% if you use the 180 basis points of headwind, you get just under 1%. And so that's how we'd like people to think about the first quarter, and I think that would be a reasonable place to start. If you move down the P&L, operating margin is setting up to be the lowest of the year in Q1, sequentially down from Q4 '25 to Q1 '26 but that's similar to what we experienced last year in 2025. So a very similar setup to last year, and that's really driven by gross margins, which relative to the normalized 55% we gave for Q4, we would expect to see some normal sequential seasonal headwind to that moving from Q4 '25 to Q1 '26. So same set up again as last year. Keep in mind, tariffs are a headwind in the first half as well before we annualize them. And then when you move down operating expenses, kind of similar here. We'll have higher OpEx in Q1 as we have some seasonally higher expenses than Q4 '25. And Q4 '25 was a little unnaturally low as we had some favorable project timing. And then just given the gross margin pressures we were having in the quarter, we did some cost reduction initiatives that gave some favorable OpEx in Q4 as well. We don't have any weather specific things to that specific question, Jason, nothing that we would call out. And then again, I would just say, for the remainder of the year, the setup looks more consistent other than I would just highlight, and it was really the driver of that volume in Q1. This first half, second half impact of IPSS. We had a lot of volume mainly in the first half last year. These were mostly ERP timing-driven impacts. But the good news is they're all contained within the year. So first half, second half dynamic, mostly Q1 additional volume, Q3 give back. But the good news, the story actually gets quite simple at a full year basis, but there is that trade-off, particularly in IPSS between mainly Q1 and Q3. Jason Bednar: All right. Super helpful. Bryan, I wanted to shift over to you, bigger picture question. You mentioned product pipeline that's expanded within some of the core growth categories you've identified or you identified at your Investor Day. Can you give us a sense as to some of the things you're more excited about or expected to be more impactful when we look out this year and also next year? Really to help bridge to that 4% to 5% growth target, knowing that you're targeting 3% to 4% underlying growth this year. What helps accelerate you that last 100 basis points to get to those LRP targets you have out there? Bryan Hanson: Yes. Yes. I appreciate the question. And I would say maybe first, just taking a step back because I have a feeling some of our Solvers are listening to this call as well. And I just want to say that I appreciate the work that they put into revamping and revitalizing our innovation process, and it's paid dividends. As we talked about in the prepared remarks, vitality index has gone up and the cadence is more focused to products that we're going to see. I'm not going to speak specifically about any individual product, as you know, competitive reasons. But maybe I'll give you some color, that I think could at least help, we've got close to 20 new products that we're going to be launching now over the next 2 years relatively evenly over those 2 years. So it's not back-end loaded. And those, as you would expect, just given the size of MedSurg, almost half of those are going to be in MedSurg. The other half is split between HIS and Dental. And as you would expect, a decent portion of those are going to be inside of the growth driver areas. But it's not just those. I kind of look at it as a 3-legged stool, right? You've got this opportunity for new products in that revitalization of innovation that I've been talking about. But we also have existing products and brands that are really strong in the marketplace. And I think some people underappreciate the fact that they're also underpenetrated. So with the new specialized sales organization, we can get after that underpenetration even with existing brands. And the third leg of the stool is just the commercial enhancements we've made. And those really have 3 components to it. First is specialization, which is probably the most important. But we're also training those individuals now to being more clinically at depth, which is very important when you have clinically differentiated technology. And the final one is just to make sure that we have a sales operations team that is best-in-class to focus the organization and to make sure that they have the tools to be successful in the field. So it's all 3 of those really that's driving the growth. Operator: We'll go next to Kevin Caliendo at UBS. Dylan Finley: This is Dylan Finley on for Kevin. Maybe for a minute, could you guys talk about the strong outperformance in Dental this quarter. Again, you grew organically nearly 6%, how much of that was volume expansion versus price capture related to or not related to tariffs? And what do you think a normalized growth rate looks like in Dental, controlling for any sellouts or unusual comps? Bryan Hanson: Okay. Yes. So again, that was another one we thought we'd probably get a question on because it was pretty standout quarter again for Dental. So again, because I know they're listening to the call, congratulations, great quarter. And I would say that probably the -- well, I know the biggest underlying reason for growth is new products. They have done a nice job of revitalizing innovation, launching new products, and that's really what's driving our underlying business performance. Now in the quarter, I think we said in the prepared remarks, that another factor was back order recovery. That's the second quarter in a row. They've done a really good job of capturing back order recovery, and that's boosting us. That's more of a onetime thing. I wouldn't think about that as a go-forward opportunity, but it definitely helped us in the quarter. When we think about the market because I know that's probably inside of your question as well because I'm sure you're covering other companies in Dental. We kind of look at it the same as what you're hearing from others. It's a stable to maybe slightly improving market, but that's really the way we look at it. Stable market, slightly improving, we would expect that to go forward in 2026. But really, the momentum here is the new product development. They're just doing a great job with a specialized sales organization driving it right now. Did you have another one? I didn't want to cut you off there. Sorry about that. Dylan Finley: Sorry, yes, if I had a moment. Looking at the $500 million, the Transform for the Future program, and apologies if this was hit on earlier. But what should we contemplate regarding the phasing of those -- both the costs going into the restructuring and the timing of the benefits? Is that really a big growth driver discretely as we look at the benefit for 26? Or is the phasing more '27 and thereafter? Wayde McMillan: Bryan, I can start that one, if you want. So obviously, a very important program for us. It is a multiyear program from starting this year, 2026 into '29 and '30. Maybe just to highlight, as you said, it's a $500 million cost takeout program. It's meant to support both margin expansion as well as opportunities to meaningfully invest for growth. We want to make sure that we're driving efficiencies that despite things like tariffs, we've got enough efficiencies going so we can continue to reinvest for growth given the importance of us continuing to drive and accelerate that sales growth line. Maybe just a little bit more about the program itself. It's targeted at transforming our cost structure, I mentioned the operational efficiencies and then repositioning us for that profitable growth. We'll be looking at streamlining systems, increasing automation, it's a really comprehensive program. To your question on the phasing, we haven't given details on that. We're still developing the program. As I said, it's a multiyear program. But I would say just generally, we will start to benefit from the program in '26, but the majority of the benefits will be in 2027 and beyond as it just takes time to put the programs together and then execute on them. Bryan Hanson: One other thing maybe to add to that too, what's very important about this program is it is a cultural shift for our organization, all around the concept of continuous improvement. We've got this mantra here that we can be satisfied. We can be happy, but we can never be satisfied, right? So we can be happy and celebrate success, but we can always get better. And that's what this program is, it really is the concept of Transforming for the Future through continuous improvement. And it's not just at the senior level of the organization. This -- it transcends the organization, we're asking everybody to get involved in the program. So it really is a cultural event, not just a savings program. Operator: We'll take our next question from Ryan Zimmerman of BTIG. Ryan Zimmerman: Just following up on the HIS comments, and there's been a lot of investor focus on this, late. I appreciate your answers earlier, Bryan. I got to dig a little deeper, though, and just kind of ask, is there any guardrails that you want to put around this? If this is up for a competitive bidding or competitive entrants and so forth, I mean, how should we think about maybe what's contractually obligated over a certain time period or any other additional details, I think you can give that, again, kind of isolates what impact there may or may not be around the HIS business? Bryan Hanson: Yes. So I would tell you 2 things here. Number one, we have pretty long contracts, multiple year contracts. And so we feel comfortable. And I don't want to rest on that because I do believe we have significant differentiation here. We're a leader today. We absolutely expect to be a leader in this transformation in the future. There's no question in our minds. We do have contractual obligations in our favor and there's switching costs associated with this. It doesn't happen overnight. And I think very importantly for people to remember here is you make mistakes, even small ones in your reimbursement model, in your coding. Not only do you lose revenue, you have the risk of compliance concerns, and there's a trust factor that goes into that. As a matter of fact, we look at autonomous coding competitors, as risking autonomous coding because we don't think they're going to do it the way we would do it, right? Again, using all those rules and all those algorithms that we have that are proprietary to us. So we truly do believe we're going to win. We're going to transform. We're already leading. We feel like we're going to continue to lead. And we do believe -- we really do believe that that's just the way it's going to be. I don't see this at this point in time as a risk. I see it as an opportunity and the contractual piece helps, but we're not going to rest on that. Ryan Zimmerman: Yes. No, that's helpful. I appreciate the color there. And then maybe turning to Acera, what are you embedding for expectations on Acera, if you can provide any high-level commentary around it? I mean I think it was doing, call it, $90 million at the time of acquisition. And so where can that sustain once it turns organic and from a contribution to growth standpoint? Bryan Hanson: Well, I'll tell you, we wouldn't have bought the asset if we didn't believe that it had a real opportunity to help Advance Wound Care and MedSurg and the total business from a revenue growth standpoint. So we feel like it's a great starting point, but it is just a starting point. And to give you some perspective on it, if they're in $1 billion market, growing 10% right now. And they're in a subcategory synthetics inside of that market that's more attractive, and they've got differentiation in that space. So it is a healthy double-digit grower for us. And I want to continue to remind people, it's in the space we already play and have commercial infrastructure. So we have a force multiplier effect given our 2 organizations coming together from a commercial standpoint, but also eventually from an innovation perspective. So I feel really good about this as a separate growth avenue for Advanced Wound Care for the total business, and it's profitable. It's really nice profitability. Operator: We'll move next to David Roman at Goldman Sachs. David Roman: Maybe I could just go into the Dental dynamic in a little bit more detail here. And I think last quarter, there was some more set of dynamics at play here. But maybe, Bryan, if you kind of maybe template Dental as one of the businesses where you have to -- I think you said in the follow-up last quarter that it is a good example when you have new products, what can happen to the top line, but you're seeing kind of that impact in one of those slower-growing categories that you serve. So maybe you could just extrapolate the experience in Dental to when we could -- when you think it's reasonable to expect that same dynamic to play through in MedSurg and HIS? And I just had a follow-up on the buyback. Bryan Hanson: Yes. David, thanks for the question. I agree. I think Dental laid out the road map that was pretty clear to people, but you're already seeing it in MedSurg. It's not just the commercial enhancements that we've made. We are launching new products in both MedSurg and HIS. Just to recap, I'll give you some of -- not a full list of them, but V.A.C. Peel and Place was a big one. Tegaderm CHG was launched in the U.S., but now it's on a global launch. So we're rolling that out around the world. We've had CHG in Ioban as well, which is a new product that we use in [indiscernible] surgical procedures. We've had 3 in test sterilization products, the eBowie-Dick was also launched. So we've got a number of products launched in MedSurg. And in HIS, you've seen various applications in autonomous coding and a lot of applications for Encompass 360 when we look at outside the U.S. implementation. So they're not having product launches right now. The key thing that's driving those product launches is the commercial enhancements. We didn't have those before. And as a result, those products are being launched into a void, if you will, general sales organization. So we're already beginning to see the momentum from those new products. And as I said before, we've got almost 20 new products coming over the next 2 years. David Roman: Got it. And then maybe, Wayde, it looks like the share count still stepped up on both the year-over-year and sequential basis that you obviously announced a large buyback authorization in November. How are you thinking about deploying the buyback? I think that there was quite a bit of volatility in the stock over the past several months. So maybe what -- what's sort of the strategy behind the buyback? And what are the factors that would drive you to deploy it either on a programmatic or more significant basis? Wayde McMillan: Sure, David. So I think directionally, it's reasonable to think about the authorization as offsetting the impact of our stock-based comp dilution and holding that share count relatively flat. I think that's one of the objectives that we have, as you said, without a share repurchase in place over the previous year, our share count went up. And so one of the major goals here is to, number one, offset that stock-based comp. And then over time, it is an opportunity for us. We've got room within the authorization if we see a need or a reason depending on performance of the share price to potentially purchase more shares. Obviously, if we do something like that, we have to work it through with our Board and make those decisions as well. But I think just taking a step back, we're very happy with the accelerated capital plan over the last year, with our ability to pay down debt. And remember back from our Investor Day, that was the primary objective. Most spins spin with a pretty significant amount of debt, and one of our primary goals was to pay down that debt. We did that in an accelerated fashion. And now we're in a position to have more balanced return and returning capital to shareholders via this authorization. So as Bryan said in his prepared remarks, we started that in January. This is our first quarter and we're pretty excited to be moving in this direction as well. Operator: Our next question comes from Brett Fishbin at KeyBanc Capital Markets. Brett Fishbin: First, just wanted to ask on the overall organic revenue guidance of 2% to 3%. And I was curious if you could just directionally provide any commentary on how you're thinking about that across the different segments, whether we should expect any material departure from what we've seen on a normalized basis in 2025? And then also, if the 100 basis point impact from SKUs would be more pronounced in any specific quarter? Wayde McMillan: Bryan, I'm going to start that one. Bryan Hanson: Maybe to rephrase that question on any specific quarter, you could maybe answer that, but also any specific business. Wayde McMillan: Yes. Yes, that's the key. So yes, maybe we'll start there. We don't see a significant difference across the quarters from the program at this time. And so nothing to share there. But as Bryan just highlighted, we do see a significant more impact within MedSurg and particularly, the IPSS business. So as we move from 60 basis points of impact in 25 to 100 basis points of impact in 2026, we'll see the majority of that 100 basis points hitting in the IPSS and MedSurg business. And then back to the front end of your discussion, and Bryan can start with that one. We obviously put a lot of thought into this guidance. And I'm glad you brought it up because it gives us an opportunity to talk a little bit about it. We did intentionally share that for 2025, our sales growth rate on a normalized basis was about 3.5%. And that's important stake in the ground for us. It's really normalized for both the SKU program as well as mainly the dental back order. And so with that 3.5% in mind, the way we looked about our guide for 2026 is we put that at the midpoint of our ex-SKU guide, we're 2% to 3% guide for '26 on a 100 basis point SKUs, we're guiding 3% to 4%. So what that really means is if we continue to perform at an accelerated rate here in 2026, we had big step-up in our growth in 2025. And if we continue that momentum, continue to perform at that level, we'll be at the midpoint of our guidance for 2026. And of course, at the high end, more 4% on an executed basis will be above last year's strong performance. And we're very focused on getting to that because then that would put us on an accelerated basis getting to the low end of our 4% to 5% target for our long-range plan. And so on an ex-SKU basis, the high end of our guidance is already touching the low end of our long-range plan guidance for 2028. So we do feel that 2025 was a very strong year where we really accelerated the sales growth rate. We shared some of that detail in our prepared remarks, so I won't repeat it here. But that's some color in behind the full year. You did call out segments as well. As you know, we don't guide at the segment level, but I can provide a little bit of color here. Overall, we expect all segments to improve their underlying growth year-over-year. And again, the momentum that we see in the business, if it continues, we'll be at the high end. Bryan Hanson: [indiscernible] Because it would be MedSurg is going to be impacted more by SKU and obviously, Dental is going to be impacted by the back order recovery comp. But outside of that, no major impacts to the businesses. Brett Fishbin: All right. That was super helpful. And then just for my follow-up question, I wanted to ask, during the fourth quarter, you announced some changes to the management structure and I was hoping you could just touch on your decision to implement a Chief Commercial Officer position, and any thoughts on how that impacts the broader strategy for Solventum? Bryan Hanson: It's funny because that feels like old news to me already. I was looking at [indiscernible]. Yes. So as you know, we brought Heather in -- to be the primary leader of our businesses. So she is the Chief Commercial Officer now. And I feel very fortunate to be able to bring Heather in. She and I have a history of work at Covidien together. She's worked with me in the past. She's a very strong operator. So it was just serendipity that she became available at the same time that Chris was going to be exiting the organization. So very lucky to get her. But it was really just the continuation of the strategy, which would have been to combine the businesses under a leader. Chris, for his own reasons, couldn't do that and Heather was available, and we were able to get her, which is fantastic for us. I wouldn't read anything else into it, other than the fact that we've got a great operator now looking at synergies across our businesses. Operator: Our next question comes from Vik Chopra at Wells Fargo. Lei Huang: It's Lei calling in for Vik. My first one is on ERP. I think you have another ERP implementation coming this year. Last year, when you had the European one, there was some pull forward buying in the first half. Is that something you should consider for 2026? And I have a follow-up. Wayde McMillan: Yes. So ERPs, obviously, we've got a lot of work going on in this area. We did share in our prepared remarks that we are planning to be done with the 3M separation ERPs in 2026. And so by definition, we've still got several ERPs to go. We've got a couple of large ones both in the first half and the second half of this year. I did share in my prepared remarks that we've started another wave here in February. We've got about 16 countries involved in that wave, and that's off to a really good start. And so we will have several more waves as we go along through the year, but planning again to be done by the end of the year. Regarding volume, we're not [indiscernible] out at this time. It really is dependent upon at what point in the quarter it falls, sometimes if it's early in the quarter, most of the inventory changes have washed out within the quarter. To the extent we see them and if we see additional volume either buying ahead or being delayed as relative to the ERPs, we'll call that out in our actuals, but very difficult to predict those. So we don't call them out. Lei Huang: Got it. That's helpful. And then for my follow-up, you talked about pricing being plus/minus 1% in Q4. Anything we should think about as far as pricing for '26 either for the overall company or across segments? Wayde McMillan: Yes. So as we've shared before, our focus for growing the sustainability of the business is all in volume. Our new products, our commercial efforts, all focused on -- I shouldn't say all, almost all on volume. We certainly have pricing capability, and we've got people looking at price. We do have several areas in the business where we have the ability to raise price than we do. But what we've shared is we expect price to be in a more normalized range of plus or minus 1%. We saw that again in Q4. And that's where we're expecting it to be again in 2026. So we don't see price being an outsized driver of the business again in 2026, more in that normalized range. And our growth will really be on sustainable volume growth. Operator: We'll go next to Rick Wise at Stifel. Frederick Wise: Bryan, just maybe reflect a little bit more on your updated thinking on your M&A strategy? Is it another deal possible? What are you prioritizing it with making so much progress towards, to quote Wayde, on an accelerated path to your long-term targets? Is it more likely we're going to see additional tuck-in growth-enhancing, margin-enhancing deals sooner rather than later? Bryan Hanson: I probably won't speak to the timing, but I was pretty intentional and have been for a while. It was in our prepared remarks and every time I probably talk to you and others is -- it is definitely a lever we will continue to flex for value creation. So portfolio optimization to me and the reason why I'm leaning on it so much is, I don't want people to think because we've done so much so fast that we're finished. This will be a perpetual lever that we're going to continue to flex in the organization, which will include acquiring companies on a tuck-in basis in a serial fashion to be able to drive revenue growth and profitability. It's a requirement. It's got to be mission-centric first and foremost. It's got to be an attractive market with strong profitability in areas that we think we can win. And we'll continue to do that. I won't speak to the timing of that, but we do have the financial flexibility to do them. So that's probably all I'll say on that. But it clearly is a continued lever for us. Frederick Wise: Okay. And just reflecting -- sort of stepping back and reflecting on the increasing probability that your increasing confidence in '28 goals on sales and margins and EPS, et cetera. Maybe just -- I'd be curious to hear maybe Wayde for you, it's like -- is it the SKU program being done as the debt coming down? Is it the exit of the TSA agreement? I mean what's the relative importance over the next 12 months in terms of observing that progress and building confidence in -- as you approach '27, '28? Bryan Hanson: Maybe I'll start on the revenue side, revenue growth line, and you can speak more to the margin. So I'd say proof is kind of in the pudding, right? I mean at the end of the day, you look at our growth rates, and even though when we normalize them, it's 3.5%, as we said, as Wayde just referenced. That's pretty darn good, right? Out of the gate, that's almost 3x, better than what we had in our base a couple of years before the spin. And that's great traction that we're seeing. It's coming from the commercial enhancements that we've made. It's coming from the brands that we already have, and it's coming from those new products that we've talked about. But that is giving us confidence. It was only a short period time ago in March of 2025 that I had people questioning whether we could ever get to the LRP targets that we are providing. I think it's pretty clear we'll not only get there, but we might do it faster than expected. Hopefully, we do it this year. That's the goal. So I think it's really just all the things that we put into place are coming together and the team is making it work even in the face of all of the challenges we continue to throw at them, acquisitions, divestitures, ERP cutover, separations, you name it. This team has stayed focused and delivered. And again, I'll compliment the team that I know is listening, congratulations for that. On the margin side, we've had a lot of headwinds come our way as well since we put that LRP target out but we still feel like we've got the programs in place to deliver on those margin targets. And I think it's important when you think about us versus the organization before spin, we've got like 300 basis points of pressure that we're going to be feeling that we did not have before spin, looking at raw material increases, looking at tariffs that we didn't have before spin. And so that '23 to '25 is really like a '26 to '28 when you look at benchmarking where we were before the spin. So I'm pretty proud of the team leading in there as well. I probably just took everything you were going to say Wayde, so I apologize again on the call there. Wayde McMillan: No, no, I think you covered it really well, Bryan. Maybe just to the sort of second part of your question, Rick, on what are the milestones or things that we need to clear along the way. You touched on a couple of important ones. In order to achieve those margin targets, Bryan mentioned, we do need to clear our separation from 3M. We are very excited. As I shared in my prepared remarks, 90% of the TSAs we plan to have done here in '26. We plan to be through the ERPs here in '26. So '26 is a very important year for us, but we are pretty excited to get to 2027 and put most of that separation work behind us and move a lot of our resources, a lot of our best and brightest focusing on the business versus on the separation. And then maybe, Bryan, I'll just clear a couple of the other metrics we put out earnings per share to 10% CAGR. We are very confident with the initiatives that we have in place that will be supporting that sales growth that Bryan touched on, achieving those operating margins and then driving that 10% EPS CAGR. And then the last thing is the free cash flow conversion over 80%. And we've got these transient issues that we're dealing with today around the separation costs, divestiture costs. And again, we can't wait to be complete -- mostly complete with the separation in '26 and shed a lot of these additional costs starting in '27. And so once we do get beyond those, we will have very strong -- we are a cash -- very strong cash operating company, without, again, those special projects around separation and divestiture. If you clear those out of the way, we're already at our free cash flow conversion targets. And so we're very confident in hitting all those metrics. As Bryan said, sales growth with all the initiatives we have in place, operating margins with the initiatives we have there, including Transform for the Future, will lead us to that EPS 10% CAGR. And then we get beyond these transient projects, and we'll be at our 80-plus percent free cash flow. So very confident on our path to hitting our long-range plan targets by 2028. Operator: And next, we'll move to Steven Valiquette at Mizuho Securities. Steven Valiquette: I guess at this point, it's probably more of a follow-up question, but just to come back on that topic on the TSAs and exiting 90% by the end of '26. For the 10% that's still going to be left, just remind us again, is that really more on the supply side? And then you've talked about you have those 2027 headwinds, there was like a $100 million step-up in inventory costs from 3M or might have been quantified under basis points as well, but is that the piece that would still be kind of hanging out there? Or does some of that dissipated with your progress? Just want to just tie the -- connect the dots around all those components. Wayde McMillan: Yes. Great question, Steven. And that will help us clarify because we do get this question quite a bit. I'll just start on the 90% of TSAs is primarily around separating our systems and our ERPs as well as our distribution centers, and our -- the manufacturing that we do for 3M and the 3M does for us. And so we'll have mostly rebranding work and some supply chain work to do in 2027, that remaining 10%. But I do want to just specifically differentiate between the raw materials work that we do. And that's the additional step-up that you're talking about that 3M gave themselves a contractual option to again step up our cost in 2027, and we've shared that, that's about a 100 basis point headwind for us if that in fact happens. We don't have any updates to share at this time, but we are working with 3M to see if there's a better solution for both companies, frankly, than going that road. So that will be an update down the road. So with that in mind, we've got most of the separation work done in 2026. We do have some rebranding, some supply chain that we'll carry over into 2027. Bryan, if there's anything to add. Bryan Hanson: I think maybe the only other one because sometimes there's confusion on the raw material piece. I just want to make sure that it's clear that with those raw materials, most of that is including intellectual property that we have access to. Actually, we own. There was a concern that we didn't have that intellectual property. We have full ownership rights in our field of use, and it is transferable. We can continue to buy from 3M as a raw material supplier with that intellectual property or we can go to another chemical manufacturer to use them as well. So I just want to be clear that even though we have that long-term supply agreement with 3M, we do have the option because we own the rights to the intellectual property to go elsewhere. Operator: And that concludes the question-and-answer session. I'll now turn the call back over to Amy for closing remarks. Amy Wakeham: Awesome. Thank you, Audra, and thank you, everyone, for listening. We appreciate all your questions. If you do have any follow-ups or need to clarify anything, please don't hesitate to reach out to the Investor Relations team. Audra, you can go ahead and close the call. Operator: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, and welcome to the Mesoblast financial results for the half year ended December 31, 2025. An announcement and presentation have been lodged with the ASX and are also available on the Home and Investor pages at www.mesoblast.com. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, let me remind you that during today's conference call, the company will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's announcement and the company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. In addition, any forward-looking statements represent the company's views only at the date of this webcast and should not be relied upon as representing the company's views of any subsequent date. The company specifically disclaims any obligations to update such statements. With that, I would like to turn the call over to Paul Hughes. Paul Hughes: Thank you. Welcome, everyone, to the Mesoblast financial results call for the period ending 31 December 2025. My name is Paul Hughes. I'm Head of Corporate Finance and Investor Relations. In the room with me today is our CEO, Silviu Itescu; our CFO, Jim O'Brien; and our CCO, Marcelo Santoro. We have a presentation to run through highlighting the financial results and the operations for the period, and then we'll have some time for questions at the end. So now I'll hand over to Silviu to begin. Silviu Itescu: Thank you, Paul. We could go to Slide 4, please. This slide highlights the corporate priorities for 2026. We intend to continue to show strong growth in Ryoncil sales driven by market adoption. We will build a strong cash flow with judicious use of funds for operations and an optimal capital structure. Cultural transition is critical so that we can move to an efficient commercial organization. We will expand Ryoncil label indications and obtain approval -- seek to obtain approval for remestemcel-L products, our second-generation platform. Our manufacturing focus will seek to increase diversification, capacity and cost efficiency for our platforms, and we will continue to focus on appropriate commercial partnering backed by demonstrable value drivers, including FDA approvals, strong revenues and advanced clinical programs. Next slide, please. This year was marked by a very successful product launch. We initially received FDA approval for Ryoncil in December 2024. Ryoncil is the first and only FDA-approved allogeneic mesenchymal stromal cell product. The product was launched in April of 2025 with revenues growing quarter-on-quarter. There is significant unmet need for continued uptake and increasing market adoption. And our net revenue from Ryoncil was USD 49 million in the first half of FY '26. Next slide, please. Paul Hughes: Thanks, Silviu. Jim will take us through the financial slides. Thanks, Jim. James O’Brien: Thank you, Paul. Hi, everybody. I'd like to now review our first half fiscal 2026 operating results. And I should mention that all figures are in U.S. dollars. Total revenues for the period were $51.3 million, driven by the successful launch of Ryoncil. Our net product revenues, as Silviu mentioned, were $49 million, and we had a gross margin of a strong 93%. Our R&D expenses for the period were $46.1 million (sic) [ $46.2 million ] compared to what we reported last year of $5.1 million. Now last year's numbers were a bit skewed because we had a $23 million reversal of the inventory provision once we got approval of Ryoncil. Without that adjustment, the prior year number would have been about $18.1 million. So -- I'm sorry, we would have grown about $18.1 million over the prior year. And again, the spending in the period really related to our adult GVHD trials, back pain and also our LVAD program as well as getting ready for the BLA and some manufacturing work. Our sales and general and administrative expenses were $28.5 million compared to $18 million in the prior year. And that increase really related to the sales and marketing effort that Marcelo and the sales team did in terms of driving sales growth. The loss during the period this year was $40.2 million compared to $48 million in the prior year period. Again, as I mentioned a few moments ago, that prior year loss was impacted by the $23 million worth of reversal on inventory. And -- but for not those items, we were down -- we were up about -- we were down on a net loss of about $30 million year-over-year. Just in terms of our operating spend and our cash flows for the first fiscal quarter -- first fiscal half of the year, excuse me, we were at $30.3 million. As we look to the second half of the year, we expect our operating cash flow usage to decline when compared to the first half of fiscal '26 based upon our projected cash receipts from revenues as well as maintaining disciplined cost control measures and efficiencies in the operation. And on the next slide, just to point out our profitability and growth pipeline from Ryoncil. As I mentioned, we had strong revenues for the period. Gross margin, excluding amortization expense would have been about $44.2 million. Our direct selling costs were $7.7 million. And again, we have strong operating performance that allows us to invest in our R&D programs and our life cycle extensions. And we do have a very robust pipeline, and we continue to invest in our manufacturing footprint as well as building inventory where needed and getting our second-generation products to market. On Page 9, next slide, please. We had $130 million worth of cash at the end of December of this year, which you can also note that the reduction in our net spend over the year, as I said, will decline over the second half of this year. On December 30, 2025, we entered into a $125 million nondilutive credit line facility. The first tranche of which is $75 million was drawn at closing and enabled Mesoblast to replay in full its prior senior secured loan. We also partially repaid the subordinated royalty facility, which will continue to be reduced from ongoing revenue and will be fully repaid by the middle of 2026. The second tranche of $50 million is available to be drawn on our option through June of 2026. The new facility has a lower cost of capital for the company, freed up its major assets to provide flexibility for strategic partnerships and commercialization. In addition, the new facility can be repaid at any time without incurring early prepayment or make-whole fees. It does not include any exit fees and does not cover any of Mesoblast assets, which is a very strong point for the reason why we did this. This is terrific for the company. And we have no restrictions on doing additional unsecured debt or any licensing activities. We're very pleased with this line of credit and believe it will strengthen our balance sheet to support an exciting growth period for Mesoblast. On the next slide, looking ahead to the second half of 2026, we anticipate full year Ryoncil net revenues to range between $110 million and $120 million on a full year basis. With that, I'll turn the call back to Silviu for additional comments. Silviu Itescu: Thanks, Jim. If we can go to Slide 12, I'd like to bring Marcelo Santoro, our Chief Commercial Officer, please. Marcelo Santoro: Thank you very much. Next slide, please. So good afternoon, good morning, everyone. We are extremely pleased with the performance of the launch to date, and I couldn't be proud of the work, the commitment and the passion that our colleagues at Mesoblast demonstrate every single day towards these children. We have treated numerous patients since we launched and Ryoncil is having a transformational impact in the treatment of these children according to the feedback we received from treatment centers and treatment teams. In fact, we are on track to achieve 20% market share by the end of year 1 in the market. The commercial performance to date has been exceptional. This holds true not only against our initial expectations, but also when benchmarked against other successful rare disease launches. We have been laser-focused on building the infrastructure needed to ensure Ryoncil reaches its full potential. I am very happy to report that we have onboarded 49 treatment centers to date. In addition, Ryoncil is now listed on the formulary of 30 of those centers, a number that continues to grow steadily as more P&T committees review and approve its use. Formulary inclusion is critical, as you know, as it streamlines the adoption and use of Ryoncil when it's selected for a patient. Having these many formulary approvals in less than 1 year demonstrates the outstanding value of the product and the tireless commitment of the team to build the appropriate infrastructure to expand utilization. In addition, 13 hospitals have opted to use Optum Frontier, our specialty pharmacy partner, virtually eliminating their financial responsibilities with the product. On the payer side, we have also made exceptional progress. Ryoncil is now covered by insurance plans, representing over 280 million lives across both commercial and government payers. Medicaid coverage is in place in all states and a specific J-Code for Ryoncil, J3402 went into effect on October 1, allowing for more efficient billing and reimbursement for both sites of care and payers, along with CMS published rates. Commercial payer support has also been very strong. All major payers, including Aetna, Cigna, UnitedHealthcare, Anthem, Humana and Prime Therapeutics covering all Blue Cross plans have issued favorable coverage policies for Ryoncil. Notably, these policies do not require step therapy, which simplifies patient access significantly. All of this has occurred within the first 6 months post launch. Next slide, please. From a strategic priority standpoint, the Ryoncil team is 100% focused on 3 key strategic pillars. The first is to proactively identify and prioritize appropriate patients who may benefit from Ryoncil therapy. The second to reinforce our superior patient outcomes in first-line treatment right after steroids. And the third is to empower caregivers to demand Ryoncil for their children. We have been working with several advocacy groups and will soon launch a comprehensive campaign dedicated to supporting both caregivers and patients. With that, let me turn back to Paul. Paul Hughes: Thanks, Marcelo. I'll hand over to Silviu, who's going to take us through the rest of the deck before we open it up to Q&A. Thanks. Silviu Itescu: Thank you. If we could move to Slide 14. This slide summarizes our plans for label expansion of Ryoncil into adults. A pivotal study of Ryoncil as part of second-line treatment regimen in adults with severe steroid-refractory graft versus host disease is underway with our partners at the NIH-funded Bone Marrow Transplant Clinical Trials Network. The basis for this trial is that 50% of adults who have severe GVHD fail existing second-line treatment, including predominantly ruxolitinib. These patients who fail have a 25% abysmal survival at 100 days. We have previously used Ryoncil under expanded access in patients aged 12 and older, in many adults as well, 18 and older who have failed ruxolitinib or other second-line agents and use of our product in this patient population was associated with 76% survival at day 100, a remarkable result. As a result of these results, the final protocol design for the registrational study in adults has been locked down and has been worked through with the FDA recently in a meeting with the FDA agency. We expect that following Central Institutional Review Board approval coming up in March, site initiation and patient enrollment will commence. Next slide, please. Further extension strategy for Ryoncil is focused on various opportunities in pediatric and adult inflammatory diseases. The team is currently evaluating multiple indications to unlock value, including in the inflammatory bowel, neurodegenerative and respiratory conditions. Our portfolio will be prioritized to maximize shareholder return by utilizing either internal investment strategies versus external partnership initiatives. Next slide, Slide 16. Now I'll be updating you on our second-generation platform, rexlemestrocel-L currently being developed for discogenic chronic low back pain and chronic ischemic heart failure. Slide 17, our Phase III chronic low back pain program, a first 404-patient randomized controlled Phase III trial has already completed, and that included about 40% of patients who are opioid dependent. We met with the FDA recently and received positive feedback on potential filing of a BLA based on achieving a clinically meaningful reduction in pain intensity at 12 months between the treatment arm and placebo arm. The robust result in opioid reduction from at least one adequate and well-controlled trial could be included according to our meeting with the agency as part of product labeling, which is a very, very, very important outcome. We, in fact, do already have an RMAT, Regenerative Medicine Advanced Therapy designation for rexlemestrocel-L as a potential opioid-sparing therapy in chronic lower back pain. Next slide. The confirmatory Phase III trial is recruiting currently 300 patients across 40 sites in the U.S. with a primary endpoint, 12-month reduction in pain. As I've mentioned on multiple occasions, FDA has confirmed that, that is an approvable endpoint. The enrollment of these 300 patients is expected to be completed in March or April. Data readout and BLA filing are expected in calendar year 2027. We have, at the same time, undergoing commercial manufacturing in order to leverage our existing capacity and cost efficiencies. I will reinforce that there are many patients who are suffering from this terrible disease. Over 7 million patients across each of the U.S. and EU5 are due to generative this disease, patients who are otherwise have run out of options other than surgery. This is a large unmet need for a potential blockbuster opportunity. Next slide, Slide 19. Now I'd like to update you on Revascor, our product based on our rexlemestrocel-L platform that is being developed for chronic heart failure with reduced ejection fraction and persistent inflammation in either patients with Class II/III heart failure or very end-stage heart failure patients who are being kept alive with a ventricular assist device in the left ventricle. We can go to Slide 20. LVAD implantation improves overall survival in these end-stage patients, and that's well established. However, the underlying causes of heart failure in these patients, notably inflammation, persists. And whilst the left ventricle improving the left side -- the LVAD is improving on the left side of the heart, the right ventricular pump function remains vulnerable and continues to deteriorate. Therefore, progressive right heart failure continues to occur in up to 30% of patients and is the primary cause of multi-organ failure and death in this group of patients, mortality occurring within the first 12 months. In addition, life-threatening major mucosal bleeding due to progressive right heart failure and portal hypertension occur in about 30% of patients and is the major morbidity in this group, the main cause of recurrent hospitalization. Next slide. Now we performed 2 randomized controlled studies in this patient population. The more recent study was called LVAD Study II, and that randomized 159 patients in a 2:1 randomization to provide primary evidence of Revascor's efficacy in reducing major bleeding events. A second study, LVAD Study I, an earlier study, is a supportive study for LVAD II, randomized 30 patients in a 2:1 fashion and provided supportive evidence also of Revascor's efficacy in reducing major bleeding events. Intramyocardial injections in both of these studies of either Revascor or control were performed at the time of LVAD implantation. Importantly, both trials, both randomized controlled trials showed the Revascor reduced cumulative incidence of major bleeding events, life-threatening GI bleeding, the trial's primary efficacy and safety endpoint and related hospitalizations through 6 months, both were significant. We go to the next slide, Slide 22. This provides you with some new data that we have not previously presented. This slide demonstrates the total number of major bleeding events resulting in hospitalizations over 6 months on the left-hand side and over 12 months compared to controls in the entire study LVAD II. As you can see both on the left-hand side and the panel B on the right-hand side, Revascor reduced major bleeding events and hospitalizations by about fivefold, a very significant reduction throughout a 12-month period compared to MPC treatment compared to control treatment. Next slide, please. Now moreover, particularly in the ischemic group of patients, what you can see is that on the left-hand side, in controls, in red, the ischemic controls had approximately a three to fourfold increase in hospitalizations due to right heart failure. The non-ischemics had a very low incidence and risk of heart failure hospitalization. In contrast, on the right-hand side, by 12 months, you can see that the MPC treatment reduced the right heart failure hospitalization events in ischemic patients back to background levels, the same levels as I see in non-ischemic controls. And again, those reductions of hospitalization from right heart failure were significant. Next slide, please. This slide focuses on the risk of death from right heart failure in controls on the left, and in Revascor-treated patients on the right. As you can see in Panel A on the left, amongst patient controls who have at least one hospitalization from right heart failure, the presence of -- sorry, amongst controls, the presence of right heart failure hospitalization, at least 1 right heart failure hospitalization in red was associated with a mortality risk and a hazard ratio of 7 or more than 7 compared to patients who did not have right heart failure. So in controls, particularly early within the first 4 months after LVAD implantation, the presence of a right heart failure hospitalization was a very strong predictor of death. In contrast, what you can see on the right-hand side, amongst Revascor-treated patients, the risk of death, particularly in that early period 4-month period is almost completely abolish. And you can see that the overall survival over a 12-month period in Revascor-treated patient was the same, irrespective of whether they had a right heart failure hospitalization or not. So what this means is that Revascor not only reduces the incidence of hospitalization rates, but protects these patients against death from right heart failure. If you go to the next slide, please. So the summary of these new data, data that I haven't shown you here, but we have also observed is that Revascor reduces the inflammatory cytokines and through inflammation reduction protects the at-risk right ventricle in these patients, the same right ventricle that continues to fail despite the fact that there's an LVAD in the left ventricle. The strengthened right ventricle reduces hospitalization rates in the intensive care unit due to right heart failure and improves survival. The strengthened right ventricle decreases the risk of portal hypertension and therefore, decreases GI bleeding events. This leads us to think very carefully about how Revascor beyond its potential use in patients with left heart failure problems, also has the potential to be used to improve right heart failure function in patients not only with ischemic heart disease, but other causes of right heart failure, including primary pulmonary hypertension and chronic lung diseases. Next slide, please, Slide 26. So let me give you an update on our CHF program, particularly our plans to file for approval. With these new data and our existing orphan drug designation for treating this group of high-risk patients with high mortality as well as FDA's stated preference for randomized controlled trials, Mesoblast is moving from filing for an accelerated approval to filing for a full approval. Unlike an accelerated approval, full approval does not require a confirmatory study. Aligned with FDA on items required for filing the BLA regarding CMC potency assays for product release and commercial manufacturing, we now have these activities well and truly underway, and we expect to file our BLA for full approval for this indication in the next quarter. Let me summarize our highlights and our upcoming milestones. Ryoncil is the first and only FDA-approved MSC product. It delivered net revenues of USD 49 million in the first half of FY '26. As you heard, 49 centers have been onboarded, 64 centers account for 94% of the entire pediatric bone marrow transplant population, so well underway to achieve that in record time. We're initiating label expansion to adult acute GVHD, a market that is 3x larger than the pediatric market. We are currently prioritizing our portfolio, which includes the potential to go into the inflammatory bowel disease, neurodegenerative diseases and respiratory conditions, and we will update the market as we focus on certain areas in priority over others. Our second-generation rexlemestrocel-L is enrolling the second trial in back pain with full enrollment expected to complete by the end of March or end of April. BLA filing next quarter is in line for full approval for patients with right heart failure and end-stage heart failure with LVAD. And we're actively optimizing manufacturing logistics to support commercialization, both of the rexlemestrocel-L pipeline and obviously, to have further inventory for the projected growth in Ryoncil sales. With $130 million in cash on hand as of December 31 and the new credit line that you heard about, which still has the potential for $50 million available to draw down, we're in a very strong financial position. And as you heard earlier, we are projecting full year fiscal 2026 Ryoncil net revenue to range between USD 110 million and USD 120 million. And I think I'll stop there. And hopefully, there are some questions that we can all address. Thank you. Paul Hughes: Operator, if you could please open the lines for questions. Thank you. Operator: [Operator Instructions] Your first question comes from Edward Tenthoff with Piper Sandler. Edward Tenthoff: Congrats on all the great progress across the board. Could you just repeat the guidance you broke up a little bit for this coming year? James O’Brien: Yes. Yes. What we're projecting for the full fiscal year are net revenues ranging from $110 million to $120 million again, on a full year fiscal basis 2026 hitting June 2026. Operator: Your next question comes from Olivia Brayer with Cantor Fitzgerald. Olivia Brayer: I have a few, if you don't mind. Maybe just first on Ryoncil in peds. You all mentioned potentially hitting 20% penetration of that pediatric population by the -- I think it was by the end of your fiscal year, if I heard that correctly. So can you maybe just run through what those assumptions include to get to that 20%? And how high of penetration do you think you can realistically reach in this specifically peds population over time? And then I've got a couple more on your pipeline programs. Marcelo Santoro: Yes. So thank you. So let me start with the second one and then go to the first, right? So the second one, we assume a 40% peak share. And you have to understand, we believe it should be 100%. This is a product that should be used by everyone. But let's be responsible and realistic, a 40% share is reasonable, right? So if you assume a range of patients, and obviously, that's dynamic of 375 patients, that's what the 20% is based on. It's 20% until the end of our fiscal year. That's what we aim on achieving at that point. Olivia Brayer: And is that specifically for the fourth quarter of your fiscal year? Like if I'm kind of doing the math. Silviu Itescu: Yes. Olivia Brayer: Okay. That's helpful. And then for your Revascor BLA next quarter, how is the FDA viewing the ischemic versus non-ischemic phenotypes? And have they given any input on to or around potential labeling language around the ischemic etiology or inflammation biomarkers? Silviu Itescu: Well, so I think it's important to note that in the 159-patient trial, we achieved the principal endpoint of -- in overall in the full patient population without having to go to any subgroups in terms of the cumulative incidence of major bleeding events over 6 months. Also, we achieved a significant reduction in hospitalizations for major bleeding events across the entire patient population without having to go to subgroup. So our position is that we will be seeking a label for the entire patient population, especially given that the confirmatory study, LVAD I, also achieved the same endpoint across all patients. There's no question that the patients at greatest risk are those with ischemic etiology. And those patients have a higher level of inflammation, they have a higher risk for bleeding, right heart failure and death. And interestingly, we saw the very same sort of thing in the larger trial in Class II/III heart failure, where, again, we saw patients with ischemic heart disease as an etiology had high levels of inflammation, greater risk of 3-point MACE and greater treatment benefit. So we will be providing the FDA with the totality of the data that confirm the supportive trials, demonstration that ischemic patients are at greater risk and treatment with our cells is even more effective in that subgroup, but we've achieved the endpoint around the prespecified bleeding endpoint and hospitalization endpoint across the entire population. So that remains to be negotiated. Olivia Brayer: That's helpful. Understood. And then last question is just on the chronic back pain. Can you just clarify what data you're submitting to the FDA? Is it just a new analysis of the pre-existing data? And is your ongoing Phase III not actually going to be part of that submission package? Maybe just some clarity around that update because I do think that is a new disclosure. Silviu Itescu: No, no, no. I didn't mean to say that we wouldn't be submitting the data from the new trial. The new trial, the second trial, which completes enrollment by over the next month to 6 weeks is the plan to complete enrollment. That trial becomes the primary data set and the previous trial becomes a supportive data set. That's certainly our intention. We have spoken with the FDA about looking at the subgroup of patients who are opioid dependent and that's a discussion that is ongoing with the agency. But with respect to the primary endpoint in all comers of pain reduction, we will be using the 2 trials to present full data sets. Olivia Brayer: Okay. But that additional Phase III readout is coming in 2027, correct? Silviu Itescu: That's correct. Olivia Brayer: So will you -- you're kicking off filing before actually having that data? Silviu Itescu: No. The objective is to complete that trial, get the readout and move to a filing with those data in the primary file. Operator: Your next question comes from Madeleine Williams with Canaccord. Madeleine Williams: Just in regards -- just going back to the pediatric Ryoncil and just the FY '26 guidance. Can you speak a little bit to sort of how you're seeing repeat utilization among centers or just how that kind of shakes out over the remaining of the year and sort of just trying to dig into more. Marcelo Santoro: Yes. No, we'd be happy to do that. Yes. So we see the continuous growth in the centers, continuous adoption, not only by more centers, but also repeated use by the current centers we already have, which shows that they are finding utility in the products and repeating the treatment in other children, right? So that's one component. The second component, we're also seeing very big, very large centers coming on board, which will substantially increase our confidence in this guidance. And it's a reality that is happening every day. Silviu Itescu: And I would add to that, I think a major additional components moving forward is continued physician education. We've shown both in our previous Phase III trials and in the real-world data that the earlier this product is used, the greater the survival. it's unquestionable. And so a lot of the effort by the team will be to educate physicians. Physicians have their own practice habits. And they all believe that their particular way of doing things is standard. Nothing is standard in this disease, especially given that only Ryoncil is approved by FDA for treatment of children. So I think a major focus and an area of growth is to educate the majority to use the product as early as possible after steroid failure. Do you agree, Marcelo? Marcelo Santoro: For sure. And I would add 1 more, right? So as a father, unfortunately, my child had something like this horrible disease, I would like to know that this option is available. So it's our obligation to empower them to empower the caregivers, make sure that they understand that this product is available and it's the only FDA-approved product so that they can talk to their treatment teams and ask for this as a potential therapeutic option for their child. Madeleine Williams: That's helpful. And just maybe 1 more for me. Just in regards to Revascor and the full approval -- filing for full approval rather than accelerated. I'm just interested, you've obviously discussed the additional data, but I'm assuming there's sort of been some sort of constructive discussions with the FDA. And just sort of if you can provide more color about what your confidence is in receiving that full approval? Silviu Itescu: Well, we've had multiple discussions with the agency. We understand what they wanted to see and the data that I've highlighted to you today, particularly as it relates to mortality is the #1 area of focus. And the recent guidance by the agency to focus on randomized controlled trials rather than single-arm trials where major endpoints are being targeted like mortality give us the sort of confidence that particularly in an orphan disease indication where a single trial should be viewed as sufficient for approval, full approval. Operator: [Operator Instructions] Your next question comes from Michael Okunewitch with Maxim Group. Michael Okunewitch: Congrats on all the progress. I guess just to kick things off, there's obviously been a lot of changes at the FDA since you first launched the Phase III in chronic lower back pain. So I wanted to see if you've received confirmation from the current FDA administration that the 12-month pain-only endpoint is sufficient for approval? Silviu Itescu: Yes, we have. Absolutely. That's exactly why we had the meeting recently to gain confirmation from the current administration that, that endpoint is an approvable endpoint, and that's exactly what we received. Moreover, the recent guidance from the FDA that a single well-conducted randomized controlled trial is sufficient for approvals in various indications also gives us great confidence that if we achieve that endpoint, this is an approvable trial and approval endpoint. Michael Okunewitch: And then just 1 more for me, and I'll hop back in the queue. I wanted to ask when it comes to the upcoming filing in the Class IV heart failure programs, are there any outstanding items that FDA has requested that you need to finalize before you can submit that next quarter? Silviu Itescu: Well, commercial manufacturing is always a very important component of this. And that is something that we are heavily engaged in. The product rexlemestrocel-L and its Phase III trials was all made at Lonza in the same facility where Ryoncil was made and which was approved for Ryoncil. And we believe that the vast majority of the manufacturing process is quite similar to the Ryoncil process. So I think that will be an advantage in our filing, but that remains -- we need to get some more confirmation from the agency. Nonetheless, we expect that the long history of manufactured product for back pain trials, cardiac trials will hold us in good stead. Operator: That brings us to the end of today's call. I'll hand back to Paul, please. Paul Hughes: Thank you. As you heard today, we're in a strong position with a number of significant milestones in this current second half through the period. We look forward to keeping you updated on the progress and the achievements. I'd like to thank everyone for their interest in Mesoblast and participation in the call today. Thank you, and have a great day. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to Rocket Labs Fourth Quarter and Full Year 2025 Earnings Conference Call [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Morgan Connaughton, Vice President, Marketing and Communications at Rocket Lab. Thank you. You may begin. Morgan Bailey: Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab's Fourth Quarter and Full Year 2025 financial results, business highlights and other updates. Before we begin the call, I'd like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our speakers today are Rocket Lab's Founder and Chief Executive, Sir Peter Beck; as well as Chief Financial Officer, Adam Spice. They will be discussing key business highlights, including updates on our launch and Space Systems programs. We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to sir Peter. Peter Beck: Thanks very much, Morgan. So I'm going to start today by stealing some of Adam's thunder and sharing some of the financial highlights upfront. We had a new annual revenue record in 2025 coming in at $602 million, which represents 38% growth year-on-year compared with 2024. We also had a record quarter in Q4 with revenue coming up at $180 million, which was up 36% from Q4 last year. At the end of Q4, our backlog sat at a record $1.85 billion, which is up 73% from the same time in 2024. And finally, we also achieved record gross margins in Q4 at 38% GAAP and 44% non-GAAP. As you tend to say on launch day, that's greens all across the board and a great result. It comes down to one thing, and it's simply relentless execution from the Rocket Lab team across our launch and Space Systems programs. Here are some highlights from that execution. I won't labor on these now as we'll go into more detail in the up-and-coming slides. But ultimately, we launched and signed a record number of electron missions and led the way on hypersonics testing with haste and achieved some significant qualification and development milestones on Neutron. On the Space Systems front, we were awarded the largest contract in Rocket Lab's history, successfully delivered the ESCAPADE mission in Mars for NASA, and we had record growth across all of our Space Systems component businesses. On acquisitions, we welcomed Geost in 2025, which officially marked our entrance into payloads and followed this up in Q1 2026 with the acquisition of Optical Support, Inc., which further strengthens our optical systems offering. We also expanded our machining and manufacturing footprint with the acquisition of Precision Components Limited, which actually just closed today and will ultimately support continued scaling of the components manufacturer for both Launch and space systems. More on these in the slides ahead. So on to some quick highlights for Electron and HASTE. Rocket Lab remains the small launch leader globally as the only rocket delivering reliable and high cadence launch opportunities for SmallSat. We launched 21 missions across Electron and HASTE in 2025, which was a new company record. We also launched 7 missions in Q4, our highest number of launches in a single quarter to date. Meanwhile, there were no successful orbit launches of a new U.S. or European small launch vehicle in 2025 at all. And it's very clear when small cell operators need a dedicated ride to orbit, they come to Rocket Lab, and we're proud to hold the title and look forward to expanding it again the record again even further this year. The U.S. government has made no secret of the fact that faster and more frequent hypersonic testing is an urgent need and a national priority. Rocket Lab is the only credible provider that has demonstrated the ability to deliver this capability right now, not years into the future. In 2025, we conducted 3 successful HASTE missions, and the next one is on the pad in Virginia now just days away from launch. This kind of cadence and reliability positions us well for programs like Golden Dome. With more HASTE missions on the books this year, we'll be rapidly building that moat even further. It was a record year for launching missions, but also for signing them. We added more than 30 new launches to the manifest across Electron and HASTE. They came from a nicely diversified customer base spanning the U.S., NASC and defense, commercial constellations and international organizations. We had many returning customers sign new contracts often for bulk buys and multiple launches, but also added new names too, which demonstrates that our small launch customer base continues to expand. In Q4 alone, we signed a new multi-launch deal with BlackSky for 4 new launches, which brings the total number of missions they booked with us to 17. We also signed a contract with a new confidential customer in support of national security. As always, our pipeline for Electron and HASTE remains strong, and we're excited to continue signing new and novel missions as well as a standard repeat and mission profiles in 2026. Now on to Space Systems. Rocket Lab is not new to being a prime contractor, but in Q4, we made an announcement that highlights our substantial growth in satellite market and further cements our position as a preferred disruptive prime. The Space Development Agency or SDA, awarded us an $816 million contract to build an advanced constellation of 18 spacecrafts, equipped with advanced missile warning, tracking and defense sensors to provide global and persistent detection and tracking of emerging missile threats. It's the largest single contract in Rocket Labs history. What's more as a leading merchant supplier into the other Tranche III prime contractors, there are additional subsystem opportunities that could total capture -- could add a total capture value to approximately $1 billion for supplying payloads, solar power reaction wheels and star trackers software and other solutions from our broad portfolio of capabilities. It's important to point out that the acquisition of Geost played a significant role in securing this award. Rocket Lab is the only commercial provider producing both the spacecraft and payloads in-house for SDA and for the tracking layer Tranche III, supporting the government's goals for speed, resilience and affordability in space-based missile defense. This award follows on from our previous prime contract award for SDA's transport layer Beta Tranche II program. With the 2 programs combined, we now have more than $1.3 billion in contracts signed with the SDA. I think an important takeaway from this announcement is not just that we won a significant contract, it's that Rocket Lab is repeatedly winning large awards that have historically been the exclusive legacy -- exclusive to the legacy aerospace primes. We're seeing a new world order established in the defense world with the rise of companies like Anduril and Palantir playing leading roles in disrupting slow bloated traditional players. Rocket Lab is clearly doing this in space and unseating the old guard. Okay. On to Mars. In Q4, the ESCAPADE mission launched and the twin satellites we built for NASA and UC Berkeley are now well on their way to the red planet. With ESCAPADE, we've proved that it's possible to deliver decade-class missions on a drastically shortened time lines and for significantly smaller budgets than typical interplanetary missions. We made this possible through vertical integration, maintaining strict control over schedule and budget. With both spacecraft now successfully commissioned and in a Loiter trajectory near L2, that's a Lagrange point, around 1.5 million kilometers from Earth, Rocket Lab's primary role in the mission will soon be complete when we hand it over to the team at UC Berkeley next month. Even once control has been transferred, we'll be chairing Blue and Gold along as they arrive in Mars orbit in September next year. Our role in ESCAPADE might have reached mission success, but we're not quite finished yet with Mars yet. We've made no secret of the fact that we think Rocket Lab is the strongest contender to deliver NASA's Mars telecommunication Orbit program. An NTO will be fundamental to everything else on Mars, enabling science now and human exploration in the future. We'll make it possible with a rare combination of proven spacecraft, deep space mission experience, reliable rockets and end-to-end space systems capability as a vertically integrated mission provider. Our hardware and our software has enabled some of the most ambitious and successful Mars missions in history, including the Mars Insight Lander, Perseverance Rover, Ingenuity Helicopter, Mars is in our DNA and Rocket Lab has more hardware and on orbiting Mars than just about any other company today. Okay. On to programs. We had a key milestone for LOXSAT, which is our launch plus spacecraft mission to build and deploy an on-orbit cryogenic fuel depot for NASA. This spacecraft is now complete and we will be marching steadily towards launch later this year. Okay. We also have an exciting development to share from our Space Solar business. It requires some background on kind of the state-of-the-art of space solar power, so bear with me a little bit on this one. The satellite industry is rapidly expanding and projected to grow 7x by 2035. Those satellites will all need solar power. Rocket Lab is the world leader in solar space power. So it should come as no surprise that we're the best positioned to serve this growing market. In addition, ambitious opportunities are on the horizon from space-based data centers. As AI and compute demand saw data centers on earth reach their limits, companies are beginning to seriously explore moving data centers to orbit where they can take advantage of the cool conditions and infinite solar energy. But rapid market growth of this size, both for typical constellations and futuristic projects like space-based data centers will be hampered if traditional solar cells are the only option. So it's against this backdrop that I'm proud to announce that Rocket Lab is introducing a space-optimized silicon solar arrays. While silicon is not new in space, it's always suffered from low radiation tolerance and very low life expectancy with poor performance. Our team are the experts in space solar, having developed some of the most complex cells for flagship missions to the Sun and most of the missions on Mars today. The team has produced a silicon array that is a game changer. By harnessing silicon, we're able to deliver a really low cost per watt at industrial scale, enabling gigawatt class power generation and space at kilometer size scale using mass manufacturable lightweight and modular systems. We've also taken the additional step of developing a hybrid solar array solution that incorporates both high-efficiency cells and silicon cells, an approach that leverages the benefits of both technology. When size, weight and power or performance are at a premium, traditional high-efficiency cells are enabling. When cost schedule or cost constellation scale are required, silicon cells can meet that demand. When these factors must be traded off and balanced, hybrid arrays enable a combination of the 2 to deliver an optimal performance at a compelling value. So for new products, we move into new acquisitions. On the top of acquisitions, no doubt, everybody is interested in an update on Mynaric. The German government is still working methodically through the regulatory review process. So there's not much to add at this stage while that sort of runs its course as expected. But we look forward to providing an update once that's concluded. There are a few stories floating around in the media with different theories on how the transaction is progressing. All as I'd say there is don't believe everything you read in the media and online. Otherwise, this month, we have welcomed Optical Support, Inc. to the Rocket Lab team. OSI is a Tucson-based leader in the design and manufacture of custom high-precision optical and electro-optical mechanical instruments. OSI's technology is a key enabler for national security and commercial satellites. They are a key subsystem in Rocket Labs payloads for space protection, space domain awareness, missile warning and tracking defense. The vertical integration opportunities here are clear while we look forward to scaling production and capabilities to serve our customers and our own programs as we've done with many of our other successful acquisitions. And last but not least, we've also acquired Precision Components Limited in New Zealand, again, a known and trusted supplier to us that's now part of the family. With this acquisition, we have established a new precision machining complex that enables a huge increase in machining capacity. So I think it's worth spending just a quick moment here on the strategic importance of our recent optical-focused acquisitions. Vertically integrated high-performance RF and optical payload technologies unlock high-value opportunities for national security and commercial customers. They are key to unlocking programs like Golden Dome and other proliferated mission architectures. Owing to the payload chain enables -- owning the payload chain enables discriminating performance plus greater control over schedule, cost and especially for high-volume constellations. We've already seen this strategy in the action with SDA Tranche III award, and we expect to deliver more value and opportunities to us this year and beyond. We received another strong vote of confidence in our ability to deliver critical national security and defense programs when we were recently selected by the NDA for Shield. In short, we're now onboarded to the program, which has a contract value up to $151 billion, giving us the opportunity to compete for future launch and space systems contracts that deliver these capabilities to the war fighter with increased agility. All of the above ultimately points to one thing, Rocket Lab is a disruptive leader in building the future for space and defense. This was driven home by a recent visit to our facilities in Long Beach by the Secretary of War, Pete Hegseth, during the arsenal of Freedom Tour. The visit highlighted the critical support we already delivered to the war fighter today and showcased our capability to meet ever-evolving needs in the future. And last but not least, before Adam digs into the financials, here's the latest on Neutron. We've got lots of progress to share across Neutron, but I'll start with the topic on everyone's mind, I'm sure, which is the Stage 1 tank update. In January, we shared that Neutron's Stage 1 tank had ruptured during a hydrostatic pressure test at Space Systems complex in Middle River. Now failures aren't uncommon during the qualification phase of any rocket development program, but I do want to point out that this was unexpected. And ultimately, we had anticipated that this tank would pass qualification. Now the tank did meet its anticipated flight loads, but as we prepared to open up the test bound and push the pressures and loads beyond this to understand the margins in the structure, the tank let go earlier than we expected. The post-test review process identified that a manufacturing defect introduced a reduction in the strength at a critical joint in the structure, specifically around the tank closeout, which is an autoclave produced part that interfaces with the bulk composite laminate of the tank and the [indiscernible]. The review of the hardware and test data suggested that the tank otherwise performed as expected. The first tank was handlaid by a third-party contractor while we're getting the automated fiber placement machine up and running. And it's in this handlaid process that a defect was introduced. Now the decision to work with a third-party contractor was ultimately driven by schedule as it would allow us to produce the first tank rapidly while simultaneously commissioning the AFP machine for future tank production. And it's not uncommon for us to run parallel development paths like this to accelerate schedules as it can be a cost-effective way to iterate prototypes and first articles while also standing up long-term production capability to enable fast scaling down the track. Now the next tank is already in production. This time, it's being built on the AFP machine, completely eliminating the possibility of this hand defect reoccurring. It's worth pointing out that Neutron's second stage was largely produced -- was entirely internally passed and qualification -- sorry, -- it's worth pointing out that Neutron's second stage was produced entirely and internally and passed qualification comfortably. Beyond changing the manufacturing process, we also are making some minor design changes to the first stage tank to introduce more margin and improve manufacturability. To be clear, we're happy with the overall tank design. But since we're making a new one, we thought we'd always take the opportunity to tweak things a little bit and optimize it. Once completed, the new tank will undergo an extensive test and qualification campaign to verify flight readiness, and we're going to take a time of that process. The priority will always be to bring a reliable rocket to market even if it means taking a few extra months. Ultimately, the combination of the new tank and the production design tweaks and the test and qualification campaign will adjust Neutron's time frame a little bit. As such, Neutron's first launch is now targeted for Q4 2026. Neutron is still scheduled to come to market in an incredibly aggressive time frame. And what's more, we'll be bringing a robust and thoroughly tested vehicle to the pad. We look forward to sharing more development progress as we run through the final development phases this year. Okay. So on to some milestones in the Neutron program over the past quarter. You would have seen over the next few slides why I'm dubbing this the quarter of qualification. We've taken massive strides in Q4 as well as Q1 so far, successfully qualifying critical flight hardware from large structures through to component level systems. In Q4, the Hungry Hippo fairing successfully passed qualification and then on into Q1, it made its way to wallops. It's an exciting time in Virginia as Neutron flight hardware starts arriving and we can get into the final assembly and integration and test phase. For the Hungary Hippo specifically, that looks like fluid systems and installation of canards and thermal protection systems and then, of course, end-to-end testing. While we work through that in preparation for the first flight, we have the second Hungary Hipo in production for the next Neutron launch vehicle as well. Another successful qualification on the board is Neutron's thrust structure. This is a really complex part of Neutron. It must be able to withstand 2.1 million pounds of thrust, which is more than 44 electrons simultaneously lifting off to give everybody kind of a sense there. The structure is now officially on to final integration, which is the final hurdle before we get into integrated system checkouts, cryogenic proof tests, vehicle hot fires, wet dress and then, of course, launch. It will go through avionics and fluids and subcomponent integration before shipping out to LC-3. Meanwhile, at Middle River, Neutron's interstage is undergoing its own qualification campaign before being shipped to LC-3. Neutron's second stage is hung inside this during flight and then passes through the mouth of the Hungary Hipo and carried orbit. Like the Hungary Hipo, the interstage remains attached to the first stage and reuse. So it needs to undergo a robust testing program so we can assure that it can withstand the forces of launch and landing multiple times. And then Stage 2 is in its final integration and getting ready for its debut on the test standard LC-3. This is a specially built rig on the top of the LC-3 launch mount, where we'll go and conduct a barge of integrated test before ultimately moving into hot fires on the stand. That will be L3's first taste of what of an Archimedes engine and a huge milestone for the development program. So we look forward to testing that soon. Which brings me to the last but not least, Archimedes. Right now, the engines are in boot camp. We are not been nice to them at all. It's all well and good to test engines to expected bounds. But through experience, I've learned that space flight has a way of throwing things at you that aren't expected. Rocket engines don't tend to fail when everything is boring and when you can rely on analysis and simulation to bound and then truly understand performance. Ultimately, engine reliability is gained via testing. There's just no substitute. So that's what we are doing, and we're really pushing them through the edge cases, backing right off the inlet pressure, inducing cavitation and generally doing really nasty stuff to them. Ultimately, you want to know how the engines are going to perform in a really wide range of scenarios on the ground before you put them in the air and find out in flight. Too many rocket companies have not done this, and it typically doesn't end well. This is the same kind of process we undertook when developing Rutherford, the engine on Electron. And right now, we're flying more than 800 of those engines successfully to space. So we'll be bringing the same level of reliability and rigor to Archimedes. Beyond the Stage 1 tank, we've had a really positive quarter for Neutron progress, and this gives you a snapshot of just how much progress we've seen and made on the path to first launch. Major structures and subsystems are passing qualification. And for the first time, we have hardware and final integration. These are the final steps before we go into integrated testing on the pad with hot fire stage tests and then wet dress and then, of course, launch. Beyond the vehicle itself, we have established all the supporting infrastructure to enable first launch and beyond. OC3 has obviously stood up plus production and test facilities are all humming while the regulatory work is all tracking along as we expect. The things to look out for the next few months to know that we're marching steadily towards launch, including more hardware making its way to the launch site, we will be conducting extensive testing of flight hardware and then obviously, that will lead up to Neutron's first flight. So that wraps up the operational highlights. So I'll hand over to Adam for the financial overview and outlook. Adam Spice: Thanks, Pete. Fourth quarter 2025 revenue was a record $180 million, coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 36%. This strong performance was driven by significant contributions from both of our business segments. Sequentially, revenue increased by 16%, underscoring the continued momentum across the business. Our Space Systems segment delivered $103.8 million in revenue in the quarter, reflecting a sequential decrease of 9.1%. This decline was primarily stemmed from our Satellite Platforms business and our Solar businesses, both of which continue to perform exceptionally well despite the time-to-time programmatic nonlinearity of revenue recognition under ASC 606 and related subcontractor progress. We're fortunate that the growing diversification across Space Systems and Launch can often provide more predictable top line growth despite underlying volatility at the individual product line level. This was one of those quarters where strength in Launch Services more than offset the declines in Space Systems, generating $75.9 million in revenue, representing an 85% quarter-over-quarter increase due to the increase from 4 to 7 launches during the period, including 1 HASTE mission. On a full year basis, 2025 revenue was $602 million, an impressive 38% growth year-on-year. Now turning to gross margin. GAAP gross margin for the fourth quarter was 38%, at the center of our prior guidance range of 37% to 39% and an increase of 100 basis points quarter-over-quarter. Non-GAAP gross margin for the fourth quarter was 44.3%, which was also in line with our prior guidance range of 43% to 45% and an increase of 240 basis points quarter-over-quarter. The sequential improvement in gross margins was primarily driven by an increase in Electron fixed cost absorption due to the increased launch cadence within the quarter, paired with increased contribution from our higher-margin Space Systems components businesses. On a full year basis, GAAP gross margin was 34.4%, an increase of 780 basis points year-over-year, while non-GAAP gross margin was 39.7%, an increase of 770 basis points year-over-year. Relatedly, we ended Q4 with production-related headcount of 1,244, up 46 from the prior quarter. Now before moving on to backlog. I want to take a moment and zoom out and provide perspective on the progress we have made towards our long-term financial model since our NASDAQ listing in 2021. Revenue has grown nearly 10x, achieving a compound annual growth rate exceeding 76%. Gross margins have increased each year, more than doubling the contribution from each dollar of revenue. This expansion highlights our strong and disruptive competitive position in the industry as well as our highly valued and differentiated products and services across the business. The combination of this revenue growth and margin expansion has put the company on a solid foundation and path towards achieving meaningful operating leverage and long-term cash flow generation. Lastly, I thought it's important to call out our SG&A spending as a percentage of revenue as I'm encouraged to see this continue to trend downward as we scale the business. We are constantly driving the business to be fiercely efficient, and I believe that we're positioned to drive even more growth and efficiency in 2026 and beyond. Now turning to backlog. We ended Q4 2025 with approximately $1.85 billion in total backlog, an impressive 69% growth sequentially, primarily due to our recent SDA Tranche III tracking their contract award, which we announced last December. As we've mentioned before, Space Systems backlog in particular, can be lumpy given the timing of these increasingly larger needle-moving program opportunities. But once awarded, they can significantly derisk revenue growth for several years. We continue to cultivate a strong pipeline that includes multi-launch agreements across Electron, HASTE and Neutron as well as large satellite platform contracts across government and commercial programs. Currently, Launch backlog accounts for approximately 26%, while Space Systems represents approximately 74%. Looking ahead, we expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary Tranche III revenue recognition estimates, which we believe will prove to be conservative which, in addition to the healthy sales pipeline are expected to drive incremental top line contribution beyond the current 12-month backlog conversion. Turning to operating expenses. GAAP operating expenses for the fourth quarter of 2025 were $119.3 million, below our guidance range of $122 million to $128 million. Non-GAAP operating expenses for the fourth quarter were $104.5 million, which were also below our guidance range of $107 million to $113 million. The sequential increase in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount added spending to support our Neutron development program. Specifically, investments ramped up in propulsion as we continue to test Archimedes engines as well as test and integration of mechanical and composite structures at our facility in Middle River, Maryland. In R&D specifically, GAAP expenses increased $8.1 million quarter-over-quarter, while non-GAAP expenses rose $7.7 million. These increases were driven by the ramp-up of our committees production and testing along with higher expenditures related to composite structures and fluids, as just mentioned. Q4 ending R&D head count was 1,012, representing a decrease of 7 from the prior quarter. In SG&A, GAAP expenses decreased $5.1 million quarter-over-quarter, while non-GAAP expenses declined $1.3 million quarter-over-quarter. These decreases were primarily due to a reduction in transaction-related legal and other professional services fees related to M&A and capital markets transactions, paired with a slight reduction in marketing expenses. Q4 ending SG&A head count was 389, representing an increase of 4 from the prior quarter. In summary, total head count at the end of the fourth quarter was 2,645 up 43 heads from the prior quarter. Turning to cash. Purchase of property, equipment and capitalized software licenses were $49.7 million in the fourth quarter of 2025. And an increase of $3.8 million from the $45.9 million in the third quarter. This increase reflects ongoing investments in Neutron development as we continue testing and integrating across the pad at LC-3 in Wallops, Virginia and Middle River, Maryland, expanding capabilities at our engine development complex in Long Beach, California and build-out of the return on investment recovery barge in Louisiana. As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling and infrastructure expansion. GAAP EPS for the fourth quarter was a loss of $0.09 per share, compared to a loss of $0.03 per share in the third quarter. The sequential increase to GAAP EPS loss is mostly attributable to the $41 million tax benefit we recorded during the third quarter, which was due to the partial release of the valuation allowance against our corporate deferred tax assets as, a result of acquiring an equal amount of deferred tax liabilities emanating from the Geost acquisition purchase price accounting. GAAP operating cash flow was a use of $64.5 million in the fourth quarter of 2025, compared to $23.5 million in the third quarter. The sequential increased use of $41 million was almost entirely due to the timing of employee equity program related tax payments. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development, longer procurement for SDA, investments in subsequent Neutron tail production and infrastructure expansion to scale the business beyond the initial test flight. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment and capitalized software in the fourth quarter of 2025, was a use of $114.2 million compared to a use of $69.4 million in the third quarter. The ending balance of cash, cash equivalents, restricted cash and marketable securities with $1.1 billion at the end of the fourth quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program. which generated $280.6 million during the quarter. These funds are primarily intended to support acquisitions, such as the announced pending Mynaric acquisition, the recently consummated acquisitions of Optical Support, Inc. and Precision Components Limited as well as other targets in our robust M&A pipeline, along with the general corporate expenditures and working capital. We exited Q4 in a strong position to execute on both organic and inorganic growth initiatives and further vertically integrate our supply chain, expand strategic capabilities and grow our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss for the fourth quarter of 2025 was $17.4 million, which was below our guidance range of $23 million to $29 million loss. The sequential decrease of $8.9 million in adjusted EBITDA loss was driven by significant revenue and gross margin improvement, partially offset by increased operating expenses related to Neutron development. With that, let's turn to our guidance for the first quarter of 2026. We expect revenue in the first quarter to range between $185 million and $200 million, representing 7% quarter-on-quarter revenue growth at the midpoint and growth of 57% from the year ago quarter. We anticipate slight slip down in both GAAP and non-GAAP gross margins in the fourth quarter with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 9% to 41%, with a modest sequential decline driven by a greater mix of Space Systems versus higher-margin Launch and a weaker margin mix within our Space Systems segment. We expect first quarter GAAP operating expenses to range between $120 million and $126 million and non-GAAP operating expenses to range between $106 million and $112 million. The quarter-over-quarter increase were primarily driven by ongoing Neutron development and spending related to Flight 1, including staff costs, prototyping and materials. However, we expect to see a shift in spending from R&D and into flight to inventory throughout 2026, which is an encouraging sign of progress as we move closer toward Neutron's transfers flight and adjusted EBITDA positivity as a result. I'm optimistic that with the impressive strides we've made towards this milestone and currently expect Q1 to mark peak Neutron R&D spending. We expect first quarter GAAP and non-GAAP net interest income to be $8 million, which is a function of higher cash balances as well as conversion of approximately $117 million of convertible notes since December 31. We expect first quarter adjusted EBITDA loss to range between $21 million and $27 million and basic weighted average common shares outstanding to be approximately 605 million shares, which includes convertible preferred shares of approximately 46 million and reflects the conversion of approximately 23 million shares from our outstanding convertible notes thus far in Q1. We there remains only 7.5 million shares or 11% of the original $355 million issuance outstanding. And when taken into the additional context of the retirement of the Trinity equipment line on Q4, we have substantially eliminated -- we have eliminated indebtedness from the business. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from financing activities. Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months. And with that, we'll hand the call over to the operator for questions. Operator: [Operator Instructions] Our first question comes from Andres Sheppard with Cantor Fitzgerald. Andres Sheppard-Slinger: Adam, maybe I want to start with the backlog. I'm wondering if you can maybe help us build drill a bit deeper in it. And maybe remind us what is included in here, does this include the 40% of revenue from SDA Tranche II 10% of maybe the Tranche III? And what are you including from Neutron and Electron here? Adam Spice: I don't know how much you caught that -- so the -- all of the SDA contracts were added to backlog. So what remains for SDA Tranche II transport layer is still in the backlog. Obviously, what's been recognized as revenue is no longer there. Through the end of Q4, we hadn't recognized any of the Tranche III contract awards. So all of that value is currently in backlog, and that will start to convert into revenue and come out of backlog obviously in that process. As far as Neutron is concerned, I think we've spoken before that we have several flights that are representative in our Launch backlog that's reflected in our filings. So hopefully, that answers your question on backlog composition. Andres Sheppard-Slinger: Yes. That's helpful. And maybe just as a follow-up. So on Neutron, with the shift to Q4 now with the first launch, how should we think about cadence? Will you still target maybe 3 launches within the first 12 months after the first one? How confident are we in the development of the second tank and wondering if maybe we should expect any step-up in CapEx now with the second tank in production. Peter Beck: And I can answer a couple of those and maybe you and summer as well. Andres, so with respect to the tank, I think it's well understood what needs to be done there. And we had built a lot of the second stage tank on the machine. So that really solves that problem. And the way to think about just sort of follow-on flights is it's not quite as dire as like moving all of the follow-on flights 12 months or to the first flight because as you've seen in the presentation, we're already building flat out additional Neutron tail numbers. So it will probably be a slightly faster convergence into subsequent flights because none of the other hardware that's qualified as being halted, obviously, it's just that tank and the AFP machine enables us to build a tank just way more rapidly than with a hand lay process. So I think we'll be in better shape there. Adam Spice: Yes. And Andres, I guess with regards to your question as far as CapEx and so forth related to the second tank that's replacing the first 1 that ruptured I mean the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was expensive because as Pete mentioned earlier, it was a hand-laid up tank. It took a long time, this will be much quicker. And also, since we've now commissioned the AFP, we're really just talking about variable costs related to the tank materials, more than anything else because the existing labor is already kind of in the model. So there won't be any increased CapEx and the impact to R&D as a result of the tank failure is actually not -- the tank itself is actually not that significant. Operator: Our next question comes from Edison Yu with Deutsche Bank. . Xin Yu: Wanted to ask a question on space data centers. And I think you had alluded to a lot of interest. I think it's obviously become a topic in the industry. Can you give us a sense on how these kind of early discussions are going with potential customers interested in doing this? And is it realistic to see some type of Rocket Lab content in a space data center, let's say, within the next 2 or 3 years? Peter Beck: So thanks for the question. So I think, look, we're early with data centers. If you look at some of the models, there's a number of things that sort of have to come into focus before they become the logical choice versus terrestrial. But we never want to miss an opportunity and we've been developing the silicon arrays and power solutions for a while now focusing on mega constellations and there's high-volume power applications. But if you stand back objectively and you think about what are all the challenges with putting data centers in orbit, it boils down to really 3 things. One is cost and cadence of Launch to be able to make the model close. And then 2 is heat rejection through various means. And 3 is just sheer power, like there's a gigawatt of electricity, electrical power. So solar arrays of multi kilometers in scale are what's needed. So we wanted to make sure that whether they leave this Earth or not, there'll be Rocket Lab logos all over that stuff. So as far as I'm aware, there's nobody else has a silicon solution quite like we've developed. Xin Yu: Understood. And to your point on heat rejection, I guess, the rate eater, is that a capability you have in-house that you need to develop over time? Or is that something inorganic? Just curious on what needs to be kind of technically done there. Peter Beck: Yes. I mean, look, all of that spacecraft have radiators, I mean, you generate heat, you have to reject it. So there's various kind of ways of doing that piping heat around the spacecraft radiator. So I don't see that as a huge technical challenges just on the scale, that scale required hasn't been achieved before. So that's the challenge there. But to be clear, I mean, I don't foresee us building massive AI data centers any time soon, but those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions. Xin Yu: Got you. If I could just sneak one quick one in. In terms of just the discussions, can you give us a sense of like the flavor of customers? Are these kind of new customers, nontraditional customers kind of exploring this idea with you? Peter Beck: Yes. I mean we have to be a little bit careful here, but I would say that there's certainly more nontraditional looking at this kind of solution than traditional players. Operator: Our next question comes from Ronald Epstein with Bank of America. Alexander Preston: This is Alex Preston on for Ron. So I know you talked a little bit about progress on the Mynaric acquisition, but I was a little more interested maybe broadly in the environment in Europe and more generally, right? It seems like there's a growing appetite for, call it, indigenous launch in national security space capabilities. And I'm interested if you sort of see this trend yourselves or how you see this developing. I know Pete mentioned no other small launch provider has really succeeded in the last year, but it's still, I think, focus for a lot of people. Peter Beck: Alex, it's a great question. Look, one of the reasons why we like Mynaric and why we think it's important, Europe and Europe more in general, is exactly that point is that -- there's a lot of space nations there that have very little capability with giant aspirations and really short time frames. And I think it's always everybody's desire to build domestic capabilities. But the reality is, if you want to stand up these kind of capabilities really, really quickly. You don't have the decades that it takes to build often these sovereign capabilities. They're very specialist often equipment and facilities and also intellectual property and knowledge. So we see Europe as a great opportunity for us and a real expansion beachhead we can provide solutions at the component level. We can provide solutions at the complete system with respect to a satellite. We can provide launch, and you've seen even European space agencies procure Launch from us now. And once we have a footprint in Europe proper, being eligible for participating in your European programs becomes possible. So I think it is -- it's a great opportunity. There's literally billions and billions of dollars of well-funded government programs underway right now, and the time lines associated with those are conducive or, I would say, not conducive necessarily always to creating sovereign capability. Alexander Preston: Got it. And then I guess it would sound like the attitude is still broadly constructive from what you said versus maybe Europe starting to get a little more distant from U.S.-based providers? Peter Beck: No, I think it's very constructive. I think naturally Europe is looking to create sovereign capability, but often also the conversations we've had, they're very pragmatic and realistic that the capability they're looking to create takes a long time. So working with, for example, a Rocket Lab Europe is a great way to move forward. Alexander Preston: And just real quick, would you characterize is that the same on launch as you went on Space Systems where I think there's a bit more existing indigenous capability in Europe already. Peter Beck: Yes, they're certainly giving it a good college try but not having tremendous success, I would say, -- but that is just how difficult launch is. But I think launch is just so strategically important. You can build all the satellites you want, but if you can't put them in all, but it's kind of pointless. So this is the reason why you have the European Union and ESA launch vehicles that on the face of it aren't that commercially competitive, but they will never go away because the nations need access to orbit. So, I would expect to see that persist for some time and continued investments made in -- into Launch for the -- for Europe. But in saying that everyone is pragmatic and if you need to get stuff all but then pick up the phone. Operator: Our next question comes from Erik Rasmussen with Stifel. Erik Rasmussen: Yes. Maybe just back on Neutron. I appreciate the sort of the update on cadence. And it sounds like with the pushout, naturally, you continue to sort of build out some of those more capabilities in just Neutron infrastructure around Neutron. But post sort of test flight, and we think that sort of Q4 and if it's late Q4, I don't know the timing, but what you think then that first revenue flight? What do you think the timing around that could be? And also when considering that, that probably needs to have a higher level of reliability. And then with that, are you still targeting this as a recovery mission? Peter Beck: Erik, thanks for the question. So the timing of Flight 2 will always depend on the results of Flight 1. If flight 1 goes swimmingly, then the time to get the second vehicle on the pad, we'll endeavor to make it short as possible. If the things to fix this kind of things to fix. But nominally, the timing remains consistent to what we've kind of talked about. And the vehicle will be outfitted with all of its kind of requirements for Flight 1 even for a down range lending, we'll attempt to do the reentry and landing burden space it down. Once again, if all that goes well, then the next one we would intend to slip a barge under. If we pull drive it into the ocean, then we'll probably go to a Flight 2 and get that soft landing right before we go and put infrastructure under that, could be costly to them if we damaged. Erik Rasmussen: Great. And maybe just on Electron. You had a nice launch campaign in 2025, 21 successful launches. What does the manifest and internal planning suggests or this year? And then maybe just the mix between your standard Electron missions and HASTE? Peter Beck: Yes. I mean I'm not sure how much we've disclosed about that. But I mean, certainly, this year, we're looking for more launch than last year. As you saw the bookings and manifest are bulging and we're being in electrons out every sort of 11 or 13 days now. So that's going extremely well. But I'll pass over to Adam, if he wants to comment on -- you want schedule for the year. Adam Spice: Yes, Erik. So I think consistent with prior discussions, we see good growth opportunities in Electron. And when I say electron, I mean Electron and HASTE. So I think you'd expect increase in both standard Electron launches plus growth in the HASTE side of the business. We've normally point people towards kind of 20% growth, I think is a pretty kind of I would say a reasonable estimate for where we see this business growing over the near and intermediate to maybe long term. So I would say we've certainly given the production team direction to produce significantly more rockets in 2026 than in 2025. And as Pete mentioned on the call earlier, we booked over 30 Electron launches in '25. And we always get turns orders. So look, I think if you kind of nominally assume a 20% growth in kind of the Launch business, excluding Neutron, of course, I think that's probably a pretty good place to be. Operator: Our next question comes from Trevor Walsh with Citizens. Trevor Walsh: Peter, maybe first for you, some of your prepared remarks around the OSI acquisition made it sound like that was even further enabling you with the customer as far as just attractiveness for your services and your capabilities, even though it sounds like from the announcement that OSI was actually already in the chain of suppliers with Geost. So is the customer that focused really then, can we assume on just the vertical integration aspect? Or is there also just capabilities, functionality features of that acquisition from a systems perspective that are also attractive? Just trying to gauge kind of how you think customers are really looking at this, if that makes sense. Peter Beck: Yes. No, that's a great question, Trevor. And to be fair, the customers probably don't care that much, other than the fact, what they really care about is, does this sensor arrive on time at a cost and a performance capability that they've never seen before. And that's what we're delivering. And in order for us to be able to guarantee we deliver that, the most critical element of many of these optical systems are, in fact, the optics, bringing and owning that optics in-house really, really drives certainty for us around cost and schedule and innovation. And it's -- yes, they were a supplier to Geost, that's for sure. And when we acquired the Geost business, the first thing we sat down with the leadership team there and said, right, we are the critical supply chain elements that might trip us up and been able to deliver really disruptive and affordable parts or programs for our customers, and this was the #1 thing. I think this makes us very unique amongst the other suppliers of payloads who are outsourcing optics. And it is the most expensive, the most longest lead item in any of these explicit optical payloads. So it was important to own it. Trevor Walsh: Terrific. Super helpful. Adam, maybe just a quick follow-up for you. for your prepared remarks commentary around the backlog and how Tranche III is going to -- sounds like it's maybe conservative in terms of what's going to be recognized in that first 12-month period. Can you just maybe walk us through a little bit of the puts and takes of how -- what's, I guess, influencing that Tranche III rev-rec? Is it just customer timing of when they want deliverables? What's the -- just give us maybe one level deeper, that would be terrific. Adam Spice: Yes. So I think we've articulated previously that typically when you win one of these programs, you can recognize revenue kind of like 10% in the first 12 months after award, then 40% in the second 12 months, 40% in the third 12 months, in the last 12 months, it's about another 10%. So you got a pretty kind of normal bell curve. What I would say is that with -- what really gates our ability to kind of move faster is really our subcon deliveries, right? So would really either kind of helps us accelerate and get through these gates and milestones and rev-rec quicker is our subcons ability to deliver on time. And so I think that, that all goes back to what Pete was talking about earlier and the importance of vertical integration. So to the extent that we can just own more of the platform, we have greater control. And that allows us to have more predictability to how we kind of time revenue recognition and so forth. So I would say that a big job for us in 2026 is across our engineering and production teams is to really make sure we stay on top of what parts are still coming from third parties, make sure that they stay on their deliverables so we can kind of, again, get the program accelerate as much as possible and get more of that revenue recognized. So again, we go into it pretty conservative. I think what we've -- what -- if you look at the pure conversion at 37%, I think that was mentioned earlier of backlog converting, I mean, obviously, a portion of that is Launch but the portion that's related in Space Systems. Some of that is coming from the components and subsystems completely unrelated to SDA Tranche II and Tranche III. But what is in there for Tranche III is, again, assuming some pretty conservative delivery dates from our subcons, and hopefully, we can work with them to do better. Operator: Our next question comes from Ned Morgan with BTIG. Andres Sheppard-Slinger: Actually got Andres on, I don't know what happened there, but all good. I wanted to ask about Space Systems. It seems like it came in a little bit weaker than what consensus might have expected at first. So, I just wanted to know the puts and takes there. I know you explained it, but why might have consensus gone a little bit ahead here in the quarter? Adam Spice: Yes. I don't know that consensus does a great job in breaking out the various pieces of the business, even differentiating much between Launch and Space Systems. And then certainly within Space Systems, I'm not sure they really look at between kind of our platforms business versus the subsystems business. So one of the things I mentioned this in my prepared remarks, is that it is difficult to I would say -- I mean you can't -- to the extent that you can control the execution for your rev-rec requirements under ASC 606. It just depends on how well your subs are executing, right? And how tightly you're working with them to make sure they stay on track. And to your best efforts, I think we've all seen in some fairly public venues customers of these programs talking about how there's been some snags in the supply chain, including from those, for example, like from the optical terminal providers. And so if you look at what we do is we continually look for ways, as Pete mentioned, to just reduce any kind of dependency on third parties as much we can. That's why if you look at Electron, how vertically integrated that vehicle is Neutron will be very similar. We're getting that way more and more with our Space Systems platform offerings where very little is still, I would say, outsourced to third parties. So it's really just a function of, again, you work with them and get them to deliver as aggressively as you possibly can, while not sacrificing quality or cost where we can. So yes, I wouldn't read too much into the granularity that people may have expected from our Space Systems business because 1 of the benefits that we have now from being -- having such a diversified businesses, we really just look at the top line, how can we deliver that sequential growth of the business and sometimes more of it's going to come from Launch. And sometimes the word is going to come from Space Systems and within Space Systems, platforms can have a great quarter and components can be weak and vice versa. And then just gets that much better, and we'll have that many more tools at our disposal when we have Neutron coming online, which is why, obviously, getting that first flight off is so important, why we're all looking so forward to that. Andres Sheppard-Slinger: Yes. No, that's super helpful. I guess to stick with you. I mean, around the 2 acquisitions that were just announced, are there any financials that you can give any kind of color as to what they were doing on a performance basis? And I guess, just how much cost we might be able to see taken out as a result of them being brought in-house? Adam Spice: Yes. Our pipeline is always kind of interesting. It's got a mix of kind of more needle-moving deals from a financial perspective as far as revenue contribution and so forth. These particular deals really much more strategically around, again, vertical integration, reducing risk versus, I would say, providing big access to large external third kind of TAMs, if you will, or adjacent markets. So these are really more, I would say, reducing some margin stacking and also just taking greater control over the programs. So I wouldn't say there's not a, I would say, a material amount of revenue contribution that's going to move the needle from the deals that we just announced. Clearly, Mynaric is -- would be a different story if and when that deal gets approved because that would come with a significant backlog and revenue opportunity. And again, our pipeline also has lots of other deals that have a mixture of just, again, elimination of margin stacking and in some cases, also more meaningful revenue contribution. But these 2, I don't think you need to change your models at all for the impact for these 2 relatively small deals. Operator: Our next question comes from Guatam Khanna with TD Cowen. Gautam Khanna: I was wondering on the Neutron tank failure. Have you guys -- are you high certainty that it was that manual layup process. And therefore, the new process is not going to have the same anomaly? Or is the study still ongoing of what happened? Peter Beck: Yes. No, we undertook a complete pastry analysis, and we're able to find the piece of tank that caused the initiation of the failure. We're able to reproduce the results through analysis and then also through coupon testing as well. So no, we're very, very confident. We understand that value extremely well. Gautam Khanna: Okay. That's great to hear. And then you mentioned some areas where you'd like to take more in-house vertical integration. Can you describe some of those product areas that might be of interest? Peter Beck: Yes. I think if you look across the space craft these days, the areas that we still don't have 100% control of are starting to get smaller and smaller. We have a great RF team, but I think that's an area and we will look to bolster. And we'll seek opportunities to add scale where possible. But I think -- this is just going to be bread and butter for us to constantly make sure that we don't get stung with suppliers that aren't able to deliver for us and continue to vertically integrate. But as Adam pointed out, our M&A pipeline is pretty full, and there's a range of opportunities there from these kind of things that important, don't add huge revenue bottom lines, but they kind of guarantee revenue because we're not going to miss milestones. But they're ranging through to some real needle movers that are much more transformational and as Adam also pointed out, we're always making sure that we have plenty of capital reserves to go and do those more meaningful acquisitions. Operator: Our next question comes from Ryan Koontz with Needham & Company. Ryan Koontz: I want to ask about backlog, Adam, your commentary there as you think about the opportunities ahead over the next, say, 12, 18 months? Obviously, the SDA has been very, very active. And how you think about the composition of your backlog relative to DoD versus commercial, just in terms of the next 12, 18 months? Adam Spice: Yes, all fortunate spot, where traditionally, government business has not really been ever viewed as a hockey stick. I think for us since we're coming in, in such a disruptive way -- and were disruptive, but also the whole architecture where you've gone from Geo to Leo and the number of satellites that are required to support that architecture has just been so strong. We've got so many things that are pushing us in the back as far as kind of where the opportunities are. But I'd say, overall, we've got really big commercial opportunities that we continue to chase even though for me, I was given the choice of chasing a government hockey stick or a commercial hockey stick, I would take the government hockey stick because even though they may not be as dynamic in some cases at a program level as commercial, they always pay their bills. They're pretty clear cut how you work with them. And in that government market, we're just competing with people that seem to be fighting with their hands tied behind their backs, right? So we move much more quickly. We have a lot more tools at our disposal because of our vertical integration. So I love the mix as it's trending towards government. I do think it's also very comforting to have this big commercial hockey stick opportunity out there as well. But I would say that it's -- the pipeline -- when you look at the pipeline of kind of business opportunities, forget the M&A side, it's a pretty balanced set of opportunities between commercial and government. I mean I'll let Pete kind of provide his view, but it seems like we don't just have a choice of kind of taking one fork or the other in the road where we can try to think about how do we take both of those things. And I think we've done a pretty good job balancing, but maybe Pete want to speak about that. Peter Beck: I think you've said it perfectly, Adam. Yes, Mike, I can't add anything better than that. Ryan Koontz: Great. Maybe just a quick follow-up. As you think about Golden Dome and timing and PWSA fitting into that architecture, any updated thoughts on your role there or opportunities when you think that emerges as a truly viable business opportunity for you? Peter Beck: Yes. I think Golden Dome is quite a complex one is obviously, it's a huge program, but it's -- a lot of it is also classified. So it's very difficult to discuss too much. But I would say that in multiple fronts, I think we are well positioned to have a good chunk of this, whether it be launch or satellites, optical terminals, a lot of the optical payloads, the SDA, when the Tranche III SDA win is a clear missile track payload, which is very complicated pallet obviously and critical for the Golden Dome. So as that program formulates and continues to grow, I think we're pretty key piece of that foundation. Operator: Our next question comes from Michael Leshock with KeyBanc Capital Markets. Michael Leshock: I wanted to ask a longer-term question on a potential future Rocket Lab, satellite constellation, just given some of the recent announcements across the industry. And as you mentioned in the presentation, the significant growth in satellites that's expected over the next decade, have there been any changes to your approach on a future constellation of your own or what potential applications you may target? Or is this still a longer-term growth opportunity that really won't be a priority until Neutron is launching consistently? Peter Beck: Yes. Thanks for the question, Michael. I think what's kind of call here is that you've all heard me say that it's going -- space is going to get blurry. It's going to be difficult to determine what is the space company and what is something else company. And that continues -- that thesis really continues to firm now that you look at data centers and all these other kind of opportunities that are growing in space. It's like it is -- the large successful companies are going to be blurry. Are they going to be a space company, are they telecommunications company are they data services company. And your point is really accurate until kind of Neutrons online, and we have multi-ton reusable launch capability. I think that's the time that we can really lean into deploying infrastructure. But in saying that, we're not sort of sitting back and sitting on our hands, thinking about what we could do. I think you can see in just about every avenue, we at least have knowledge or components or exposure. When I say revenue every kind of opportunity that potentially being thought about or used in space today. So it's still too early, Michael, but it's not on a day that doesn't go by where there's not an internal discussion about it. Michael Leshock: Great. And then maybe on the Stage 1 tank rupture, I don't know if I missed it, but how fast can you produce the second tank now with the new AFP machine? And then will that get even faster as you repeat this process over time? Peter Beck: God, look, it's ridiculous. The AFP machine is just is totally ridiculous. I can't remember the exact time line to lay out a dome. But we measure a dome manufacturer on the AFP in days. Actually, the longer pole in the tent dear for a tank manufacturer is not actually laying up and curing the components. It's the joining of the various domes and tanks and barrels together and all the tabs and details of baffles and all those kinds of things actually take the time, but a new tank, we're talking months here not for a complete tank. But from an actual manufacturing of the oral components, it's ridiculously fast. And also that to Adam's point, it's like now that it's all automated, really the only cost of the raw material that's going in there. Operator: Our next question comes from Jan Engelbrecht with Baird. Unknown Analyst: I'd like to get your -- just go back on PWSA and just get your sort of your high-level thoughts about that program. It does seem like your focus will shift more towards the tracking layer given that's really impressive when the Geost acquisition, just how you're thinking about the future of that for Rocket Lab. And then also just we've heard a lot of government reports being issued on the transport layer piece, like how difficult would it be for a commercial variant like Starshield with MILNET to sort of act as the transport area. It seems like there's a lot of things that would stand in the way of that because a commercial Starshield orbits at much lower altitudes than the transport of tracking layer. So there would be a lot of redesign work. But I'll stop there and just to get your overall thoughts there. Peter Beck: I mean we could dig out about this for days, Jen. So yes, it was intentional for us to move up the value chain, if you will. Not the transport layers elementary by no means is a entry, but it's an order of magnitude more difficult and more valuable to be able to doing the tracking stuff. And the tracking stuff is critical for things as things develop for Golden Dome and other kind of programs. So that's the high-value stuff where you want to be, that there's really only a few people in the nation that can successfully execute on. With respect to the transport layer going away, I mean we haven't heard or seen any evidence to that. Obviously, there's a lot of discussion about other providers. But the whole point of the SDA program is kind of all of the spacecraft are integrated very closely with each other, even though they're from other providers, there's a set of requirements that we all must meet for interoperability. So I think your point is a good one. It becomes more difficult to have interoperability when you have something that's quite different. But it will be interesting to see how it all shakes out. But I think for the tasks that SDA is trying to achieve, to me, at least, it makes more sense to have a dedicated transport layer and then the other layers, of course, tracking and then custody and so on, on top of it. Unknown Analyst: Very helpful. And then just a quick follow-up, if I may. I want to be respectful of the Mynaric deal, let that play out as it will, but on optical terminals, sort of at which point, and again, hoping like it works out well here, but at which point do you potentially look at not maybe an alternative supplier of OCTs or does Geost or the new acquisition, OSI have any capability that you could look towards developing these optical terminals over time? Peter Beck: Yes. So Geost has developed some optical terminals. And obviously, we have the optics now in-house as well. But there's just it's incredibly difficult to do. And as we look across the landscape of all of these optical terminal suppliers, of which there's really only 3, Mynaric just stood out as the absolute best with respect to technology. Now they're stuck at other things like running their business, but they make the best terminals. So to go out and develop your own terminal, yes, totally feasible. It's just a time thing. And it would just take longer to do that than it would to acquire. Operator: Our next question comes from Jeff Van Rhee with Craig-Hallum Capital Group. Unknown Shareholder: This is Daniel Hischman on for Jeff Van Rhee. On Mars Telecommunication Orbiter, the $700 million, $750 million there about wondering, it looks like earlier this week, NASA put out an RFP for Mars Telecommunications Network. So a little bit of a name change there. It sounds like that might be a multi-satellite architecture where previously, they were just looking at that one single orbiter. But what can you tell us just about how the competition and market lines positioning for that's been evolving? Peter Beck: Thanks, Jeff. Great question. Yes, so the MTO, as you pointed out, there's a slight change there to network. And as more infrastructure is built on Mars, then, of course, the network will need to be created. The MTO was always intended to be the first of water to come. Look, obviously, we think we're well positioned here. There's -- we have the experience. We have a lot of the capabilities and a lot of the demonstrated capabilities, but I think we'll put our best foot forward there. And of course, others think they can do the job, too. That's the great thing about competition and we'll see who wins. Unknown Analyst: And then Adam, one for you just on the gross margins, which obviously are growing tremendously, I think, what, 8 points up in 2025. And then the guide for Q1 '26 has those stepping back down a few hundred bps and you called out the Space System mix shift, is there anything persistent about that mix shift either in terms of the new business coming online potentially with the SDA transport layer that it's going to have some persistent margin pressure? Or should we be assuming in our models that we'll be getting right back to that more normal cadence of a few hundred bps of expansion as we get back into the later half of the year? Adam Spice: Well, I think gross margin is a -- there's a lot of things that are going on underneath the surface there. So as we continue to grow, there's a call -- a question earlier from Erik about the Electron launch cadence, so I mentioned a 20% launch growth in that. To the extent that we can do better than that, which I think there's opportunities to grow faster in 2026, then that's going to be a positive upward bias to margin. These larger, longer-term programs like SDA Tranche II and Tranche III, they typically come in at relatively at the low end of our gross margin mix, but they have really good operating margin kind of characteristics to them or contribution margin because of the fact that there isn't a tremendous amount of incremental R&D that's kind of outside of the programs. So I would say that in a quarter where you've got a lot more contribution from the big programs like Tranche II and Tranche III, that will put downward pressure, offset hopefully by growth from -- increase in the Electron contributions. The Components business has a quite interesting range of margins. You have some products in there that are more towards, say, 30 points in non-GAAP gross margin, other ones that are kind of north of 70 points of non-GAAP gross margin. So there's a widespread and mix is hard to predict that far out in the year. I mean I do think there will be a supportive trend towards gross margin, but I think it's difficult to really get a lot of granularity kind of much more than, I'd say, maybe 1 or 2 quarters out. But overall, I think as we continue to kind of grow that components mix of the business, more Electron in the mix, it's all going to be positive. Now I think the 1 caveat to that is, as we bring Neutron into production, it will have a margin expansion curve, probably not too dissimilar to what we've experienced on Electron which has been incredibly, it's been a great margin expansion story. But when you bring a new product like a rocket to market, you do things like block upgrades and then that all helps bring down cost, increase performance, so you can sell out more capacity on the rocket, which is helpful to ASP and so forth. But I think the most important thing in the Launch business is rate, right? So it's all about absorbing your fixed overhead or fixed costs related to that program or product. So I think that you're going to see what we'll start to do, our plan is to give you guys as much clarity as we can or break out between Electron, for example, and Neutron as that comes into production. So you can see that continued expansion and kind of that Electron business operating at model and then the trends as Neutron ramps as that goes towards target model as well. Hopefully, it's a bit quicker to get to target model, target margins on Neutron because it's a reasonable launch vehicle, but it will still take several years. So you'll start off with fairly kind of low to even maybe negative gross margin for some of the early flights. But then again, you'll see just like Electron to pop back up and become pretty positive pretty quickly and get to target model. So it's a long-winded answer. I do think, again, the trends are supportive of gross margin expansion, but it could be a little bit kind of volatile and hard to predict quarter-to-quarter when you get more than 1 or 2 quarters out. Operator: Our next question comes from Suji Desilva with Roth Capital. Suji Desilva: Just real quick on the Electron launches. Are there any ASP trends to not add on any tailwinds in the second half? Or are they fairly steady next couple of quarters? Adam Spice: I think that we're going to continue to see a march towards, I'd say as we increase more of the mix towards HASTE, that's helpful to the ASP. I think margins are relatively consistent because even though HASTEs are priced higher, there's a lot more mission assurance and other things go along with them. So absolute dollars are higher. The gross margin percentage is relatively consistent across HASTE and Electron. And then -- so I would say, overall, we've seen a very nice expansion in ASP over the last several years because of the increased mix from HASTE, and I don't see that changing. In fact, we continue to grow that subsegment of the business quite nicely. And again, I just given the things that Pete has talked about earlier regards the Golden Dome and the importance of the hypersonics test capabilities, that's a really strong area of growth for us going forward. So I think overall, a positive bias towards higher ASP per launch. just as we've seen over the last several years. Sujeeva De Silva: Okay. And a follow-up question maybe is for Pete. Pete, maybe you can reflect on versus a few years ago to get to the launch cadence, the customers' payload readiness was something that was variable. Has that changed? Has the nature of the customers changed where you can feel more comfortable that you can hit a 11- to 13-day cadence? Is it just a higher number of customers coming in that you can kind of load them off? Or just any color there would be helpful. Peter Beck: Yes. Thanks, Suji. I would just say that we've probably got better at looking like a duck where it's just on a glassy pond and it looks normal and there's legs flat out underneath it. And with a higher cadence gives us the ability to move customers around. So I would say that, that's just the reality of the Launch business, payloads are ready until they're not. I think we've just got way better at managing those customers having more rockets integrated, ready to go and managing that. So it's great to hear that it looks smooth, but behind the scenes, as everyone's flat out, mixing and matching and making sure that it all looks smooth on the outside. Operator: Our next question comes from Kristine Liwag with Morgan Stanley. Unknown Analyst: This is Justin Lang on for Kristine. Pete, can you just back on the Neutron time line, how do you not run into the Stage 1 tank issue? Would the program have met the earlier goal of getting to the pad here in 1Q? It sounded like from your earlier comments, there was a good volume of qualification work completed in the quarter. So, just trying to assess whether there are other factors that play in this new time line or are really isolated to the Stage 1 tank issue? Peter Beck: Yes. Thanks, Justin. It's kind of hard to say because when the tank let go, like the reverberation went through the test stand and the entire business. So at the moment that happened, everybody just stopped what they were doing and a lot of sense to get on to the tank to figure out what went wrong. So we moved a lot of resources around from lots of parts of the business. So I'd have to go back and have a look and see if we played everything forward with what that time line would have looked like. But sort of hard at this point because we had an anomaly. Adam Spice: I would add one more thing to that. I think if there's a silver lining to the tank anomaly is the fact that because of what happened, it just has given the other kind of subsystem teams, the opportunity to really kind of fully exercise all the demos, if you will, much more than they could have under the compressed time schedule we were working towards. So in some ways, the tank letting go will create certainly a lower risk test flight when that happens later this year. So I think yes, it's -- nobody is ever happy when you have an anomaly. It's something that wasn't planned and certainly wasn't anticipated, but I think it does help us bring down the overall kind of risk stance of the program as we move towards that first test launch. Unknown Analyst: Got it. That makes sense and helpful. And Adam, actually, just one for you back on the SDA award. Curious if you could speak a little bit more to the cash profile in particular and how that lines up against the revenue build curve that you sketched out earlier? Adam Spice: Yes. So actually kind of interesting with these types of programs because of the way that you do the accounting and the rev-rec so under ASC 606, you -- we model these things, though, you always have to be in a positive cash position. So you -- when you kind of work out your milestones and how you're flowing out dollars to your subs and so forth and spending money in the program internally, you always need to be in a position of positive cash in order to be able to recognize revenue along the way. And so this program is consistent with that. We've gotten some questions as to whether or not the partial government shutdown has impacted our customer, in this case, ability to pay as they know. In fact, we got a very large payment from that customer. So the money is still flowing and everything seems to be green lights right now. Operator: There are no further questions at this time. This does conclude the program, and you may now disconnect. Everyone, enjoy the rest of your day.
Operator: Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Latanya, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the conference over to your host today, Jorge Casado, Senior Vice President of Investor Relations. Thank you. You may proceed. Jorge Casado: Hello, everyone, and thank you for joining us. With us today are Gary Smalley, CEO and President; Ron Tutor, Executive Chairman; and Ryan Soroka, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during this call, we will be making forward-looking statements, which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could contribute to such differences in our Form 10-K, which we are filing today. The company assumes no obligation to update forward-looking statements, whether due to new information, future events or otherwise, other than as required by law. In addition, during today's call, management will be referring to certain non-GAAP financial measures. You can find information and a reconciliation of these non-GAAP financial measures in the earnings release that we issued today and in the Form 10-K being filed today, both of which can be found in the Investors section of our website. Thank you. And with that, I will turn the call over to Gary Smalley. Gary Smalley: Thanks, Jorge. Hello, everyone, and thank you for joining us. Tutor Perini had a tremendous year in 2025, perhaps our best year ever. Our results were highlighted by a record $5.5 billion of revenue, a return to strong profitability that produced $4.29 of adjusted earnings per share, a fourth consecutive year of record operating cash flow with $748 million of cash that shattered last year's record. This enormous cash generation was largely due to the contributions from new and ongoing projects and our record revenue is driven by double-digit backlog growth that we expect will fuel even higher revenue and earnings, increased profitability and continued strong cash flow in 2026 and beyond. A year ago on our earnings call, I shared some of my top priorities as Tutor Perini's then newly appointed CEO, which included a sustained focus on cash, the return to profitability and providing ambitious yet reasonable earnings goals, all with the goal of significantly increasing short- and long-term shareholder value. I'm pleased to report that we have delivered on each of these priorities, which together have helped us to achieve unprecedented share price performance and record returns for our shareholders. There's a lot of enthusiasm here at Tutor Perini and among investors and other business partners about the progress we have made and especially about what the future holds. So it continues to be an exciting time to be a Tutor Perini shareholder, and we want to thank those of you who are shareholders for your support. Our revenue growth accelerated progressively throughout each quarter of 2025, and our record revenue was primarily driven by contributions from various larger, higher-margin projects. As many of these projects continue to ramp up, we expect they will generate further double-digit revenue and earnings growth over the next 2 years. The Civil segment, our highest margin segment, generated more than $2.8 billion of our total revenue in 2025, the highest ever annual revenue for the segment. Consolidated operating income was up significantly in 2025, driven by our larger, higher-margin projects as well as significantly less negative impacts on earnings from legacy dispute resolutions as compared to 2024. In addition to generating record annual revenue, the Civil segment produced its highest ever annual operating income and operating margin in 2025. The Building segment's operating income for 2025 was its highest since 2011. And importantly, the Specialty Contractors segment returned to profitability in the second half of 2025 ahead of expectations. We see higher margins ahead for the Building and Specialty Contractors segments and sustainably strong margins for the Civil segment as many newer large projects continue to ramp up. We concluded 2025 with a robust backlog of $20.6 billion, up 10% year-over-year and had a solid book-to-burn ratio of 1.34x for the year. Our backlog growth was driven by $7.4 billion of new awards and contract adjustments that we booked during the year, the largest of which included the $1.87 billion Midtown bus terminal replacement Phase 1 project in New York, the $1.18 billion Manhattan Tunnel project, also in New York, the UCSF Benioff New Children's Hospital in California valued at approximately $1 billion, a $538 million health care project in California, $241 million of additional funding for the Apra Harbor Waterfront repairs project in Guam, a $182 million military defense project in Guam, the $155 million Diego Rivera Performing Art Center at City College of San Francisco, $131 million of additional funding for an electrical project in Texas and an electrical project at Cook Children's Medical Center in Texas valued at more than $100 million. Looking back a bit further, over the past 3 years, we have won 9 mega projects totaling approximately $16 billion, each valued at approximately $1 billion or more. Three of these were among our major awards of 2025 and all but one were awarded since the summer of 2024. These projects all have very healthy margins, more favorable contractual terms and longer durations than many other large projects we have booked in the past. They also provide us with excellent visibility into our future revenue and earnings over the next several years. We believe our backlog will remain strong in 2026 and beyond. We anticipate booking approximately $1 billion into backlog later this year for the finished trade scope of work for Phase 1 of the Midtown bus terminal project in New York City. And earlier this month, we received $204 million of funding for the Eagle Mountain Casino Phase 2 expansion project in California, a project that was originally awarded and announced last summer. In addition, our subsidiary, Rudolph and Sletten was recently selected for a large new multibillion-dollar health care project in California, which is currently in the preconstruction phase. We expect to book significant additional backlog as this and several other Building segment projects also currently in the preconstruction phase advance to the construction phase over the next several years. Furthermore, we continue to see numerous major bidding opportunities for our Civil and Building segments, many of which should include significant work for our electrical and mechanical business units within the Specialty Contractors segment. Our most significant bidding opportunities over the next 12 to 18 months include, a program believed to be valued at approximately $12 billion for the Sepulveda Transit Corridor, the $3.8 billion Southeast Gateway Line and the $700 million Metro Gold Line Foothill extension, all 3 of which are in California as well as the multibillion-dollar Penn Station transformation project in New York, the $3 billion Newark Liberty International Airport Terminal B project in New Jersey, very similar to the award-winning Terminal A project that we recently completed, the $1.4 billion I-535 Blatnik Bridge project in Minnesota and the $1 billion I-69 ORX Section 2 project connecting Indiana and Kentucky. There are also several large hospitality and gaming opportunities we are pursuing, mostly in the Southwest of the United States. In addition, we continue to have significant Indo-Pacific opportunities driven by the federal government's Pacific Deterrence initiative. Black Construction, our Guam-based subsidiary, has been tremendously successful winning various new projects throughout the region and continues to be well positioned to capture additional major projects over the coming years. We remain highly selective as to which opportunities we will pursue with a continued focus on bidding projects with favorable contractual terms, limited competition and higher margins. Due to the timing of our significant prospective opportunities, most of which start bidding around the middle of 2026 and continue through the first half of next year. And because of the significantly higher revenue we expect to recognize for work already in backlog, we anticipate a modest backlog reduction in the near term, followed by resumed backlog growth as we capture our share of major new projects. So expect a bit more lumpiness in our backlog as we move forward with growth still expected over the medium to longer term rather than the steady backlog increases we have seen virtually every quarter over the past 2 years. That said, growth remains a priority for us in this environment, and we believe we can scale up resources as necessary. While our civil business is expected to continue to drive most of our future growth and profitability as it typically does, a substantial proportion of our Building segment backlog is operating at significantly higher margins than what we have seen historically. For example, our 2 New York City Jail mega projects carry margins that are consistent with large complex building projects of a fixed price nature. In addition, today's large health care campus projects are more technically complex than more traditional commercial office building projects in the past and therefore, also command higher margins. Last November, our Board of Directors authorized our first ever quarterly cash dividend of $0.06 per share as well as a share repurchase program totaling $200 million. And today, the Board declared another $0.06 quarterly dividend, which we paid on March 26. Next, let's turn to our outlook and guidance. Tutor Perini continues to benefit from favorable macroeconomic tailwinds that are driving strong sustained market demand for construction services across all segments. We believe these tailwinds will persist due to the substantial amount of funding that is in place and because our country has for decades and until recently, inadequately funded and prioritized the types of substantial infrastructure investments being made today. Based on our assessment of the current market and business outlook, we anticipate double-digit revenue growth and strong earnings in 2026 with even higher earnings expected in 2027, by which time newer large projects should be in the construction phase. For 2026, we expect adjusted EPS in the range of $4.90 to $5.30. As we did last year, we have factored into our guidance a significant amount of contingency for unknown or unexpected outcomes and developments in 2026, including the possibility of a lower-than-anticipated success rate for future project pursuits, the potential for project delays, slower ramp-ups for our newer projects and any unexpected settlements and/or adverse legal decisions associated with the resolution of disputes. We also continue to expect strong operating cash generation in 2026 and beyond due to increased project execution activities and the anticipated resolution of remaining legacy disputes. We have continued to chisel away at our remaining legacy disputes and made excellent progress in 2025, resolving certain long-standing matters. We are already off to a strong start this year, having recently reached an agreement in principle regarding one of our larger disputes related to a long completed project. We believe that we will finalize a settlement agreement in the coming days, which will not have a material impact on our earnings. However, the settlement is expected to result in the collection of approximately $40 million for Tutor Perini in the near term. Because of our tremendous backlog and ample bidding opportunities, the outlook for Tutor Perini remains incredibly positive even beyond 2026. Thank you. And with that, I will now turn the call over to Ryan to discuss the details of our financial results. Ryan Soroka: Thanks, Gary. Good day, everyone. I will start by discussing our results for the year, after which I will review the fourth quarter and then provide some commentary on our balance sheet and our 2026 guidance assumptions. All comparative references will be against the same period of last year, unless otherwise stated. Operating cash flow was certainly one of the most noteworthy highlights of 2025. As Gary mentioned, we generated a new record operating cash flow of $748 million for the year, up 49% compared to the previous record of $504 million for 2024. This was our fourth straight year of record operating cash, and it was driven by strong collections on newer and ongoing projects, reflecting a significant increase in project execution and improved working capital management with less contribution from dispute resolutions in 2025 compared to previous years. We expect that we will continue to generate strong cash flow in 2026 and beyond, with most of our cash to be generated from organic operations, that is from new and existing projects and occasionally enhanced by dispute resolutions. Revenue for 2025 was $5.5 billion, up 28% with the robust growth primarily due to the increased project execution activities on certain large newer civil and building segment projects in the Northeast, Hawaii and Guam. This included, among others, the Newark Airtrain replacement, the Midtown Bus Terminal Phase 1 project, the Brooklyn and Manhattan jails, the Honolulu Rail project and the Apra Harbor Waterfront repairs project in Guam. Civil segment revenue was $2.8 billion, up a solid 34% due to increased project execution activities on certain large, higher-margin projects in the regions I just mentioned, all of which have substantial scope of work remaining. It was the Civil segment's highest annual revenue ever, reflective of the robust sustained demand that Gary noted, we are seeing for our services. Building segment revenue was $1.9 billion, up 15%, primarily due to increased activities on the Brooklyn and Manhattan Jail projects in New York and a large health care campus project in California, all of which also have substantial scope of work remaining. The Building segment delivered its highest annual revenue since 2020. Specialty Contractors segment revenue was $844 million, up a strong 43% with the growth primarily driven by increased activities on various electrical and mechanical components of some of the large civil and building projects I mentioned. The Specialty segment revenue really started to show strong growth in the second half of 2025, and we expect this growth to continue this year and next year as these and other newer projects advance. Our operating income was driven by higher margin contributions from various Civil and Building segment projects as well as the absence of certain net unfavorable adjustments that impacted our results last year. Operating income was up significantly despite a $110 million increase in share-based compensation expense tied to the near tripling of our stock price in 2025, which affected the fair value of liability classified awards. Our share-based compensation expense is expected to decrease in 2026 and decline much more significantly in 2027 as some of these liability classified awards have now vested and most of the remaining awards will vest by the end of 2026. We are no longer issuing liability classified awards, which should meaningfully reduce earnings volatility. Civil segment operating income for 2025 nearly tripled to $391 million compared to $138 million in 2024, with a segment operating margin of 13.7% for the year within the range of 12% to 15% that we had expected. It was the segment's highest ever operating income and operating margin of any year. The strong increase was primarily due to contributions related to the segment's increased project activities that I mentioned and the absence of certain prior year net unfavorable adjustments. Earlier in 2025, we recorded favorable adjustments that resulted from the settlement of certain change orders and changes in estimates due to improved performance and a favorable project closeout on a domestic mass transit project. These were mostly offset by an unfavorable adjustment in the fourth quarter, which was mostly noncash and associated with the settlement of a legacy dispute on a tunneling project in Canada. Building segment operating income was $58 million, a substantial turnaround compared to the operating loss of $24 million in 2024. The segment's margin for 2025 was 3.1% compared to a negative 1.5% last year. The significant improvement was driven by contributions related to the increased higher-margin project activities I mentioned and the absence of certain prior year unfavorable adjustments. We anticipate Building segment margins in the range of 3% to 6%, fueled by contributions from certain higher-margin projects. The Specialty Contractors segment returned to profitability in the second half of 2025, ahead of expectations, but posted a slight operating loss of $7 million for 2025 compared to a loss of $103 million in 2024. The significant improvement was primarily due to contributions related to the increased activities I mentioned on the electrical and mechanical components of certain Civil and Building segment projects. Many of these projects are in the early stages and are expected to ramp up considerably over the next several years. The improvement was also driven by the absence of certain prior year unfavorable adjustments on several completed projects. Corporate G&A expense was $211 million in 2025 compared to $110 million in 2024, with the increase primarily due to the substantially higher share-based compensation expense that we had in 2025, as discussed earlier. Income tax expense was $61 million in 2025 with an effective tax rate of 30% for the year compared to a tax benefit of $51 million with an effective tax rate of 29.3% in 2024. Net income attributable to Tutor Perini for 2025 was $80 million or $1.51 of GAAP earnings per share compared to a net loss attributable to Tutor Perini of $164 million or a loss of $3.13 per share in 2024. Excluding the impact of share-based compensation expense, net of the associated tax benefit, adjusted net income attributable to Tutor Perini for 2025 was $229 million or $4.29 of adjusted earnings per share compared to an adjusted net loss attributable to Tutor Perini of $124 million or an adjusted loss of $2.37 per share in 2024. Now let's turn to the fourth quarter results. We had a solid turnaround performance across all segments in the fourth quarter in terms of revenue, operating income and margins. As Gary mentioned, our revenue growth accelerated sequentially throughout 2025 with particularly strong growth in the second half of the year that is continuing into 2026. Revenue was $1.5 billion, up 41% compared to $1.1 billion for the fourth quarter of 2024. Civil segment revenue for the quarter was $732 million, up 32%. Building segment revenue was $512 million, up 45% and Specialty Contractors segment revenue was $263 million, up 63%. The strong growth was due to the increased project activity, as I mentioned earlier, on various projects that are ramping up and have significant scope of work remaining. Civil segment operating income was $72 million for the fourth quarter of 2025, up very substantially compared to $4 million of operating income for the fourth quarter of 2024. The significantly lower-than-normal operating income and margin in the 2024 period was due primarily to a temporary earnings reduction of $32 million that resulted from the successful negotiation of significant lower margin and lower risk change orders on a West Coast project. The Civil segment's operating income and margin for the fourth quarter of 2025 would have been substantially higher had it not been for the unfavorable adjustment I mentioned earlier. Building segment operating income was $11 million for the fourth quarter of 2025 compared to a loss from construction operations of $41 million for the fourth quarter of 2024. The improvement was driven by contributions from certain higher-margin projects as well as the absence of prior year unfavorable adjustment on a government building project in Florida. Specialty Contractors segment operating income was $11 million for the quarter, with a margin of 4.4% compared to a loss of $20 million in the fourth quarter of 2024. The segment's performance has continued to improve significantly as their involvement in our large civil and building projects grow. We expect the segment to eventually and consistently generate margins in the 5% to 8% range. For the fourth quarter of 2025, net income attributable to Tutor Perini was $29 million or $0.54 of GAAP EPS compared to a net loss attributable to Tutor Perini of $79 million or a GAAP loss of $1.51 per share in last year's fourth quarter. Adjusted net income attributable to Tutor Perini for the fourth quarter of 2025 was $58 million or $1.07 of adjusted earnings per share compared to an adjusted net loss attributable to Tutor Perini of $78 million or an adjusted loss of $1.49 per share in the fourth quarter of 2024. And now I'll address the balance sheet. In 2025, we paid down our total debt by 24% and reduced our CIE by 13%. The CIE reduction was mostly driven by billings and collections, including those associated with the resolution of various previously disputed matters. Our CIE is expected to continue to decrease over time as we resolve the remaining legacy disputes. Due to our record cash generation, we ended the year in a healthy net cash position with cash and cash equivalents exceeding total debt by $327 million as compared to our $79 million net debt position at the end of 2024. Cash available for general corporate purposes was $271 million at the end of 2025. Overall, our balance sheet is healthier than it's ever been, and our solid net cash position provides us with excellent capital allocation flexibility. Lastly, I'll provide some assumptions regarding our guidance for modeling purposes. G&A expense for 2026 is expected to be between $400 million and $410 million. Depreciation and amortization expense is anticipated to be approximately $50 million in 2026, with depreciation at $48 million and amortization at $2 million. Interest expense for 2026 is expected to be between $40 million and $50 million, of which about $3 million will be noncash. Our effective income tax rate for 2026 is expected to be approximately 27% to 30%. We anticipate noncontrolling interest to be between $75 million and $85 million. We expect approximately 54 million weighted average diluted shares outstanding for 2026. And capital expenditures are anticipated to be approximately $125 million to $135 million, with the vast majority of the CapEx in 2026, approximately $75 million to $85 million being owner-funded for large equipment items on certain large new projects. Thank you. And with that, I will turn the call back over to Gary. Gary Smalley: Thank you, Ryan. In summary, we had our best year ever in 2025, marked by record operating cash flow, record revenue that grew 28% year-over-year, strong operating income and profitability with record annual results for our high-margin Civil segment as well as robust year-end backlog of $20.6 billion that was up 10% year-over-year. With this tremendous backlog, we are confident in our ability to produce double-digit revenue and earnings growth and continued strong annual cash flow in 2026 as our newer projects progress through design and into construction. The outlook for Tutor Perini remains very bright over the next several years as we continue to benefit from favorable macroeconomic tailwinds and strong public and private customer funding that is fueling sustained market demand and numerous major bidding opportunities. As I mentioned earlier, it's an exciting time to be with Tutor Perini, whether as an employee, an investor or other business partner. Thank you. And with that, I will turn the call over to the operator for your questions. Operator: [Operator Instructions] The first question comes from Steven Fisher with UBS. Steven Fisher: Sorry for the background noise here. Congratulations on a very strong 2025. Just a couple of questions to start off on the guidance. Wondering if you could just talk about the coverage you have in your backlog on the outlook. I would think it would be pretty strong in light of all the bookings that you have. But just curious if there's any particular things you need to see still happen and get booked to hit the numbers. And then just from a cadence perspective, first quarter tends to be fairly light relative to the full year due to seasonality, and we've obviously had some pretty tough weather here in parts of the country in the first quarter. So I'm just curious if there are any expectations you want to set there? Gary Smalley: Yes, Steve, thanks for the congrats. This is Gary. Yes, first of all, we've got great visibility into the to the results for 2026 and really beyond. There's not much that has to happen for us to hit the numbers that we've represented. There are going to be some additional awards that could enhance things, and there's some built-in awards that we're expecting that technically, we'd need to hit the numbers, but it's going to happen. It's not like we're expecting some large projects to come our way in order to be able to hit 2026. As far as the seasonality, you're right, Q1 is usually light for us. It's typically the way it goes. It will be the same this year. What's happened primarily in New York with the large snowstorm. That hasn't really -- it's not going to have much of an impact. We've got contingency for that. We've also budgeted expecting Q1 to be light. And then I might as well throw in Manhattan Tunnel. We're back working after about a 2-week suspension. And that's all accounted for in the guidance as well, accounted for by -- with contingency. So we feel good. Steven Fisher: That's great. And then just from a backlog perspective, it sounds like you expect some, I think, lumpiness was the word that you used. But you did cite some potential larger awards in the second half of the year. Just curious, should we be expecting some net burn this year on the backlog? Or do you think there's still enough opportunity to kind of keep it steady at the levels kind of where we are now? And then maybe the bigger picture question is just on -- maybe on the civil side, is there any kind of view you have on kind of where we are in the cycle of bigger projects? I know this is an area where you've had relatively limited competition recently. I'm just kind of curious where you think we are in sort of the bigger picture cycle there. Gary Smalley: Sure, Steve. Look, taking the last part first, we've got good visibility again on a lot of these larger projects for civil. We think that they're on pace to what we are expecting and making good progress on things. And we don't disclose every large project that's out there, just the biggest ones and the ones that are most likely to happen in the near term. We've got -- the first part of your question again, remind me... Steven Fisher: Yes, do you think it will be net burn in the backlog this year? Gary Smalley: Look, we think at the end of the year, we should be -- our plan shows us a little north of where we are currently. I want to introduce the lumpiness concept because we've kind of spoiled everyone, I think, to some extent because over the last 2 years, almost every quarter, we've grown backlog. And it didn't happen this particular quarter with a modest adjustment on a percentage basis. And I just want everyone to know that it could be lumpier than it has been over the last couple of years where every quarter, we seem like we're hitting a new record. But the pipeline is rich. There's a lot of really strong work out there. Look, we won 9 out of 11 of the large awards over the last 1.5 years or so. I don't know if we'll continue that win rate, but we should have a good win rate because we target those projects that we think suit us best and where we think we have a good chance of winning. So I think it all adds up to backlog growth. And whether it's by the end of the year or into next year, it's coming, I can say that. But it's hard to predict exactly when those projects are going to hit backlog. But I wanted just to emphasize that it could be a little bit lumpier than it has been, but it's -- we're going to see growth. And I guess the last is we're going to be generating revenue at an all-time record. 2025 was a record '26 '27 as we go forward, even going to be higher. So it just means that to sustain backlog, you have to have significant awards. So again, that's the reason for the words of caution. Operator: The next question comes from Alex Rygiel with Texas Capital. Alexander Rygiel: Gary and Ryan, very nice quarter. Congratulations. A couple of questions. Gary, can you go a little bit deeper on sort of the improvement in contract terms on new awards and talk about what that means longer term for Tutor Perini? Gary Smalley: Yes, we'll do. Look, in the past, when the competition was heavier for these projects that we pursued, the larger projects, we wanted to change contractual terms, but we were unable to because there's always somebody else that would have accepted the terms and taken the contract. Now what we've been able to do with the limited competition is to work with our customers, our owners in order to drive better payment terms, better terms with respect to no damages for delay, especially in New York, just damages, provisions also on differing site conditions, things that in the past could and sometimes did impact us in a negative way and things that like no damage for delay is something that just the way the statute is written, it's tough to work around in court if you happen to go to court. So now eliminating that provision of the contract is certainly beneficial. So I think what you'll see is less disputes as we go forward. And then -- and part of that is just because it's really a clarification of terms. But also I think that we will less likely end up in court because the pendulum is more -- swung more toward our side, more in the middle so that I think you'll get negotiations and meaningful negotiations before you go to court, preventing you from having to go to court. Alexander Rygiel: And then secondly, I believe as it relates to Rudolph and Sletten, just from a clarity standpoint, did you say it was looking at a multibillion-dollar health care facility. So maybe expand upon that. And then any commentary about opportunities over the next handful of years as it relates to high-tech manufacturing and reshoring? Gary Smalley: Yes. So first, on the multibillion-dollar project, it's a confidential project, so we can't say a whole lot about it. It's -- the multibillion-dollar side, it's closer to $2 billion than anything above that. But we really can't offer much on that other than we're in preconstruction. And usually, when something is in preconstruction, our history shows us a 90% plus chance of heading to construction down the road. So that's what we expect that when we think that will end up as a construction contract for us. the timing of which some of that will come in this year, but probably the majority of it is going to be in 2027. And then could you elaborate on the -- your second question? Alexander Rygiel: And then are you seeing developing opportunities from large manufacturing facilities, fab plants and whatnot and how that might play out over the next handful of years? Gary Smalley: No, not really. Of course, that doesn't hit us on the civil side. But on the building side, the focus right now is on health care, some educational facilities and some multipurpose facilities, hotels, casinos, things like that. But that's really where our focus is. Operator: The next question comes from Adam Thalhimer with Thompson, Davis. Adam Thalhimer: Congrats on the strong year. I wanted to start -- can you give more color on the Canadian project? And how much was the negative impact to Civil in Q4? Gary Smalley: Yes. In Q4, I think it was $42 million, as I recall. And that's a consolidated joint venture. That's the joint venture portion of it. And there was, call it, a dozen, $12 million or $13 million earlier in the year. That's behind us. It's roughly offset by a Midwest project that really of the same magnitude, maybe a little bit more that we recognized over probably the last 3 quarters. of the year. So anyway, it's one of our larger disputed items. We just felt that it was better to resolve that one than to proceed down the path of litigation. Adam Thalhimer: Yes, absolutely. And then how many legacy jobs are left to settle? Gary Smalley: Yes. Let's just say about a dozen. It's -- and there are some yes, we've got around a dozen. And those are of some significance. There are some cats and dogs out there that are smaller amounts that are less meaningful. And as Ryan was just noting here, he's right, we started with about 50. So we've gone from about 4 dozen to a dozen, and we're making progress on some of the others. As you heard, one was just cleared within the last 1.5 weeks. So we'll continue that focus. We're optimistic that some turn favorably for us, right? Some are write-ups, not write-downs. And we hope that's the case with what we have left, but time will tell. But in the meantime, we've tried to put away -- put aside contingency, not just for that, but a lot of other unknowns. So we think that we have enough contingency to cover any unexpected delays, anything that is just not forecasted, including the potential for any write-downs due to litigation outcomes. Adam Thalhimer: Okay. So it really was a great quarter if you strip that out. And then... Gary Smalley: Yes, it was. Adam Thalhimer: And then I wanted to ask, so you brought up -- you made a comment about 2027 construction starts. And I don't expect you to give '27 guidance, but just hoping you could expand on that and what you are trying to say about the 2027 visibility. Gary Smalley: Yes. And Adam, you just said it was a great quarter. given that, well, look, even with that write-down, it was a great quarter. I think that shows the strength of what we're building here with this new work that we have. And that new work carries us past '26 into '27. And you're right, we don't guide multiyear, but '27 is going to be better than '26. I think that's clear. We've said last year around this time, we're saying '25 is going to be good, '26 is going to be better and '27 is going to be better yet, and there's nothing that's changed from that guidance. Operator: The next question comes from Liam Burke with B. Riley. Liam Burke: Ryan, you are bidding on larger and larger, more complex projects. Is there any risk of being resource constrained? And how would that affect your bidding process? Ryan Soroka: Yes. I think at this point, we certainly haven't seen any of the constraints on resources. It's probably important to point out that the majority of our labor is sourced from the union halls. And so we've got agreements in place, whether project-specific or with the union itself for that labor to be supplied. So from our perspective, the day-to-day craft workers, we don't see any constraints, and we don't really see that going forward. Gary Smalley: And from a management standpoint, I think we've talked in the past about that's really where our focus has been because the unions have always done a great job providing us skilled labor when we needed it. But as we've grown, we've been very aggressive and in fact, in a constant recruiting mode to bring in the project managers, project executives that are needed to manage this work. And we feel that we're well equipped there. We're always looking. Anyone out there listening, you want to apply, we're always looking. But at the same time, we think that we're already staffed at an appropriate level for future growth. Liam Burke: Great. And you mentioned in your earlier comments that the specialty margins could be in the, we'll call it, mid-single-digit range. It's a business that's traditionally been marginally profitable at best. Is it the same game plan as building and civil? Or is there something different about the business where you're going to have a pretty meaningful change in profitability? Gary Smalley: Yes. Look, I think what's happened is we have been able to weed out some of the poor contracts that we've had with the poor contractual terms and lower margin work. Now we have higher-margin work, better terms. A lot of the litigation, a lot of the disputes are behind us there, most of them. And so look, if you look at the last 2 quarters of 2025, I think what was a 2.7% operating segment margin and then 4.4% operating margin for the segment in just those last 2 quarters. That's the trend we're on right now. That's what the current work is producing. And so our 1% to 3%, it's really -- it's got contingency in there. We know that the work that we have in hand is going to be in that mid-single-digit range. But then we want to make sure that we hedge it a little bit with any unexpected outcomes. But we feel real good as we clear '26 that we're going to see that 5% to 8% range that we've talked about for some time. Operator: The next question comes from Michael Dudas with Vertical Research. Michael Dudas: Gary, just so as we enter into 2026, you talked about the 9 mega projects, $16 billion in backlog. So as we move forward through 2026 and '27, how do we assume that the project -- the revenue conversion you'll be seeing over the next couple of years will be coming from the enhanced T&C, better backlog or better margin backlog that has been booked and certainly on the targets that you have out into the market, I'm assuming there are similar targets relative to the margin expectations you have currently? Or is there some range or some opportunities there elsewhere going forward? Gary Smalley: Look, I think that margin will only build over time, and that's probably with all segments as these 9 -- the big 9, as we'll say, continue to move into full production. So I think that will certainly have a positive impact on earnings, but also on revenue generation. And as those projects continue to mature and continue to progress, we'll see, I think, some margin enhancement. And look, the new work that we're looking for, we -- as you get more work, and this has been our strategy, we have been, I will say, I don't know if I guess it's more aggressive on margin, but expecting larger margin. You start to fill your coffers. And every time we get another project, we raise margins next time, and it depends a little bit on competition. So I can't say that there's a limit on that, or there's no limit on that and that we'll continue to grow margins forever. But right now, that's the world we're living in where -- and that's what our focus is. Michael Dudas: And the clients are getting more -- maybe they don't like it, but getting more comfortable with that environment given the tightness in the market? Gary Smalley: Yes. I guess that's one way to say it, Mike. I'd say another way is they like what we do. They like us. They like the performance that we provide. They like the quality. They like the timeliness of the work. And then you combine that where the competition, in some cases, is not bidding or in some cases, we're clearly the best product and whether that's on the quality of the work or quality and price. And so I think those factors, we're bidding on work. It's not that they're just handing it away -- hand it out and they're giving it to us and they don't want to. I think we've got a good future here. We're -- the past is driving the future in the past is just solid execution. And yes, we're raising margins, but that's the market that we're in. And we'd be foolish not to with -- as we survey the competition and look at what's in front of us. Michael Dudas: Well said, Gary. Ryan, with the tremendous job you executed here with the balance sheet over the last several years, how is that going to help with business and opportunities going forward in the size of projects and maybe being more sole source versus potential partners? And how do you look at a more -- the optimal size of the balance sheet or what kind of recapitalization can we see given where you are with the debt, the maturities and the cash we're going to have and even further that you're going to be generating in the next few years? Ryan Soroka: Yes. All good questions. I'll try to answer them in order. Just starting with the balance sheet and looking at the debt that we have out there today, 11.8% is a tough coupon to swallow, obviously, and certainly something that we're looking to refinance probably midyear or so is the expectation for some significant interest savings. We're hopeful for a 500 basis point reduction. As far as the level of debt, we're comfortable at that 400-ish mark, in particular, if we extend that out longer term. So we have that liquidity certainty and also that longer-term liquidity view. As it relates to obviously, the operating cash and free cash that we've kicked off over the past 3 years at a record pace. Obviously, that having that cash on hand also gives a better long-term liquidity view and for other stakeholders like the sureties, giving them confidence to -- as we look at some of these future opportunities to bid that sole source as opposed to having to get a JV partner. In 2026 alone, we're talking about, what do we say, $75 million to $85 million of noncontrolling interest. We'd sure like to keep that in-house. Gary Smalley: And I think that's a great answer. Let me just throw something else out there that we haven't really talked a whole lot about. And earlier in the call, we talked about better contractual terms. I mentioned less litigation. Look, there's -- we spent a lot of money over the last several years on litigation expense. And as we have progressed the last couple of years, we're seeing that amount come down. We expect to see that come down even further. Legal expenses are something that, of course, are necessary in business and certainly in this industry. But I think you'll see less and less legal expenses from us, and that's only going to drive profit improvement too. Michael Dudas: That's not a terrible thing, isn't -- just to clarify, Ryan, your interest expense guidance doesn't assume any refinancing recapitalization, correct? Ryan Soroka: So we did broaden the range. And so... Michael Dudas: Okay. Ryan Soroka: Sorry... Gary Smalley: Half the year... Ryan Soroka: Yes, yes. So I mean what we've assumed a refinancing, call it, roughly midyear. Michael Dudas: Just wanted to clarify that. Operator: Thank you. At this time, I would like to turn the floor back to Gary Smalley for closing remarks. Gary Smalley: Thank you all again for your interest and participation today. We look forward to continuing to deliver strong results as we go forward. We'll talk to you again next quarter. Thank you. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Summit Hotel Properties, Inc. Fourth Quarter 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Milota. Please go ahead, sir. Kevin Milota: Thank you, operator, and good morning. I'm joined today by Summit Hotel Properties' President and Chief Executive Officer, Jon Stanner; and Executive Vice President and Chief Financial Officer, Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, February 26, 2026, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at www.shpreit.com. Please welcome Summit Hotel Properties President and Chief Executive Officer, Jon Stanner. Jonathan Stanner: Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our fourth quarter and full year 2025 earnings conference call. As I reflect on last year, I'm pleased with how we executed in what was a complex and challenging operating environment. Coming out of the first quarter, we understood the year would be defined by uncertainty surrounding macroeconomic conditions, demand visibility and certain policy-related headwinds and I'm proud of how our teams responded. Throughout the year, we remained disciplined and focused on the aspects of the business we can control, growing market share, managing expenses, strengthening the balance sheet, allocating capital prudently and investing in our portfolio to best position Summit for long-term shareholder value creation. On today's call, we will provide details on our fourth quarter and full year 2025 results, offer our perspective on the current lodging environment and our outlook for 2026, and highlight our recent capital recycling and balance sheet activities. In the fourth quarter, we experienced an encouraging positive inflection in demand compared to the second and third quarter of 2025, as RevPAR trends improved sequentially by over 200 basis points, resulting in a fourth quarter same-store RevPAR decline of 1.6%. Demand patterns generally stabilized throughout the quarter despite the incremental pressure created by the October government shutdown. In particular, midweek results reflect stable underlying group demand and growing corporate travel, which allowed us to increase rates in each of these segments for both the fourth quarter and full year. Government and international inbound demand, which combined represent approximately 10% to 15% of total room nights across our portfolio, continued to create meaningful headwinds in the quarter, declining approximately 20% on a blended basis. Excluding these 2 segments, our fourth quarter RevPAR grew by approximately 60 basis points year-over-year, reflecting the overall relative strength of other segments. These are encouraging trends as we move into 2026, particularly with easier government demand comparisons on the horizon. Our teams continue to do a terrific job growing market share with our fourth quarter RevPAR index improving by 220 basis points to an index of 117, reflecting the high-quality nature and locational strength of our portfolio, complemented by our expertise in revenue management. We are approaching and in many markets surpassing all-time post-pandemic market share highs across our portfolio. For the full year, same-store RevPAR declined 1.8%, driven predominantly by lower average daily rates as demand shifted towards lower-rated segments starting late in the first quarter when the significant reduction in government demand first began to materialize. While weakness in government demand and international inbound travel has been well documented. It is important to emphasize that demand patterns in other segments have been stable. And we are expecting year-over-year results to improve as comparisons ease starting in the second quarter. From a capital allocation perspective, we continue to execute on our disciplined capital recycling strategy during the fourth quarter, closing on the sale of 2 noncore hotels, the 107-room Courtyard Amarillo Downtown, which was owned in our joint venture with GIC and the wholly owned 123-room Courtyard Kansas City Country Club Plaza. These dispositions generated aggregate gross proceeds of $39 million, reflecting a blended yield of 4.3% based on trailing 12-month net operating income after consideration of approximately $10 million of foregone near-term capital expenditures. In addition, last week, we closed on the sale of the 122-room Hilton Garden Inn in Longview, Texas, another noncore asset owned in our GIC joint venture. The $12.3 million sale price represented a 6.7% capitalization rate based on the estimated trailing 12-month net operating income after consideration of approximately $2.6 million of foregone near-term capital expenditures. These 3 assets had a blended RevPAR of $89, a nearly 30% discount to the current pro forma portfolio. Since 2023, we have sold 13 noncore hotels, generating approximately $200 million of gross proceeds and eliminating nearly $60 million of anticipated capital expenditures at an approximate 4.6% net operating income capitalization rate. These sales reflect our disciplined approach to monetizing lower growth, capital-intensive assets and redeploying proceeds to enhance liquidity, reduce leverage, and support higher return uses across the portfolio. As we turn to 2026, we believe the fundamental setup for our industry is improving and several company-specific tailwinds position Summit for a positive year. We expect demand trends broadly to continue to improve and year-over-year comparisons to ease as we move through the year. Historically low levels of new supply support incremental demand growth, translating into both occupancy and rate gains in 2026 and for the foreseeable future. While we remain mindful of near-term volatility, we believe these trends create a more constructive backdrop for top line growth in 2026. With that context, we're introducing our initial outlook for the year. Trey will walk through the details of our ranges later in the call. But broadly speaking, our guidance reflects modest top line growth supported by improving fundamentals, disciplined expense management and the cumulative benefits of our capital reinvestment and recycling efforts, which have enhanced our portfolio and strengthened the balance sheet. The company is poised to benefit from several special events in 2026, notably the FIFA World Cup. We have exposure to 6 World Cup host markets, which together account for nearly 60% of the matches played domestically, providing a unique demand tailwind in June and July. In addition, convention and special events calendars are favorable in several of our key markets. And we expect continued normalization of government-related demand and international inbound travel as year-over-year comparisons begin to ease in the second quarter. We expect full year 2026 RevPAR to range from flat to up 3%, driven predominantly by gains in average daily rates. While our outlook for the full year is constructive, we expect the first quarter to be the most difficult of the year with RevPAR trending in line with our fourth quarter 2025 results. January RevPAR declined approximately 3% despite a strong start to the month as Winter Storm Fern created significant disruption across our portfolio. We also faced difficult comparisons in the quarter as our first quarter last year benefited from incremental demand created by natural disasters in Florida and California; and Super Bowl 59 being hosted in New Orleans, where we have 6 hotels. February represents our most difficult comparison of the quarter as portfolio RevPAR increased over 7% last year. Finally, the majority of our first quarter of last year was insulated from the significant reduction in government demand we experienced for the remainder of the year. Despite these challenges, our outlook is trending positive as March pace is down less than 1% year-over-year and April pace is up year-over-year, reflecting the ongoing gradual improvement in demand patterns we see across the portfolio. It is important to highlight these pace improvements come at a time of the year prior to lapping the sharp pullback in government demand we experienced last year over the same period, making these trends even more encouraging. In summary, we believe our industry is beginning 2026 with modest expectations, but with meaningful upside driven by the continued improvement in several of the demand patterns we are already experiencing in our business. Longer term, we are poised to benefit from an extended period of low supply growth and the ongoing societal prioritization of travel and experiences. Summit is uniquely positioned to benefit from these conditions given our high-quality portfolio, efficient cost structure, and strong balance sheet. Our priorities in 2026 remain clear: a continued relentless focus on optimizing hotel profitability, prudently allocating capital and strengthening our balance sheet, all of which will drive long-term shareholder value. With that, I will turn the call over to Trey, to walk through the financial results and balance sheet in more detail. William H. Conkling: Thanks, Jon, and good morning, everyone. Fourth quarter 2025 RevPAR demonstrated sequential improvement of 240 basis points from the third quarter as operating fundamentals outside of government and inbound international demand remained resilient in the face of broad macroeconomic uncertainty. Fourth quarter pro forma RevPAR declined 1.8%, driven by occupancy and average daily rate declining by 0.7% and 1.1%, respectively. This outperformed our RevPAR expectations for the quarter of down 2% to 2.5%, as we experienced stability in group and strengthening business transient fundamentals as well as a mix shift to higher-rated demand segments. Several core markets demonstrated strength in the fourth quarter, including San Francisco, Orlando, South Florida and Nashville. San Francisco is benefiting from improved perception as the market experienced strength from citywide conventions, event-driven leisure demand and improving business travel, which drove outsized RevPAR growth of over 40% year-over-year during the quarter. Two citywide events, including Dreamforce, which shifted into the fourth quarter and Microsoft Ignite were key contributors to our hotel performance in Fisherman's Wharf and Oyster Point. In addition, continued strength in corporate demand, particularly in the Silicon Valley submarket, resulted in another strong quarter for our Hilton Garden Inn Milpitas. Looking ahead, we expect continued growth for San Francisco in 2026, driven by citywide events, increasing business transient demand and broader Bay Area activity surrounding Super Bowl 60 and the World Cup. In Orlando, all 3 of the company's assets are benefiting from the recently opened Epic Universe Park, driving growth in both the leisure and group segments. RevPAR for our Orlando properties increased 9% in the fourth quarter as strong demand enabled our hotels to shift away from advanced purchase rates and back toward higher-rated retail channels, driving meaningful ADR improvement. In South Florida, where RevPAR grew 4% during the fourth quarter, our hotels are experiencing sustained momentum across leisure, corporate and special event demand, supported by a strong local economy and a continued wave of new business and investment activity in the region. Miami continues to benefit as a destination for corporate relocations, financial services and international business, translating into solid corporate transient and group demand. In particular, our newly renovated Oceanside Fort Lauderdale Beach is delivering very strong results with fourth quarter RevPAR, total revenue and gross operating profit increasing 9%, 39% and 53%, respectively, as the renovated rooms product and multiple Oceanfront food and beverage outlets are resonating with guests. We expect another strong year in 2026 from our South Florida properties, which are off to a great start in the first quarter, supported by the College Football National Championship held in January and incremental leisure demand, partially driven by the harsh winter conditions in the Northeast and Midwest. Looking ahead, our portfolio is well positioned to capitalize on World Cup-related activity in South Florida, alongside the continued ramp-up and stabilization at the Oceanside Fort Lauderdale Beach. In Nashville, fourth quarter performance was primarily driven by strong sports-related and group demand, complemented by our focused transient revenue strategies aimed at capturing high-value weekend leisure travelers. This deliberate mix shift allowed us to optimize rate on peak nights, drive incremental occupancy around key events and further strengthen our properties' position within a resilient and experience-driven market. Non-rooms revenue increased 9% and 5% for the fourth quarter and full year 2025, respectively, in our pro forma portfolio. Food and beverage revenue continues to benefit from the re-concepted restaurant and bar offerings at the aforementioned Oceanside Fort Lauderdale Beach. Our reprogrammed breakfast offering at certain hotels and other ongoing initiatives aimed at improving breakfast and beverage sales. Other non-rooms revenue growth was driven by strong increases in marketplace sales, parking income and resort and amenity fees. We are encouraged by the growth of these ancillary revenue streams and expect this trend to continue in 2026. Fourth quarter adjusted EBITDA was $39.7 million and adjusted FFO was $22.3 million or $0.18 per share as the company benefited from lower interest expense and a reduced share count resulting from our accretive share repurchases completed in the second quarter. For the full year 2025, same-store RevPAR declined 1.8%. Adjusted EBITDA was $174.8 million and adjusted FFO was $0.85 per share. The company's intense focus on expense management resulted in pro forma operating expenses increasing approximately 2% year-over-year. Throughout the year, our asset managers and third-party operators executed effectively on wage management initiatives, reduced reliance on contract labor and improved employee retention. For the year, contract labor declined nearly 9%. And contract labor currently represents less than 10% of total labor costs, which is approaching pre-pandemic levels. We also continue to experience improvement in employee retention, which is driving higher productivity, lower training costs and enhanced guest satisfaction. Turnover rates at year-end 2025 have declined approximately 24% from year-end 2024, highlighting the ongoing stabilization of the labor market. From a capital expenditure perspective, for the full year 2025, we invested approximately $75 million across our portfolio on a consolidated basis and $63 million on a pro rata basis. Ongoing and completed renovations during 2025 include the Oceanside Fort Lauderdale Beach, Courtyard Charlotte, Residence Inn Madrid, Scottsdale Oldtown Hyatt Place and the Atlanta Midtown Residence Inn. Over the past 3 years, we have invested more than $250 million in capital expenditures on a consolidated basis, reflecting our continued commitment to maintaining a best-in-class portfolio. Our 2026 pro rata capital expenditure guidance is $55 million to $65 million, which is consistent with our spend in 2025 and a level we believe is sustainable going forward. This represents a significant reduction relative to the elevated capital spend from 2022 through 2024 as the company addressed deferred capital investment related to the pandemic. Turning to the balance sheet. During 2025, we made significant progress in extending maturities, reducing borrowing costs and enhancing corporate liquidity. Subsequent to year-end, we fully drew our $275 million delayed draw term loan to retire the $288 million, 1.5% convertible senior notes that matured in mid-February. Pro forma for this refinancing, we have no debt maturities until 2028. Adjusting for swap activity in the third and fourth quarters as well as the retirement of the fixed rate convertible notes and the draw on the floating rate delayed draw term loan, approximately 50% of our pro rata share of debt is fixed. Including the company's Series E, Series F and Series D preferred equity within our capital structure, we were over 60% fixed on a pro rata basis. With ample liquidity, an average interest rate of 5.5% and an average length to maturity of nearly 4 years, we believe the company is well positioned to navigate any potential near-term volatility while pursuing value creation opportunities. On January 22, 2026, our Board of Directors declared a quarterly common dividend of $0.08 per share, representing a dividend yield of approximately 7.7% based on the annualized dividend of $0.32 per share. The current dividend continues to represent a modest payout ratio relative to our trailing 12-month AFFO. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage and maintaining liquidity for future growth opportunities. Included in our press release last evening, we provided full year guidance for key 2026 operational metrics in addition to certain nonoperational items. For the full year, we anticipate RevPAR growth of 0% to 3%, which translates to an adjusted EBITDA range of $167 million to $181 million and an adjusted FFO range of $0.73 to $0.85 per share. It is worth noting that the company's 2 asset sales from the fourth quarter of 2025, the Courtyard Kansas City and the Courtyard Amarillo, as well as the recently announced sale of the Hilton Garden Inn Longview contributed approximately $1.6 million in adjusted EBITDA or $0.01 of AFFO per share in 2025. Based on the indicated RevPAR range of 0% to 3%, we expect margins to be flat to down 100 basis points, which incorporates approximately 25 basis points of headwinds from higher property taxes and implies operating expenses increasing between 2% and 3% year-over-year. We expect pro rata interest expense, excluding the amortization of deferred financing costs to be $57 million to $61 million, which includes an incremental $9 million from the recent refinancing of the 1.5% convertible notes with the delayed draw term loan. Preferred distributions, including the Series E, Series F and Series D securities are forecasted to be $18.5 million. This outlook does not include any additional acquisition, disposition or capital markets refinancing activity beyond what we have discussed today. Finally, the GIC joint venture results in net fee income payable to Summit covering approximately 15% of annual pro rata cash corporate G&A expense, excluding any promote distributions Summit may earn during the year. With that, we will open the call to your questions. Operator: Our first question will come from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin Wurschmidt: Jon, you discussed the booking pace accelerating into March and April. Can you just dig into kind of the visibility that you have in length of the booking window that underlies your confidence in the trends in the months ahead? Jonathan Stanner: Yes, sure. Thanks, Austin. Look, I think as we said, we've seen some very positive indications from a pacing perspective, really throughout most of the beginning of the year. But I'd say even more specifically over the last couple of weeks. That's translated into a pretty meaningful improvement in March. We're actually now pacing slightly positive for March. Our pace for April has turned almost up mid-single digits. I think what gives us the most optimism around that is, as we said, we still have not lapped the point where we started to see the effects of the pullback in government demand. So we're still kind of comping against periods where government demand was in place at this point last year. So we have seen -- again, I think a lot of this has been the continued solid performance midweek and particularly in urban markets. I do think we are seeing some near-term lift in Arizona and Florida markets from folks potentially relocating away from Mexico, given some of the security concerns there. So we do think that's going to give us a bit of a lift, particularly over the spring break period. But I would say more generally, the demand trends and the patterns that are giving confidence are fairly broad-based. Austin Wurschmidt: Then you mentioned that rate growth is really underlying the RevPAR growth outlook this year. Is that consistent with what you're seeing in terms of the pace figures in the months ahead? And just for the year, which segments really do you expect to be the biggest drivers of that improvement year-over-year? Jonathan Stanner: Yes. Again, I'd say generally broad-based. But I do think we're -- today, what we're seeing is better performance and better lift midweek. And so I would expect the majority of that lift to come from the BT and group segments. But again, I do think we're encouraged with some of the signs we've seen on the leisure side as well. But I would say it's kind of a 2/3, 1/3 mix for us going into the year. And I think 2/3 will come from rate growth, which obviously has positive flow-through implications to the bottom line. Austin Wurschmidt: Then just last one from the World Cup perspective. I mean, how much lift do you have really that we'd call World Cup or event specific this year? You highlighted a number of events, but I assume World Cup is a big piece of that. Could you just kind of peel that off of the 0% to 3% RevPAR growth outlook? Jonathan Stanner: Yes, sure. Look, I will say we're very constructive around World Cup. I do think the industry has tempered expectations to some extent around what that will actually drive. What we pointed out on the call and what I'd emphasize is a couple of things. One, we've got exposure to about 60% of the matches domestically and it touches about 1/3 of our total portfolio. And so we do have a significant amount of exposure to the World Cup. When we roll it up, again, we expect to see the vast majority of the benefit of those matches in the 6 markets where we host. I think the biggest impacts -- positive impacts for us will come in markets like Atlanta, Miami, and Dallas. But we also expect to see some lift in a market like Orlando, where people will kind of tack on an extra trip in South Florida potentially from Miami. When we roll it all up for our outlook, we think it probably adds plus or minus 50 to 75 basis points to our full year expectations. Operator: [Operator Instructions] Our next question will come from the line of Michael Bellisario with Baird. Michael Bellisario: Jon, on your 0% to 3% RevPAR guide, can you maybe help us go from sort of a broader industry outlook to stacking some of the market or asset-specific drivers that are boosting your forecast, maybe like Fort Lauderdale, assumed ramp-up in Asheville, any other markets or assets to call out that are lifting your outlook relative to the broader industry trends? Jonathan Stanner: Sure. Look, I think at the midpoint of our range, we're probably not too far off of where most industry forecasts are for the year. I think you did highlight a couple of what I'll call Summit-specific tailwinds for this year. One is the lift we expect to get in Fort Lauderdale. And Trey commented on this in the prepared remarks. We are seeing tremendous lift since the renovation has completed. We do lap kind of the renovation comp for the first part of the year. So we'll obviously some significant year-over-year growth. But I think more importantly and more sustainably, we just think that, that asset is going to continue to perform incredibly well given the capital that's been invested there and the market that is strong. Asheville is another one that we have. We're still recovering from the storm a couple of years ago that we expect to have strong performance. We expect all of our World Cup markets to perform. I talked a little bit about that just a minute ago. But it is meaningful for us given the significant percentage of assets we have in those markets. And then obviously, there are markets like San Francisco, which we expect to continue to be very strong. Obviously, off to a great start to the year with not only the convention calendar, but the Super Bowl is also another World Cup market, which we think we will see some benefits from. I'd also highlight the South Florida market generally, even outside of Fort Lauderdale. The trends we've seen in Miami, particularly in Brickell, we're off to a tremendous start to the year there and expect that to continue to be a very strong market. And Tampa, once it laps the weather comps from the first quarter in Orlando are both doing very, very well. Orlando, again, is the beneficiary of the new park that's come in at Universal, which is driving incremental demand. Michael Bellisario: Then just to go back to the prior question on the booking window. I just want to dig a little deeper there. Any changes in discounting or advanced purchase rates? Are you still grouping up? Just anything beneath the surface that you're seeing or doing that gives you more confidence looking ahead? And that's helpful. Jonathan Stanner: Yes. Sure, we talked a bit about this -- a lot about this in the second and third quarter. And I think when we looked at -- and we tried to emphasize this on the call. The pressure we saw on RevPAR, particularly in the second and third quarter of the year was so much driven by the pullback in government and international inbound demand. And part of the knock-on effects of that was it forced us to remix our business. And part of that remixing was into lower-rated channels, particularly lower-rated leisure travels, more OTA exposure, more advanced purchase exposure. We definitely tried to create a layer of group and advanced purchase demand. I think we are successful doing that. I think what's given us some encouragement is while we were still down in the fourth quarter. And we expect the first quarter to still have these government-driven headwinds, we've been forced to do less remixing. And we are seeing a little bit more stability and growth in some of these other segments. And obviously, we're going to get to a point where we lap the very difficult government comparisons. So again, what we've tried to emphasize is that outside of those demand segments, the performance of other segments of our business has held up reasonably well. I wouldn't say we've seen any significant widening of the booking window at this point. I will say that, again, we feel like there is more and more incremental demand that's helping offset some of the falloff from the government segment in particular. Operator: Our next question will come from the line of Chris Woronka with Deutsche Bank. Chris Woronka: Apologies if you might have covered all or part of this earlier. But I was really trying to get a sense for -- as we look out kind of World Cup, 2Q, you have a little bit more visibility now maybe. I'm trying to get a sense for whether you think there's before and after? Is there a lull before and after? And so the markets where you have exposure, is it -- do you have enough visibility to see what happens before? I think the question is really, does any of the benefit you're likely to get offset at all by things that people not visiting immediately before or after the games? Jonathan Stanner: Look, it's not something that has been particularly high on our list of concerns. I certainly understand that perspective. Look, we think kind of net-net, this is going to be a very positive event for the industry, certainly for our portfolio, given the exposures. I will say and kind of to that point, Chris, part of how we've approached the event, not dissimilar to how we typically approach Super Bowls is we like to create a layer of base demand on the books. We typically try to get some longer term stay business, whether it's media or takedown setup type of business particularly where we have guaranteed nights for extended lengths of time. And we think that helps derisk match-up scenarios that may not be as favorable. If there is some softness in the transient pickup, we derisk that to some extent because we've created this base layer of demand. We've taken a very similar approach. Our approach has been very tailored by market because our hotels have different locational strengths and weaknesses relative to where either the fanfests are located or the actual stadiums are located. So those strategies are customized by market. But by and large, I would say we approach this in a way where we try to strike the right balance between taking a base layer of group at still high rates. I think the rates on the books we have over the World Cup period are north of $300. So we still have very attractive rates on the books. But we do it in a way where, again, we derisk a little bit of the kind of in the period for the period risk around potential matchups. So that's been our approach consistent with how we've approached Super Bowls in the past. Chris Woronka: Then as a follow-up, I don't know if there's been any discussion if we drill down a little bit deeper on Hyatt stuff. I know there's the points, big changes to points coming up not great as a customer, but hopefully helpful for you guys. And I know there's been discussions in the past about breakfast at Hyatt Place or Hyatt House. Any color you guys would add? Is that going to be -- is there any measurable benefit you see going from your Hyatt? Jonathan Stanner: Yes. We did -- as you alluded to, we did beta test in a number of our assets, the pay-for breakfast concept at Hyatt Places. I would say, generally speaking, it was successful to the bottom line. I think Hyatt is still evaluating. And we're still working with Hyatt on the evaluation of how that gets rolled out more broadly. But it is something that we felt some benefits of in the second half of last year. I would say more broadly in terms of kind of points and loyalty in these programs. I think, again, the brands have been receptive to making sure that as those loyalty programs are growing, some of that benefit accrues to the hotel owners. Operator: This will now conclude today's question-and-answer session. And I would like to hand the conference back over to Jon Stanner for closing remarks. Jonathan Stanner: Well, thank you, everyone, for joining today for another earnings conference call. We do look forward to seeing many of you at some of the upcoming conferences we have, but we hope you have a wonderful day. Thank you. Operator: This concludes today's conference call. Thank you for participating. And you may now disconnect.
Operator: Thank you for standing by. Welcome to the Intchains Group Limited Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alice Zhang with The Equity Group. You may begin. Alice Zhang: Thank you, operator. Good evening to everyone. Welcome to Intchains' Fourth Quarter and Full Year 2025 Earnings Conference Call. Please be advised that the discussions on today's call will include forward-looking statements. These statements involve known and unknown risks and uncertainties and are based on the company's current expectations and projections regarding future events that may impact its financial condition, operating results and strategic direction. Although the company believes that expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the company cautions investors that actual results may differ materially from anticipated results. Investor should review other factors that may affect its future results in the company's registration statement and other filings with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances or changes in its expectations, except as required by law. Please note that in today's call, we'll discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. The presentation and webcast replay of this conference call will be available on the Intchains' website at www.ir.intchains.com. It is my pleasure to introduce Interim CFO, Mr. Charles Yan, who will provide an overview of full year 2025 financial results, recent operational achievements and the company's long-term growth strategy before opening the floor for questions. Charles, please go ahead. Chaowei Yan: Thank you, Alice, and welcome, everyone. Intchains engaged in the design and development of altcoin mining machines, ETH accumulation and yield-generating strategy as well as the delivery of Web3 infrastructure services. Starting December 2025 following the completion of acquisition and the launch of our Goldshell Stake platform, we also provide cryptocurrency staking services for individual and institutional crypto investors. Altcoin mining hardware and Ethereum accumulation and staking activities are the other core pillars of our businesses with sales of our mining machine being the primary source of our revenues. As discussed in the past, we operate in an industry heavily influenced by cyclical volatility, and this has impacted net revenue for full year 2025. Despite short-term market volatility, our ability to continuously and properly deliver state-of-the-art mining products showcases our business agility supported by a long-term commitment in R&D. 2025 was highlighted by launch of series of mining products, including ALEO, Dogecoin and XTM miners. In Q1, we introduced our first ALEO mining series to the market in response to the rapid growth of the ALEO product demand. The launch achieved a strong customer adoption and contributed to substantially increased revenues in the first quarter. During the year, we also launched our groundbreaking byte -- Goldshell BYTE, dual miner, an innovative solution that allows our customers to maximize mining returns by switching seamlessly between algorithm cards according to market conditions. This new machine has generated significant market interest and law supports -- moral support mining across 6 different cryptocurrencies using our proprietary algorithm cards. Throughout 2025, these products experienced rapid iterations with multiple additional product models released for ALEO and Dogecoin miners. Late in this year, we introduced XTM miners, another high-performing minor series, which accounted for a significant portion of our Q4 net revenues. Together, these product launch have reinforced our market competency, reflecting Intchains' capabilities to seizing early market share in the innovative altcoin projects with the top-tier next-generation mines. During the year, we also continued to explore ways to evaluate -- to elevate our ETH accumulation, holding and staking strategies. On the ETH accumulation side, we continued executing our disciplined and self-funded ETH purchase strategy, always mindful of prevailing market conditions and price, more so during the second half of the year. 2025 was characterized by significant swings in ETH pricing, driven by macroeconomic uncertainty, shifting liquidity conditions and evolving institutional participation in digital assets. ETH experienced a period of sharp upward momentum followed by notable corrections, creating a volatile but opportunity-rich environment. During a year full of volatility in ETH and overall crypto market, we adopted a more mindful approach in accumulating ETH and took a conservative and strategic capital allocation approach in the second half of 2025. That said, our long-term conviction in Ethereum ecosystem hasn't changed, and ETH remains the critical assets in our cryptocurrency strategy. As of December 31, 2025, we held a total of 8,826 ETH, increasing from 5,702 a year ago, growing this position by 56%. The same volatility continued in 2026, with ETH trading within a broad range as macro and crypto sentiment fluctuated. In February, ETH stabilized in a range that highlighted opportunistic entry point for long-term accumulation. As a result, we are pleased to announce that by February 23, 2026, we hit another significant milestone of our ETH accumulation strategy with over 9,000 units of ETH and remain one of the top players of ETH' treasury holders. Moving into the staking aspect of ETH holdings. In 2025, we expanded our digital asset strategy by partnering with FalconX to support ETH's staking activities. Through FalconX institutional-grade platform, we are able to securely stake a portion of our ETH holding, generating yields while maintain operational flexibility and strong risk controls. Furthermore, in December 2025, we acquired a Proof-of-Stake platform and launched Goldshell Stake platform, which operates as we independent PoS service platform under the Goldshell brand. As part of Intchains' comprehensive Web3 infrastructure offering, we now provide poof-of-currency stake services for individual and institutional investors. Converting ETH, our launch, Manta and Conflux and expect to expand this line business to broader international markets, leveraging Goldshell's existing customer base and market presence. I will provide additional details on staking strategy for 2026 shortly. Turning to a summary of our full year 2025 financial performance as compared to full year 2024. FY 2025 revenue of RMB 220.9 million or USD 31.6 million decreased by 21.6% due to cyclical fluctuations in the market and softer demand for our products in this period, whereby our ALEO mining machine series contributed to increased revenues in the first 6 months in 2025, and overall demand for our products become softer during the second half. FY '25 cost of revenue was RMB 204.9 million or USD 29.3 million, an increase of 56.1% (sic) [ 57.1% ], impacted by impairment charges recorded against excess mining machine inventory for certain altcoin minings during the period. FY 2025 total operating expenses were RMB 120.6 million or USD 17.3 million, decreased by 18.7,%, primarily as a result of lower sales and R&D expenses and primarily due to the reduced expenses related to the preliminary and research costs conducted for new altcoin mining projects. As a result of lower revenues and gross margins, FY 2025 loss for operating was RMB 104.7 million or USD 15 million compared to the income from operations of RMB 2.9 million. FY 2025 interest income was RMB 11 million or USD 1.6 million, decreased from FY 2024 mainly due to cash used to acquire ETH-based cryptocurrency. For the full year period, we recorded a gain in fair value of cryptocurrency of RMB 4.8 million or USD 0.7 million, primarily a result of increased ETH holdings by 3,170 units since the beginning of the year, partially offset by an approximately decrease of 12.6% in ETH's price during the period. Net loss for FY 2025 was RMB 52 million or USD 7.4 million compared to a net income of RMB 51.5 million in FY 2024. We continue to maintain a strong balance sheet. As of December 31, 2025, our cash position, which consisted of cash and cash equivalents, deposits and government securities listed in long-term investments and short-term investments was USD 67.8 million. We had current assets of USD 83.2 million, total assets of USD 145.2 million and total liability of just $6.2 million. And I would now like to provide an update to sales of our altcoin mining machines in Mainland China before discussing our 2026 strategies and business focus. On February 6, notice on further preventing and handling risks related to virtual currency was issued, prohibiting the provision of service such as sale of mining machines within Mainland China by mining machine production enterprises. In response to the notice and to ensure full compliance, we are enhancing internal control policies and undertaking ratification measures. I would like to note that although our primary sales markets have consist of overseas end users as well as domestic channel partners within China, the company's business model is designed to serve a global customer base and our channel partners purchase are primarily for export purpose. So as detailed in our earnings release, management does not expect a notice to have a material adverse impact on company's business, financial condition or results of operations. Now moving on to our 2026 business strategies. For 2026 and beyond, our growth is centralized on continued investment in R&D on the development and the sale of our Goldshell mining machines and our ETH accumulation and staking activities, supplemented with cost optimization to improve overall financial performance. In first half of 2026, we remain focused on generating revenues from the sale of our existing mining machine sales that were launched in 2025, including ALEO, Dogecoin, XTM and... Operator: Excuse me, ladies and gentlemen, please continue to stand by. Your conference will resume momentarily. Thank you. Excuse me, ladies and gentlemen, your conference will now resume. Charles, go ahead. Chaowei Yan: Sorry, everyone, let's continue for our earnings conference call. So 2026 is expected to be a year of margin improvement due to steps we took to implement cost management initiatives, including workforce reduction and organizational restructuring, aiming to enhance efficiency, optimize headcount and operate with leaner corporate level -- corporate model. We believe these initiatives will enable us to force resources on core R&D efforts to maintain a leading position in altcoin mining product industry, driving further margin expansion for FY 2026 and beyond. Prior to our altcoin hardware business, we are well equipped to enhance our ETH accumulation and restructure treasury holding strategy. In 2026, Intchains participates continuing a prudent approach in ETH purchasing by pursuing selective value-driven purchases when market conditions are favorable to gradually expand ETH's treasury holdings over time. As of December 31, 2025, the fair value of our cryptocurrency assets other than stablecoins such as USDC and USDT was RMB 187.6 million or USD 26.8 million, which includes approximately 8,826 ETH-based accrual currencies, valued at RMB 186.7 million. In 2026, Intchains continued to accumulate ETH. And as of February 23, 2026, total ETH held reached over 9,070 units. As part of our efforts to generate incremental returns from idle assets, we plan to continue our dual-platform staking approach using FalconX to stake ETH we have accumulated in our Goldshell stake platform to stake our third-party ETH. Staking on 2 platforms allows diversification, and we expect this practice of combination to maximize returns as we build our strategic ETH reserve and also from third-party staking. As an update, as of February 23, 2026, we have a total of 2,600 units of ETH or 28.7% of our total ETH treasury holding, currently staked with 1,000 units or 11% staked in -- on FalconX and 1,600 units or 18% staked in on our own Goldshell Stake platform. Additionally, Goldshell currently stake, 1,359 units of ETH currently owned by crypto investors. We remain optimistic about these initiatives, and we are implementing combining sale of new and existing altcoin mining machines and a solid ETH accumulation holding and staking strategy, along with cost-saving methods we are undertaking to drive solid top line results and improve operation margins in 2026. As a Web3 infrastructure provider, we have a market-leading altcoin hardware business and integrated hardware and software service portfolio, such as Goldshell Wallet and Goldshell Stake and a prudent long-term ETH strategy. With staking service serving as a second growth engine beyond our mining machine business, we have expanded into the blockchain infrastructure service sector. So we are looking to further generate synergies across our business lines, capture and act on additional opportunities as we emerge. With that, operator, please open it up for questions. Operator: [Operator Instructions] Your first question comes from the line of Matthew Galinko with Maxim Group. Matthew Galinko: I think you've covered this in the prepared remarks, but just to clarify, do you expect to launch new mining products in the second half of '26 at this point? Chaowei Yan: Yes, we are targeting new altcoin mining machine in the second half, but it's also subject to market conditions and our R&D progress. Currently, we have multiple coins project is under R&D process. Matthew Galinko: Got it. And on the Goldshell Stake, I think you mentioned you have about 1,400 units of ETH staked by third-party investors. Did that come over with the acquisition? Or are those new users for the platform since you rebranded it? Chaowei Yan: I think it's both. Yes. The staked ETH is about -- we cannot -- after the acquisition, it have amount growth in the ETH units. So it's both and half are prior to the acquisition and another half post-acquisition. Thank you. Operator: [Operator Instructions] And we have no further questions at this time. I would like to hand it back to Charles Yan for closing remarks. Chaowei Yan: Yes. Thanks again to all of you for joining us. We are always open to dialogue with investors. Please feel free to reach out to us or our Investor Relations firm, The Equity Group for any additional questions. We look forward to speaking with you all again on our next quarterly call. Thank you. Operator: Thank you. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, and welcome to NuScale's Fourth Quarter and Full Year 2025 Earnings Results Conference Call. Today's call is being recorded. A replay of today's conference call will be available and accessible on NuScale's Investor Relations website. The web replay will be available for 30 days following the earnings call. At this time, for opening remarks, I would like to turn the call over to Rodney McMahan, Senior Director of Investor Relations. Please go ahead. Rodney McMahan: Thank you, operator. With us today are John Hopkins, NuScale President and Chief Executive Officer; Ramsey Hamady, Chief Financial Officer; and Clayton Scott, Chief Commercial Officer. We will begin by providing an update on our business followed by a discussion of our financial results. We will then open the phone lines for questions. This afternoon, we posted supplemental slides on our Investor Relations website. As reflected in the safe harbor statements on Slide 2, the information set forth in the presentation and discussed during the course of our remarks and the subsequent Q&A session, includes forward-looking statements, which reflect our current views of existing trends and are subject to a variety of risks and uncertainties. For a detailed discussion of our risk factors that could contribute to differences in our expectations, please refer to our Form 10-K for the year ended December 31, 2025 and our subsequent SEC filings. I'll now turn the call over to John Hopkins. John Hopkins: Thank you, Rodney, and good afternoon, everyone. I'll start with some key highlights from 2025, a year marked by significant progress for NuScale. The U.S. Nuclear Regulatory Commission, or NRC approved our 77-megawatt electric standard design ahead of schedule, allowing us to support a wider range of offtakers and consumers seeking clean baseload energy. NuScale remains the only SMR technology to achieve NRC design certification. And with 12 modules in production, we retain our position as the industry's first mover. Furthermore, our exclusive global commercialization partner, ENTRA1 Energy reached an agreement with the Tennessee Valley Authority or TVA to supply 6 gigawatts of power by deploying the largest nuclear power program in U.S. history. In ENTRA1, we use NuScale SMR technology inside its power plants. Both are incredibly important milestones in our commercialization journey and gives us strong momentum going into 2026 to pioneer the SMR space as the only NRC certified SMR under 10 CFR Part 52 versus other technologies pursuing 10 CFR Part 50. We believe this approach provides NuScale's SMR power plants with a much different risk profile. Now turning to Slide 3. We list NuScale's fourth quarter and recent highlights, which we will discuss in more detail in a moment. They include significant progress made by ENTRA1 and TVA on a power purchase agreement or PPA as well as the completion of our work on Fluor's Phase 2 front-end engineering and design or FEED study for the proposed RoPower Doicesti power plant in Romania. In the continued strengthening of our cash position to ensure NuScale is well funded to pursue its activities. Turning to Slide 4. In September of last year, TVA announced an agreement in connection with the purchase of power from ENTRA1 for 6 gigawatts, which would represent a total deployment of 72 NuScale Power Modules or NPMs and 6 ENTRA1 Energy plants, providing power to support TVA 7-state service region. In the 5 to 6 months since the program was announced, we understand that ENTRA1 and TVA have advanced discussions, maintaining strong momentum in collaboration in their efforts. Our understanding is that the following recent steps have been taken to move the program forward. First, ENTRA1 is assembling an infrastructure experienced team that includes design engineers, a construction contractor, owners' engineers, investors and legal advisers. Second, on project financing, several major financial institutions are working with ENTRA1 and discussions are underway. And 1 major institution has already signed a multibillion dollar term sheet with ENTRA1. Third, on the project execution side, site visits have been conducted and site evaluations are underway by teams of qualified professional engineers and heavy infrastructure experienced individuals. Fourth, sites identified that could each support ENTRA1 plants powered by NuScale SMR technology with respect to the 6 gigawatt program. The prospective site for the first plant deployed has been identified. Fifth, drafting of a definitive PPA is underway with robust engagement from legal teams and progress is being made on transaction documentation and structure. Finally, please note that TVA announced the deal last September, and the new TVA Board was confirmed just this January. Considering all of this, we believe that significant progress has been made relative to time Separately, we'd like to touch on the U.S.-Japan investment initiative, which was discussed in our last earnings call. As noted in recent government announcements under the U.S.-Japan framework agreement, several American and Japanese companies were named as potential recipients of financing from Japan's groundbreaking commitment of $550 billion towards investments in the United States. Two points here. First, we understand and as publicly known, ENTRA1 Energy was one of the several companies named on the fact sheet, chosen by the Japanese government. It is the only American SMR power plant developer on the list, others included engineering and construction firms, OEM companies, investment holding groups in industrial players. Second, Japan has been NuScale's second largest investor since 2022. Their selection of ENTRA1 would validate their continued interest to support NuScale and our SMR deployment via ENTRA1 Energy power plants. While we are still on a subject of ENTRA1 Energy and in the spirit of being helpful to our listeners, I'd like to reiterate a few key points with respect to our ENTRA1 partnership. One, ENTRA1 is an American-owned and controlled development and investment platform that is focused on supporting the commercialization of next-generation base load energy technologies, which includes the NuScale's SMR technology. Two, their mission is to support American and global energy security and economic growth by deploying baseload power infrastructure to generate power. Three, the company is led by an American energy and technology investor and brings together experienced professionals with backgrounds in energy and infrastructure project management, finance, development and asset management. Four, in our partnership, ENTRA1 as the project developer is responsible for financing, project development and deal execution management to build the infrastructure, ENTRA1 works with seasoned engineering and construction firms. Five, ENTRA1 was established to address a need for a strategic developer and investor in a first-of-a-kind industry and to be the first mover to bridge the gap between financing and execution of such first-of-a-kind technologies. Sixth, over the course of several years, ENTRA1 conducted due diligence and analysis on the various nuclear technologies that have been under research and development, and we believe they recognize the value creation opportunity that they could capture around the need of a strategic partner and investor to support nuclear SMR commercialization. Seven, NuScale was selected among several of the reactor technologies analyzed by ENTRA1, along with their financial institutional partners. A, ENTRA1 has professionals with backgrounds in project finance, investment management, engineering, construction management, legal and infrastructure development. And they work with specialized technical partners, contractors, engineering firms, financial institutions and legal advisers for each project phase. It is important to note that TVA and NuScale have had a relationship for almost a decade. And Japan has been an investor in NuScale since 2022. We view these as long-standing follow-on relationships now supporting our commercialization along with our strategic partner, ENTRA1. NuScale has chosen to be a technology provider with our NRC-approved small modular reactors. We chose to pursue an asset-light business model, relying on outsourcing responsibilities outside our scope to reliable third parties. Currently, Doosan Enerbility is our primary manufacturing arm. We chose not to be a manufacturer of the reactors, nor are we the developer of power plant infrastructure that houses the reactor equipment. ENTRA1 is the development arm that helps NuScale commercialize its reactor technology by installing our SMR technology and equipment into their new power plant infrastructure assets. I'd like to remind everyone that the SMR space is a first of a kind within the U.S. nuclear industry, and there are no commercially operating SMR power plants in the United States. All stakeholders and participants in the SMR space are pursuing a first-of-a-kind activity. ENTRA1 and NuScale work closely together to advance the deployment of the NuScale's SMRs in the United States and in global markets. Both teams work in an integrated fashion and in close collaboration while maintaining a common professional work environment. In summary, we are very excited about the TVA ENTRA1 opportunity, which we hope will empower the local economy across TVA's seven-state region, support the fast-growing energy demand for AI data centers, advanced manufacturing in national defense, all while creating thousands of high-quality American jobs, reinforcing America's energy independence and strengthening our country's energy security. Moving to Slide 5. Regarding Romania, by the end of 2025, NuScale completed its FEED 2 work for Fluor Corporation to further RoPower's goal of developing and deploying their 6 module SMR power plant in Romania. In total, NuScale recognized $63.1 million in revenue from licensing fees and engineering work from the FEED 2 study over an 18-month period ending in December 2025. Earlier in this slide, shareholders of Romania's SN Nuclearelectrica overwhelmingly voted in favor of progressing the RoPower project. We understand that this all allows the projects to seek secured financing through further feasibility studies and site-specific design work and to advance the licensing and geotechnical work, finalize a pre-engineering procurement and construction, or EPC contract, and begin negotiating contracts for long lead items. Therefore, we anticipate that they will have pre-EPC activities begin in the second quarter of this year and have an estimated duration of up to 15 months and will include, among other things, the development of a Class 2 cost estimate. We look forward to continuing supporting Fluor on their Doicesti project. Turning to Slide 6. You will find a list of our plant services broken out by pre and post commercial operations date. While the sale of NPMs to ENTRA1 will make up the largest percentage of NuScale's future revenues, those revenues will be complemented by the many different plant services we offer. These plant-related services cover licensing, installation commissioning and post-COD services. We have already seen services generate revenue for NuScale from the RoPower project. And we expect that once the PPA between ENTRA1 and TVA is executed, we will begin generating service revenues related to those projects as well. Specifically from the combined operating license application, or COLA process, plus services related to FEED work for ENTRA1 power plants. Now on Slide 7, we would like to provide an update with respect to an exciting use case for NuScale's SMR technology producing process steam and electricity for chemical plants. Just last month, in collaboration with Oak Ridge National Laboratory in Tennessee, NuScale released the results of a technoeconomic assessment, examining the performance and profitability of company NuScale power modules with a U.S. chemical facility to provide needed generated steam and electric power. The findings showcase that nuclear power, specifically, nuclear power generated by NuScale's SMR technology to help industries that use process steam and electricity in a reliable and profitable manner. A recent second study conducted by Idaho National Labs demonstrated that NuScale's high-temperature process steam is on par with high temperature gas reactors. To further validate this use case, NuScale and Ebara Elliott Energy, a major Japanese industrial player established a collaborative program to fabricate and field test a high-temperature steam compression system at their plant in Pennsylvania. It is further intended that the compressor will be later deployed at a domestic industrial petrochemical site. NuScale and Ebara Elliott are actively in discussions, seeking a petrochemical industrial player for this effort. The results of the Oak Ridge lab study and plans for high temperature compression demonstrator will be presented to the World Petrochemical Conference next month in Houston. In other news, NuScale has also launched a project at the Oak Ridge National Laboratory in Tennessee to use AI to enhance fuel efficiency for multi-module nuclear plants. Beyond what is achievable in nuclear plants with a single reactor, be it small or large. Next month, NuScale will be speaking at the National Academy of Engineering sponsored conference on closing strategy gaps for the future of AI, hosted by the University of Maryland in College Park. NuScale SMRs are the only nuclear technology, large or small that have been certified by the NRC for off-grid behind the meter application. At that event in Maryland, NuScale will be discussing the advantages of off-grid behind the meter, small modular reactors to power data centers. Now over to Ramsey for the financial update. Robert Hamady: Thank you, John, and hello, everyone. Our financial results are available in our filings. So my focus will be on explaining major line items, which can be found on Slide 8. NuScale's overall liquidity increased to $1.3 billion at December 31, 2025, versus $754 million at September 30, 2025 and $442 million at the end of 2024. This liquidity allows NuScale to further enhance supply chain and manufacturing revenues, fund obligation in connection with the advancement of commercialization and further strengthen our balance sheet. As project progress forward, NuScale expects revenues from products and services to support positive cash flow from operations. Moving on to revenue. NuScale reported revenue of $31.5 million for the year ending December 31, 2025 compared to $37 million during the same period in the prior year. This decrease was due to a reduction in revenue recognized in the RoPower technology licensing agreement, which was partially offset by higher Fluor Phase 2 engineering and services revenue. I will conclude my remarks with a brief overview of our capitalization summary, as shown on Slide 9. As you can see on this slide, the number of Class B shares was greatly reduced in the fourth quarter due to Fluor's conversion of their NuScale B shares into Class A common stock. We understand that Fluor continues to monetize their investments in NuScale via open market transactions subject to certain agreed upon restrictions. With that, I'd like to thank you again for joining today and for your continued support of NuScale. We'll now take questions. Operator. Operator: [Operator Instructions] Our first question comes from the line of Eric Stine with Craig Hallum. Eric Stine: So maybe if we could just start on the supply chain and specifically, Doosan, you did talk about that a little bit. But I know that it's committed to 20 modules a year committed to being able to take that higher. So just maybe some commentary on confidence in that, but also curious, it's a pretty differentiated position to actually those are actually being built. And so curious how is that playing into the process with ENTRA1 and TVA? And also, just some of the other opportunities as they progress in your pipeline. Carl Fisher: Yes. This is Carl Fisher, Chief Operating Officer. As you know, we've progressed significantly well with Doosan. We have 12 modules under production right now. So whether -- no matter what the project is, it gives us a significant timing advantage because we have ordered long lead materials and the modules are under production. Eric Stine: Okay. Got you. And in terms of just feeling confident in -- that Doosan is committed and able. I know that they've got a big facility and they are committed to this space, but that they are, in fact, in a position that should TVA -- should that move forward that they could -- I know it's a ways out, but that they could execute on that and help you get to potentially some big numbers. Carl Fisher: Yes. We have extreme confidence with Doosan. The other thing that you should know is that they're increasing their capacity so they can move up to 20 modules per year and then eventually doubling that capacity. I just recently was at Doosan and seen the works that are being done. These 12 modules will set the stage for the next set of 12 modules that could be used with the ENTRA1 projects. And having these already in production, it really gives us a significant timing advantage because we do have the long lead materials already ordered and the modules ready to be fabricated. Eric Stine: Got it. And maybe just turn to the upgrade approval. I know that 6-plus months ago, I asked this on the call, were there customers that were waiting for that upgrade from 50 megawatts to 77 megawatts, what that potentially kind of set in motion. So I guess now that it's 6-plus months later, looking back, what has that impact been on your pipeline, whether it's overall growth of the pipeline or movement within that pipeline? Carl Fisher: Yes. I think, first of all, the upgrade that was approved last year was approved ahead of schedule. And we've got -- there's a lot of confidence we have with the fact that we have that approval because a lot of questions and any concerns that may have had by the regulator were put -- were approved and put aside. In that case, after that and having that FDA approval, our customers, the ones that we've been speaking with and also basically just the general industry, it puts a lot of confidence in the fact that the NRC has made that approval. I'll let Clayton Scott discuss the pipeline aspect of it. But I will say, even for our international projects, having that NRC approval is significant because of the respect that the international community and the international nuclear regulators have for the NRC. John Hopkins: Yes. This is John. We do regular quarterly generally drop-ins with -- to commissioners of the NRC. We were just there 2 weeks ago. And it was a pleasant surprise to speak with the commissioners in relation to expediting processes and et cetera. But they asked a lot of questions because as you know, we are the only one that's ever submitted a design certification application for the SMR space that have been approved. So we've been through the rigor. And so we're -- we've been ready to go and we're just sitting here as a company, wanted to get these things before. And the bottom line still is, I keep saying this, we are the only game in town that has an NRC certified not only to construct but also to operate. Clayton Scott: But I think in addition to the 77-megawatt approval, it's really given an ENTRA1, the opportunity to really push their pipeline, and it's given confidence from the industry to understand that, that regulatory hurdle has been completed. And now that we can reach capacity levels that I think are a little bit more satisfactory when ENTRA1 looks at their overall facilities. Eric Stine: Got it. Helpful. Last one for me. Just -- you mentioned it in your commentary here, but the term sheet with ENTRA1, you mentioned the one financial institution who has entered that. Can you just unpack that a little bit? Is that something that's firm that gets triggered on the signing of a PPA? Or is that something where there would be some additional steps upon that signing to lock that in? William Cooper: Thanks for the question. It's Bill Cooper, General Counsel at NuScale, and we're under NDA with ENTRA1, so we can't say any more about that. Operator: Our next question comes from the line of Ryan Pfingst with B. Riley. Ryan Pfingst: Maybe just a follow-up on that last one. To the extent that you can say, John, you mentioned the major institution that signed a multibillion dollar term sheet with ENTRA1. Is there anything you can share there around who the players might be? What exactly was signed for? Anything there, I think, would be super helpful. William Cooper: Nothing we can share. I'm sorry. Ryan Pfingst: Got it. I'll turn to Romania then. Could you talk about the next phase of the RoPower project? What will entail for NuScale in terms of services rendered or maybe the potential revenue opportunity there? John Hopkins: Yes. This is John. We met with the Romanian government last night, actually. So it's a timely question. As we stated, FEED Phase 2 has been completed as of the last quarter. February, they did have a shareholders meeting that they voted in favor of moving the project forward. RoPower is now authorized to advance the licensing in geotechnical moving towards a pre-EPC and we anticipate NuScale will be generating revenues as soon as -- now understand, we are a subcontractor to Fluor Corporation. And Fluor is in negotiations right now with the RoPower government. Our contract is with Fluor. It's not with the Romanian government, and we explained this last night to the Romanian government, and they understood. We view this as a very important project that right now, we're waiting for the next steps via Fluor and RoPower to do their deal and then we move on. It was an interesting conversation last night. They appreciated it. Ryan Pfingst: Appreciate that. And then just one more. Could you give an update on the status of the material weakness in your financial reporting that you identified last year? And where that stands today? Robert Hamady: This is Ramsey Hamady. In our 2024 annual report, we disclosed a material weakness on internal controls over financial reporting, ICFR is what we term it, and specifically, we focus on something called ITGC, which is information technology general controls. We stated the plan to remediate it. We worked very hard. I would give credit to David Tuttle, our Chief Accounting Officer and his team. And we've come through with a clean bill of health from EY. I think it's a remarkable feat, and so we no longer have that. We addressed it as we said we would. Operator: Next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif Elmaghrabi: First, on Fluor, once they monetize their remaining stake, will they still have right of first refusal as your EPC provider for future projects? William Cooper: This is Bill Cooper again, General Counsel. I'm not familiar with any right of first refusal, but the agreement is otherwise confidential. Sherif Elmaghrabi: Okay. Got it. And then the study you completed with the Oak Ridge National Lab, that study gives us a sense of power module pricing that is significantly lower than large-scale nuclear. Of course, that's part of the value proposition of SMR, but is that sort of the pricing you're aiming for in Romania and with the TVA? Or is it kind of for later-stage projects? John Hopkins: Yes, I'm sorry. Could you repeat the question? Sherif Elmaghrabi: The study that you guys did with the Oak Ridge National Lab, it talks about roughly I think, about $5,500 per kilowatt pricing for your modules. And I'm wondering if that's the sort of pricing that applies for Romania and the TVA. John Hopkins: Yes, I'll have to look into it. I apologize. I'm not familiar with that number. I think what's important here, if you remember over the years, we've said we've seen 3 significant markets. One was coal plant refurbishment, one was working with process companies for need of process heat, it could be for electricity. And the other one, obviously, the elephant in the room is hyperscalers. And these studies, the prevailing notion was that high temperature gas can only produce steam requirements needed for high-pressure steam. We went into an analysis that Oak Ridge or actually INL did for us to show that NuScale light water reactor could provide the economics and efficiencies necessary to provide the steam requirements for these plants. And why this is gaining specific interest, remember, our emergency planning zone is that site boundary. So when I look at process plants in an area like Baytown, Texas, we have multiple companies that share a fence line. ENTRA1 could build that plant outside that fence line, close to the end user and provide if it's process heat, if it's electricity, if they want to do hydro production, and it's not inside the evacuation zone typical of a large-scale nuclear reactor. Clayton Scott: The other thing is, too, John. I think that's really important is we're also the only nuclear technology company, period, that is certified by the NRC for behind-the-meter off the grid applications, and that's a significant benefit. Operator: Next question comes from the line of Derek Soderberg with Cantor Fitzgerald. Derek Soderberg: Yes. Just on cash, $1.3 billion, what's sort of the expected cash burn range for '26? And then can you talk about any sort of swing factors potentially in that as well? Robert Hamady: This is Ramsey Hamady, Chief Financial Officer. As you pointed out, we ended 2025 with approximately $1.3 billion in cash. That's a tremendous achievement. It shows a very defensive position in terms of our liquidity. Post-close disclosure, I believe Note 9 in the financial statements. We noted a payment of about $250 million out. Arithmetically, we can assume about $1 billion of cash on balance sheet today. If I look at my OpEx, apart from what I would call onetime type items, my OpEx stays fairly consistent between $170 million to, call it, $200 million, closer to $193 million actually in 2024 on an adjusted basis. The $1 billion in cash I think our investors and rest assured that we have taken a very conservative, very strong liquidity position. And burn rate or runway is not a problematic item for us. NuScale has the legs to run this race. Derek Soderberg: Got it. That's helpful. And then, Ramsey, you mentioned just the onetime payment. I'm wondering if you can talk about how many more of these sort of onetime payments or milestone payments you guys expect to make associated with the project? And will those payments sort of be a similar magnitude? Or can you help us maybe quantify the potential there. Robert Hamady: Sure. I think on this one, we have been very transparent in our disclosures in our filings. There is a partnership milestone agreement filing, which describes all the payments in great detail. And this is more developer-led model, which I would refer you to. Operator: Next question comes from the line of Nate Pendleton with Texas Capital Securities. Nate Pendleton: Good afternoon. After ENTRA1 signs a binding PPA with TVA, can you talk about what that means from a near-term revenue perspective? And would that revenue be comparable to what we've seen at RoPower thus far? Clayton Scott: This is Clay Scott, Chief Commercial Officer. So what we expect after the PPA is signed, is that we would enter into COLA and FEED activities to generate revenue, which will allow us to move forward. But this is something that I would expect to be more than what we see in RoPower just because the size of the plants are much larger, and we anticipate a little bit more revenue stream in that respect. Nate Pendleton: Got it. And as my follow-up, perhaps saying with you, Clayton, referencing Slide 7 in the chemical plant study. Has that study opened any new doors for the commercial team with that extra layer of validation there? And are there any other applications that you feel are underappreciated as well? Clayton Scott: Yes, there's other discussions that are happening, and we're in concert with ENTRA1 to have those. But at this point in time, we're under NDA, and we can't really disclose anything. Operator: Next question comes from the line of Leanne Hayden with Canaccord Genuity. Leanne Hayden: Just wanted to start by digging into progress of ENTRA1 and TVA. Can you please help us try to understand any sort of gating factors to securing a binding PPA? Understand that there has been some pretty strong progress since January and that you're in the process of drafting the PPA. I do believe you previously guided for binding PPA execution by the end of 2025. So any color around what may have caused that delay would be much appreciated. William Cooper: We've said all that we can say -- this is Bill Cooper, again, General Counsel. We've said all that we can say about the PPA in the prepared remarks. We can't say anything more. Leanne Hayden: Okay. Understood. To the extent that you're able to comment, when can we expect any sort of site permitting or early site submissions associated with the 4 identified sites? Rodney McMahan: This is Rodney. Yes. No, we went through that in the script that kind of laid that out with the 4 sites. So I would just reference that or if not, we can circle up after the call. Operator: And our last question comes from the line of Dimple Gosai with Bank of America. Dimple Gosai: I understand that you don't give guidance, but there's just many different pieces here with the FEED 2 coming to an end and RoPower advancement now while you are also kind of prefunding ENTRA1 and/or Romania. Can you help us or give us a sense of how to think of the revenue and liquidity outlook or call it profile over the next 12 to 24 months, please? Robert Hamady: Dimple, this is Ramsey Hamady. Thank you for your question. As we stated earlier and as you pointed out in your question, we do not give guidance at this point. However, I think looking at our balance sheet, we look at our liquidity position, the company is conservatively positioned and prudently raised capital towards the end of last year or to give us a balance sheet that has lasting power and as I said, run rate and -- pardon me, runway is not an issue for us. Operator: We have another question comes from the line of Brian Lee with Goldman Sachs. All right. That concludes the question-and-answer session. I would like to turn the call back over to John Hopkins for closing remarks. John Hopkins: Thank you, operator. Thank you, operator, and thank you to everyone for joining us today. As we close this period for NuScale, we are excited about the path ahead in 2026. We look forward to continuing to take meaningful strides to our deployment of the only NRC certified SMR technology to support American and global energy security. Thank you very much. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Zscaler Second Quarter 2026 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kim Watkins, SVP of Investor Relations and Strategic Finance. Please go ahead. Kim Watkins: Good afternoon, and thank you for joining us today. Welcome to Zscaler's Second Quarter Fiscal 2026 Earnings Conference Call. On the call with me today are Jay Chaudhry, Chairman and CEO; and Kevin Rubin, CFO. Please note that we posted our earnings release, shareholder letter and a supplemental financial schedule to our Investor Relations website. Unless otherwise noted, all numbers we talk about today will be on an adjusted non-GAAP basis. You will find a reconciliation of GAAP to the non-GAAP financial measures in our earnings release. Before we get started, I'd like to remind you that today's discussion will contain forward-looking statements, including, but not limited to, the company's anticipated future revenue, annual recurring revenue, net new annual recurring revenue, gross margin, operating profit, net other income, earnings per share and free cash flow margin, our customer response to our products, our expectations regarding AI and its impact on our business and customers, and our market share and market opportunity and our objectives and outlook. These statements and other comments are not guarantees of future performance, but rather are subject to risks and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a more complete discussion of these risks and uncertainties, please see our filings with the SEC as well as in today's earnings release. I also want to inform you that we'll be attending the following conferences: Morgan Stanley Technology, Media and Telecom Conference on March 2; Loop Capital Markets Investor Conference on March 10; Stifel Technology Conference on March 10; Cantor Global Technology and Industrial Growth Conference on March 11; and Wells Fargo Software Symposium on April 8. And with that, I'll turn the call over to Jay. Jagtar Chaudhry: Thanks, Kim, and thanks to everyone for joining us today. We delivered strong Q2 results, and I couldn't be more proud of the team's execution. ARR grew 25%, reflecting continued strong demand for our platform. We are confident in our outlook for the second half of fiscal 2026. And as a result, we are increasing our guidance across the board. I'd like to zoom out for a moment and talk about what's on everyone's mind, AI. AI is the single most transformative technology of our time, and its mass adoption is only just beginning. We believe Zscaler is the security platform for the AI era, because we already protect users, data and applications across clouds and the Internet at scale. Just as we enable customers to securely accelerate digital transformation and cloud adoption, we believe we are uniquely positioned to secure the AI transformation, driving continued demand for our platform. Organizations are rapidly adopting AI to drive productivity and innovation, but doing so is creating new vulnerabilities, significantly expanding the attack surface and increasing cyber threats in scale, sophistication and speed, recasting AI from a productivity engine into a dangerous security threat. During my conversations with more than 100 CEOs and CIOs, including many at the World Economic Forum in Davos last month, the urgency of securing AI is one of the top concerns on their minds. This is the opportunity for Zscaler's industry-leading Zero Trust Exchange, which enables our customers to securely scale AI for the agentic era and beyond. Zscaler minimizes the attack surface and limits lateral movement with our unique Zero Trust architecture that enables direct one-to-one communication among users, applications and AI agents. I started Zscaler with an initial focus on securing users with Zero Trust. Then we extended our platform to deliver Zero Trust for workloads, branches and devices, which has increased our TAM significantly and extended our technology lead from other vendors who are still trying to build a SASE solution for user security. Now we are extending our global Zero Trust Exchange platform to secure AI applications, AI agent communication and agentic workflow at scale. As AI agents are unleashed within the enterprise, it won't be long before billions of AI agents interacting with each other will have access to mission-critical applications and sensitive data. Just like users and organizations, AI agents are also becoming the weakest link in cybersecurity. Imagine a threat actor hijacking even one of an organization's AI agents resulting in a serious breach. AI agents shift the threat landscape and operate autonomously at speeds far exceeding humans, exponentially increasing agentic traffic while compressing the time to prevent, detect and respond to threats. This is becoming even more acute as AI agents or apps exposed to the Internet can be scanned and targeted in seconds. Securing this new reality requires in-line policy enforcement at massive scale. This is what Zscaler is built to deliver. Zscaler stands for the Zenith of scalability. Effective AI security requires a proven global Zero Trust Exchange infrastructure, and we believe Zscaler is the only cybersecurity platform for the AI age that's able to secure at this unprecedented speed and scale, creating a durable advantage. We have 15-plus years of experience operating our own cloud across 160-plus data centers worldwide, offering real-time security services with 99.999% reliability. This global infrastructure is critical to secure AI agent communication. Our software is present on millions of end-user devices, servers as well as in the cloud and branch offices, and it enables us to get agentic traffic to our Zero Trust Exchange, giving us a unique advantage. With our AI platform capabilities, we processed nearly 1 trillion AI transactions in calendar 2025. We are also processing millions of MCP requests through our exchange on a monthly basis, up from literally nothing a couple of quarters ago. As an example, a large Fortune 100 financial services customer is using our Zero Trust Exchange to enforce policy for the software development agents. In another example, a CISO of a Fortune 500 entertainment company, a Zscaler customer, shared with me that with little deployment effort, he was able to turn on Zscaler Exchange to enforce policy for AI traffic and is securing over 4 million prompts per week. Our Zero Trust Exchange is fundamentally different from competitive firewall-based security architecture that connects users or AI agents to a network and then allows them to roam free, dramatically increasing the risk of cyber breaches. We expect these advantages, including significant architectural differentiation and our large customer base to drive short-term and long-term demand for our platform. Turning back to the quarter. Our results reflect robust demand across all 3 of our growth pillars. AI Security, Zero Trust Everywhere, and Data Security Everywhere. I will start with AI Security, which includes 2 product areas: AI Protect, our recently introduced solution to secure the use of AI and agentic operations. I will begin with AI Protect, which secures the full spectrum of enterprise AI adoption and solves a range of cyber and data loss challenges. Zscaler ThreatLabz Research found that in calendar 2025, AI application use within our customer base expanded to over 3,400, a quadrupling in the last 12 months alone, with data transfers to AI apps exceeding 18,000 terabytes. Many of these apps have serious vulnerabilities. Zscaler AI Protect gives customers a single integrated way to secure AI at scale by discovering and managing all AI assets, including shadow AI uses, enforcing safe access to approved apps and inspecting every prompt and response in real time to stop data leaks and attacks like prompt injection. For customers building their AI models and applications, our AI Red Teaming solution performs continuous security assessment. This quarter, we integrated our AI Red Teaming and our Guardrail products to provide true closed-loop security. While our Zscaler AI Protect solution is new, we see demand rapidly accelerating, including landing new logos, representing a massive future growth opportunity. This quarter, several large enterprises adopted our solution. In an 8-figure new logo win, we landed a Fortune 500 semiconductor manufacturer. This customer expanded its use of our platform to include AI Protect and Data Security solutions to block access to unsanctioned applications, prevent public LLM data leakage and provide visibility into prompts. Zscaler's integrated AI Protect solution spanning the entire AI life cycle was a key differentiator for this new logo win. In another example, in a 7-figure upsell deal, a Global 2000 construction company, which is securing users with Zscaler, added our AI Protect solution to prevent data leakage and enforce acceptable use controls for access to GenAI applications. The second product area of our AI security is Agentic Operations, which includes our Agentic SecOps and Agentic IT Ops solutions. we are significantly advancing our Agentic SecOps capabilities by integrating Red Canary's agent framework with the deep security insights we generate from the Zscaler Zero Trust Exchange, which processes more than 500 billion transactions every day, more than 20x the number of daily Google searches. This fusion of capabilities simplifies customer operations, automates threat hunting, and provides more accurate, actionable threat prioritization. Some of our wins for our Agentic SecOps solutions this quarter include a leading AI software and research organization, a Global 2000 utilities energy company, and a Global 2000 oil and gas company. In Agentic IT operations, our innovations include Zscaler Digital Experience or ZDX CoPilot, which combines Agentic technology with a conversational interface to troubleshoot and resolve performance issues of applications and network and endpoint devices. Booking for ZDX Advanced Plus, which includes our ZDX CoPilot product, crossed $100 million over the last 12 months, growing more than 80% year-over-year. We are soon launching an AI agent for ZDX that will automate multiple troubleshooting tasks, resulting in faster diagnosis and resolution of performance issues. Overall, I'm very pleased to see growing demand and continued momentum for our AI Security solutions. Our next growth pillar is Zero Trust Everywhere, which includes revenue from customers who are more broadly adopting our Zero Trust architecture by purchasing all of the following: Zero Trust Users, Zero Trust Branch, and Zero Trust Cloud. We pioneered the Zero Trust Users market by disrupting the traditional proxy and VPN markets, and we are a clear market leader. With our Zero Trust Branch, we are disrupting branch firewalls, software-defined networks or SD-WAN and MPLS networks. With Zero Trust Cloud, we are disrupting virtual firewalls in the cloud. We are seeing ARR from Zero Trust Branch and Zero Trust Cloud growing significantly as we dramatically reduce cost and complexity. The number of Zero Trust Everywhere enterprises has grown at a rapid pace and now sits at over 550, up from over 130 a year ago. The pricing of Zero Trust Branch and Zero Trust Cloud are based upon the number of devices, the number of workloads and the amount of traffic, which keeps growing. This expansion also creates a flywheel effect, generating follow-on demand for our Data Security and AI Security offerings. Let me give an example of a Zero Trust Branch win at a subsidiary of a Fortune 500 retailer, who significantly expanded its deployment of Zero Trust Branch to over 1,000 sites in a 7-figure upsell, making it one of our largest ever Zero Trust Branch deals. The use cases for this customer were frictionless M&A integration and rapidly bringing both newly acquired and greenfield sites online. This order also included our AI Protect solution to secure sensitive data from GenAI apps. In Q2, 45% of the total customers who bought our Zero Trust Branch solution were new logos, demonstrating that Zero Trust Branch is helping us grow our new logos. This is also a clear proof that for better cyber protection, customers want each branch to become like an Internet cafe and replace SD-WAN, which is often sold by SASE vendors. Another important part of our Zero Trust Everywhere solution is Zero Trust Cloud, which reduces cost and operational complexity by eliminating virtual firewalls in data center and cloud environments and can be deployed in 10 minutes. We're seeing tremendous momentum for Zero Trust Cloud. To share a customer example, in one of our largest ever Zero Trust Cloud wins, a Global 2000 financial services customer signed a 7-figure deal, increasing their ARR to more than $5 million, up over 40%. Zero Trust Cloud is priced based on traffic, creating a natural path for ARR to grow as customer traffic grows. This deployment will eliminate a large number of virtual firewalls in their multiple cloud environments, which significantly reduces the operational burden of managing firewalls in multiple clouds and improves cyber posture by preventing lateral threat movement. With significant wins, we are proving that for better cyber protection, customers want each cloud workload to become like an island and communicate only through our Zero Trust Exchange and displace virtual firewalls. Our opportunity is to secure millions of workloads. Our third growth pillar is Data Security Everywhere, which is 8 modules, including Data Discovery, Data Classification, Posture Management, and Data Loss Prevention. We are seeing significant traction driven by enterprises consolidating the data security point products onto our integrated platform and simplifying deployments. The growing use of AI apps is making data protection essential, generating strong demand for our solution. Let me share an example. In an 8-figure upsell win, a Global 2000 financial services customer expanded its adoption of our platform by purchasing additional data security modules, strengthening protection for sensitive data across its organization. This customer selected us over well-known competitors to replace multiple legacy point products due to our unified policy for various data sources and channels. With this purchase, the ARR for this customer increased nearly 5x. We believe Zscaler is incredibly well positioned to secure the AI era. As the number of agents expands, the unique Zero Trust architecture becomes even more crucial, minimizing attack surfaces and limiting lateral movement by enabling direct one-to-one communication. In summary, our growth opportunity is straightforward. Traffic flowing through our Zero Trust Exchange for secure communication expands our revenue opportunity. In the agentic era, the traffic from Zscaler's more than 50 million users, servers, cloud workloads, branch locations and AI agents will grow exponentially, driven by billions of autonomous agents. We believe that Zero Trust communication will be the only way to provide the real-time protection customers need to adopt AI safely and securely. We run the largest in-line globally distributed security cloud platform in the world, processing more than 500 billion transactions every day, more than 20x the number of daily Google searches. This proprietary anonymized data is used to train our AI engine, a powerful differentiator to stop ever-changing threats at speed and scale. We provide the global infrastructure, which enables our customers to secure communication and apply policies in real time at wire speed. Today, we are trusted by more than 45% of Fortune 500 companies, and we expect to continue expanding our partnership over time. In addition, with just 4,400 of more than 20,000 largest enterprises in the world as Zscaler customers today, we have a significant opportunity ahead. This gives us a durable runway for long-term growth from both upsell and new logo opportunities. Protecting AI is not just a job or task for Zscaler, it is our mission. We believe Zscaler is the cybersecurity platform for the AI age. Now I will hand it over to Kevin to walk through the financials. Kevin Rubin: Thanks, Jay. We delivered strong Q2 '26 results, exceeding our targets while investing with discipline. With 26% revenue growth and a 36% free cash flow margin, we achieved Rule of 62 performance in the first half of the year, placing us among the elite companies that consistently outperform the Rule of 40. Our Q2 '26 net new ARR was $156 million, up 19%, bringing total ARR to $3.4 billion, up 25% year-over-year. Net new ARR benefited from strength in large deals and volume of deals. In particular, the Americas closed twice the number of $1 million-plus deals this year as compared to last year. Excluding the contribution from our acquisition of Red Canary, net new ARR was $139 million, up 7% year-over-year and total ARR up 21%. These results compared to an exceptionally strong 24% net new ARR growth last year. Red Canary exited Q2 with $114 million of ARR. For the first half of the year, net new ARR, excluding Red Canary, grew 10% year-over-year, accelerating from 1% last year. This quarter, our Zero Trust Internet Access, or ZIA, and Zero Trust Private Access, or ZPA, ARR remained healthy and grew in the mid-teens. We have steadily expanded our Zero Trust platform beyond users to protect branches, workloads, AI applications and now AI agents. We believe AI agents will drive a meaningful increase in machine-to-machine and agent-to-agent interactions over time. In Q2, our non-seat-based metered usage solutions delivered just over 1/4 of new ACV and the ARR tied to those offerings grew more than 100% year-over-year. Revenue of $816 million grew 26% year-over-year and 4% sequentially, exceeding the high end of our guidance. We closed Q2 with 728 customers generating over $1 million of ARR and 3,886 customers exceeding $100,000 in ARR, both growing 18% year-over-year. We also set a record $1 million-plus new ACV deals for a Q2. On a geographic basis, we saw strong growth from the Americas, which accounted for 57% of revenue, up approximately 31% year-over-year. EMEA accounted for 28% of revenue, up approximately 18%, and APJ for 15%, up approximately 23%. Remaining performance obligation, or RPO, of $6.1 billion grew approximately 31%, including approximately 47% classified as current RPO. We are pleased with the strong execution in our account-centric sales motion, which is strengthening our position as a long-term strategic partner and driving deeper customer adoption over time. In Q2, we again delivered double-digit sales productivity growth, reflecting continued improvement in our go-to-market execution with meaningful headroom ahead. We also achieved record pipeline conversion for Q2, signaling stronger pipeline quality and improved visibility. We continued to build strong momentum this quarter with our recently launched Z-Flex program. Z-Flex gives customers with multiyear commitments, the flexibility to activate or swap modules without starting a new procurement cycle, along with premium deployment assistance and support. This program is driving meaningful upsell, shorter sales cycles and greater forward visibility. In Q2, Z-Flex generated more than $290 million in TCV, up over 65% quarter-over-quarter. Since launching a year ago, we have delivered approximately $650 million in TCV at an average 4-year term, underscoring customers' long-term commitment to Zscaler. To share a couple of customer examples, in a 5-year 8-figure Z-Flex deal, a large U.S.-based finance and insurance customer nearly tripled its annual spend by expanding its module adoption across 11 existing modules and adopting 5 new modules, including our AI Security solution. In a new logo Z-Flex win, a Fortune 500 retail customer purchased 11 modules in a 5-year 8-figure deal. This customer adopted all of our Zero Trust solutions, including Zero Trust Users, Cloud and Branch, landing as a Zero Trust Everywhere customer. Turning to M&A. I'd like to start with some color on our recent acquisitions. On February 5, we closed the acquisition of SquareX, which extends Zero Trust capabilities into any browser, enabling organizations to leverage standard browsers like Chrome and Edge to secure access on unmanaged devices without requiring a separate third-party enterprise browser or using outdated and costly virtual desktop infrastructure. Next, Red Canary. On February 1, we executed the next phase of integrating the Red Canary teams with the respective Zscaler teams. Red Canary was primarily a technology and talent acquisition. As we shared when we closed this acquisition, churn for MDR businesses is higher than we experienced in our Zscaler business. Post acquisition, Red Canary's churn has been elevated. We'll be providing Red Canary ARR in Q3 and Q4. Turning to operating performance. Non-GAAP gross margin was 80.2% compared to 80.4% a year ago. Non-GAAP operating income of $181 million grew $41 million or 29% as compared to $140 million last year. Non-GAAP operating margin of 22.2% increased 50 basis points year-over-year, reflecting the sales productivity improvements I mentioned earlier, demonstrating leverage on sales and marketing. Turning to the balance sheet. We ended the quarter with $3.5 billion in cash, cash equivalents and short-term investments and $1.7 billion of debt. In Q2, we generated $204 million in operating cash flow, up 14% year-over-year, and CapEx was $18 million or 2% of revenue. Finally, free cash flow margin was 20.7% this quarter, down from 22.1% last year, driven by the timing of cash collections. Looking ahead, I'd like to spend a minute addressing the recent increases in memory, storage and processor prices and availability. So far, we haven't seen a meaningful impact to our operations. However, it could become a factor in the future as we purchase equipment for our data centers and Zero Trust Branch appliances. We'll continue to monitor our costs and adjust customer pricing if needed. Turning to guidance. Let me provide our outlook for Q3 and full year fiscal '26. As a reminder, these numbers are all on a non-GAAP basis. For the third quarter, we expect revenue of $834 million to $836 million, reflecting approximately 23% year-over-year growth; gross margin of approximately 80%; operating profit of $187 million to $189 million, equating to an operating margin of 22.4% to 22.6%; net other income of approximately $25 million; and earnings per share of $1 to $1.01, assuming a 21% tax rate and 167 million fully diluted shares. For the full year fiscal 2026, ARR of $3.730 billion to $3.745 billion or year-over-year growth of approximately 24%. This guidance implies net new ARR growth, excluding Red Canary, of approximately 9.5%. For Red Canary, we expect ARR of approximately $130 million in fiscal '26, up from our prior guidance of $95 million, with net new ARR of approximately $6 million in Q3 and $10 million in Q4. This includes all the business expected in each period, including fiscal '26 renewals, upsells and new logos. For the second half of fiscal '26, we expect approximately 40% of total net new ARR to be recognized in Q3. Revenue of $3.309 billion to $3.322 billion, reflecting year-over-year growth of 23.8% to 24.3%. We expect Red Canary revenue of approximately $125 million in fiscal '26, up from our prior guidance of $90 million. Operating profit of $742 million to $748 million, up approximately 28% to 29% year-over-year, up from our prior guidance of $732 million to $740 million. Earnings per share of $3.99 to $4.02, assuming a 21% tax rate and approximately 169 million fully diluted shares. And free cash flow margin of approximately 26.5% to 27%, reflecting CapEx in the mid-single digits as a percentage of revenue. We are very pleased with the results we delivered in the first half of fiscal '26. We achieved 25% year-over-year ARR growth and record operating income. Excluding Red Canary, our net new ARR growth accelerated to 10% in the first half of the year, up from 1% in the same period last year. We also saw continued momentum with Z-Flex and closed a record number of $1 million-plus ARR deals for Q2. Looking ahead to the second half of the year, we believe we are well positioned to build on this momentum. We will do this by scaling our rapidly expanding AI Security portfolio, expanding Zero Trust Everywhere adoption, and growing our Data Security Everywhere revenue. Ultimately, we remain focused on driving durable, profitable growth with strong cash generation. I want to thank our employees, customers and partners for their continued support. With that, operator, you may now open the call for questions. Operator: [Operator Instructions] Our first question will come from the line of Saket Kalia of Barclays. Saket Kalia: Thank you, team, for the increased disclosure on Red Canary. Very helpful. Jay, maybe for you. I'd love if you could talk about just the competitive backdrop a little bit and anything you can touch on in terms of competitive win rates and what you saw this quarter. I mean, clearly, this is a rising tide market, but there are other players as well. Maybe the question is, where are you winning? And what impact, if any, are they having? Jagtar Chaudhry: Thank you, Saket. We haven't seen much change in the competitive dynamics over the past few quarters. What we saw was a record pipeline conversion for Q2, which is wonderful. And we also had a record Q2 in terms of large deal wins in Q2, and by large deal wins, I mean, over $1 million. I mean, there's a fair amount of noise the market creates out there, SASE this, SASE that. SASE is a collection of all kinds of products. In many of these SASE numbers, legacy firewalls, VPNs get thrown out. But what we are seeing in the market is our customers care about Zero Trust. And as we engage and explain Zero Trust, we almost always win. And by the way, SASE is not equal to Zero Trust, and Zero Trust is what eliminates lateral movement. So very pleased with the performance. Our brand has grown. Most of the large enterprises like us, they know us. And I think the future is great for us. Operator: Our next question will be coming from the line of Brad Zelnick of Deutsche Bank. Brad Zelnick: Congrats again on another great quarter, guys, and also appreciate the additional disclosure. Kevin, it seems you're raising your full year ARR expectation by more than your overachievement in Q2. How much might be from newer acquisitions? And are there any seasonal anomalies we should consider, perhaps slipped deals out of Q2 or anything like that? Kevin Rubin: Thanks, Brad. I appreciate the comments and the question. First of all, just remember, our business seasonality tends to favor H2. So we are going into the second half of the year feeling confident. We do see a strong pipeline of deals going into the back half, which does give us confidence in the raise, excluding Red Canary. So I would point to strength in the overall business as well as just general seasonality that we see in the back half of the year. Operator: Our next question will be coming from the line of Gregg Moskowitz of Mizuho. Gregg Moskowitz: Also welcome the additional disclosure. So thank you for that. Very interesting that your non-seat-based meter usage solutions are now over 25% of new ACV. That's higher than a lot of people had thought. And with the related ARR more than doubling year-over-year, this has the potential to put some upward pressure on the growth algorithm for Zscaler in the future. But Jay, when you kind of look deeper at these non-seat-based solutions, you gave some good color in your prepared remarks, but can you help us better understand what's really most resonating with customers today as well as what you're most excited about going forward? Jagtar Chaudhry: Of course. Yes, we started early on with Zscaler for users for Zero Trust that is largely seat-based. But now we have Zero Trust for workloads, branches, devices, and now we are extending it to AI agents as well. Now even for users, we did have a number of use cases that are non-seat based. This is ZIA, ZPA, where we were doing third-party contractors, guest Wi-Fi or B2B data exchange with suppliers and customers. And yet our growth on Zero Trust Branch and Cloud has been very strong, and that's all non-user or meter pricing. Our AI Security solutions, which are starting small but growing pretty rapidly, are all non-user-based, rather they are token-based. And yes, we are pleased to say that 1/4 of our new business came from metered usage, and we expect it to grow over time, especially with AI agents, because we believe that there will be billions of AI agents. The only way to secure communication of AI agents is to go through Zero Trust Exchange that scales, that's highly reliable and globally distributed, and that's what we have. Operator: And our next question will be coming from the line of Brian Essex of JPMorgan. Brian Essex: Another set of kudos to Kevin for the organic versus inorganic disclosure. Maybe a question for you, Jay, and we saw this quite a lot during -- like a decade ago when digital transformation was the buzzword and a lot of different IT projects were classified as digital transformation products. Similarly, we're starting to hear of a lot of projects where executives are throwing AI on top of their projects to get more budget. And from that perspective, are you beginning to see any attach to budgets outside of security? How are CIOs thinking about funding some of these projects? And is Zscaler a beneficiary of that? Jagtar Chaudhry: Yes. So we are seeing CIOs trying to really move as fast as they can to implement AI security projects. The kind of feeling is, if I'm not doing something, I'll be left behind. That's a clear thing I see as I talk to lots and lots of them. But they do all worry about cybersecurity, especially when you see all these agents showing up every other week. I mean, last night was Perplexity Computer and Claude before that and all these guys keeps on coming. They are definitely creating security issues. So our customers are asking us, what can you provide me for visibility into AI assets and risk associated with that. And then start moving around. How do we control agents? How do we have a policy that can say certain agents can access certain applications. Agents are somewhat like you. They're just more dangerous, and they're growing at a rapid pace. So there is a high degree of interest in proper security, especially Zero Trust or agents that we provide. The budget opens up. The budget either comes from the security side of it or the CIOs are allocating some number of budget out of the AI project. If you're spending $100 on an AI project, you spend $4, $5, $6 on security is viewed as very nominal thing. So we're not seeing budgets as an issue to do AI security projects. It does require that you need to engage at the C level, and we have very good C-level relationships. And we have pretty good brand and credibility with Fortune 500 companies. Operator: Our next question will be coming from the line of Meta Marshall of Morgan Stanley. Meta Marshall: Maybe a question for me, kind of following up on Brian's question of just what you're seeing in terms of sales cycles once kind of a deal is encompassing more AI. I guess just how does it change the dynamic of either kind of needing to take a more holistic view or needing to include more modules? Just what are you seeing there? Jagtar Chaudhry: Thank you. So sales cycle depends on the scope of the project. The first thing our customers are trying to do is put their hands around what do they have in AI environment, what public AI application is being used and what private AIs are being used. So for that, we offer AI asset management. Then they want to do vulnerability assessment, teaming kind of stuff. As they roll out the project, guardrails become important. Last month, we launched a very integrated AI security portfolio. The sales cycle based on what modules they're doing is generally faster, because they are not really trying to go after everything, they want to start somewhere, but they want an integrated solution. And a number of customers have told me, hey, we bought this solution from a start-up, but for 1 year, until I figure out what integrated solution can I get from a trusted vendor like Zscaler, who will be around for the long term. So these sales cycles are faster. They are smaller deals to start with, and I think they'll grow over time, especially most of those deals are based on consumption or tokens. And as usage grows, users or tokens will grow. Operator: And our next question will be coming from Fatima Boolani of Citi. Fatima Boolani: Kevin, this one is for you. I was hoping to take a step back to have you reconcile the comments around Red Canary seeing elevated churn, but also the close to 30% revision on your financial contribution expectation from Red Canary, both to ARR and top line on revenue. So just wanted to kind of better understand. I know you sort of flagged that the Red Canary business generally had much higher levels of churn relative to Zscaler proper. So I just kind of wanted to better understand the dichotomy between those statements and if you can opine on that. Kevin Rubin: Yes, I appreciate the question. So look, I mean, there is an element here that, as we talked about when we did the acquisition, as we do secure the renewals, there is a positive impact to ARR. And so you are seeing some of that come in. My commentary just around the elevated levels of renewals is just to give color around what we are seeing. As a reminder, Red Canary was a technology and talent acquisition, and it is a core feature of the Agentic SOC that we are putting together and combining. And I mentioned that we moved into the next phase of our integration earlier this month and now consolidating those teams, which we're really excited about. So I mean, the reconciliation is really just to give you guys a sense for what we're seeing in the business and how you should think about the second half of the year. Operator: And our next question will be coming from the line of Roger Boyd of UBS. Roger Boyd: Jay, I want to touch on sales productivity. You've made a number of changes to the go-to-market strategy over the past year in order to really help guide customers towards more transformational projects. And I know you mentioned another improvement this quarter, but can you talk about kind of the future ramp you're expecting in terms of sales force productivity? Do you see further room to upside given the push towards more of these transformational deals that are bigger, but maybe more complex? Jagtar Chaudhry: I'll give you a broader view, and Kevin can get into more specific stuff. With the changes we have gone through, we are driving more transformational deals, better engaging with our customers. With that, you're seeing bigger deals, Z-Flex type of deals that are happening and that's leading to improved productivity. In fact, rather, we had a double-digit sales productivity growth. Very pleased with the way sales transformation has happened. As we said last quarter, the transformation is done. Now we keep on executing further. Kevin? Kevin Rubin: Yes. Thanks, Jay. So I want to just kind of double-click on that last point, right? So as we engage with our customers, the account-centric model is a much different level of engagement. We're seeing a lot of interest in Z-Flex and what that looks like from a strategic point of view. And so the nature of the conversations, the way in which we're engaging, the larger deals that we're seeing all will lend itself to continued productivity opportunity going ahead. So as I look forward, I would expect that we will continue to see improvement in productivity as a result. So we are seeing the benefits, and I expect that we'll continue to see an improvement over time. Jagtar Chaudhry: And if I may add, the record pipeline conversion in Q2, as a good indication of that what we want to do is working. Record $1 million dollar deals in Q2, another indication of the results we're getting. Operator: And our next question will be coming from Ittai Kidron of Oppenheimer & Company. Ittai Kidron: Kevin, I wanted to dig in into your comment on the core ZIA, ZPA growth. I think you mentioned mid-teens in ARR. Can you give us a little bit more color what was that growth rate over the last 2, 3 quarters perhaps? And how do we think about expectations for your core ZIA, ZPA business for the next 2, 3 quarters? Kevin Rubin: Yes. Thanks, Ittai. I appreciate the question. We have seen a pretty consistent performance in ZIA, ZPA. We did get some feedback that it would be helpful for you guys to get a little bit more color in that regard, which is why I added that into the script. Keep in mind that ZIA, ZPA as it relates to Zero Trust Everywhere is the foundation and, to a large degree, the base and the opportunity. If you look at the number of customers that we have today, roughly 4,400 out of more than 20,000 potential companies that we think can be customers, you look at it in terms of the Fortune 500, where we still have over half of those to prospect against, there is a massive opportunity left with ZIA, ZPA as we think about it. And even within the companies that we do have on ZIA, ZPA, we have an opportunity to upsell those to Zero Trust Everywhere and then adjacently through the other pillars, Data Security and AI. So from our point of view, it just reiterates the stability in the underlying business and really gives a sense for what's driving kind of the core of the business. But again, we've got these other 3 growth pillars that have been doing exceptionally well. And hopefully, that additional color is helpful for you. Jagtar Chaudhry: One interesting stat on ZIA is that customers on average are tripling their initial purchase in 4 years. That's pretty remarkable. Operator: And our next question will be coming from Gray Powell of BTIG. Gray Powell: Okay. So I want to follow up on some of the earlier questions, and I think you've hit on this somewhat. So you are seeing a lot of momentum in Z-Flex deals. If I'm doing the math correctly, I'm calculating that Z-Flex was over 30% of RPO bookings. I'm not sure if that's how you look at it. But I guess the question is, how does the ARR ramp on a Z-Flex deal compare to customers under historical contracts? And then just any directional commentary you can give on how big a typical Z-Flex customer is at maturity versus traditional or like what they spend? And what's sort of like giving you the most upside from a product perspective? Kevin Rubin: Yes. Thanks for the question. Let me maybe just orientate -- I mean, the way that we look at Z-Flex is it is another opportunity for us to offer a package to a customer that we think is mutually compelling. It gives them flexibility, so they have less concern about being locked into a particular product or product decision in the future. It gives them an opportunity to focus more on long-term partnership versus more transactional selling in nature. And then it does give an opportunity for them to try, in a much easier, less friction way, new modules and expand into those modules. So from a from an offering perspective, it is a much better and more strategic way to engage. We do think over time that more and more of our customers will adopt Z-Flex. It is not something that we mandate or push, but where we feel that it really is well positioned, the field is enabled to be able to offer Z-Flex going forward. Your question around differences in ramps, et cetera. Fundamentally, 2 deals, if it's a Z-Flex or if it's a non-Z-Flex, so long as they're similar structure, there's no difference in how that shows up in ARR. Z-Flex is by their nature, because they're longer term, they've got more products, they may have a ramp that is built in, so that the customer can deploy along their deployment plan, which could take anywhere from 6 months to a year. But I wouldn't think about Z-Flex is creating a different dynamic with respect to ARR other than it's just another level of indication that we are very strategic in that environment. The average Z-Flex deal is typically an 8-figure TCV commitment. And for those deals that we've done thus far, it's been about a 4-year period. As we've talked about, they tend to be 3- to 5-year deals. And right now, the average is about 4. So hopefully, that's helpful color. Operator: And our next question will be coming from the line of Jonathan Ruykhaver of Cantor Fitzgerald. Jonathan Ruykhaver: So I think, Jay, this is for you. Just curious, when you look at SquareX, from my understanding, you're embedding browser security via an extension rather than having a dedicated secure browser. Can you just talk about that? It seems like the flexibility could be a plus, but is there any trade-off between control and functionality between extension and full browser? And then just curious also on your view of how critical is the browser layer to winning broader Zero Trust deals over the next couple of years? Jagtar Chaudhry: Thank you. Very good question. So we have been offering Zero Trust Isolation solution using any standard browser for managed and unmanaged devices. Managed, no problem. Unmanaged devices means they were using their standard browser. Some customers wanted something like a device posture check on an unmanaged device. And for that, one option was you buy a full-blown enterprise browser from a third party. We looked at some of those acquisitions a couple of years ago. We did not like it. Full-blown browser with its own vulnerabilities and customers don't like one more agent, or in this case, this is one more mega agent on their endpoint. So what we found was with SquareX acquisition, we could add the security functionality such as device posture check using browser extensions on unmanaged device. It's a wonderful use case, but generally for third-party type of stuff for us. So it's a clean, better solution rather than trying to have full-blown third-party browser. And it really takes care of the gap that we have in this environment. So we think it expands our TAM. We have lots of customers who are using browser isolation. This actually will help us expand it to handle some of the third parties who will come from unmanaged devices. So very pleased with the acquisition and the fit and the early market reaction to it. Operator: And our next question will be coming from the line of Eric Heath of KeyBanc. Eric Heath: Maybe I wanted to come back as an extension to Gregg's earlier question thinking about AI agents. So AI agents will drive a lot of network traffic. So Jay, Kevin, just how should we think about how you can monetize that increased traffic? And Kevin, how we should think about it impacting the model over a longer time period? Jagtar Chaudhry: Yes. Thank you. We think these agents that are growing at a pretty rapid pace will generate a fair amount of traffic. The traffic means they're going to access application A or B, or one agent is going to talk to a second agent. In order to do that, we believe the best security is that they should be going through a zero trust exchange, so that a given agent can only talk to a given agent or applications. Otherwise, imagine one infected or hijacked agent will infect the whole enterprise. That's the biggest value we bring to the table. The more agents, the more agentic traffic, the more value we deliver, and the better revenue opportunity for us. So we look at it as probably the biggest upside for growth of Zscaler business. Operator: And our next question will be coming from the line of Matt Hedberg of RBC. Matthew Hedberg: Strong results you're raising, Kevin, you said by more than the beat. But I just had a clarification on ARR. I just want to make sure that I'm not missing anything. It looks like you raised the ARR midpoint by $30 million. But it looks like in the disclosure, and maybe this is where I'm mistaken, but it looks like you took your Red Canary expectations up from $95 million to $135 million. So to me, that looks like a $35 million raise. So am I interpreting that right? Because I'm just not totally certain about what kind of the organic raise here is for the year. Kevin Rubin: Yes. No, I appreciate the clarification. If you look at this on an organic basis, we are raising the organic net new from 6.7% as our initial raise in the beginning of the year to 9.5% growth for '26. So yes, there is some element of Red Canary that is mechanically inherent in the raise. But the underlying growth and strength in the organic business, giving us confidence to raise to 9.5% net new growth this year is what you're seeing fundamentally in the raised guidance. And keep in mind, just in the first half of this year, net new without Red Canary grew 10% against the backdrop of last year, where it grew 1%. So we are seeing very healthy acceleration in net new ARR growth, both first half and signaling for the back half. Operator: And our next question will be coming from the line of Keith Bachman of BMO. Keith Bachman: Okay. I broke up a little bit there, but I want to go ahead and ask a question about Zero Trust Everywhere. And Jay, the question for you is how significant could this be? You're at 550 customers now, you were at 130 a year ago. Two dimensions of the question are, a, what's the average ARR uplift that you experience when a customer goes to Zero Trust Everywhere? Is there some kind of lift that you could help guide us on? And then how deep do you think this could get with your installed base? What's the potential reach here? Jagtar Chaudhry: Yes. So first of all, we are very pleased with the number of customers becoming Zero Trust Everywhere customers, the number 550 is very good, and these are enterprise customers. They are large customers out there. In terms of lift on ARR, I think we even shared last quarter that we are seeing 2x to 3x essentially move in the ARR when customers are moving to Zero Trust Everywhere, which is very good. In terms of potential out there, I can tell you, a year ago, when I was talking to customers about Zero Trust launch, which essentially replaces MPLS or SD-WAN, I was wondering how many customers will be saying, I love my SD-WAN, okay? I can tell you, I don't find any Zscaler customer. Now these are our customers. They all want to replace SD-WAN for cost reasons and for security reasons. Remember, SD-WAN enables lateral threat movement. So interest is very high in the Branch. On the Cloud side of it, too, it's a fascinating new disruptive play. We have literally no real competition other than old school firewalls and trying to do firewalls in the cloud with IP address and ACL is a nightmare. So we're seeing that traction going. So very bullish on both Zero Trust Branch and Zero Trust Cloud. So I would love to see that every Zscaler customer in a matter of time will be a Zero Trust Everywhere customer. Operator: And that concludes our Q&A session. I would now like to turn the conference back to Jay Chaudhry, CEO, Chairman and Founder, for closing remarks. Jagtar Chaudhry: Thank you for joining us. We look forward to seeing you at one of the investor conferences we'll be attending. Thanks again. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Enovis Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kyle Rose, Vice President of Investor Relations. Please go ahead. Kyle Rose: Good morning, everyone. Thank you for joining us today for our fourth quarter 2025 results conference call. I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call today are Dami McDonald, Chief Executive Officer, and Ben Berry, Chief Financial Officer. Our earnings release was issued earlier this morning and is available in the Investors section of our website, enovis.com. We also posted a slide presentation in relation to today's call, which can also be found on our website. Both the audio and slide presentation of this call will be archived on the website later today. During the call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. For further details regarding any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and in the appendix of today's slide presentation. With that, let me turn it over to Damien. Damien? Damien McDonald: Hey, thanks, Kyle. Good morning, everyone, and thank you for joining us today for our fourth quarter and full year 2025 earnings call. Our results reflect strong performance across our global organization. It was a year of meaningful change and progress for the Enovis family, and I'm encouraged by our increasingly focused execution and the opportunities in front of us. We've transformed and reshaped our portfolio in a short amount of time, and 2025 was a pivotal year in moving from integration to execution. Since I joined in May, we've leaned into 3 key priorities: commercial execution, operational excellence and financial discipline. They have guided our strategy and remain the foundation of how we are building a more profitable, capital-efficient growth engine. As part of this work, we are embracing a One Enovis operating mindset, working collaboratively across the company to improve performance, standardize commercial processes and embed our EGX business system more deeply into our daily work. This shift is foundational to both our growth trajectory and margin expansion. Our highlights for the year include organic revenue growth of 6%, with 8% organic growth in Recon, reflecting above-market performance across anatomies. Prevention and Recovery accelerated to 4% organic growth in a market we believe is growing closer to 2%. We also had a solid year operationally. We maintained adjusted EBITDA margins at 18% despite the dynamic global operating environment and the impact of tariffs. As planned, we returned to positive free cash flow of $20 million in 2025, which places us firmly on our path towards our long-term free cash flow conversion targets. Fourth quarter revenue grew 3% on a reported basis and 2% organically. Recon grew 3% and Prevention and Recovery was flat. It's also important to note our fourth quarter had 4 fewer selling days than the prior year, which represented a headwind of 400 basis points to organic growth. In U.S. Recon, we grew 6% on an organic basis in 2025, led by double-digit growth in extremities. Our augmented reverse glenoid system, ARG, continued to gain traction and was key to driving double-digit growth in shoulders. What's exciting here is we have a robust pipeline to support a multiyear cadence of innovation and extremities, and we expect sustained growth in this area. In Hips and Knees, we grew 6% in implants, adjusting for the prior year sales of enabling technology, and we continue to reinforce our portfolio to compete across hospital and ASC settings. In 2025, we launched the Nebula Stent and the OrthoDrive Impactor, and they are performing well early in the adoption cycle. Over 60% of Nebula sales in 2025 were to competitive users, and we expect to more than double the installed base of OrthoDrive in 2026. Internationally, we grew 10% in Recon on an organic basis, including high single-digit growth in hips and knees and double-digit growth in extremities. We're executing across the cross-selling synergies we targeted in each anatomy and are positioned for sustained above-market growth rates in 2026 and beyond. Innovation remains key to our strategy. In 2025, we had 50% more 510(k) clearances than our best prior year. Looking ahead, we have a robust pipeline of new product introductions planned for the next 24 months. We'll showcase many of these innovations, including Arvis at the AAOS conference next week in New Orleans. We plan to deploy Arvis through a flexible business model, purchase, lease per procedure or implant commitment with the primary goal of driving implant utilization. Now moving to P&R, which on an organic basis grew 4% year-over-year in 2025. Global Bracing grew 3%, driven by revenue cycle management, upper extremity and spine bracing. BoneStim was another source of strength for the year, delivering double-digit growth. With the sale of Dr. Comfort in the fourth quarter, 50% of our revenues in P&R are growing higher than mid-single digits. So there's a lot to be excited about across the portfolio, and I'll now turn it over to Ben to walk through the financial details. Phillip Berry: Thanks, Damien. Hello, everyone. We reported fourth quarter sales of $576 million, up 3% versus the prior year on a reported basis and 2% organic growth. As Damien highlighted and as we outlined at the beginning of the year, growth in the fourth quarter was artificially low given the trade-off of 4 selling days between Q1 and Q4. With this dynamic in mind, I'll focus the majority of my comments on the full year results. For the year, we generated $2.2 billion of sales, which represents 7% reported growth, including a 140 basis point tailwind from foreign currency and an 80 basis point headwind from divestments. Organic growth for the year was 6%, led by above-market growth in Recon at 8% and solid mid-single-digit growth from P&R at 4%. Adjusted gross margins increased to 61%, an improvement of 170 basis points, driven by favorable mix, ongoing productivity and realized synergies in our manufacturing and supply chain operations. This was slightly diluted by tariff impacts as we absorbed, mitigated and offset a portion of the roughly $15 million of tariffs we paid in the year. Adjusted EBITDA margin was 17.9%, flat year-over-year as we increased R&D investments, particularly in Recon enabling tech and were unable to fully mitigate the impacts from tariffs. Tax rate for the year was 23.5%. Interest expense was $35 million, down from $57 million last year. As a result, adjusted earnings per share was $3.30, up 16%, driven by gross margin expansion and reduced interest expenses. In the quarter, we recorded a noncash technical impairment of goodwill of $501 million after evaluating the company's stock price and market capitalization relative to the carrying value of our operating units. As stated last quarter, these impairments do not have any impact on Enovis' liquidity, cash flows, debt covenants nor does it have any impact on future operations. We remain confident and optimistic in the long-range plans and positive trajectory of the company. In 2025, we delivered higher sales and earnings than our original guidance. While it was a dynamic operating environment with tariffs, currency fluctuations, abnormal quarterly selling days, we believe the company demonstrated resilience as we continue to make progress towards our long-term goals. From a growth perspective, we were very pleased to see accelerated growth in our P&R segment. Positive portfolio mix and shaping moves that we've executed over the last several years are reading through to top line results. In Recon, we delivered double-digit growth in U.S. Extremities and International Recon. We've been deliberately diversifying and constructing this segment to be a robust growth driver for Enovis with a weighted average market growth rate above the industry norm. In U.S. hip and knee, we've been rejuvenating the portfolio to fill product gaps in hip and enabling technology. Implant growth for the year was 6%, slightly above market, and we're encouraged by the early results from the launch of Nebula and OrthoDrive. As detailed on prior calls, we were delayed in the rollout of Arvisin 2025 and are eager to begin ramping the enhanced product over the course of 2026. Our adjusted EBITDA remained at 17.9% for the year with strong underlying operating performance from positive product and segment mix executed productivity projects and Lima synergy capture. These improvements were offset by increased investments in R&D to support future growth as well as negative impacts from tariffs in the year. We continue to see a clear pathway to 20% plus EBITDA margins driven by positive business mix, productivity and leverage as the business continues to scale. We generated 10% free cash flow conversion in 2025 after a negative 43% in the prior year, as integration efforts are continuing to step down. Leverage has dropped to 3.1x. And in Q4, we were able to successfully refinance our TLA, upsize our revolver and maintain low interest rates on our debt. We will continue to focus on disciplined capital allocation as we climb the cash flow conversion curve and bring leverage levels below 3. Turning to guidance. We expect 2026 to be another year of strong execution and expect revenues in the range of $2.31 billion to $2.37 billion. This includes mid-single-digit organic revenue growth of 4% to 6% year-over-year, inclusive of high single-digit growth in Recon and low single-digit growth in P&R. We expect positive currency tailwinds of 0.5% to 1.5%. And as a reminder, we will have a $41 million headwind in revenues from the divestiture of Dr. Comfort in October of 2025. On margins, we are expecting adjusted EBITDA in the range of $425 million to $435 million, 50 basis points of margin improvement versus prior year. Depreciation is expected to be in the range of $118 million to $122 million. We expect interest and other expenses to be in the range of $30 million to $32 million and an adjusted tax rate of approximately 23% in 2026. Along with these estimates, we expect a share count of approximately 59 million and are forecasting our adjusted earnings per share range to $3.52 to $3.73. Additionally, we expect free cash flow conversion as a percentage of adjusted net income to be 25% plus in 2026, while supporting the final year of substantial investments to integrate Lima and fuel growth. To summarize, 2025 was a dynamic year for Enovis, and our results highlight the power of our diversified portfolio and the continued progress we're making towards sustainable, profitable, capital-efficient growth. Kyle? Kyle Rose: Thanks, Ben. In an effort to accommodate everyone in the Q&A session and keep things to a reasonable time. We ask that analysts keep the questions to one question and one follow-up. You're welcome to rejoin the queue and we will fit you in if we've got time. With that, we'd like to now open the call up to questions. Operator? Operator: [Operator Instructions] The first question comes from Vik Chopra from Wells Fargo. Vikramjeet Chopra: First one, great to see the progress on the free cash flow conversion in 2025. You're now targeting 25% plus for 2026. Can you maybe talk about the specific operational improvements or working capital initiatives that are expected to drive the significant step-up? And then I had a quick follow-up, please. Damien McDonald: Vik, thanks for the question. As you can imagine, we have leveraging our business system, we always have productivity projects in place trying to drive efficiencies and improvements across the board. One of the main drivers of improvement this year, as I mentioned, is we'll continue to step down integration-related costs. Last year, 2025 was the last material year of investments for European medical device regulation remediation. So those costs are stepping down as well. We'll continue to drive efficiencies where we can in working capital. There's some headwind there as the business shifts more towards Recon as it carries higher working capital and CapEx investments, but we can offset that with productivity across the board and across the other business segments. So we still see a clear pathway to the 70% to 80% free cash flow conversion targets that we've laid out, and we believe 2026 is a critical step in the right direction towards those goals. Vikramjeet Chopra: A quick follow-up on Arvis. Can you talk about what's your view on how quickly Arvis can grow in 2026? And are you on track for the next-gen Arvis launch in 2026? Damien McDonald: Yes. Thanks, Vik. So actually, we're excited about starting the rollout of this at AAOS next week. And you think about it in phases, rolling out domestically in 1H, rolling out internationally in 2H. There's -- as we said in the script, there's a model flexibility here. So it's not just going to be straight capital sales. What we're really looking to do is drive implant utilization. So there's not a line of capital sales that we're really targeting. It's a flexible model. We know that one of the key advantages of the product is that it's mobile, it's capital efficient. And so we want to make it as easy as possible for people to use more of our implants. So watch this space. I think we're seeing you next week at AAOS, and the team, we're excited about showcasing this. Operator: The next question comes from Jeff Johnson from Baird. Jeffrey Johnson: Maybe almost staying on the same focal points there, the 2 same focal points. U.S. hip and knee business, you guys have a nice slide in your deck this quarter that shows kind of all the adjustments on selling days and some of the Arvis headwinds. You were very consistently in that 5% to 7% range on U.S. hip and knees if we make those adjustments every quarter of '25. Is that roughly the area you're thinking this year? And would there be any opportunity for Arvis to push that a little above that? Or would you expect that multi-pronged Arvis strategy to fit more with some placements and maybe implant commitments? Damien McDonald: Yes. I'm excited about what I think we can do here. Firstly, the hip and knee expansion, we talked about this with the Nebula and OrthoDrive. Hip is exciting for us. And I think we've said before, 50% of our knee surgeons don't use our hip. So having that portfolio gap filled, I think, is important just for our existing customers. And as I mentioned, 60% of our placements were conversions from competitive hip users. So I think hip of itself has some runway. And then with Arvis, we're expecting the knee focus and then ultimately, the shoulder focus to really lift that whole -- that whole U.S. group. Jeffrey Johnson: And maybe one follow-up, Ben, just on the cash flow question. You did talk in prepared remarks around 510(k) numbers where filings were up quite a bit in 2025. Obviously, this multi-pronged Arvis could cost maybe some cash upfront depending, I guess, on how placements look versus actual outright sales. And Ben, as you take that 25% free cash flow conversion to 70% to 80% over time, are we still set up where we should iteratively over the next few years, continue to see improvements? Or do we hit kind of a ceiling for a couple of years as you work through a couple of these heavy launch years and the initial Arvis strategy? Phillip Berry: Yes. Thanks for the question, Jeff. We see it as continuing to drive incremental improvements in our conversion over the next several years. So we would expect it to continue to accelerate as we get closer to that 70% to 80% goal. Now it's going to take us a couple of years to get there. But overall, I think you'll see us continue to take steps towards that direction year-over-year. Like I said in my prepared remarks is that we still have one more, I'd say, substantial year of investment to integrate Lima, especially as we continue to finish a lot of the executed projects that we had identified across the supply chain to make our supply chain more efficient on the Recon international side. So we'll see continued improvements on free cash flow conversion, and we'll be able to absorb all of those impacts that you described with regards to Arvis and some of the investments that we need to make. One of the great things about Arvis is its very capital light. So one of the opportunities for us is to really be aggressive with this to drive penetration. Operator: The next question comes from Vijay Kumar from Evercore ISI. Vijay Kumar: Congrats on a nice execution on the margins here. Damien, maybe my first question is, was there any cadence issues in the Q4 and any impacts on utilization in -- when you think about Q1, you did mention days impact. I know weather has been a topic. So I'm curious on how we're thinking about Q1 kind of issues impacting organic. Damien McDonald: I'll take a bit of this, and then you can jump on in, Ben. By the way, good morning. Thanks, Vijay, for being on. So Q4, look, there was no underlying change in markets. We performed seasonably lower than our historical data. And if you look at the range shift that we announced back in January, it was basically 1 trading day impact. And the impact was segment, geography and product agnostic. So we didn't see any change in the dynamics at all. It was entirely related to just the way the days fell as we finished the year. Do you want to talk about? Phillip Berry: Yes, Q1 in 2026, Vijay has 2 less days. Q2 has 1 more day and Q4 has 1 more day. So no selling day impacts for us for the full year, but there will be a little bit of a softer impact given the 2 less days in Q1 and the super high comp that we have from 2025. Yes, we, like everyone else, are experiencing some of the weather dynamics that are happening that are putting elective procedures on hold. We think most of that gets recovered in the quarter. And overall, what we've seen so far in terms of the business performance is in line with our expectations. So overall, we think it's going to be another solid year for market performance. And I laid out the day's impact for you there as well. Vijay Kumar: And then maybe, Ben, one on the margins. Gross margins came in nicely in Q4, beat Street estimates. Was this just a mix impact? Or can you talk about sustainability? Do you expect gross margins to expand in fiscal '26? Phillip Berry: Absolutely, Vijay. I think from our perspective; this is really starting to read through a lot of the shaping moves that we've been making as a company over the last several years because the things that Damien mentioned with regards to P&R growth where about half of our portfolio is now mid-single-digit growth. A lot of that comes with products that carry higher than fleet average gross margins in the P&R segment. We're several years into embedding our EGX business system now in the P&R side of the business. You're seeing productivity start to read through. I also mentioned in my prepared remarks that we got synergy capture from Lima that we still see opportunities to drive margin improvements on the Recon side through further activities there. And the mix of extremities growing faster than hip and knee as well as it carried higher gross margins. So the business is really set up to drive positive mix, but that doesn't mean that we won't also be driving productivity and other opportunities to drive gross margins higher over time. That's part of our formula to get to the margin expansion that we lay out from an expectation standpoint every year. So overall, yes, we expect gross margins to go higher, and there's a lot of tailwinds that are supporting that while we're having some headwinds like tariffs that we're having to absorb. Operator: The next question comes from Robbie Marcus from JPMorgan. Robert Marcus: Two for me. First, can I follow up on the fourth quarter comments, and I just want to flush this out a little bit. You say that it boiled down to the miss essentially 1 selling day. We didn't see that happen to any of the other orthopedics peers. So do you think it was simply a selling day misforecast on your end versus what you thought you could do? Or was it due to some products coming in below expectations and that in the end amounted to 1 fewer selling day? Damien McDonald: Yes. Look, it's really simple. We just didn't execute. We missed it by a day as the way the days were falling with where Christmas was. Look, all of that is -- we just didn't execute. And we've got work to do there. I'm new into the gig, and we're working on our disciplined execution. And the first thing I've talked about is commercial execution. And so that's why I say it was segment, geography and product diagnostic. We've just got to get a bit better in how we execute. Robert Marcus: Great. So maybe on that, 2025 ended up at the low end of the initial guidance range. As you set the guidance range for 2026, how are you thinking about the conservatism of this guide? And what are some of the puts and takes that get you to the high end and the low end? Damien McDonald: Well, look, there's a -- pretty dynamic environment. So we've tried to be conservative in our guidance. I mean we know there's a lot of moving parts for everyone. So our approach has been to be conservative. But to the upside, again, we'll point to where we're going with hips and what we're doing with the Nebula opportunity. We're very early in that release. The shoulder compatibility, we now have an implant system that's got basically 3 very great systems, the Prima, the SMR, AltiVate are all completely compatible, and we've only just started that rollout across our shoulder surgeon base. And towards the end of this year, the OUS hip, the Optimus Stem and the RM Cup, we'll be bringing that to the U.S. and that's a great product portfolio given that it's got phenomenal 10-year data. So on the Recon side, we think we've got a lot of runway. On the P&R side, there's reimbursement tailwinds on cold therapy and OA that we're liking. We're really excited about what the team is doing with Manafuse for BoneStim. So again, to the upside. To the downside, we all watch the socials and let's see what happens. But we're doing what we can do to and the things we can control, which is to drive the upside. And as I said, focus on commercial execution. Operator: The next question comes from Danielle Antalffy from UBS. Danielle Antalffy: Damien, I wanted to ask a high-level question of you that has, to some extent, to do with capital deployment. But -- you're now almost a year into this. At a high level, as you take a look at the portfolio and where you sit today from a product breadth of portfolio perspective as well as your competitive positioning, where do you see the most need for whether it's improving execution, continuing to fill out product gaps? And how do you expect -- how do you plan to address that organically, inorganically, what have you? And then I did have one follow-up. Damien McDonald: Sure. Well, look, again, on commercial execution, I think it's in each of the business units, we've got an opportunity to improve where we're going with commercial execution. Now it could be about how we target and segment. It could be about how we do account acquisition and account penetration, two of my favorite metrics to track. And it could be just how we think about positioning and the way we go about putting the various new products into the market and being very specific about our messaging. So there's a lot of opportunity across the board. And each business unit, as we're working into the new year and doing our reviews, we're very focused on that commercial execution. The NPI, the new product introductions are really looking good for us, and we talked about the 510(k)s last year. We've got a really rich pipeline that we're excited about with this cadence of new product launch. A lot of the way I see the orthopedics market is you don't have to do home runs. You have to be good at singles and doubles, and we are working hard to get the cadence and the prioritization of those singles and doubles so that when you walk into a clinician and they say, "hey, what's new," we can talk about that. And I'm very excited about that. Now are we looking for things that tuck in? Yes. But as we've said very emphatically, our capital allocation priority is to reduce debt. So it will be unlikely we do anything unless it's a generational opportunity. And like if we miss it, it will pass us by. But our focus is for capital allocation is debt reduction. And we like the way we can fill in the portfolio with our organic pipeline. Danielle Antalffy: Okay. Got you. And then P&R, you mentioned 50% of the portfolio. I think you said growing mid to-high single-digits. How sustainable is that? And should we -- because I think of this business more as sort of low to mid-single-digit growth so that's faster than what I was thinking. And can more of the portfolio get there? Or how are you thinking about that? Damien McDonald: Yes. Look, I think we've used the word shaping the portfolio. And I think this is where we're going to continue to work not only on product rationalization and SKU rationalization to keep moving up the gross margin curve. But the growth here is important. And now, as we said, 50% of the portfolio is mid-single digit or greater. There's a lot of opportunity for us to continue that. And it comes with our geographic expansion. We have a new leader in Europe who is really bringing a lot of thoughtful and exciting new ways of thinking about the markets. So I like our chances here just in the base portfolio. And as we said, we've launched some recent new things like Manafuse and BoneStim, which is growing very nicely double-digit, and I think has a lot of runway. Phillip Berry: Yes. I would just jump in there, Danielle. I mean it's one of the critical aspects as we think about continuing to construct a portfolio that can get to consistent high single-digit growth capability. The more P&R is growing, the more it helps us to get to that equation given that the Recon business is already growing high single-digits plus. So overall, we've built the portfolio with that in mind to get to high single-digit consistent growth opportunity and continue to shape the organization towards that end. Operator: The next question comes from Mike Matson from Needham. Joseph Conway: This is Joseph on for Mike. Just a couple of product-related questions. I guess, BoneStim, and the laser product, I believe both at least you called out growing at double-digits. I'm just wondering how that growth compares to the market growth rate for those 2 products, respectively. Damien McDonald: Yes. Thanks, Joseph, for the question. We think we're slightly ahead of market in both categories there. With the introduction of Manafuse on the bone growth side, we have a more comprehensive portfolio to really address market opportunities, but this market also has a great opportunity in terms of penetration as well. So overall, we're excited about the future of that portfolio. LiteCure has been a good story from us. We acquired this back in 2022, I believe, or maybe even before that, and it continues to be a really strong performer for us. And we still see lots of opportunity there, not only from the current product line, but as we continue to refresh it with innovation as well, we'll continue to see higher growth rates than the fleet average driven by that product line. Joseph Conway: Okay. Great. And then maybe just on the Optimus launch, how are you guys looking at that in terms of hip growth? Does this kind of keep Enovis at that above-market growth rate? I think around double the market growth rate; I think you called out. Is this an acceleration opportunity? Yes, just wondering how you're thinking about that launch at the end of the year. Kyle Rose: Joe, this is Kyle. Yes, look, we've got a long runway with Nebula. Last year was the first year where we put Nebula and OrthoDrive into the market. So we've got significant plans to continue pushing there. From a longer-term perspective, at the end of this year, we'll bring the first component of Optimus and the RM Cup to the United States market. So it's more of just highlighting the strength in the longer-term pipeline we have. So a lot to be excited about on the hip side. Operator: The next question comes from Keith Hinton from Freedom Capital Markets. Keith Hinton: So I have 2 questions. One is kind of high-level strategic and the next one is more financial. So starting with the strategic question. With regards to the One Enovis initiative, can you just talk about how you're planning to exploit synergies between the two segments between Recon and P&R, both on the revenue side and the cost side, and if you want to differentiate U.S. versus OUS as well? Damien McDonald: Yes, thanks. I really appreciate the question. One of the things that I noticed very early as I joined the group was the 7 business units, which is a valid operating model, didn't share a lot of information, and we didn't optimize how we were investing in either commercial execution or new product development. So one of the things that I think is really important is taking a view across the entire entity. That's the first thing. So how do we optimize where we invest. That's the first part of One Enovis. The second part is how do we collaborate and that's in the field as well. The fact is we've got a number of distributor partners in the U.S. who have great relationships on the P&R side, and we don't share a lot of that information across the group. So one of the things we're working much more on is how do the various commercial organization components talk to each other and share contacts and so that's on the commercial execution. On the operating excellence, there's a lot of work we can do to simplify the organization and how processes run in finance, in HR, in procurement, direct or indirect. So we're really looking right through the P&L at how we can do it. A classic example and something that we had started the journey on was shared services. We had a shared service group in Portugal that was working predominantly in P&R. Putting more effort into using that for the Recon Group internationally is important. We had an outsourced shared service with a provider in India that worked on our revenue cycle management. We're insourcing that, which, by the way, brings a lot of savings, but then we can make productivity improvements in that with AI to get to really driving our RCM processes better. So we're excited about this One Enovis mindset, and we've been campaigning this, firstly, with the key leadership starting in Q4 and now more broadly as we head into Q1 with the organization. Keith Hinton: And then on the financial side of things, so the 50 bps margin improvement this year, and you've kind of guided to 50 bps going forward, obviously, sort of 4 ways to get there. You could improve P&R margins, improve Recon margins, the mix shift towards Recon and then just leveraging corporate costs. So in those kind of buckets, can you help us think about where the 50 bps mostly comes from in 2026 and then going forward, where the 50 bps can come from in '27 and beyond? Phillip Berry: Yes. Thanks for the question, Keith. We continue to focus on really all of those aspects to be clear. But right now, I'd say the focus is really to continue to drive improvements in gross margins that can help fuel some of the investments required on R&D as we continue to tick up in terms of investments to support future innovation and growth of the business there. Damien just outlined several ideas and executed projects that we continue to advance around driving leverage of the cost structure of the enterprise. So that can happen in both business segments and in the SG&A line of the business. So we see opportunities across the board. The near-term focus is to continue to drive the positive mix and gross margin productivity projects that we have in flight as well as getting the synergies out of Lima that we expect. That will help us as we continue to work these other projects that can help us drive improvements in the overall cost structure. Operator: [Operator Instructions] The next question comes from Caitlin Roberts from Canaccord Genuity. Caitlin Cronin: Maybe just focusing on extremities. With the foot and ankle business, where did you end the year? And how are you thinking about the foot and ankle market as we go into 2026? Damien McDonald: Yes. That was a really fascinating year to watch with that foot and ankle. And we've talked about this before. The front end, what we're seeing with clinicians in terms of their bookings and consultations really remained pretty strong. At the back end, we really saw a softness in the market. Now we believe -- again, there's not a lot of market data, but we believe we're significantly outgrowing the market and the competitors in this space. And I think it's because we've got a balanced portfolio that's not just about the bunion market. And that really carried us through with the DynaNail, for example. So extremities for us is a point of real focus for the Recon team. We believe there's a long runway. I'm convinced we've got great clinician partners. I think we've got a great focus and pulse on the whole portfolio. The market for us is something that we're very much watching, particularly on the elective side. But we, as I said, outgrew the market pretty significantly. Caitlin Cronin: Understood. And then just for extremities more broadly, I think you pointed to a multiyear pipeline earlier in the call. Any more color on these opportunities? Damien McDonald: Yes, we really haven't talked about that publicly. As the year progresses, I'm going to be more explicit about those things. You'll see some of it at AAOS. You'll see it at the specific shoulder events. But our focus really here is the fact that we've got a 3 system compatibility now, and we really want to make sure that we're getting to basically every procedure that's valid being a target for us. We've also got an opportunity to expand more into the sports medicine side of the arthroplasty application. Most of our customers are fellowship trained. So we're more on one side of the family than the other. And I think we've got opportunity to expand our go-to-market there. Operator: We have a follow-up question from Keith Hinton. Keith Hinton: Yes. I just wanted to ask strategically on the P&R side. So you said 50% is growing mid-single digit or better, but you're obviously guiding low single-digits. So that implies that on average, the rest is kind of flat-to-down. So how do you think about the process of shaping the portfolio going forward? Do you expect more divestitures to the slower-growing products have good margins? And then how do you think about that from a perspective of just making sure that the portfolio remains of a size where it's continuing to generate the cash that you need to invest in the Recon? Damien McDonald: So I would put this into buckets of activity. One is commercial execution. As we've said, we just have to get better across the portfolio and across the entire sales organization at executing. That's one. Two, we've got geographic expansion opportunities that I think are important that we can exploit that we just have to again get better at, but we've got, I think, some good runway there. Three, I think we should continue to look at shaping the portfolio. There's SKU rationalization, portfolio rationalization to move up the growth profile and the gross margin profile. And then four is to look at the portfolio in its entirety and what are the components of that. And you saw we made the move on Dr. Comfort. I think that's a relevant conversation that we're having with the team. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kyle Rose for closing remarks. Kyle Rose: Thanks for joining us today. I'm going to hand it over to Damien for some closing remarks. Damien McDonald: Well, thanks, everyone, for joining. As I wrap up, I'd first like to thank all our employees for the ongoing commitment, focus and dedication to improving our patients' lives. After 9 months in the role, I am more excited about the opportunities and the strength that we have in the Enovis team. 2025 was an important year for Enovis. P&R growth accelerated to nearly 4%, 2x the market. Recon outgrew the global market at 8%. We strengthened our portfolio with key new product launches, improved our operating discipline and returned to positive free cash flow. Just as importantly, we made meaningful progress transitioning from a period of portfolio construction to a period of focused execution. As we enter 2026, our priorities are clear. We'll continue to drive commercial execution, expand margins through mix and productivity, step meaningfully up the cash flow curve. We believe our innovation cadence, differentiated portfolio and disciplined capital allocation position us well for durable, profitable growth. So we appreciate your continued interest and look forward to updating you on our progress throughout the year. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Fidelis Insurance Group's Fourth Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded for replay purposes. [Operator Instructions] With that, I will now turn the call over to Miranda Hunter, Head of Investor Relations. Ms. Hunter, please go ahead. Miranda Hunter: Good morning, and welcome to Fidelis Insurance Group's Fourth Quarter 2025 Earnings Conference Call. With me today are Dan Burrows, our CEO; Allan Decleir, our CFO; and Jonny Strickle, our Group Managing Director. Before we begin, I'd like to remind everyone that statements made during the call, including the question-and-answer section, include forward-looking statements. Management's comments regarding expectations, projections, targets and any future results are based upon current assessments and assumptions, and are subject to a number of risks, uncertainties and emerging information developing over time. It is important to note that actual results may differ materially from those expressed or implied today. Additional information regarding factors shaping these outcomes can be found in Fidelis' SEC filings, including our earnings press release issued last night. Management will also make reference to certain non-GAAP and proprietary measures of financial performance. The reconciliation to U.S. GAAP for each non-GAAP financial measure as well as descriptions of proprietary financial measures can be found in our earnings press release and financial supplement available on our website at fidelisinsurance.com. With that, I'll turn the call over to Dan. Daniel Burrows: Good morning, everyone, and thank you for joining our fourth quarter earnings call. Reflecting on our performance, I want to highlight 3 key takeaways. Firstly, our ability to deliver excellent results. Our fourth quarter performance is further validation of our business model. We delivered an 80.6% combined ratio, which represents a 47 point improvement year-over-year for the same period. This is the second consecutive quarter of performance exceeding our long-term targets with the second half of the year, highlighting the true strength of our portfolio and risk management. Secondly, the growth of our platform. We remain focused on identifying the most attractive opportunities in the market and partnering with top-tier underwriting teams to execute our strategy. This disciplined approach enables us to allocate capital where we see the best risk-adjusted returns. Gross premium written grew 7.1% for the full year with new underwriting partners contributing 4 points of this total. We're excited about the progress we continue to make in expanding our network of underwriting partners, and we are well positioned to capitalize on attractive growth opportunities while continuing to deliver strong underwriting margins. Our new name and brand, Pelagos Insurance Capital, best captures our identity and future direction, reflecting our positioning as a capital allocator working with best-in-class underwriting partners. And thirdly, our committed focus on being a best-in-class capital allocator. That focus concentrates on 3 areas: how we underwrite, how we use outwards reinsurance to enhance our risk profile and how we return capital to shareholders. I'd like to briefly touch on all 3 pillars. Our underwriting approach focuses on building a differentiated portfolio. As a leader, we are capturing enhanced pricing and structural efficiencies in a verticalized market while maintaining diversification and continuing to add accretive profitable business through selective new underwriting partnerships. Outwards reinsurance enables us to enhance our risk profile and optimize our portfolio. By thoughtfully combining pricing and structural differentials, we improve margin and increase capital efficiency. In terms of capital management, our first port of call will always be profitable underwriting growth. And because of our robust capital position, we were also able to repurchase over 15 million common shares in 2025, including privately negotiated transactions with a founding shareholder. This action contributed $0.90 to our book value per share in 2025. Overall, our strategic approach to share repurchases has contributed $1.24 of book value per share since the inception of our program in 2024. This combination of discipline, flexibility and execution underscores the strength of our balance sheet and the strategic advantage it provides to pursue both attractive underwriting growth and consistent shareholder returns. Last week, we further increased our common share repurchase authorization to $400 million, providing additional flexibility. We strongly believe that at our current market price, our stock is undervalued and buying shares represents an accretive use of capital. Later in the call, Jonny will go into more detail on our underwriting approach, including the new underwriting partnerships we've added, and our strategic use of outwards reinsurance. Turning to fourth quarter results. We are very pleased to have reported top line premium growth of 3%, a combined ratio of 80.6% and an annualized operating ROAE of 18.3%, meaningfully exceeding our through-the-cycle targets. For the full year, we delivered on our growth objectives, posting an increase of 7% in gross premiums across the year, driven by strong retention rates and continued diversification through new business opportunities, including new strategic partnerships across multiple lines of business. 2025 has been a year of 2 distinct halves. In the first half, we worked to proactively resolve legacy challenges relating to our Russia-Ukraine aviation litigation exposure. Having taken actions to resolve this exposure, in the second half of the year, the underlying strength of the business is clearly visible in our results. These results reinforce the resilience of our platform and our confidence in sustaining strong performance moving forward. Notably, we would have delivered combined ratios well ahead of our through-the-cycle targets for the full year in 2025 and for every year since our IPO, if not for the impact of the Russia-Ukraine aviation litigation. Taking a closer look at the dynamics in each of our segments, our portfolio remains approximately 80% specialty insurance and 20% reinsurance. Within insurance, we delivered 6% growth in 2025 gross premiums written, demonstrating our disciplined approach to capturing growth opportunities where price and structure supported our return hurdles. Asset-backed finance and portfolio credit was a significant driver of growth and opportunity through the year. We continue to see strong margins across these products, which are insulated from traditional market cycles. We have established ourselves as a leader in the structured credit market, driven by our underwriting expertise and our ability to price and structure effective and repeatable solutions for counterparties. In addition, we have seen growth in our mortgage portfolio through our engagement with Euclid Mortgage, who we partnered with at the beginning of 2025. Asset-backed finance and portfolio credit now comprises over 11% of our total premium. These products are characterized by longer earning patterns compared to the rest of our predominantly short-tail focused portfolio. Jonny and Allan will provide further details on the extended earning patterns associated with these lines. In our direct property segment, we successfully maintained overall income year-over-year, which positively demonstrates our ability to navigate dynamic market conditions. We have a disciplined approach to portfolio management. We deploy capital by focusing on margin, optimizing line size and leverage and selectively adding new niche and targeted books of business where we have identified attractive risk-adjusted returns. Examples of this include our expansion into data centers and the onboarding of new underwriting partners. We write a leading book of specialty marine business. Throughout the year, we leveraged our capacity to maximize margins across the subclasses, and in response to strong demand, we took advantage of opportunities to convert attractively priced, large capacity-driven construction risks. We have discussed our caution with respect to aviation throughout the year, and we walked away from risks that did not meet our hurdles. While we did see some improvement in pricing in the all-risks market, largely driven by loss activity in the early part of the year, in general, the uplift was not sufficient to meet our return hurdles. Given the complexity of this line of business, we are not willing to compromise on certain terms and conditions at any price, including governing law and jurisdiction, which can significantly impact loss outcomes. As a result, gross written premium in this line of business declined by approximately 50% year-over-year. And we made the strategic decision to pivot into other attractive areas of the market to allocate capital. Across the insurance portfolio, rate adequacy remains strong. Beyond price alone, our positioning allows us to achieve a consistent differential relative to follow markets. By exercising underwriting leadership and leveraging relationships and line size, we are able to influence structure and terms, not simply accept them, driving stronger risk-adjusted outcomes across the portfolio. Turning to the reinsurance book, where we also continue to see strong margin, we delivered 11% premium growth for the year. Our excellent underwriting results reflects our ability to grow profitably and capitalize on favorable market conditions, including post-loss opportunities. So putting it all together, we are very pleased with our 2025 performance. This is an exciting time, and we are confident in our ability to continue delivering strong performance in the year ahead. With that, I'll turn it over to Allan for a detailed review of our financial results. Jonny will then discuss our strategic approach to capital allocation, and then I'll return to share insights on our market outlook and new brand identity. Allan Decleir: Thanks, Dan, and good morning, everyone. We had an excellent fourth quarter with operating net income of $110 million or $1.09 per diluted common share, resulting in an annualized operating return on average equity of 18.3%, driven by another quarter of strong underwriting performance. We delivered a combined ratio of 80.6%, an improvement of 47 points over the fourth quarter of 2024. Our book value per diluted common share continued to grow to $24.61. Including dividends, this is an increase of 15.2% in the year. For the full year, our operating net income was $205 million or $1.92 per diluted common share, resulting in an operating return on average equity of 8.5%. Our full year results reflect the actions we took in the first half of 2025 to move past the uncertainty associated with the Russia-Ukraine aviation litigation, judiciously settling claims and including the impact of the English High Court judgment. We believe our third and fourth quarter results are excellent demonstrations of the quality of our business. Turning now to our quarterly results. We grew our gross premiums written by 3% to $978 million, bringing our total for the year to $4.7 billion, an increase of 7% compared to 2024. During the fourth quarter, in the Insurance segment, gross premiums written increased by 6% to $981 million. We saw continued growth, including new underwriting partnerships in several lines of business. The fourth quarter typically has minimal premium volume for our Reinsurance segment. The primary changes during the quarter resulted from a reduction in reinstatement premiums that were initially recognized in connection with the California wildfires. This is in line with us lowering our ultimate loss estimates for the wildfires during the quarter. As mentioned by Dan, we continued to walk away from business in certain lines that didn't meet our pricing hurdles, contributing to a 13% decrease in our net premiums earned in the quarter versus prior year. A few points to highlight. First, our strategic decision to decline business that did not meet our pricing hurdles and our underwriting standards. This was most notable within aviation, where gross premiums written were down 50% from 2024. Second, we have taken advantage of many new opportunities and achieved growth in asset-backed finance and portfolio credit, which in 2025 saw an increase of $132 million in gross premiums written versus the prior year. These lines have a longer earnings pattern, generally of 5 to 7 years, compared to the rest of our portfolio, which typically earns out over 1 to 2 years. Finally, reinstatement premiums that were initially recognized in California wildfires were reduced during the fourth quarter. As I mentioned, this is in line with us lowering our ultimate loss estimates. Looking ahead to the first quarter, we expect net earned premiums to range from $450 million to $500 million in our Insurance segment, and $50 million to $60 million in our Reinsurance segment. Our excellent underwriting performance resulted in a combined ratio of 80.6%. I'll break down the components of our quarterly combined ratio in more detail. For the fourth quarter, our catastrophe and large losses were $51 million or 9.1 points of the combined ratio. This is an improvement compared to the same period last year where our catastrophe and large losses were $133 million or 21 points of the combined ratio. The Insurance segment was impacted by Hurricane Melissa in the fourth quarter as well as a satellite loss in our aerospace book, along with a loss event in our political risk violence and terror line of business. In contrast, the Reinsurance segment had no catastrophe and large losses and benefited from the sale of certain subrogation rights related to the California wildfires. During the fourth quarter, our attritional loss ratio was 30.4%. We are pleased to see that the attritional losses have and continue to come through at a low level. As we look to 2026, we see our overall loss ratio in the mid-40% range, which includes attritional losses and cat and large losses. Of this number, in insurance, about 2/3 is from attritional losses and 1/3 is from catastrophe and large losses. In reinsurance, it is split roughly equally between catastrophe and attritional losses. We recognized net favorable prior year development of $35 million for the quarter compared to net adverse development of $270 million in the prior year period related to the action we took to derisk our overall exposure to Russia-Ukraine aviation litigation. A key driver of this quarter's favorable prior year development was $25.6 million in our Insurance segment due to positive development on prior year cat events and from continuing benign attritional development on prior accident years. Turning to expenses. Policy acquisition expenses from third parties were 26.2 points of the combined ratio for the fourth quarter compared with 33.6 points in the prior-year period. We continue to anticipate our annual policy acquisition expense ratio to be in the low 30s for insurance and in the mid-20s for reinsurance, comparable to our year-to-date results. Policy acquisition expenses to the Fidelis partnership were 16.8 points of the combined ratio in the quarter. Finally, our general and administrative expenses were $25 million, including the benefit from Bermuda's substance-based tax credits. This was compared to $24 million in the fourth quarter of 2024. As we expand our pipeline of new underwriting partners, we continue to make strategic investments in our capabilities. This includes further strengthening our talent base and enhancing our infrastructure and technology to support this growth. For 2026, we anticipate these strategic investments will lead to G&A expenses of approximately $29 million per quarter. It's important to emphasize that our business is designed to have a lean and efficient structure and our expense ratio reflects that. This positions us well to scale effectively while maintaining operational discipline. Moving on to our investment results. Our net investment income and net realized and unrealized gains on other investments for the quarter were $47 million. As of December 31, the average rating of our fixed income securities remains very high at A+, with a book yield of 4.9% and average duration of 2.7 years. Overall, these investment results reflect our disciplined approach to portfolio management and our focus on generating attractive risk-adjusted returns while supporting a broader capital allocation strategy. We anticipate that our 2026 investment results will be broadly in line with those of 2025, with our portfolio, including funds, expected to generate a return of approximately 4% to 4.5%. Turning to tax. Our effective tax rate for the year was 18.2% compared to 16.9% in 2024. This 2025 rate reflects a greater proportion of our pretax income generated in higher tax rate jurisdictions. For 2026, we anticipate a full year effective tax rate of approximately 16%, reflecting the projected mix of profits across our 3 operating jurisdictions. Turning to capital management. We are in a very strong capital position, which has enabled us to grow our underwriting portfolio and also return capital to shareholders. In the fourth quarter, we repurchased 6.4 million common shares for $119 million at an average price of $18.47. This includes $83 million through privately negotiated transactions. This brings our 2025 repurchases to 15.2 million common shares at an average price of $17.22. This has been highly accretive on both the book value and earnings per share basis to our shareholders, contributing $0.90 to our book value per share in 2025. Subsequent to December 31 and through February 20, we repurchased an additional 967,000 common shares for $18 million at an average price of $19.12. And as mentioned by Dan, and as announced last week, our Board approved an increased share repurchase authorization of $400 million. In summary, we delivered excellent results for the quarter, further demonstrating our strong capital management, the strength of our portfolio, the effectiveness of our approach to investments and our commitment to delivering returns to shareholders. And with that, I will now turn the call over to Jonny. Jonathan Strickle: Thanks, Allan, and good morning, everyone. Today, I want to emphasize that our core strength lies in being a strategic capital allocator, an approach that not only drives our strong current performance, but also positions us to capitalize on future opportunities and outperform the market going forward. As Dan highlighted, our capital allocation approach consists of 3 core pillars. First, finding the most attractive areas of the market to allocate capital to, and the best partners to execute on our underwriting strategy within those areas. Second, using outwards reinsurance as a flexible tool to support growth, improve margins and optimize our capital structure. And third, leveraging our strong balance sheet to return excess capital to shareholders through dividends and share buybacks. I will focus the remainder of my comments on how we advance those first 2 pillars during the year. Starting with underwriting. Each underwriting partner we work with brings expertise and proven track records in specific underwriting areas, allowing us to deploy capital where we see the most attractive risk-adjusted returns. We have exclusive first right of access through a 10-year rolling agreement to all business written by The Fidelis Partnership, a leading specialty insurance and reinsurance MGA. Only business outside our underwriting appetite, which we choose not to support can be offered and placed with other capital providers. Expanding our underwriting partnerships builds on our proven strategy. Since the start of 2025, we have continued to broaden our network by establishing a growing number of select long-term underwriting partnerships in areas where we see profitable growth. To give you a sense of these new partnerships, I'll highlight a few of the larger ones that we're working with. At the beginning of 2025, we began our first new underwriting partnership with Euclid Mortgage. We entered this partnership with long-standing relationships with the Euclid leadership team. Our first year together has been exceptional, successfully accessing U.S. mortgage risk in a market dominated by the larger players. Our growth in these lines demonstrates both Euclid's technical expertise and our ability to identify and back high-quality partners. We view Euclid as a long-term partner in 2026 and beyond. By providing committed long-term capital and active partnership, we are helping them execute their strategy while benefiting from their level of differentiated access to risk. This is a clear example of how we combine careful partner selection with the capacity to support specialist businesses in building credible, scalable platforms. Later in 2025, we partnered with Bamboo Insurance, a property MGA backed by industry-leading talent. Bamboo is a data-enabled insurance distribution platform, providing homeowners insurance and related products to the residential property markets in California and Texas. The collaboration builds on our property expertise and is highly accretive to our existing portfolio. We are aligned in our view of risk and exposure management, and we are excited to help Bamboo continue to scale their platform into 2026. At 1/1/2026, we initiated a portfolio-wide partnership with Oak Global, providing funds at Lloyd's for their syndicates and making a long-term commitment that we intend to expand as their business grows. We chose to partner with the team at Oak because of the exceptional performance track record of their leadership group and the strong data-driven people-powered culture that they have built. Oak is bringing disciplined specialist capacity into the market, underpinned by technology, data-driven insights and deep expertise, addressing a gap in the Lloyd's market for a scaled reinsurance-focused platform. By committing meaningful long-term underwriting capital, we are supporting both Oak's expertise and the structural opportunity, partnering with a platform built for durability across market cycles. Today, including those noted above, we are actively collaborating with a select group of leading global insurers and reinsurers as well as top-tier MGAs. Our approach to identifying and engaging with partners remains highly selective. We focus on partnering with organizations that demonstrate strong underwriting discipline, deep market expertise, broad market access and a proven track record of performance. We anticipate that contributions from new underwriting partnerships will become an increasingly meaningful component of our premium over time. And our goal is to achieve this growth with a small number of trusted partners that we can grow alongside. In fact, we turn down the vast majority of opportunities we review, underscoring our commitment to quality over quantity. Now let me spend a few minutes talking about why partners seek to work with us. A key reason is that, across our management team, we have decades worth of diverse experience, working directly with industry leaders. We have always placed a strong emphasis on building and maintaining trusted relationships. Underwriters and brokers know that our approach is based upon collaboration, trust and true partnership because they've seen it in action. In addition, I would cite our long-term focus. We are committed to long-term value creation, transparency and alignment of interest with our partners that goes well beyond onetime transactional interactions. This approach ensures that our clients and partners can rely on us for consistent support. Finally, our proven expertise in analyzing portfolio-level deals, combined with a structure, which enables engagement from the entire management team on every opportunity. This gives us the conviction to deploy bespoke solutions at scale, something that our partners have found of great value. Our onboarding of additional underwriting partnerships is a natural extension of what we have been doing successfully since inception. By executing our strategy of partnering with multiple best-in-class underwriting teams, selecting the most compelling opportunities and sizing them appropriately, we expect to further improve portfolio diversification, tightly manage exposures and optimize margins throughout the cycle. Our second strategic pillar is the disciplined use of outwards reinsurance. Our outwards program delivers robust portfolio protection while driving ongoing margin improvement. By combining disciplined execution with long-standing industry relationships and expertise, we secure broad multi-class coverage at strong risk-adjusted pricing. Trusted partnerships with top-tier reinsurers built over decades are a cornerstone of this strategy and a clear competitive advantage. We balance core program development with opportunistic purchases, working with counterparties who understand our portfolio and our underwriting discipline. Our organizational structure and depth of expertise support this approach. Close collaboration between management, underwriting and our inwards partners gives us access to a wide range of products and market insight. This enables us to set an optimized reinsurance program each year and consistently improve outcomes. Throughout 2025, we strengthened our outwards program by securing additional coverage at attractive terms using a blend of traditional reinsurance and ILS. This broadened protection has enhanced overall portfolio margins as we continue to optimize the interplay between our inwards and outwards exposures. We use outwards reinsurance not only to manage downside risk, but also as a flexible tool to support gross line size while still controlling net exposure. This approach reduces volatility and supports a more resilient risk profile across stress scenarios. In January, when we placed the majority of our annual program, we capitalized on favorable market conditions to expand coverage and improve terms, delivering a really strong outcome, which included meaningful rate reductions of around 20%, while upgrading both coverage quality and counterparty security, enhanced structural protection through new aggregate purchases that were not previously available to improve the overall margin protection, and targeted enhancements that broaden coverage, enhancing terms where needed and strengthening program efficiency. In addition, we also sponsored another Herbie Re catastrophe bond, securing $75 million of U.S. earthquake protection, leveraging the pricing available in the cat bond market with what we can achieve writing the inwards portfolio. This renewal underscores the role of outwards reinsurance as a flexible and active portfolio and capital management tool. While January marks the core placement period, we remain opportunistic throughout the year, adding coverage when it improves margins, enhances our risk profile or increases capital efficiency. To provide context on risk exposure, as of January 1, our 1-in-250 California earthquake probable maximum loss is in the mid-single digits as a percentage of shareholders' equity. And our 1-in-100 Southeast Gulf and Caribbean clash exposure remains below 10% of shareholders' equity, which is consistent with our view of risk and return metrics. In closing, we are excited with the progress we continue to make. We have expanded our network of new underwriting partners, which will be key to our growth moving forward. Our strategic use of outwards reinsurance has been proven throughout market cycles to enhance our risk and return profile. And our balance sheet is in a very strong position with broad protection in place to manage peak exposures. And with that, I'll turn it back to Dan to cover our outlook for 2026. Daniel Burrows: Thanks, Jonny. I'd like to emphasize that our top priority is creating shareholder value. We are confident that our focused and strategic approach to capital allocation across our 3 core pillars will continue to differentiate us in the marketplace and drive sustainable value creation for our shareholders. Turning to what we are seeing in the marketplace entering 2026. The broader environment has clearly evolved over the past year. Consistent with what others in the industry have reported, we are seeing a moderation in pricing in some areas. But importantly, we do not see this as a return to the old soft cycle. The correction we have experienced across the portfolio since 2019, including higher attachment points and tighter terms and conditions has created a more durable trading environment. Those features have largely remained intact. Even as headline pricing may have come off a bit, margins and adequacy across the portfolio remains strong. It's important to note that in overall pricing terms, this is taking the market back to levels seen a few years ago, a period widely viewed as one of opportunity and margin, underpinned by underwriting discipline. When I think about the market, the message I really want to get across is that the impact, as we move through the cycle, is not the same for everyone. Outcomes are increasingly differentiated by not only market positioning, but also relevance to clients, quality of relationships. Our portfolio is highly diversified across products, geographies and increasingly underwriting partners. We benefit from strong long-standing market relationships and most importantly, we have the flexibility to allocate our capital dynamically. We remain focused on identifying new areas of opportunity, and we are partnering with those best positioned to execute alongside us. That's why we are confident in our ability to deliver top line growth of mid-single digits in 2026, delivering strong performance through the cycle and continuing to create value for our shareholders. Yesterday, we announced our new brand identity, Pelagos Insurance Capital. This branding underscores our positioning as a capital allocator, working with best-in-class underwriting partners. Pelagos comes from the root of the word archipelago, a community of islands, each unique, yet connected and working together. It reflects how we're built: a global community of teams, locations and trading partners, each bringing distinct expertise and made stronger by the connections between us. We are confident that the Pelagos Insurance Capital brand identity, which we expect to launch in May, provides greater clarity for our people, our clients and our shareholders, highlighting our unique market presence and reinforcing our commitment to building lasting partnerships and meaningful connections. Let me leave you with one final thought on the market. As a capital allocator, we navigate an environment shaped by macroeconomic shifts and ongoing geopolitical disruptions. The evolving risk landscape is creating new opportunities across our industry. In times of uncertainty, our sector's ability to provide innovative solutions becomes even more relevant. For those organizations that can adapt quickly and lead with innovation, these changes are not just challenges, they are catalysts for growth and differentiation. We remain committed to staying at the forefront, leveraging our agility and expertise to deliver value for our clients and our shareholders. And with that, operator, we will now open the line for questions. Operator: [Operator Instructions] With that, our first question comes from Matt Carletti from Citizens. Matthew Carletti: Thank you for the color on kind of the partnerships you've established outside of The Fidelis Partnership. I think that's very helpful in terms of kind of understanding how you go about it. I don't know if this is for Dan or Jonny, but as we think about kind of how that plays out going forward and new partnerships, should we think more about lines of business? Is it more about geographies that maybe you don't have exposure to? Is it more about kind of bespoke products that maybe don't really exist in the market today? I'm just trying to get a feel for kind of how your bingo card looks and what the missing pieces are. Daniel Burrows: Yes. Thanks, Matt. So firstly, I'll start with -- I know that was quite a long introduction, but there was a lot to talk about, a lot of detail. So if you don't get through the questions today or during this call, please come back to us, and we'll take any questions you've got over the course of the coming days. So Matt, great question, as I said. The way we think about underwriting is always to start with the risk strategy, and we think about our capital allocation. So we're always looking at what is the best risk-reward dynamic in the market across all of our options. So that could be underwriting or other capital actions we can take. So we do have flexibility with the arrangement with the TFP about how we deploy. Obviously, we have the ROFR, so we have the right of first refusal on any business that they originate. But outside of that, obviously, we're always looking to execute on the relationships that we've got where we see margin that's attractive to us in other lines of business that are complementary to what we're doing or, in fact, in addition to what we're doing sometimes, then we're going to execute on that. So it could be a mix of everything you just said. I think we don't close ourselves off. There are certain lines of business that aren't attractive to us. I think we've talked about aviation. Obviously, for us, casualty is not in scope at the moment. We don't see them hitting our hurdles at the moment. But I think it's -- in general, it's a mix. It's more about the quality of the underwriter, their track record, the leadership team, does it help to diversify? Is it creating margin for the book. And that, again, expanding the distribution channels that we have through new partners, geography or product line that we're entertaining, all of those things, and we're working hard to do that. Jonny, do you want to add anything? Jonathan Strickle: Yes, I think you covered most of it, Dan. All I'd add is it's a very high bar. I think The Fidelis Partnership have performed very well. If you look at our combined ratio this quarter, it's obviously mostly driven by them. It's [ down ] 80%, 79% last quarter, and we're really pleased with that. And we're not going to lower the bar for new partners. They have to meet or beat that hurdle. I think the other thing I'd highlight is where a partner does meet that, where they do fit in well and hit those characteristics that Dan mentioned, then we're really in a position where we can get comfortable with that very quickly. As I said, the entire management team is able to look at every opportunity. And that gives us the conviction to commit at size and for the long term where we think that's the right thing to do. And I think that's the key to what we bring to partners. We can lead them to concentrate on the underwriting, which is what we've done with The Fidelis Partnership, and benefit from the extra alpha that's generated by allowing that time to them. The only other bit I'd mention is, as I mentioned in the pre remarks, we're really looking to concentrate on a small number of partners and have something that's meaningful and something that can grow over time with them. This isn't something that we see being 100, 200 partners very quickly. It's a small number of core partners that we want to do something meaningful with. Matthew Carletti: And then just a quick follow-up, probably for Allan. I appreciate the guidance you gave us on the net earned premium. As I look at -- let's just take maybe the Insurance segment, kind of the relationship between net earned and net written has definitely come down. It was in the 90s for 2024, and got 75% earning through in 2025 and then even lower, that guide you gave us for Q1. So can you just help us understand, is that -- you mentioned some credit type products and otherwise that have much longer earnings patterns than the rest of the book. Is that what we're seeing there? And then a follow-on to that is that lower level that we're seeing in Q1 to be expected to carry on through the year? I mean it grow as premiums grow, but that relationship hold. Allan Decleir: Yes. Thanks, Matt. This is Allan. Yes, we're obviously pleased with our gross premium written growth during the year of 7% and how this is flowing through our portfolio with a Q4 combined ratio of 80.6%. Three factors are really influencing that delta between earned and written in the quarter, some of it carrying through to 2026, as you're mentioning. First of all, in the quarter, our loss experience improved on California wildfires, reducing our reinstatement premiums. And overall, our reinstatement premiums accounted for approximately 40% of the variance between written and earned growth. Second of all, as Dan mentioned, we came off aviation business throughout the year. This accounted for another 40% of the variance between written and earned. But yes, importantly, as you said, and it will be more obvious going forward, I think that our business mix reflects the positive steps that we've taken to grow in areas with attractive margin, such as asset-backed finance and portfolio credit, which do have longer earnings patterns. So 3 strong reasons for the delta between earned and written, favorable loss experience, disciplined underwriting and a nimble portfolio focused on higher-margin business. And as you mentioned, and as I mentioned in my prepared remarks, the net premium earned, that guidance we're giving forward -- and we did listen to you guys because we know it's hard to sometimes model earned premium, is based on this new expected business mix that we have going forward. And again, the earned asset-backed finance and portfolio credit earned over sort of 5 to 7 years rather than 1 to 2 years, that's something like aviation would earn. Daniel Burrows: Yes. I mean we can, if you want to talk a little bit about the aviation. We did -- it's very important that we demonstrate disciplined underwriting. And that market, we have outlined the challenges, especially given very active loss activity over the last 18 months. We did see some green shoots midyear, especially in the risk market, driven by that loss activity. But ultimately, the pricing did not meet our hurdles and our approach is all about risk-reward trade-off. So as a lot of that business is actually bound in Q4, it's difficult to get how that's going to emerge and how the execution is going to go as late in the year, and that's added to the net earned premium reduction. But part of it is price and part of it is terms and conditions that are just nonnegotiable. So I think as I've said, governing law and jurisdiction can significantly impact loss outcomes, and we're just not going to negotiate on that. So we dropped 50% of the premium. But because we've got a strong capital position, because, through our partnerships, we've got access to market, we've still grown. There's over 100 other lines of business, and we see plenty of margin in the current environment across those. So you've got to -- if you want to grow, you've got to be disciplined, it's got to be with margin, it's got to be profitable, and that's what we're aiming to do across the market cycle. But it did impact, as Allan said, significantly the net earned premium. Operator: Our next question today comes from the line of Meyer Shields from KBW. Meyer Shields: One question to begin with on the new underwriting partners. How should we think of the time line for you ramping up to your targeted participation on their book? Is that -- I mean, I'm assuming with financial -- with The Fidelis Partnership, it's instant. Is there a longer duration before you're at your targeted share of the newer partners' book? Daniel Burrows: Yes, it's a really good question. Obviously, when we're looking at partnerships, first and foremost, it's risk-reward. The characteristics are all very similar, high barriers to entry in that particular market, different distribution, strong teams with good track records with good technical underwriters. So the hit ratio is not going to be extremely high. We probably decline more than 90% of what we see. But we have identified, over the last couple of years, the relationships with those teams that we see being accretive to our business plan. So yes, I think we're in a very strong position now, given our capital strength, the performance of the business. It's working exactly as designed with the partnership. So adding on the complementary new partnerships, diversifying is a smart thing to do. I think in terms of time line, we haven't really set a time line. But certainly, what we'd be aiming for in the medium term is 25% to 30% plus of the book will be with new partnerships. But look, we're also looking for growth with the TFP. So I think we're in a strong enough position from a capital sense that we can do both as long as it's profitable, as long as we hit the very high benchmark that TFP sets and it's accretive to the business. Jonathan Strickle: And what makes it so hard to split between TFP and new underwriting partners is it's not really how we think about it. We don't have a plan for how much to grow with each. We have a plan for where in the market we want to grow, where in the market we think things best add to our risk profile. And then we decide which partner we think is best placed to execute on that. So as the market evolves, that mix between things that TFP execute on for us and things that other partners execute for us shifts, if that makes sense, Meyer. Meyer Shields: Yes, it does. Second question, sort of unrelated, but as the mix shifts more towards longer-duration contracts like asset-backed finance and so on, does that imply an opportunity for extending the investment portfolio duration? Allan Decleir: Yes. Thanks, Meyer. It's Allan here. Obviously, we do consider that as part of our capital allocation process. We are pleased with our investment portfolio producing a 4.4% yield on the year. Our return reflects our strategy that we focus on attractive investment income while targeting an above-average risk-adjusted return through all cycles. We take risk, though, first of all, on the liability side, not on the asset side, and that's consistent with our capital allocation strategy. As I stated in my script, part of the investment this year was -- investment income reduced this year because our capital strategy meant we bought back a lot more shares during the year, $261 million worth, which, as a result, reduced the total amount of investable assets and as a result, hit our investment income. We also paid dividends of $52 million during the year, contributing to shareholder return. So as we look forward, we will expect our returns to be broadly in line. Our expected return is 4% to 4.5% for 2026, but duration is always something we look at, but we're not going to do that immediately. We need to look at how new underwriting partners evolves, how the asset-backed portfolio evolves in terms of duration. But yes, that's always a consideration. Jonathan Strickle: And, Meyer, just to add on, some of the business that we write, it's not like casualty business. It's more long tenure than long tail is how we phrase it. And some of those asset-backed finance policies as a result of that, you get the premium over time. You don't necessarily get it all upfront. So there's not as big a shift in terms of our cash flow pattern as you might expect if we had gone in and written a big casualty book, for example. Operator: Our next question today comes from the line of Leon Cooperman from Omega. Leon Cooperman: Can you hear me? Jonathan Strickle: Yes. Leon Cooperman: Let me just say this. I've learned over the years that the value of the book for a company is a function of what the return on that book value is. Given your returns, I think the way you're trading in the market just seem to be a very well-kept secret. There are 9 analysts that have a forecast for you and the 9 analysts have you worth well below your book value. And it seems to me that you're worth well above book value. A company that can earn 15% to 18% of the book, that book is worth at least twice book value, yet we -- I think a year from today, I can see a book value over 30% and your earnings is close to $4.5, $5 a share. So your stock is 5x earnings and the market is 23x earnings. And your return on book value is higher than the S&P and yet your multiple is 1/4 of it. So is it -- are you not telling your story? Or you're telling your story but nobody listening? Daniel Burrows: Yes. Look, thanks very much, Leon. Good to hear from you. We -- everything you said, we agree with, we're undervalued. If we think about book value growth since the inception of the business, that's up 57%. In dividends, it's higher. In dividends, it's 15% in the last year. Then you look at ROAE, look at the last quarter, combined ratio, there are very few better, if at all, than those numbers going forward. It's -- I don't think it's just about the numbers, though, Lee. It is about the story. We've listened to the messages in the market. People ask questions about the structure. We'll look at the performance, look at the growth in the business. It's working exactly as it was structured as it was meant to do. There were questions around Russia-Ukraine. We've dealt with that. There were questions around the overhang in terms of liquidity. ADIA, one of the bigger PE firms have exited in '25. We've been very front foot about buying shares in the open market, buying out PE when there's P&C opportunities, and then obviously, the diversification with partners, which we're expanding now. So we think we're doing the right things to send the right message out. Consistency is key, making sure quarter after quarter, we're putting up these results. But Leon, be assured, we've got a big conference in Naples coming up this weekend. We'll be on the front foot. Our performance is strong. You need to start thinking about us and our performance as a capital allocator and the valuation should come through. But we're working very hard on that, Leon. Leon Cooperman: I'm not looking to put you out of business in terms of selling you, but I just looked at Zurich [ Reinsurance ] make an offer, and I think they've agreed to buy Beazley and they were paying twice -- over twice the book and about 10, 12x earnings. And if somebody in a slow-growing world where people are looking to buy growth, I would think that we'd be very attractive at a multiple of earnings. Daniel Burrows: Completely agree. And I think, as I said, if we continue on the path that we're on, then we would expect to see a similar run rate in terms of book value growth over the next couple of years. So yes, north of 30%, absolutely. And we would expect our valuation to come to par with that. We think the valuation should be a multiple of book. When you look at our results, they are exceptional. But it's got to be consistent we get that. Leon Cooperman: Congratulations on excellent results. Daniel Burrows: Thanks for your question, Leon. Operator: The next question today comes from the line of [ Peter Knudsen ] from Evercore. Unknown Analyst: The first one, I thought the reinsurance renewal commentary was interesting. I'm just wondering if you could maybe talk about any changes to the retention, if at all, on the XOL program, given the 20% rate decline? And then, in addition, it sounded like you guys were able to purchase an [ agg ] cover for the first time. And so, a, could you provide some details on that? And then b, what does that say about the market? Why do you think you were able to now versus I think you said in the past that wasn't available? Daniel Burrows: Yes. Thanks. Great question. It's Dan. I'll just put into context, the agg deal we spoke about actually was not for cat. We've had agg deals since the inception of Fidelis in 2015. So specifically the natural perils, this was a volatility agg for other lines of business that we kind of said you couldn't have bought that a year ago. So that came on board in the fourth quarter. So we're very pleased with that. But Jonny, do you want to answer the other question? Jonathan Strickle: Yes. I think we found ourselves in a completely different market to a year ago, Peter. I mean on top of the agg Dan mentioned, we also bought aggregate cover in our cat program as well. That certainly wasn't available a year ago. In terms of attachment points, I mean, the exposure going through was up in some ways. I mean you see rates have come off to some extent. Our premium is the same. So that aligns to that story. And we haven't had to push attachment points up at all. In fact, in some places, we've been able to either bring them down or broaden coverage. So we've got more perils attaching at lower attachment points in that. So we're very, very pleased. I mean we've always said that our preference is usually, rather than to cash in on the price reduction, to spend the extra money on getting better, broader and more coverage, and that's what we've done this time. I mean, as I said, we also remain opportunistic. I think there might be opportunities to add to that program as we move through the year. And what really helps us there is we can buy in any market. We buy UNL covers, we buy quota share, we buy ILWs, we buy cat bonds. And we're literally looking at options every week. We're looking at some stuff right now, in fact. Unknown Analyst: Okay. That's really helpful. And then I'm wondering if you guys could just help me -- maybe I'm thinking about this wrong, but maybe talk a little bit about the intellectual property line within ABS and portfolio credit, I guess, in relation to some of the software concerns in the market today. Is that a risk or a concern for you guys at all? Jonathan Strickle: Peter, intellectual property is something that we pulled out of a couple of years ago. And we've given commentary in prior calls that we really didn't have many exposures there. I think we're down to a couple of policies that will run off over the next year or so. We've not seen any real loss activity movement on that in the past few quarters. And it's certainly not something we'd be looking to go back into. Operator: We have now hit the top of the hour, so this will conclude today's question-and-answer session. I'd like to turn the call back over to Dan Burrows for closing remarks. Daniel Burrows: Yes. Look, thank you very much. We really appreciate you joining the call today. As I said earlier, for any additional questions, we're here to take them in the coming days and weeks. Thanks for your support, and I hope you enjoy the remainder of the week, and have a great weekend. Thank you. Operator: Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.
Jarle Dragvik: Good morning, and welcome to HydrogenPro's Fourth Quarter Presentation. Today, I'm as usual, accompanied by CFO, Martin Holtet, who will present the financial results; and our still new CCO, Michael Caspersen, who has been with us for 3 months and will give us a market update. And I will take you through the highlights of our recent developments. As we always start with, for new viewers, HydrogenPro is an original equipment manufacturer company, focusing on the core technology, which is well suited for renewable energy. It's a pressurized alkaline electrolyzer and a gas separation unit. I noticed other OEMs are bringing pressurized electrolyzers to the market now. Well, we have delivered 220 megawatts and are on our way with the next 100 megawatts of pressurized electrolyzers. We address markets for decarbonization of selected large-scale industry segments already using gray hydrogen or where decarbonization is hard to achieve through electrification. Of the recent highlights, in 2025, we saw several projects being canceled or postponed. During the latter part of the year, however, several projects were activated and new ones even added. We see now a maturation of the pipeline and projects where we are in negotiations. Of these, we expect FIDs of projects to be taken at a value of around NOK 1 billion. Michael will address this and our position to further in this market update. We are both pleased and proud of one of the world's largest hydrogen projects, the ACES project, now coming to finalization and start-up. Our electrode manufacturing in Aarhus continued during the fourth quarter, its production ramp-up delivering to Salzgitter. Organization was streamlined with reduced costs. We completed the transaction of acquiring the 25% minority share in our Tianjin factory. And Michael was engaged as new CCO as of December 1, and I'm happy to present him here today. The ACES project is now coming to completion. It has taken time, but this is technologically groundbreaking work and very complex and thus, a long commissioning period. It is 40 electrolyzers and 20 gas separation units working together and producing gas as they should. Compressors have started filling caverns. And due to the long distance and preparedness, we have also delivered 4 additional electrolyzers. And there are no exchanges or replacement of electrolyzers or gas separation units. The ACES 1 project will be capable of storing hundreds of gigawatt hours of energy in its 2 hydrogen salt caverns. The current project is using 30% hydrogen in the gas turbine power generation. And now the Los Angeles Department of Water and Power and Intermountain Power project have started the preparation for next stages going to first 67% and then later 100% hydrogen. After concluding the commissioning phase, it's now open for selected customers to visit the plant as reference, seeing 220-megawatt plant operating. For customers, it's all about having references for capability to deliver on large-scale projects, seeing them in operation and have documented performance. For the Salzgitter project, the construction of the hydrogen building is in good progress. For HydrogenPro, all components have been delivered to Erfurt, where we are assembling. 10 electrolyzers are now assembled, and we are currently delivering our Gen 3 electrodes to be included in the remaining of the electrolyzers. We see now a lot of initiatives and policies for incentivizing use of hydrogen in Europe. That is good and will contribute to low cost. See what happened in the solar industry development, how it was driving down production costs. Bridging the cost gap versus fossil energy remains the main hurdle for green hydrogen market scale up. And cost competitiveness is key to decarbonize Europe. But at the same time, we are also seeing initiatives from manufacturers, which are supposed to limit competition, but protectionism will slow industry pace by driving up levelized cost of hydrogen. Over the last year, we have seen projects in Europe being postponed or even canceled due to cost increases. HydrogenPro's answer is being a European OEM with cost competitive position. That is with high efficiency in the electrolyzer and the electrodes, which is also why we are focusing on R&D and engineering. But we diversify our supply chain through flexibility and cost competitive manufacturing by producing certain elements in China and through partnerships for manufacturing in Europe and India. a partnership model in the market for a full scope offering and maintaining a lean cost and efficient organization. And I will now hand over the presentation to Martin. Martin Holtet: So in the quarter, HydrogenPro generated revenues of NOK 17 million. The EBITDA came in at minus NOK 49 million, and the net loss was NOK 44 million. So important to note, the quarter is negatively impacted by costs on the ACES project. But as Jarle now mentioned, the commissioning is now close to completion. We are continuing to deliver on the SALCOS order and also doing some on-site work at the ACES project, and those are the 2 main drivers of the revenue in the fourth quarter. Personnel expenses was down with NOK 6 million compared to Q3 and other OpEx was down by NOK 12 million compared to Q3. So this is driven by continued cost reduction measures mainly. Then let's look at the development in the liquidity position in the quarter. So the cash balance at the start of the fourth quarter was NOK 121 million and ended at NOK 102 million. So looking at the changes, the EBITDA, as mentioned, came in at minus NOK 49 million. We had changes in net working capital of NOK 37 million, a positive impact, mainly then driven by a reduction of trade receivables. We invested NOK 5 million during the quarter, mainly then in the production line in Denmark. And then we had the financing mainly leasing of NOK 2 million, so ending then at NOK 102 million. The total budget of the manufacturing of the electrodes, the manufacturing line there is still sort of unchanged at NOK 60 million. Where we, as of end of 2025 have invested some NOK 47 million, meaning that there is NOK 13 million left to invest. But the manufacturing line is fully operational. So those remaining investments are related to further improvements. And as of the end of the year, the backlog stood at NOK 275 million. Then let me give an update on the cost savings program. So at the start of the year, meaning -- or actually late 2024, we set a target to reduce our cost base with some NOK 40 million, equating to approximately 20% of the fixed cost base. And please note that the cost program then excludes all the project-related expenses. So we completed that cost-saving measure program already in the third quarter last year, and we have now made even further measures in the fourth quarter, bringing then the total cost savings on an annual basis to in excess of NOK 50 million or 24% of the starting point. So we have a very lean cost base with our strategic partners, and that is enabling us to win contracts on a global scale. So we combine that then with keeping a lean organization. But still, we need to keep sort of the core competence in the company in order to have the delivery capacity on large-scale orders. So with that, I will give the word to Michael to give an update on the market side. Michael Caspersen: Thank you, Martin. As said, I'm Michael Caspersen, and I was recently announced as Chief Commercial Officer for HydrogenPro. I will share today a snapshot of how I see the hydrogen industry today and moving forward, what we see in the field and share our latest commercial update. First, I'll share just a brief on my background and what got me here to HydrogenPro. I'm what you can probably call a bit of an incumbent from the hydrogen industry. Since the start of my career, I worked in this industry and around it. My background is technical. I come with a master in material science and a PhD in hydrogen technology specifically. So since the very start, I worked hands-on with components, with stack technology maturation, scaling, industrializing alkaline technology. Since then, I've worked practically nonstop more or less with hydrogen in various capacities, the latest with Boston Consulting Group coming from a handful of years, we had the responsibility for everything that was Greentech offers, which means basically electrolyzers and fuel cells. So I've seen ups and downs in this industry. I've worked up and down the value stream and firsthand experienced a lot of, let's say, beliefs and discussion and frankly, also misconceptions that surround this industry. Now joining HydrogenPro, it feels to me like a coming full circle. So I'm happy to be here and happy to be in a company that basically have already great achievements and help pushing this forward. But let's look at the market now and get into the commercial side of it. I'll kick it off with a little bit of backdrop. So looking back just a few years. is probably not lost in anyone that hydrogen has taken longer time to cement the true potential for decarbonization that it holds. The reasons are many. But at the essence, establishing a whole new and complex value chain takes time, more so than was expected. The industry is now reorganizing following these recent years of slowdown. Projects have been rolled back or put on hold, and we see that and everyone see that. We're not out of the woods yet, but we do see definite and concrete positive trends. And I'll come back to this just in a minute. But moving forward, there is a large consensus on market expectations that have been communicating broadly and widely, more so than before, just even a few years back. It seems now that everyone is looking at the same market and the same picture, which is actually different from before and very positive. What is communicated around these 5 million to 7 million, 5 million to 10 million of tons of clean hydrogen, of which some will be green, some will be other -- follow other production paths. It also comes with a higher certainty than previously. These are more rigid, solid numbers. And importantly, this is to be considered more of a floor than an actual ceiling. A reason for this is a change in focus on delivery capability rather than the technical potential of hydrogen for various applications. There has been some turmoil and has been discussion back and forth where to use hydrogen, where to use it more efficiently and where it actually belongs. I truly believe now that this is for the better for our industry, and it's a welcome chance for stabilization. But -- so let's look at just a bit into what these numbers actually contain underlying here. For the last handful of years, the hydrogen industry is, for me, a tale of 2 opposite directed tails. One is broadening out the technical potential across a wide range of applications and use cases, potential, some high, some low. And the other side, undeniable project cancellations and rollback due to high cost and length of certain bankability. Looking into the underlying dynamics, there has been both headwinds on a project level, but also tailwinds on industry level, which is why some things are experienced as moving forward, while some are experienced as moving backwards. It's been a bit of a chicken and egg situation. And all actors across the supply chain has basically been shouting for steadiness, for transparency and for predictability in order to make sound business decisions that last into the future. This is all the way from technology providers as ourselves, project developers, financiers and so on and so on. And they are starting to get that now. The noise that has been surrounding us from these 2 dual tails is fading away and business fundamentals can then take over. So despite of what is being conveyed from opposing lobbyist and trying to convey that everything is just bad and glooming, there is real progress, and we see it in the numbers. policy support is growing in the key markets, and it's moving forward and it has been year-by-year. We see an increasing volume of investments. It's actually quite steady and moving forward. We also see innovation on technology. And we do see, as also highlighted here, that these project rollbacks is actually part of a weeding out of less profitable projects that do not belong and never really had a fighting chance. This is not a sign of illness, but of increasing health. The result at the very end is higher certainty on industry level for HydrogenPro as well as an electrolyzer OEM and to our shareholders. When the noise -- this noise and the uncertainty is fading away, the industry can then focus on where it's needed the most, and that's driving down cost. And cost is coming down. As an electrolyzer manufacturer, HydrogenPro plays part of this, but we also recognize the great efforts that are made when we look outside the window and see our partners and our customers down the value chain also fighting hard to lower the levelized cost of hydrogen. And we see and we meet a wide range of projects with very different circumstances with quite different characteristics. And it's more clear than ever which ones are effectful. And hence, these examples goes a little to -- a little bit on archetype level on some of the ones where it works and where it doesn't work. And this is maybe a little bit sketched up. That's true. But the recipe for addressing both the CapEx and the OpEx side to the contributions of the levelized cost of hydrogen are clear. We need lower cost of the hardware, and we need efficient systems. And then we need, of course, further the externalities to play its part on infrastructure development, on policymaking and so on. So these decision-makers are working with us. These are indeed archetypical in nature, I'd admit that, but we can have a look at where the latter one of these plays out in reality and where it reaches even the very low end of the green bar you see here for green hydrogen. And this is -- keep in mind that the 2030 bar, the estimate for 4 to 5 years from now. So if we keep that in mind, that these estimates is somewhat around $3 to $8 per kilo in 2030. We can see that can be beaten because even while unhealthy projects have been rolled back, we're seeing the emergence of new projects. They appear in new locations. They're also growing in size. And if we go 3, 4, 5 years back, only a few select OEMs could claim to actually deliver electrolyzer systems in a 3-digit megawatt scale. HydrogenPro is one of them. Now there's a growing number of projects in this size range. They're big, they're significant as well as there is in the double-digit range, and they're more healthy. And we owe that to the industry itself, but equally to these decision-makers in the political landscape. So we list here a few examples from our key regions of where clean hydrogen is actually moving towards. And they are observing and experiencing favorable terms on political and regulatory level. And that's a big part of it because it is clear and it is communicated from policymakers that hydrogen is needed for decarbonization in the energy mix. The European hydrogen mechanism is just one example, brought it here because it highlights one of the very critical aspects that needs to be fixed in the industry, basically connecting supply and demand. It's a very, very important part of securing offtake for the future. We will see the efficiency of this kicking. But we do see already industry in turn responding to this. We're seeing recent bids falling down to or even below the $3 per kilo of produced hydrogen in India that's observed in the start of this year. And granted, these examples here are the best conceivable circumstances, pointed out here for now, but they won't continue to be. This will be moving. And it's a testament to the progress that is happening in our industry. And many industry professionals would likely have struggled with the likelihood of reaching $5 per kilo around Europe by 2030 or before this. These numbers that we collect here are from 2024. We definitely see progress. And this progress that we also meet it out in the field. It's converting into practical opportunities for HydrogenPro. And what is probably clear is that we're working in an industry with big capital projects, sales cycles are long, and that gives a natural latency period for refilling the pipeline. And it is no secret that with the rollback in the global hydrogen pipeline, a chunk of our previous opportunities roll back to. But we do see great potential moving forward, both from existing and from new opportunities. This is across a wide range of interesting segments where the hydrogen business case is now coming into fruition and actually being competitive. We see that across the entire pipeline in the geographies that we are present and we're opening in. So we have believed in our model during the last couple of years, we've stayed consistent in our mission to deliver low-cost and efficient electrolyzers. And by staying true to this, we've been able to manifest an attractive pipeline across hydrogen relevant markets. It's in North America, EU, the Middle East and Asia with this range of attractive applications. So we believe that we are as good as we can set up for success. So more specifically, for the most mature opportunities, we see very promising signs moving towards realization on the short term. These 4 projects marked here are entering a final contract stage. So it's advanced now. And together, they hold a potential around NOK 1 billion. It's significant. We're confident that these projects are moving ahead, and we are in the pole position to take a good portion of this value. So we feel good about that and 2026 will be an interesting year for HydrogenPro. As a final mark on this, what makes us positive that we will stay in pole position for more opportunities to come is positive feedback that we received from market when we do sounding and ask for feedback from our clients, from customers and other professionals. And these testimonies, they convince us that we are on track. We're perceived from their side with their eyes to be strongly positioned, which means we get feedback on being cost competitive, being high on performance, having a real-life track record. Jarle mentioned the 220-megawatt project. That's a real-life asset that we can showcase and that we have delivered, and we will also take learnings from. And besides this, on the more softer side of things, we are a flexible partner and with our partners, optimizing for the layout and delivery of full scope that we can deliver together with them across regions. So the flexibility in this partnership is something that we also get as good feedback. So I repeat, 2026 will be an interesting year for the industry and for HydrogenPro. Thanks for now. That concludes our presentation. So I will welcome Jarle and Martin back on stage now for a brief Q&A session. Operator: Yes. So audience has come up with some questions. The first one is your order backlog is NOK 275 million. Which profit margin do you expect from this backlog? Martin Holtet: Yes. So just firstly, the backlog then mainly consists of a service and support contract on the ACES project, mainly related to overhaul some years down the road and some remaining revenues on the SALCOS order. So those are the 2 main elements of that. And with regards to margin, unfortunately, we're not guiding on margin. So I'm not able to give exact figures on that. Operator: And do you expect any projects in India to be started in 2026? Jarle Dragvik: Maybe I can go first on that. We are very active in India now in process with several projects in the pipeline. Exactly when the projects will start, it might be a little bit harder to predict. But there are definitely a mix of projects that we are in discussions with on a shorter-term horizon and then obviously, of the larger one, which we have seen in the press being further out on the time line. Operator: And next one. Can you elaborate the service agreements on ACES and Salzgitter? And what can we expect of the income? Jarle Dragvik: Maybe Martin. Martin Holtet: Yes, I think that was more or less the question I replied to before. But again, yes, so the majority of the backlog is related to the ACES service agreement and then a larger overhaul after some years of operation. So that again, out of the NOK 275 million, that is the majority of the backlog. Operator: Another financial related question. Do you have enough liquidity to take you through 2026? Martin Holtet: Yes. So as you will also see in our quarterly report in Note 10, where we have done sort of a going concern consideration, we have concluded that we have sort of the adequate liquidity resources given the market uptick we see now and sort of the high probability of FIDs during the year. So that's our conclusion on that based on today's assessment. Operator: Regarding the market dynamics, could you comment on the current competitive dynamics? Specifically, have competitors secured projects that you were involved in? And if so, what do you believe are the key differentiating factors in those awards? Michael Caspersen: Yes. Well, we're not claiming the entire market. So I'm sure there will be competitors that grab projects that we are either in or have not been in. So that's a very broad picture there. The dynamics are very different per region. And I think they are developing across regions. So we actually see in general across the market, a lot of competition moving across regions, which used to be maybe more regional, more local, is becoming more of a global competitive business and competitive situation. And in some markets, it's pushed harder than in others. And some markets are just more advanced than others, probably a result of the first point. So I think what sets us apart is nothing unusual, and it's the business fundamentals. So it's helping to drive down the cost for our customers in the end. The end result is the cost of produced hydrogen, and we play a part in that. And we do that by delivering our cost-efficient electrolyzers, integrating them with our partners and making them efficient so that once in actual operational mode, they also deliver the lowest possible LC rates for our customers. And then, of course, there's how do we make these projects come through, come alive and operate under more and more advanced situations and circumstances. But that's pushing the envelope on innovation all the time. But there's no secret sauce to it. It's hard work and it's business fundamentals. Operator: Let's say, if one of the hot leads ending a order, does the company have capital to execute and deliver the order without the need for a capital raise? Jarle Dragvik: I don't think we can answer specifically on that. The base position is that, yes. Obviously, contract is structured with a certain prepayment and then payment milestones throughout the delivery period. But as you can appreciate, we cannot go into the details of the contracts in that way. Martin Holtet: And further to that, of course, with our sort of partnership strategy, offering sort of the full scope and on the EPC side and also bankability, it's, of course, very important for us in order to be able then to deliver on the contracts. And as a sort of a principle, we typically then enter into contracts where we seek a net positive sort of working capital through the project. Operator: The expected FIDs in 2026, are they typically more back-end loaded in the second half of the year or are expected to spread out throughout the year? And what are the main risks for these projects? Jarle Dragvik: I think we come back to that question when we get to a point, obviously, of announcement and refer to it at that time. Michael Caspersen: Yes, they are spread across the year, but more specifics on that is we are waiting for further notice on the contracting side. Jarle Dragvik: And to the risk element, there's always a risk. And the clue is, of course, for the customers to take the final investment decisions. And offtake has been the key constraint up to now, but we see that is coming more and more to reality. Offtake contracts are coming in place. We see it being signed in Europe. We see that being signed also in other parts of the world. India was mentioned. Operator: And could you elaborate a little bit on any developments around the strategic partnership with Longi and specifically around the use of the next-generation electrodes? Jarle Dragvik: I'm not sure the -- should we say, connection here in terms of the electrodes and the partnership with LONGi. LONGi is a good equity partner for us. We act independently in the market. We are exploring all the possibilities of streamlining the manufacturing structure in China, most of all. And obviously, we are also looking at other areas of cooperation. Operator: And given the current cost structure and prices of equipment, how much megawatts of capacity do you have to secure or deliver per year to go EBITDA breakeven? Martin Holtet: Again, we don't guide on that. Yes, there are some equity analysts covering us. So I think it's more of a question to raise to them. But I think what's fair to say is that we are in the industry with at least with a headquarter in Europe or the Western Hemisphere, the lowest sort of breakeven player in this industry. Operator: And so one audience says, first, thanks for a very good presentation, and welcome to Michael. And any news that you would like to say about H2 Giga projects in Denmark? Jarle Dragvik: H2-GIGA is still in a study phase. I think I'll repeat what we have said all along that investment will be taken when we see that the delivery schedule and the order situation allows for it. Operator: All right. So thank you for all your questions and for joining today's session. If you have further follow-up questions or inquiries, please feel free to reach out to us, and we appreciate your time, and this concludes our webcast.
Operator: Hello, everyone, and welcome to PubMatic's Fourth Quarter and Full-Year 2025 Earnings Call. My name is Rees, and I will be your Zoom operator today. Thank you for your attendance today. And as a reminder, this webinar is being recorded. I will now turn the call over to Stacie Clements. Stacie Clements: Good afternoon, everyone, and welcome to PubMatic's Earnings Call for the Fourth Quarter and Full-Year 2025. This is Stacie Clements, and I'll be your operator today. Joining me on the call are Rajeev Goel, Co-Founder and CEO; and Steve Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host live Q&A. [Operator Instructions] A copy of our press release can be found on our website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements, including, without limitation, statements regarding our future performance, market opportunity, growth strategy and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and future conditions. These forward-looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties and other factors in our forms filed from time to time with the Securities and Exchange Commission and are available at investors.pubmatic.com, including our most recent Form 10-K and any subsequent filings on Forms 10-Q or 8-K. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. All information discussed today is as of February 26, 2026, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, cash flow from operations and free cash flow. These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. And now, I will turn the call over to Rajeev. Rajeev Goel: Thank you, Stacie, and welcome, everyone. We delivered an exceptionally strong fourth quarter, with revenue and adjusted EBITDA ahead of guidance, healthy margins and strong cash flow. Our results highlight continued growth in our underlying business, our leadership position in AI solutions and the durability of our business model. For the full year, CTV grew over 50% year-over-year, excluding political, and Activate activity grew over 3x. Emerging revenues, which include Activate, commerce media and new AI solutions, nearly doubled over 2024 and now represent nearly 10% of total revenues. Over the past year, we made decisive moves to reposition PubMatic for renewed profitable growth. Those actions are bearing fruit and have directly contributed to our performance over the last 2 quarters. They have strengthened our competitive moat and have positioned us to deliver accelerated double-digit percentage growth for the second half of 2026. These moves represent the first critical steps of our 5-year road map designed to reaccelerate growth, expand margins and compound long-term shareholder value. This road map marks an important turning point for PubMatic and coincides with the pivotal transformation in the industry driven by AI. In fact, AI in the form of agentic advertising, has emerged as a new and incremental tailwind to our business. Advertising is entering a new phase, one defined by AI-driven autonomous systems operating in real time. We sit at the center of a highly competitive, millisecond-level auction environment where value is determined by measurable outcomes such as yield, performance and efficiency. PubMatic is enabling AI adoption across the open Internet. Our proprietary data, scaled infrastructure and thousands of deep integrations across buyers and publishers form a real-time execution layer that cannot be replicated by vibe-coded software. Our leadership in agentic advertising gives us confidence we can shape this next evolution of digital advertising, and we are investing and executing aggressively to capture that opportunity. In October, we co-founded the Ad Context Protocol alongside Yahoo, LG Ad Solutions, Raptive and others, setting industry standards for safe and interoperable agent-to-agent interaction. In December, we partnered with Butler/Till and Geloso Beverage Group to launch the industry's first fully autonomous, end-to-end agentic campaign, proving that PubMatic's agents can execute media plans and optimize outcomes on behalf of advertisers. The campaign delivered more than 5x cost efficiencies, enabling significantly more advertiser spend to shift directly into working media. Following this success, the agency quickly launched a second campaign. In addition to delivering top-tier agentic performance, our AI-powered platform handles more complexity with significantly less manual effort. We are cutting campaign setup time by 87% and speeding up issue resolution time by 70%. This means faster activations, higher productivity and better outcomes for our customers. In January, agent-to-agent transactions became a scalable reality. At the Consumer Electronics Show, we unveiled AgenticOS alongside our launch partners including WPP Media, Foxtel Media, and multiple independent agencies and tech partners. As Skyler McGill, Head of Video and Programmatic at independent agency Wpromote put it, "We're witnessing the biggest transformation in programmatic since real-time bidding. Our work with PubMatic puts us at the forefront of defining how human strategy and autonomous systems converge to unlock new capabilities in personalization and scale." Now, building on this momentum, we recently delivered one of the industry's first agentic CTV advertising campaigns with Abovo Maxlead in Europe, integrating directly with the largest independent media agency in the Netherlands. Adoption of AgenticOS continues to be swift. We have already run over 250 agentic deals across our platform, many of which represent new and incremental advertisers to PubMatic. Our Agentic AI Accelerator Program enables customers and partners to launch live agentic campaigns within weeks and quickly scale usage. Remarkably, almost 100 brands, agencies and streamers have applied to join, making it the fastest early-stage adoption of any product we've launched. This strong uptake underscores 2 important and distinctive points. First is the magnitude of the secular growth opportunity as digital advertising adopts agentic AI. By 2028, I expect 25% of all digital advertising to be executed autonomously via agentic AI. And by 2030, I expect that to jump to 50%. As an early AI leader, this unlocks transformative growth for PubMatic long before our peers. With our scale already building in agentic AI, this leading advantage is widening, with each transaction enhancing our model's ability to drive improved performance, fueling long-term revenue growth and incremental margin expansion. And second, the opportunity is much bigger than simply technology revolution. Agentic AI will upend and collapse the industry's value chain, bringing advertisers and publishers much closer together. This will create a step-function change in advertising efficiency and effectiveness, which will significantly expand the open Internet advertising market in aggregate with new advertisers and increased budgets. In short, AI is an incremental tailwind for PubMatic, and we are uniquely positioned to take advantage of this opportunity with nearly 2,000 premium publisher integrations representing over 100,000 sites and apps, 250-plus data partners on Connect, our direct buying platform, Activate and our fully owned AI-enabled infrastructure. While the past 20 years were about real-time bidding, the next decade will be about AI-led intelligence that connects the entire customer journey. The depth of our publisher inventory, combined with our tech stack, gives PubMatic a clear competitive advantage in this transition. We own our own infrastructure, sit at the intersection of media and the consumer and innovate rapidly without dependence on third parties. These strengths power our 3-layer architecture of advertising intelligence. At the infrastructure layer, our NVIDIA partnership enables next-gen AI models to run in our private cloud, with hardware and software solutions optimized for digital advertising. Owning our infrastructure also means that as compute requirements grow, our efficiency and margins expand with scale. At the application layer, AI is embedded into core workflows and publisher solutions that unlock new revenue opportunities. Nearly 10% of publishers on our platform are now deriving revenue from our AI solutions and generating incremental revenue for PubMatic. And at the transaction layer, Activate and AgenticOS are transforming how advertisers and publishers connect, delivering higher performance and efficiency. Together, these layers form a flywheel for growth. Each innovation drives usage and strengthens our long-term competitive moat. They also allow us to innovate around growing opportunities within open Internet advertising. We recently partnered with Kontext, a monetization layer for generative AI content experiences. Our integration enables publishers to monetize conversational AI experiences programmatically, while maintaining control over their content, data and user experience. Our direct integrations and AI-first infrastructure position us well to support and scale as these and other emerging ad formats evolve. Even as agentic advertising accelerates, we remain sharply focused on the 5 strategic priorities we set mid last year. These priorities are fueling underlying growth across our platform and will underpin double-digit revenue expansion in the second half of 2026. First, we continued to diversify our buyer mix, integrating with 50 new DSP partners last year. The mid-market advertisers represented by these DSPs are the fastest-growing segment of the market as demand for performance-oriented solutions accelerates. This growth is reflected by the strength of the open Internet, which offers professionally created content and a growing logged-in user base across CTV and mobile app. This logged-in scale is critical for measurement, conversion and ROI, making the open Internet increasingly compelling for performance advertisers. Second, we grew our buyer-focused go-to-market team by nearly 20% year-over-year and strengthened that team with new leadership to support deeper market penetration and account expansion. These investments are translating into stronger direct relationships with brands and agencies, with Activate consistently delivering top-tier performance that drives repeat spend and broader adoption. For example, in an IPG Kinesso-led campaign, Activate outperformed on every key metric, generating 72% more clicks, 11% more impressions purchased and nearly 20% lower CPMs for a leading global oil company, upending their traditional approach to programmatic buying. Similarly, MiQ, a global programmatic partner, significantly boosted brand visibility. Using Activate, MiQ powered a CTV campaign that required transparent, show-level reporting, capabilities unavailable in its legacy buying platform. These outcomes demonstrate how Activate collapses the value chain in the open Internet, improving efficiency and ROI. What's more, with AgenticOS, Activate will increasingly serve as a gateway to AI-enabled advertising for a broad range of advertisers. Third, CTV remains one of our most exciting growth channels. We recently added a new marquee global streamer to our platform and now partner with 28 of the top 30 global streamers, including Roku, Samsung TV Plus, DirecTV, Fox Sports, Tubi, Vizio and more. This leadership continues to attract top global brands to our platform. Sony Network Communications recently chose PubMatic to seamlessly reach both linear and CTV audiences programmatically via our platform. The campaign highlights how PubMatic helps brands unlock new incremental customers while driving stronger monetization for CTV publishers. Longer term, this campaign illustrates how PubMatic's programmatic solutions can drive execution across linear formats. Similarly, our mobile app business continued to scale with major mediation solutions. Most recently, we announced that PubMatic's OpenWrap SDK is now integrated with one of the largest global mobile ad networks, Google AdMob and Google Ad Manager for mobile app. This integration gives buyers a direct connection to high-quality, brand-safe inventory. As we enter 2026, mobile remains a strong secular growth area for us, with more partnership announcements in the near future. Fourth, emerging revenues will continue to be a significant growth driver in 2026 as adoption increases across several new products, in particular, new AI-powered solutions. Strategically, these solutions strengthen our revenue model in 2 ways. They increase platform usage as automation drives more transactions and higher performance, and they introduce incremental revenue streams. For example, earlier this month, we announced AI Insights, which gives publishers actionable sales intelligence so they can maximize yield. Using these insights, leading CTV and online video publishers are unlocking 20%-plus higher CPMs. Realtor.com's Senior Vice President of Digital Media and Advertising, Yi-Fang Yen, explained that PubMatic's AI Insights deliver the timely market-level visibility we need to spot performance opportunities, understand shifts in demand and make confident real-time optimizations as conditions change. And finally, just as we are using AI to drive increased customer performance, we're also using AI to drive our own operational excellence. AI has become a core productivity engine across PubMatic, embedding into processes and work streams across the business. In engineering, over 40% of new code in the second half of 2025 was written by AI, boosting productivity and accelerating time to market. These efficiencies funded new investments in sales and marketing while slightly reducing overall headcount. We'll continue to drive increased productivity in 2026 through AI adoption, which in turn will fund investments for profitable growth. I'm proud of the progress we've made and the discipline with which we built a more durable, scalable growth model. As we enter 2026, we remain focused on our key strategic priorities: Activate adoption, DSP diversification and accelerating growth in CTV, mobile and emerging revenue streams. We expect these initiatives to drive double-digit year-over-year revenue growth in the second half of the year. Looking ahead, agentic AI is an incremental tailwind and a defining advantage for PubMatic. It enhances advertiser performance, expands our addressable market and increases the flow of budgets to the open Internet. With adoption accelerating faster than anticipated, PubMatic is leading the next wave of innovation, helping our customers drive better outcomes through more automated, intelligent and transparent advertising. We have the strategy, technology and team in place to capture the opportunities ahead and to create lasting value for our shareholders. I will now turn the call over to Steve. Steven Pantelick: Thank you, Rajeev, and welcome, everyone. Q4 was a pivotal turning point for us, as we significantly exceeded expectations on both revenue and adjusted EBITDA. Adjusting for political revenues and revenues derived from the legacy DSP referenced mid last year, the remainder of our business, which represented 83% of revenue in Q4, grew 18% year-over-year. This strong double-digit growth was driven from secular growth areas: CTV, mobile app and emerging revenues as well as solid performance in display. These results materially expanded our Q4 adjusted EBITDA margin to 35%, underscoring the efficiency and operating leverage of our business as incremental revenue dropped to profit. Our strong Q4 capped a year in which we established ourselves as an AI leader among our peers, successfully realigned our business to address dynamic changes in our industry and positioned the company for sustained profitable growth. Here are some of the notable achievements we delivered in 2025. We generated revenue and increased usage on our platform from newly launched AI solutions. These existing products, along with new products being launched in the coming months, provide an incremental tailwind for us in 2026. We ended the year with nearly 50% of our revenues coming from high-engagement, first-party data-rich environments of CTV, mobile app and emerging revenues. We added 50 new DSP partnerships and reshaped the mix of our largest DSPs towards fast-growing commerce and high value-add verticals like pharma. We increased productivity through the effective use of AI across every business function, enabling us to increase investment in revenue growth initiatives while reducing overall headcount. We accelerated our free cash flow by 32% compared to 2024. And we've made significant progress executing on our multi-year innovation road map, investing in key growth areas with operational discipline, supported by a strong financial profile. I'm incredibly proud of what the team has accomplished and the momentum we're carrying into 2026. Our multi-year journey transforming our business focused on high-value, high engagement and data-driven revenue streams is on track. Beginning with CTV, our 2025 results represented the fourth year in a row of significant organic revenue growth. Over this period, CTV's compound annual growth rate has been over 50%. We now monetize inventory from 28 of the top 30 global streamers and over 450 CTV publishers. It is a global business with approximately 60% of our customers in the Americas and 40% in the rest of the world. In Q4, we saw robust incremental monetized impression growth from both newly signed partnerships and existing publishers. The 4-year compound annual growth rate for our mobile app business has been 15% and in Q4, delivered over 25% year-over-year revenue growth. This performance reflects the ramp-up of strategic partnerships, ongoing product innovation and continued expansion of our global app publisher base. Emerging revenue streams in the fourth quarter grew over 75% year-over-year and represented roughly 12% of total revenues, driven by increased adoption across several new products. Just 3 years ago, emerging revenues represented less than 1% of revenues, demonstrating our ability to scale innovation and diversify our revenue base into high-value profitable areas. We've achieved double-digit percentage growth across our curation, data, commerce and Activate offerings. Notably, our new AI-powered solutions are already starting to scale. In just a few months, nearly 10% of publishers on our platform are now deriving revenue from our AI solutions and generating incremental revenue for PubMatic. We anticipate our AI solutions will provide an incremental and growing tailwind for us in 2026 and beyond. Display revenues in the fourth quarter returned to year-over-year growth in the mid-single-digit percentages. Excluding the legacy DSP referenced earlier, display revenues grew over 20% in the fourth quarter, significantly outpacing the market rate of growth. Turning to ad spend. We benefit from a diversified portfolio of ad verticals. In Q4, we saw strong year-over-year double-digit percentage growth in the shopping, health and fitness and technology and computing verticals. We saw some softness in the business and food and drink verticals, which declined year-over-year in the single-digit percentages. Overall, our top 10 ad verticals in aggregate grew nearly 10%. As Rajeev shared, we continue to expand our business beyond the largest legacy DSPs, focusing on both product innovation and targeted sales execution. These efforts gained momentum in Q4, with ad spend from our mid-market DSP partners up 30% year-over-year, accelerating from 25% growth in Q3. With the addition of 50 new DSP partners to our platform, we are well positioned to further diversify our buyer mix. Regionally, our APAC and EMEA businesses grew rapidly at over 25% and 15%, respectively, offsetting a minus 18% decline in the Americas, which was primarily due to spend declines from political advertising and a large DSP buyer. Throughout 2025, disciplined cost management and AI-enabled automation supported both growth and profitability. We significantly expanded infrastructure capacity, processing 337 trillion impressions, up 28% over 2024, while keeping cost of revenues relatively flat. On a trailing 12-month basis, unit costs declined 20% year-over-year, demonstrating the efficiency and scalability of our own infrastructure and the leveraged model that we built. We also harness AI and automation across our back-office functions to drive measurable and sustainable efficiency gains. For example, in legal, the application of AI-enabled contracting tools has reduced average contract cycle times by roughly 15%, while also supporting a higher overall contract volume. In accounting, we achieved over 35% efficiency gains in our procure-to-pay process, enhancing speed and control in our financial operations. In FP&A, we've significantly reduced manual data aggregation efforts by nearly 1/3 while maintaining analytical rigor via AI-assisted data processing and reporting. Collectively, these initiatives showcase how AI-driven automation is unlocking real productivity, cost efficiency and operational leverage across PubMatic. Illustrating this point, in the fourth quarter, total operating expenses were flat year-over-year. At the same time, we increased investments in revenue-driving initiatives, most notably our buyer-focused sales team, which increased by nearly 20% year-over-year. Q4 adjusted EBITDA was $27.8 million or 35% margin, which included a foreign exchange impact of approximately $0.5 million due to the weakening U.S. dollar over the quarter. Q4 GAAP net income was $6.7 million, or $0.14 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. We generated $81 million in net operating cash flows in 2025, up 10% over 2024. We delivered free cash flow of $46 million, a 32% increase over last year. In addition to our disciplined approach in managing our working capital, cash flow benefited from lower cash taxes following the new federal tax legislation. To underscore our long-term ability to generate cash, since the beginning of 2021 through Q4, we have generated over $410 million in net cash from operations and more than $220 million in free cash flow. We ended the quarter with $145.5 million in cash and 0 debt. Our capital allocation strategy remains disciplined and balanced, focused on long-term shareholder value creation. We continue to invest in innovation and infrastructure to drive incremental organic growth, while maintaining the flexibility to pursue strategic M&A opportunities. We've also made a long-term commitment to return capital to shareholders via our share repurchase program. Since the inception of our repurchase program in February 2023 through the end of Q4, we have bought back 12.4 million Class A common shares for $181.1 million. We have $93.9 million remaining in our repurchase program authorized through the end of 2026. Moving on to our outlook. In terms of the latest trends, our January revenues came in line with our expectations and ad spending was healthy. Factoring in the changes from the legacy DSP we called out mid-2025, we expect Q1 revenue to be in the range of $58 million to $60 million. Spend from this DSP continues to be stable and in line with normal seasonal patterns. We expect to lap this impact by the end of Q2. Excluding this DSP, the midpoint of our outlook implies year-over-year growth in the high single-digit percentages. Q1 adjusted EBITDA is expected to be in the range of minus $0.5 million to positive $1 million, which includes a negative foreign exchange impact due to the continued weakness of the U.S. dollar. As a reminder, we have a fixed cost model and margin scale as we gain leverage over the course of the year. Looking beyond Q1, we expect to return to double-digit revenue growth in the second half of this year, with a corresponding expansion of our margins from revenue growth, supported by disciplined investment and increased efficiencies from AI. Full year cost of revenue is expected to marginally increase in the low single digits, primarily due to industry-wide utility cost pass-throughs from data center providers beginning in Q1. We anticipate partially offsetting these costs by continued efficiency efforts already underway. Full-year operating expenses are expected to grow in the mid-single-digit percentages and include the cost to pursue our litigation against Google. Sequentially, quarterly operating expenses are anticipated to marginally increase in the low single-digit percentages. We will continue to invest in high-return AI revenue initiatives, while pursuing cost savings unlocked by AI productivity efforts across all functional areas. Full-year CapEx is projected to be approximately $15 million to $19 million and reflects a shift away from investments for increased ad impression capacity and instead towards expanding support for AI workloads where we're seeing strong performance gains and revenue from our AI solutions. In closing, Q4 represented an important structural inflection point for PubMatic. As our secular growth engines in CTV, mobile app and emerging revenue scale, our model generates operating leverage. In Q4, we delivered 35% adjusted EBITDA margins and strong free cash flow, reinforcing the durability of our own infrastructure and fixed cost base. As we move through 2026, 3 dynamics give us confidence. First, revenue growth is broadening. We are increasingly diversified across DSPs, verticals, geographies and high-engagement environments, which reduces concentration and strengthens the resilience of our model. Second, AI is not just a product catalyst, it is a financial lever. We are simultaneously driving incremental revenue from AI-powered solutions while using AI to expand margins, improve productivity and fund growth investments. Few companies in our space are capturing both sides of that equation. Third, our balance sheet remains a strategic advantage. With approximately $146 million in cash and no debt, strong operating cash generation and nearly $94 million remaining under repurchase authorization, we have the flexibility to invest, return capital and pursue strategic opportunities, all while maintaining financial discipline. Importantly, we expect to return to double-digit revenue growth in the second half of this year, with corresponding margin expansion driven by revenue scale and AI-enabled efficiencies. We enter 2026 with a stronger revenue mix, a more efficient cost structure and a scalable AI-enabled platform. That combination positions us to expand margins, grow cash flow and create durable long-term shareholder value. With that, I'll turn the call over to Stacie for questions. Stacie Clements: [Operator Instructions] Our first question comes from Shweta Khajuria at Wolfe. Shweta Khajuria: Could you please maybe speak to how you work with Amazon, what role Amazon plays with your partnership and in the industry as it relates to their involvement in the ad tech chain? Maybe that's not very well understood as we think about the supply side of it all. Rajeev Goel: Sure. Yes. So, we work with Amazon in multiple ways, and that partnership is growing and expanding as, of course, their ad business is growing. So first of all, we're 1 of 3 SSPs in their Certified Supply Exchange program, which was publicly announced, I think, over a year ago. And the goal of that program is to foster collaboration amongst our go-to-market teams for mutual growth in addition to from a product and technology perspective. And that program has grown well. It exceeded the targets that we laid out in 2025, and we're excited about the growth opportunity for that in 2026. On the sell side, we monetize streaming inventory through our partnership with Amazon Publisher Services or APS as well as Fire TV devices from almost a dozen different streaming apps. So, these are CTV streamers that have apps for Amazon's Fire TV devices. We've been monetizing this inventory for multiple quarters now, a couple of years, and we do that by delivering unique PubMatic ad demand to our shared streaming publishers while also expanding the streaming inventory that's available to buyers on our platform. We also monetize omnichannel inventory, so non-streaming inventory, mobile web, display, et cetera, through the wrapper, Amazon's wrapper, Transparent Ad Marketplace. Now this DSP -- from a DSP perspective, they've been scaling and they're a top 5 buyer on PubMatic. So, we've collaborated with them on multiple different product releases, including traffic shaping in order to drive greater efficiency. We've got a number of growth opportunities in the pipeline with them for 2026, and I anticipate sharing more about our relationship with them in the future. Stacie Clements: Next question comes from Matt Condon, Citizens. Matthew Condon: Just one for me. But Rajeev, as you take a step back and you look at this new AI world that we live in, it seems like ad platforms really need to differentiate on either data asset or access to unique inventory. As you think about PubMatic, just what are the structural assets that PubMatic has that really differentiates it from other platforms? Rajeev Goel: Yes. Thanks, Matt. So, I mean, first of all, I'd just say the interest and energy around agentic has been amazing to witness. I think we're seeing a wholesale revolution in how media is planned, transacted and optimized. And while it's early, we're well ahead of the curve on this. And just to kind of give a sense of where we see the opportunity, I think the last 10 to 15 years of the industry have really been about real-time bidding, right? So, optimizing that individual impression in real time. But if we step back a little bit, we look at what's happening upstream and what's happening downstream, there's a lot of manual effort happening, discovery of inventory, planning, media plan, what inventory, what data, which users to go after pricing and then downstream of the actual RTB transaction. There's a lot of work to be done in measurement and optimization. So, now with the introduction of generative AI, we're in a position to automate all of those pieces and create a lot of value for the ecosystem in the process, right? And I think this is just kind of super obvious where we can leverage AI and allow humans to do more value-added work, more creative work and make advertising not only more effective, but also to make it a lot more efficient, which should grow the overall market opportunity as well as grow our addressable market. So, on your question about what's unique about how we're positioned, I think we are uniquely positioned to win in this arena for a few reasons. So, first is that we have a significant advantage with respect to deep customer integrations. So, you heard me talk about on the call, several thousand publishers representing over 100,000 sites and apps. So, we have code on those websites, in those apps, et cetera. That's a huge network effect where a buyer can effectively access the entire open Internet ecosystem on our platform. And that advantage only sits on the sell-side because of the yield optimization that we provide to publishers. Second, with Activate, buyers can now buy directly in our SSP, which really simplifies the end-to-end workflow and agentic communication. And this is, I think, really critical because we are not in a position where we have to wait for standards to emerge so that sell-side tech and buy-side tech can communicate in a standardized protocol because we have Activate, which is direct buying in our SSP, we're free to innovate beyond any standards and so we can move a lot more quickly. Third is that we've launched AgenticOS to provide Model Context Protocol or MCP-enabled access to all of the core use cases on our platform and in the ecosystem. And we think we're well ahead of where the market is with AgenticOS. And then fourth, we have purpose-built AI infrastructure. So, we have owned and operated infrastructure, which we've partnered with NVIDIA on, and that enables us to run next-gen AI models in a customized hardware and software stack. And then finally, we have not only the data from our publisher base, but also 250 data partners in our Connect data platform, providing first -- very rich first-party data and commerce data and the like. So, when you put all of that together, that's why we're in the position we're in where we've gone from the first campaign in December to over 250 agentic campaigns being run in a very short period of time. I also want to just close by saying this is not something that can be vibe-coded by 3 guys with an LLM subscription, right? Even if you could recreate the application software overnight, vibe-coded software is not going to be tuned for high volume of transactions for high concurrency, for low latency, for efficient memory consumption, efficient storage. You need customized infrastructure for these advertising workloads, which has been built on $100 million plus of CapEx. You need integrations with thousands of publishers and buyers around the world. You need commercial contracts in place, payment flows. So, we think we're in a really strong position to lead this revolution, which is much more than just technology. It's really something that's going to upend the entire value chain of the ecosystem. Stacie Clements: Question comes from Barton Crockett at Rosenblatt. Barton Crockett: I was curious, Rajeev, when you gave your outlook about '28 and 2030, I think 25%, 50% volume being agentic. Is that -- when you say volume agentic, do you envision this working like with Butler/Till where it would be entered through an LLM like Claude straight to you guys and in that way, maybe streamlining the industry a bit, lowering fees and perhaps losing a DSP in the process? Rajeev Goel: Yes. So, I think it could happen in a variety of different ways, Barton. And to be clear, we're quite early, right, in this kind of opportunity and revolution here. So it could be through LLMs. It could be through buyer agents, so specialized agents that various tech companies are building or launching into the ecosystem. It could also be directly through our platform. It could be through an agent that a DSP builds. So, I think all of those are opportunities. I do think that with AgenticOS and Activate bidding directly within our SSP, we are creating more value and adding more value across the ecosystem. And I expect us to participate in that with increased revenue from those transactions, even at the same time as we're reducing the cost to transact advertising. So, I see a really strong dual benefit on both the top line and the bottom line. Barton Crockett: Okay. But just to follow up, I mean, is it your vision that AI over time streamlines and reduces fees in open Internet? Is that basically your kind of base case of what happens and you're just trying to position to be the player within that? Rajeev Goel: Yes, that is right. So, I do think, as I mentioned earlier, this is going to be not just technology, but a value chain disruptor. And by that, what I mean is the supply side and the buy side, I believe, are going to come much closer together. And Activate is a great example of that where a buyer can buy directly in our SSP. Of course, they can continue to choose to work with any of 150-ish DSPs that are integrated into our platform. So, I do think that we can create efficiency in the ecosystem. Part of that is operational overhead of people and systems and part of that can absolutely be fee efficiency. And it's probably natural to expect that as any industry scales up, including digital advertising, there should be more and more fee efficiency built over time. Stacie Clements: Next question comes from Rob Coolbrith at Evercore. Robert Coolbrith: Rajeev, I just want to ask you -- so the 5x cost improvement and campaign execution that you talked about resulting increase in working media dollars, so is that by elimination of supply chain ops, specifically the DSP or just anything more you could tell us about that? And then just taking another step back, I think there's sort of dual or maybe competing visions or maybe there's multiple visions of agentic, one where it sort of sits on top of existing programmatic infrastructure, one where it potentially displaces it where you could have more sort of a federated model of -- there could be 1,000 walled gardens effectively, if you will. So, just wondering why maybe one or the other might win out? Do you have ultimately a preference? I suppose you guys could be the one powering the 1,000 walled gardens. So just any thoughts on how this ultimately plays out? Is agentic going to make the programmatic world more centralized or more federated over time? Rajeev Goel: Sure. Yes. So, just on the first part of that question, so the 5x cost efficiency, it's looking at the entire cost to execute a campaign, right? And so pre-agentic, there's a lot more manual activity involved, as I talked about earlier in terms of campaign setup and then in-flight optimization, post-campaign measurement. And then there's, of course, multiple technology partners in the mix with fees kind of pre-using the agentic approach with us. And then post, we look at, okay, how much manual activity came out of that process. how many third parties were eliminated and look at that efficiency as a percentage of the total media campaign, and that's where we get the 5x cost efficiency. So, these are pretty substantial. And what it leads to is that performance in the open Internet when transacted agentically can be much stronger than what it is today. And I think that can be a big driver of total addressable market and of the market that we're going after. On the second part of your question, yes, I would say like maybe a month or 2 ago, I heard a lot of conversation about is AdCP or agentic going to replace programmatic or real-time bidding. I definitely do not see that. I see what's happening with agentic capabilities and what we're building with customers to be complementary, meaning a lot of this work is being done on top of programmatic pipes where ultimately, transactions do need to be bided in real time. And AI is just not at a place where it can deliver at the low latency and high throughput that is needed. And so I very much see this as bringing a lot more volume into our platform. Robert Coolbrith: Great. Steve, just to ask you a quick follow-up. Just versus the forecast, I wanted to maybe ask if you could take us through the top couple of drivers of upside in the quarter from your perspective, any key verticals, demand platform, supply platforms that they have outperformed? Steven Pantelick: Sure. Yes, no, obviously, we're very pleased with our Q4 outcome. We exceeded our expectations by a significant amount. And the good news is that it was all driven by areas that we've been investing and innovating to see key secular growth areas. So, we saw strong growth in emerging revenues, which grew over 75% in the fourth quarter year-over-year. We saw mobile app accelerate to 25% growth. And we saw CTV continue to perform double-digit rates. And so from our perspective, we had all the key areas that we've been investing, innovated around, deliver above expectations. At the same time, we also saw stability in the DSP change that we called out mid last year. So, that was stable and was a net neutral to positive. And then importantly, I think when you step back and think about what we've done as a business, we've been transforming our business over the last couple of years. And so the fourth quarter really distilled down all those key trends and sort of laid down the foundation. As Rajeev called out, we've diversified our DSPs in the mid-market. And so feel really good about the outcome in terms of exceeding expectations and the setup for 2026. Now with respect to particular ad verticals, I called out there were a couple, shopping, for example, was robust in the fourth quarter and there was overall pretty healthy ad spend. So, I think it speaks to stability in the ad ecosystem, and that's our expectations in '26 that that's going to continue. Stacie Clements: The next question comes from Matt Swanson, RBC. Matthew Swanson: Going back to what you were just talking about, Steve, but the question might be a little more for Rajeev, but just that DSP diversification. I mean, first of all, congratulations because I had no idea there were that many DSPs in the world that you're now working with. But could you just talk a little bit more after these last 2 years, kind of how much of a renewed point of emphasis that is within your company to make sure that you control everything that you can control and not get overly set on 1 or 2 large providers? Rajeev Goel: Yes. Sure. Let me take that off and then Steve, I'll hand it over to you. So, I think this is an exciting growth area for us, and we've made tremendous headway in expanding our DSP mix. And I think if we go back and consider the industry from a couple of years ago through the preceding 5 to 7 years, it was very much characterized by DSP consolidation. A couple of DSPs emerged as winners and consolidators. But now what we've seen is something very different where in the last couple of years, I think, as the industry has continued to fragment, we've seen depth in a lot of new verticals, retail media, pharma, for instance. We've seen new formats like CTV streaming, et cetera, come into the mix. There are many more specialist DSPs that are out there. And I think it probably also reflects a much bigger broadening of the number of advertisers, many in the mid-market, whether it's upper, middle, lower, that have very different and diverse needs than the head of the market, the top 250 or top 500 advertisers have had. And so that's creating a lot of opportunity, and we have a really robust road map going after this group of DSPs because we see, a, there's a lot of growth potential; and then b, strategically, it's very good for us from a diversification perspective. Let me turn it over to Steve as well. Steven Pantelick: Sure. Matt, I think you hit the nail on the head when you commented on focusing on what we can control. And so Rajeev called out some of the key drivers of that, identifying where the opportunities are. We had tremendous results in '25, adding 50 more DSPs. And that's a function of focus and making sure that we go after the right DSPs and then innovating around them. And what allowed us to do that is our continued focus on efficiency, and we've actually put more resources into the sales area, focused on advertisers, DSP buyers to really take advantage of the trends that Rajeev just described. So, we continue to control what we can control. We're investing in areas where we see upside. And then you are starting to see the outcome of that with improved diversification. I called out the stat that the mid-market DSPs that we've been spending more time with, accelerated growth in the fourth quarter to over 30% year-over-year. So from our perspective, this is a multi-quarter longer-term process, but we believe we're doing exactly the right things to diversify our overall buying base. Matthew Swanson: Yes. That's super helpful. We've gone over a lot of company-specific positives for both the quarter and kind of playing out through 2026. And you've talked about the DSP headwind diminishing somewhat and starting to improve. Could you just talk a little bit more about what goes into that Q1 guidance? Obviously, a beat and raise quarter, but still from a year-over-year perspective, down a bit. So, just is there still DSP headwinds, macro? Just kind of how you're thinking through that, Steve? Steven Pantelick: Sure. No, absolutely. The big headwind that we're working through is what we called out mid last year is the large legacy DSP. And one of the stats that I shared was if you -- for the fourth quarter, if you adjust for that DSP as well as political, which was a big factor in the fourth quarter of '24, we grew 18%, which is well above market growth rates. And so you can see the impact that, that DSP headwind had on us. Now with respect to the guidance, making that same adjustment, obviously, political is not a factor. So just adjusting for the DSP, our expectation is the midpoint of our guidance is in the high single-digit. So from our perspective, clearly, on track in terms of getting back to growth. And by midyear, we will have lapped that impact. And so we expect revenue acceleration in the second half of the year because we've been investing and seeing results, mobile app, CTV, emerging revenues. So all told, what you're really seeing is that headwind that's still in the reported numbers that we're going to grow through in the second half of the year. Other factors are obviously built into it, so assumption that the macro will remain relatively stable. And what we saw in January was that was the case. We saw 6 out of 10 ad verticals grew double digit. So all told, we see a stable background. We see the results of our investment, and we see working through some of the structural headwinds that we feel are now stable and will soon be behind us. Stacie Clements: Next question comes from James Heaney at Jefferies. James Heaney: Rajeev, when you say that your Q4 results represented an inflection point in your business, could you just elaborate on what you think the biggest unlock was this particular quarter? Is it a combination of things? Or is there one thing you'd call out? Rajeev Goel: Sure. Yes, I would say it's a combination of a number of things, right? And to kind of just highlight it, Steve called out the metric just now in the last Q&A, which is excluding political and that legacy DSP. 83% of our business grew 18% year-over-year in Q4. So, clearly, a very positive signal. So, things that I think are working well. CTV grew in the double digits, excluding political. We partner now with 28 of the top 30 global streamers. So, we added one more. We'll share more on that one a little bit later. Mobile app grew 25% year-over-year. The emerging revenue streams, that's now 10% of revenue growing very quickly. The DSP diversification that we talked about earlier. And then I think the big one that certainly I am personally very focused on is the emergence of agentic as a new incremental tailwind in our business. And we just started to see a bit of that in Q4 as we launched those initial campaigns in December. But just the fact that we're now at 250 and growing campaigns that have run, obviously, we feel very excited and bullish on that opportunity. Steven Pantelick: And if I would just add a couple of additional comments. We think about -- obviously, we have been working through structural changes in the industry. And I think what really distilled for us is that the confluence of our hard work in terms of innovation, investing, gaining efficiencies and really setting ourselves up for a strong, healthy 2026 with accelerating revenue in the second half of the year. And so from our perspective, to rephrase again, we're controlling what we can control and we're seeing the fruit of our labors. And so we're feeling very confident about the trajectory of the business because we are seeding our business around the areas that will have long-term growth opportunity for us. Stacie Clements: The next question comes from Jason Helfstein at Oppenheimer. Steven Hromin: This is Steve Hromin on for Jason. So, just a quick question on AgenticOS. The over 250 deals metric is encouraging. But just can you help us understand whether these deals are already driving meaningful revenue? Or is that more of a this year and next year story? And then also, how do the economics work? Like are you charging higher CPMs or an expanded take rate or separate fee structure? Rajeev Goel: Sure. Steve, do you want to take that? Steven Pantelick: Sure. No, from our perspective, first, we're out of the gate. And from our perspective, we are absolutely the leader among our peers in terms of this respect, having an end-to-end system that's working, PubMatic's AgenticOS. And so as we've done with many other innovations in our company, we build out the foundation and then we scale it over a number of quarters and years. And so this will be similar in that regard. To give you some proof points, it was about 3 years ago, where our emerging revenues was less than 1% of our revenues, and we exited '25 at 12% of revenues. That's Activate, curation, commerce, et cetera. And so we expect our agentic efforts will build a base and then it will accelerate over time. So for -- in the second half of the year, we would assume that, that will be a similar profile, but it's going to take time. But the key point is that we are actually leading the pack and actually learning from the process and we'll start to hit the revenue line. Now, we're experimenting with a lot of different models in terms of CPM-based, et cetera. The powerful aspect of what we're doing is that we now have sort of a complete breadth. We obviously have the deep integrations that Rajeev called out. We have the buying capability. So, we have a lot of flexibility in terms of how the economics play out over the long run. And any good company that's innovating is we're experimenting and testing and see what is most palatable and will be the unlock for our customers and partners. Rajeev Goel: Yes. Maybe just 2 data points to add to that. So thank you, Steve. So, when a buyer uses AgenticOS as the agentic doorway into PubMatic and they buy through Activate, then we do generate an incremental fee. So Activate, the direct buying interface into our SSP, we do generate an incremental fee on those transactions above and beyond the SSP fee. And then second, I called out in the prepared remarks that 10% of publishers are now generating revenue from AI solutions, and that can be AgenticOS as well as a variety of different publisher solutions that we have. So, that number -- it's great that it's in double digits, but that number should be 100% eventually. So, I think it just points to the fact that we're still early and there's a lot of runway ahead of us. Stacie Clements: Zach Cummins at B. Riley. Zach Cummins: I just wanted to start off with the impacts that we've seen to search traffic with the emergence of some of these large LLM models, just curious if you've seen a meaningful shift in terms of channels that advertisers are now prioritizing versus maybe what you saw 6 or 12 months ago? Rajeev Goel: So, we have not seen a meaningful shift. I mean, obviously, OpenAI is out with a new advertising solution. And I think it's pretty early. I don't know if you call it an alpha, beta or something like that. And so I don't think that's at scale. And I think that's primarily competing with search budgets, which do not flow on our platform to begin with. So, we aren't seeing that from a kind of channel perspective. I'd also say that our business is quite limited in terms of exposure from a traffic perspective. We've sized it at single-digit percentage of revenue if search traffic were to go away because about 60% of the impressions that we process are now for CTV and mobile app, and those are unaffected by the kind of the changes in search. And then industry data indicates that for the remainder of our business, about 15% of traffic is referral traffic versus direct navigation. So, when you play that math out, you get into the single-digit percentages. I mean, we continue to grow the impression volume on our platform. There's no shortage of both browser web monetization web impressions as well as mobile app as we continue to grow with the Google announcement. And then, of course, CTV, as we add more and more streamers to our platform. Steven Pantelick: And one thing I'd add, Zach, just to underscore the point and really speak to the strength of PubMatic in the fourth quarter, we actually had a very robust display growth. We returned to growth on a year-over-year basis in the mid-single-digit percentages. And if you adjust for the large legacy DSP, our display business actually grew 20% year-over-year in the fourth quarter. So, hard to see sort of any bleed over from AI pressures in that regard. But really, what it speaks to is that when you think about all the things we've been doing, executing against our strategic priorities, all of those efforts are starting to benefit across all formats and channels. In fact, it's lifting all boats. And really, display with that said, highlights that the benefit of those efforts that is really broad-based across our platform. And of course, there's all the other structural aspects, controlling what we can control, adding more DSPs helps. Rajeev called out the strong Activate progression, the mobile app progression, all that feeds into volume growth, not just in CTV, but also our legacy formats like display. Zach Cummins: Understood. And Rajeev, I'm curious if you can give any sort of update around the Google Ad Tech Remedies trial. I'm still awaiting a final decision on that front, but maybe just level setting kind of base case outcome that you view is most likely. And I'm assuming that none of that potential tailwind is included in the forward outlook. Rajeev Goel: Yes, that's right. So, that's not included because obviously, the timing and the nature of the remedies is uncertain. So, maybe there's 2 things to comment on. One is the Google DOJ case and then the other is our own lawsuit against Google for damages. So on the former, we, like you are waiting for the court's verdict in terms of remedies, I think many people are expecting it sometime this quarter. And many folks are expecting it to be more so behavioral remedies rather than structural remedies where the primary structural remedy is Google divestiture of AdX. So, we don't know anything special. So, we're kind of waiting and seeing. I think as you know, we estimate Google is a 60% market share player and each 1% of market share would add $50 million to $75 million in very high-margin revenue, roughly 80%, 90% incremental margin revenue to our platform. So, we think it's a tremendous opportunity. But like you, we are waiting for that verdict that remedies to be handed down. And then the second piece is our own litigation against Google. And that's going to be a bit of a longer process. This is for damages. And there was, I think, a very positive decision where the judge in New York, which is where this case has been sent to determined that the factual findings made by Judge Brinkema and the DOJ litigation should be applied without relitigating the facts. And so what that means is that we don't need to prove that there was antitrust or anticompetitive behavior on the part of Google. We only need to demonstrate what the magnitude of damages is. Stacie Clements: Question comes from Elle Niebuhr at Lake Street. Unknown Analyst: So, I was just wondering if you could quantify how much of the Q4 CTV growth is tied to live sports versus the always-on budgets. Do you guys see sports becoming a higher mix of CTV revenue? Or could you comment on that? Steven Pantelick: Sure. I mean, from our perspective, live sports is obviously a key long-term driver for our CTV business as for the industry overall. So, we've been making great progress expanding inventory in not just live sports, but agency, marketplaces across the globe. And they're all going to be strong secular growth areas. And I think the way to think about the opportunity is really to dovetail with earlier comments that as we scale as a business, bring in more publishers, Rajeev shared, we now work with 20 of the top 30 global streamers. We have over 450 global CTV publishers, and we're growing that all the time. So, we have inventory that buyers value and in the process of making us easier to use through our AI capabilities, we anticipate that CTV will certainly benefit from it. And it's benefiting because we have inventory at scale, and we expect that to continue to be a long-term growth driver for us. Rajeev Goel: Yes. Just to give you a couple of examples. Last year, we monetized Cricket World Cup. U.S. Open for tennis, MLB, NFL, NHL, so kind of the list goes on and on of live sports. So it absolutely is a key growth driver of our overall CTV business, and we're continuing to get closer to both the streamers and the buyers in order to work through many of the technical challenges. Stacie Clements: We are out of time. So, I'm going to turn the call back over to Rajeev for closing remarks. Rajeev Goel: Thank you, Stacie. We entered 2026 with a stronger revenue mix and more efficient cost structure and expect to return to double-digit revenue growth in the second half of this year with corresponding margin expansion. Our early leadership in agentic AI is both an incremental tailwind and a structural advantage for PubMatic. And given our scale and proprietary data, it drives greater advertiser outcomes, unlocks new addressable ad demand and increases budgets to the open Internet. We look forward to seeing many of you at upcoming conferences, including the Citizens Tech Conference on Monday, March 2, and the KeyBanc Emerging Tech Summit on Tuesday, March 3, both in San Francisco. I will also be speaking at the NVIDIA GPU Technology Conference, or GTC, their Global AI Conference on March 19. Thanks, everyone, for joining us today, and have a great afternoon.
Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss SUI Group Holdings financial and operating results for the fourth quarter ended December 31, 2025. Joining us today are SUI Group's Chairman of the Board, Marius Barnett; Chief Investment Officer, Stephen Mackintosh; and Chief Executive Officer, Douglas Polinsky; and Chief Financial Officer, Joseph Geraci. By now, everyone should have access to the company's fourth quarter 2025 earnings press release, which was issued this afternoon at approximately 4:05 p.m. Eastern Time. The release is available in the Investor Relations section of the company's website at www.suig.io. This call will also be available for webcast replay on the company's website. Following management remarks, we will open up the call for your questions. Please be advised this conference call will contain statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements. For important risks and assumptions associated with such forward-looking statements, please refer to the company's SEC filings. Marius Barnett: Thank you, and good afternoon, everyone. Before diving into the quarter, I'd like to briefly share my perspective on the current market environment. As many of you know, I am the Co-Founder of Karatage, a London-based investment firm focused on digital assets and emerging technologies. Over the past several cycles, I have invested across public and private blockchain infrastructure, DeFi protocols and AI-linked digital systems. Volatility in digital assets is not new to us. Cyclical repricing, liquidity compression and a sharp mark-to-market movements are inherent features of emerging asset classes. What has remained consistent across cycles is the long-term progression of technology. Infrastructure improves, developer ecosystems deepen, institutional participation increases and regulatory clarity advances. We believe we are operating in that progression today. The digital asset industry is entering a more mature phase. The regulatory engagement in the United States has shifted from an uncertainty towards structure. Institutional frameworks around custody, derivatives and market infrastructure continue to formalize. Policymakers are increasingly focused on integrating digital assets into modern capital markets rather than excluding them. Those developments act as tailwinds, not just for the industry broadly, but for institutional-grade public companies like SUI Group. That context makes the strengthening of our Board, particularly important. During the fourth quarter, we appointed former CFTC Commissioner and ex- a16z crypto Global Head of Policy, Brian Quintenz, as an Independent Director. Brian is a recognized leader in financial markets, public policy and digital asset regulation. He currently serves on the Board of Kalshi, an event-based derivatives exchange, regulated by the U.S. Commodity Futures Trading Commission and has advised a range of leading institutions across the digital assets and financial services ecosystems. His presence reinforces SUI Group's governance discipline and positions us to engage constructively as regulated frameworks evolve. Against that backdrop, SUI Group continues to execute on a strategy that is intentionally long term. Our objective is not simply token accumulation. We aim to develop a public market gateway into one of the most technically differentiated layer 1 ecosystems in the market. During the quarter, we continued to activate our treasury across multiple verticals. Our partnership with Bluefin is a great example of how we're moving beyond passive capital deployment. Bluefin has scaled into the leading decentralized exchange on SUI with over $4 billion in monthly trading volume, $82 billion in cumulative volume and expanding lending and vault products. Institutional adoption of on-chain derivatives and structured yield products requires performance infrastructure and SUI's architecture enables that performance. By aligning with Bluefin, we are directly participating in one of the highest growth segments of on-chain finance. In parallel, we advanced stablecoin infrastructure through the launch of suiUSDe and USDi in collaboration with Ethena and the SUI Foundation. Moving from issuance to activation, we ceded $10 million into the Ember-operated suiUSDe Vault, a permissionless, yield-generating vehicle designed to create durable liquidity for the ecosystem. Stablecoins are foundational to capital formation on chain. Participating in the infrastructure layer positions SUI Group to capture value beyond directional exposure. The combination of these initiatives reflects a core principle guiding our strategy, activation compounds value. We are not simply accumulating an idle treasury. We are scaling it, staking it and strategically deploying it into high-impact ecosystem infrastructure, all within a regulated publicly traded framework built for transparency and institutional participation. Our strategy is anchored in a structural shift we see underway across global markets, the convergence of blockchain infrastructure, institutional capital and real-world financial use cases. SUI's architecture is engineered for performance at scale, and that matters as decentralized systems move from experimentation to enterprise-grade deployment. SUI Group is building a position accordingly, not as a short-term trading vehicle, but as a long-term duration platform aligned with network growth, ecosystem expansion and institutional adoption. Our mandate is to translate technological advancement into per share value for public market investors. With that, I'll pass it over to Stephen to walk you through our fourth quarter operational updates. Stephen Mackintosh: Thank you, Marius, and good afternoon, everyone. Our capital allocation framework remains disciplined and straightforward: increase SUI per share, activate the balance sheet responsibly and preserve long-term flexibility. At the protocol level, SUI continues to distinguish itself technically. Its object-centric architecture and Move programming language allows for parallel execution, low latency finality and composable digital asset logic. That design enables scalable, stablecoins, high-frequency on-chain trading, tokenized real-world assets and AI integrated applications, all within a single horizontally scalable Layer 1 environment. Performance characteristics matter when institutional capital enters an ecosystem, throughput, deterministic execution and low transaction costs are prerequisites for derivatives, lending markets and structured products. That is where we see SUI positioned structurally well. During the quarter, we continued scaling our treasury and staking substantially all of our holdings, generating approximately 1.7% annualized yield in SUI-denominated rewards. Since the inception of our digital asset treasury strategy in July 2025, we have generated approximately 1.13 million SUI in total skating rewards and lending activities in the SUI ecosystem. This income compounds the treasury over time and reinforces our long-duration orientation. Equally important was the execution of our authorized $50 million share repurchase program. In Q4, we repurchased approximately 7.8 million shares of our common stock at an average price of $2.02 per share. These repurchases represented approximately 8.8% of SUI's shares outstanding at the time of the implementation of the repurchases. At the time of execution, our stock was trading at a meaningful discount to its underlying net asset value and SUI per share exposure. Deploying capital into our own equity under those conditions was a high conviction allocation decision. It increased SUI per share, improved per share exposure to staking yield and ecosystem activation strategies and reflected confidence in the intrinsic value of the platform. Turning to ecosystem activation. Our Bluefin partnership provides more than yield enhancement. As Marius mentioned, Bluefin's Perpetual Futures platform has grown from roughly $1 billion in monthly volume to over $4 billion in monthly volume with cumulative trading volume exceeding $80 billion and expanding lending markets. The protocol now integrates spot, perps, lending and vault infrastructure within a unified trading environment. As derivatives and structured yield strategies expand on SUI, the presence of institutional-grade liquidity venues becomes critical. Our agreement to lend SUI into Bluefin and participate in revenue share aligns us directly with that growth vector. It also provides a return profile differentiated from passive staking. On the stablecoin side, the launch of suiUSDe and USDi marks an important evolution. Ethena's USDe has scaled into one of the fastest-growing dollar-denominated digital assets in history, bringing that infrastructure natively to SUI expands the ecosystem's monetary base. Our $10 million anchor deployment into the Ember-operated Vault was designed to accelerate liquidity formation and institutional participation. Stablecoin velocity underpins DeFi growth. By pairing treasury exposure with infrastructure participation, we create multiple pathways for value generation, total appreciation, staking yield, protocol revenue share and liquidity provisioning. As we move into the year ahead, our focus remains on: a, scaling SUI per share through disciplined treasury growth; b, continuing to activate our treasury across staking, lending, derivatives and stablecoin infrastructure; c, maintaining opportunistic capital allocation, including share repurchases when appropriate; and b, operating with institutional-grade transparency as the only publicly traded company with an official SUI foundation relationship. The digital asset market will continue to experience volatility. What endures is infrastructure quality, ecosystem adoption and disciplined capital management. We are positioned at the intersection of all 3. I will now turn the call over to Doug Polinsky, SUI Group's Chief Executive Officer, to provide an update on our specialty finance operations. Doug? Douglas Polinsky: Thank you, Stephen, and thank you all for joining today's call. For those who may be new to SUI Group, our company was originally built as a specialty finance platform under Mill City Ventures III. We provide short-term, secured, nonbank lending solutions to businesses and individuals seeking flexible capital for real estate, inventory and other liquidity needs. These loans are typically collateral backed and structured to generate income through both interest and origination fees. That legacy lending business continues to perform well, and the platform remains profitable and cash generative. Importantly, it provides steady earnings and liquidity that help limit cash burn. It is a disciplined risk-managed operation that continues to add stability to the broader company. While we remain selective and opportunistic in specialty finance, our strategic center of gravity has shifted. Today, our primary focus is building a differentiated institutionally aligned digital asset treasury platform anchored to the SUI blockchain, leveraging the strength of our legacy business to support that long-term evolution. I'd now like to turn the call over to our Chief Financial Officer, Joseph Geraci, to take you through our financial results. Joe? Joseph Geraci: Thank you, Doug. A quick reminder as we review our fourth quarter financial results, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. Due to our strategic shift on July 31, 2025, from our specialty finance business toward blockchain native treasury management, our historical financial condition and results of operations for the period presented may not be comparable. Gross revenue and portfolio income for the fourth quarter 2025 increased 179% to $2.4 million, compared to approximately $869,000 in quarter 4 of 2024. The increase was primarily driven by the generation of staking revenue and digital lending interest income from our SUI digital asset treasury strategy. Our fourth quarter 2025 results include a $196.1 million noncash unrealized and realized loss related to mark-to-market accounting adjustments on our SUI and digital asset loan receivable holdings. Please note, this is a U.S. GAAP required treatment that reflects changes in estimated fair value and does not represent an actual outflow of cash or impact our liquidity. As a result, total operating expenses, excluding net realized and unrealized gain on portfolio investments in quarter 4 2025 were $203 million, compared to approximately $960,000 in quarter 4 2024. Excluding the aforementioned unrealized and realized loss on digital assets and stock-based compensation, operating expenses for the fourth quarter 2025 were $4.8 million. The net loss for the fourth quarter 2025 was $221.8 million or $5.52 per diluted share, compared to net loss of approximately $91,000 or $0.01 per diluted share in quarter 4 2024. The decrease was primarily driven by the aforementioned noncash unrealized loss on our SUI Holdings. As of December 31, 2025, cash and cash equivalents were $21.9 million, compared to $6 million as of December 31, 2024. As of December 31, 2025, SUI Group held 105,086,451 SUI with a net value of $147.4 million, plus a digital asset loan receivable of 2,961,550 SUI with a net value of $3.6 million. This concludes our prepared remarks. We will now open up for questions from those participating in the call. Operator, back to you. Operator: [Operator Instructions] Our first question comes from the line of Devin Ryan with Citizens Bank. Neil Eloff: [ Neil Eloff ] on here for Devin. My first question is on agentic AI. There's been a lot of news on the top recently. So I'd love to get your guys' thoughts on its role in the blockchain ecosystem. And then if you could also talk a little bit about SUI from an infrastructure point of view. We're thinking that agentic AI can really lift trading volume in the coming years. So how is SUI kind of best positioned from that point of view? Stephen Mackintosh: Thank you for the question. This is Stephen Mackintosh, CIO. I think in our view, agents will soon likely be responsible for many of the transactions on the Internet. And I think that the blockchain industry will play a critical role as we essentially transition from the mobile era to the cloud era and now to the AI era. I think that SUI is best understood as a coordination layer for user intent. Those intent can be manifested in agents taking actions in commerce from the click-of-one button and essentially executing all of the necessary complex multistep actions as a single indivisible atomic operation that exists on chain. And I think that we really are at the tipping point of an explosion of agentic commerce. What's really unique about SUI's architecture is that it allows for the coordination at scale of really high throughput transactions, specifically through the use of a very unique technology perimeter that's on the SUI blockchain, called programmable transaction blocks, also known colloquially as PTBs. And a core feature of this architecture is that PTBs let developers or AI agents bundle to thousands of kind of operations such as transfers, swaps, contract calls, merges, splits of an asset, for example, into one single transaction. And because SUI is one of the only blockchains in the industry that has an object-centric data model, it allows for parallel execution of these bundles that can happen really kind of an infinite scale, whereas other blockchains are kind of restricted by sequential ordering and capacity limits for block sizes. PTBs allow the SUI blockchain to scale at really kind of low latency, high throughput and also atomic transactions. So I think that it's going to be a really critical use case for the SUI blockchain as we see commerce running on agentic workflows that are really empowered by stable coins and crypto wallets. In regard to the kind of the trading question, SUI recently shipped a big update for DeepBook, which is the central limit order book on SUI and introduced margin trading. And I think that we really are kind of walking into a new era of agentic yield generation. There's a company called BEAT, which was recently launched in the SUI ecosystem that is allowing for agentic yields to be realized on chain. And I believe there is a huge groundswell of developer activity to build new agentic businesses that will deliver either commerce workflows or yield workflows for users and developers. Neil Eloff: And then my next question is kind of on prediction markets. As these contracts kind of begin to evolve into an asset class of their own, what role do you guys think SUI gets to play in this market? Stephen Mackintosh: That's a very kind of topical question. I think predictions markets are probably on track to reach something in the order of $1 trillion in annual volume by 2030. We've seen explosive growth just in 2026 alone with, I think, averages around the $15 billion to $20 billion mark in volume per month with obviously high spikes of activity around kind of cultural events such as the Super Bowl or kind of elections. I think that right now, we have 2 dominant players in the form of Kalshi and Polymarket. But the market is still really young and really exciting. And I believe that the SUI team and the SUI community is really attracting a lot of talented developers who are looking at different types of predictions markets kind of consumer propositions that could be regional, for example, they could be focused on emerging markets. Right now, like the predictions market space is definitely Western-centric and very much kind of focused on Western politics. And I think that there's a huge world out there, especially in kind of -- the kind of the Asian communities that have very culturally and socially relevant kind of topics and ideas and sports that really do need kind of native predictions markets. And I think we, at SUI Group, are constantly looking for talented teams and developers who want to capture part of that ever-increasing TAM. And I think that SUI, because of all of the architecture advantages that I mentioned before in the answer to the agentic commerce question, they can also be utilized to deliver elevated customer experiences in predictions markets. Operator: Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: I just wanted to start with -- you mentioned at the end of the year, you had $21.9 million of cash. Can you just update us on cash today as well as, where have you had 81 million shares of buyback. Is that about roughly what you got? Marius Barnett: Brian, Marius Barnett, here. Yes, correct. That's correct. So we did just over 80 million shares in total. That includes all the buybacks we did, and we're sitting at approximately $21 million. We generate revenue income from the loan book. But then we also generate income from various institutional lends that we've done, including the Bluefin lends. So that we forecast that cash number to continuously increase in the absence of doing any -- using that cash for any investments or transactions. Brian Kinstlinger: Great. And maybe can you provide some color on the progress for the Google AP2 partnership related to development? And do you believe the new agentic AI launches with [ Clawdbot and Moltbot], do you think we'll see an uptick in the development and adoption on SUI fairly soon? Just trying to understand how you see that playing out in timing. Marius Barnett: Yes. I think Steve touched on it now just in terms of the opportunity set here. We truly believe that payments for all of these bots and agents is meant to be built on blockchain. I think Patrick Collison mentioned in his annual letter about how all of the payments of agents will be done on blockchain. And we believe that, that is the future here and that SUI is perfectly positioned for it. In terms of agentic, the Google AP2 that continues to be worked on between the teams between SUI and Google. And we believe that there's going to be many more integrations in the longer term in this opportunity set. Brian Kinstlinger: Okay. And then you -- Marius, you touched on the growth of Bluefin. Did that have an impact on the fourth quarter? Are you generating 5% of their revenue starting in November? And I guess, what part of that 5,000 daily digital coins is related to that deal? Marius Barnett: Yes. So we currently on that deal, I think it's a great, great example of the type of business we're trying to build here, where we actually also can disintermediate the VCs in the market here, where Bluefin were looking to expand and grow the business and instead of selling equity in the business, we came in and did an institutional lend on a risk-adjusted basis where we get a piece of their fees. At current, that we get paid weekly in SUI. And currently, that loan is yielding approximately 17% to 18% per annum. Brian Kinstlinger: Wow. Great. I guess my last question, and I'll get back in the queue with maybe a few others, is with the decline in cryptocurrency in general, can you speak to demand for similar such business development efforts? Is it mainly with Bluefin? Is there -- are there other opportunities and other entities that are looking for similar type deals for Bootstrap SUI? Marius Barnett: Definitely. Definitely. I mean, we're actively in the market looking at these transactions. I think the key for us is risk and how we look at risk and risk on a risk-adjusted basis. We certainly don't want to be waking up in the morning and make an announcement that one of these lends has gone wrong. So what we're looking at is how we manage the risk in these lends and make sure that we're getting the right return profile for it. I think we're looking at multiple different lends in this last quarter, although it hasn't had an impact yet, but will in the long term is that we've been doing various other institutional lends to market makers and institutional participants of SUI where we get parent guarantees. And our long-term target here over the next 12 to 18 months is to be yielding close to 10% on SUI. Operator: Our next question comes from the line of Gareth Gacetta with Cantor Fitzgerald. Gareth Gacetta: I was hoping you could kind of double-click on that last question and sort of the yield-generating opportunities you're looking at outside of traditional staking. So kind of getting to that 10% yield as a baseline is kind of a good metric. But I'm wondering if you can talk about how you're thinking about deploying your treasury balance, whether that be a percentage into staking, a percentage into these DeFi opportunities or a percentage into lending or something else, how you kind of think about deploying the treasury into these different areas of yield-generating opportunities with respect to that risk like you spoke about? Marius Barnett: Yes. It's a great question. So I think from a target perspective, as I said, risk is the key thing first and foremost. So every single opportunity that comes along, we look at the risk and then we work with Galaxy, the asset manager of -- to analyze that risk, whether it's in the DeFi ecosystem or in the general institutional market. Another lend that you would have seen that we did is we were very proud to launch the suiUSDe stablecoin together with Ethena. We minted $10 million of that stablecoin. We put it in a vault in -- on Ember, which is built by Bluefin. So that enhances the Bluefin ecosystem. But then we also are putting that into the DeFi ecosystems. And on that lend, currently, we're yielding close to 10% on that $10 million of stablecoins that we have minted. So every single transaction we do, we're looking at a balance of institutional lending and DeFi ecosystem lending. I think the key here is that we get all the right mechanisms in place to monitor these pools and ensure that the risk of it is low versus -- and make sure that we get that right return in the right coordination. I don't think that right now to be going and doing anything wild in the DeFi ecosystems makes sense from a risk-adjusted basis, and we don't see ourselves in that way. So that's why we've done institutional lends to market makers or institutions where one of the lends we did was $5 million at a 7.5% interest rate, but we've got a parent guarantee, and we let them go into the DeFi ecosystems and take more risk. So every single transaction we do, we're looking at it on a risk-adjusted basis. Gareth Gacetta: Great. That's very helpful. And then I just wanted to touch on some news outlets have been reporting that Meta is working with a third party to look into stablecoin-based payments. So given that the team at Mysten was originally a part of the team working on Meta's Libra stablecoin in 2019, could you maybe just provide some color for the people on the call about why that project was ultimately spun out of Meta? And then also why a blockchain like SUI might be the best choice for a large institution like Meta looking to integrate blockchain into their systems? Marius Barnett: So Steve, do you want to answer that? Stephen Mackintosh: Yes, sure. So I think the founding story of SUI is one of the most interesting kind of footnotes in crypto's history so far, right? Had the Facebook Libra and Diem projects been allowed to succeed, and the reason they weren't is because of a previously unfavorable administration and regulatory environment. That's the reason why that didn't happen. Had they allowed to succeed in a counterfactual view of the world, I do think that, that business, Libra and Diem, the stablecoin initiative could have been the biggest businesses in crypto. They could have been bigger than Coinbase. They could have been bigger than Tether potentially because of the distribution that came with Facebook at the time. At the time, the SUI team were building Libra and Diem, it was designed for a network of 3 billion users and when the research team, which is headed by Evan Cheng, the CEO of SUI, they looked at the kind of state of the tooling in the market, and they realized that it was not fit for purpose for the scale they needed to operate at. So what that caused them to do was to actually evaluate all of the programming languages, the kind of implementation of Solana library, the use of the Ethereum stack in the EVM to look at different kind of languages that are being used in different kind of development cultures such as C++, et cetera. And they found it was not right for moving money on the Internet. That's what allowed the CTO of Mysten and SUI, Sam Blackshear, to actually invent the Move programming language, which is a purpose-built programming language for blockchain that is designed in an object-centric architecture, which allows for really limitless scalability. It allows for parallel transaction processing, not sequential that you see in an account-based model, which is on Ethereum and Solana, but to have this kind of limitless low latency, high throughput scale. In regard to the news, yes, I believe that Meta has been engaging in different RFPs with different blockchain companies. It's unclear yet who will be part of that. But what I would say is that the future of agentic commerce is going to be one that is based around universal interoperability. These agents will be taking economic actions empowered by stablecoins in an interoperable Internet. And I think that the scale of commerce could really increase tenfold when you have agentic workflows running. And I think because of that complexity of transaction state, that really kind of order of magnitude increase in the amount of transactions and micro transactions taking place on the Internet, it's only an architecture like SUI that can handle that. And I think we're going to see more agentic frameworks being penciled not just by Google's AP2. I think Stripe has just announced an agentic framework. We've got x402, and I think many more will come. And so what I would say is that it's going to be about interoperability and it's going to be about low latency and scalability. And that's what puts SUI at the heart, I think, of this agentic commerce revolution. Operator: And we have reached the end of the question-and-answer session. And this also -- we have reached the end of the conference call as well. Thank you for your participation. You may now disconnect your lines at this time. Have a great day.
Operator: Good day, and welcome to the Monster Beverage Corporation Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Hilton Schlosberg, Vice Chairman and Chief Executive Officer. Please go ahead, sir. Hilton Schlosberg: Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Hilton Schlosberg, Vice Chairman and Chief Executive Officer. Also on the call are Tom Kelly, our Chief Financial Officer; Rob Gehring, our CEO of the Americas; Guy Carling, our CEO of EMEA and OSP; and Emelie Tirre, our Chief Strategy Officer. As you saw in the press release, these are new roles and responsibilities for Rob, Guy and Emelie and I would like to congratulate each on their new position and for their contribution to Monster's ongoing success. Mark Astrachan, our SVP of Investor Relations and Corporate Development, will now read our cautionary statement. Mark Astrachan: Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended in Section 21E of Securities Exchange Act of 1934 as amended and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends. Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2025 and quarterly reports on Form 10-Q, including the sections contained therein entitled Risk Factors and Forward-Looking Statements for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. I would also like to note that an explanation of the non-GAAP measures which we refer to as adjusted or applicable mentioned during the course of this call, is provided in the notes in the condensed consolidated statements of income and other information attached to the earnings release dated February 26, 2026. A copy of this information is also available on our website, www.monsterbetcorp.com in the Financial Information section. Please note that like last quarter scanner data, which was previously provided on earnings calls, is included in the exhibit filed with our 8-K. We point out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively or negatively by promotions or other trading factors during those periods. I would now like to hand the call over to Hilton Schlosberg. Hilton Schlosberg: Good afternoon, and thank you for joining us. We are pleased to report another quarter of strong financial results and cash generation with net sales crossing the $2 billion threshold for the first time in the company's history for a fiscal fourth quarter. We gained share in many of our global markets in the fourth quarter, reflecting the success of our core offerings as well as our product innovations. Now just giving you an energy drink category update, the global energy drink category remains healthy with continued robust growth. We believe household penetration continues to increase in the energy drink category driven by functionality and lifestyle positioning, diverse offerings that appeal to an increasingly broad and loyal consumer base and affordable value offerings in addition to premium offerings. We believe our portfolio of existing and planned energy drink offerings is well positioned to participate in the growing global energy drink category, appealing to a broad range of consumers across geographies, price points, new states and dayparts. Innovation continues to be an important contributor to category growth, and we maintain a robust innovation pipeline. Our business continues to be supported by robust marketing programs, impactful retail engagement and our strong global partnership with the Coca-Cola Company and its global bottling partners. In the United States, according to Nielsen, for the recently reported 13-week period through February 14, 2026, sales in dollars in the energy drink category, including energy shots, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, increased by 12.9% versus the same period a year ago. In EMEA, the energy drink category according to Nielsen, for our tracked markets for the recently reported 13-week period, which differs from country to country, coincidently also grew at 12.9% versus the same period last year, FX neutral. In APAC, the energy drink category according to Nielsen, Circana and INTAGE for our tracked channels for the recently reported 13-week period, which differs from country to country, grew at 16.8% versus the same period last year, FX neutral. In LatAm, the energy drink category according to Nielsen for our tracked markets, for the 3 months ended December 31, 2025, coincidently also grew at approximately 12.9% versus the same period last year, FX neutral. Our net sales to customers outside the United States were approximately 42% of total reported net sales in the 2025 fourth quarter compared to 39% in the same period last year. Turning to marketing. Our marketing messaging continues to resonate globally as we built strong momentum through the fall and into winter with marketing efforts focused on growing the core business and attracting new consumers. Highlights in the fourth quarter included the Monster Energy sponsor McLaren Formula One team, winning the Constructors' Championship for the second year in a row, while Lando Norris won his first Driver's Championship, and Oscar Piastri finished third. Our Lando Norris Zero Sugar Energy Drink continued its momentum following its successful introduction in certain EMEA markets in the 2025 3rd quarter. Lando Norris is now available in 38 EMEA and OSP markets. It was also well received as an LTO, which is a limited time offer in selected U.S. markets in the 2025 fourth quarter with a full U.S. rollout on track, no unintended for later in the 2026 first quarter. We continue to introduce this energy drink into new markets, including a recent successful launch in Australia with New Zealand on schedule to launch in March. Our sponsorship of the Call of Duty gaming franchise continue to provide considerable exposure with 650 million branded cans distributed in more than 40 markets globally in the 2025 fourth quarter. The Monster Energy sponsored Ducati team on the MotoGP World Championship, Marc Marquez won the Riders' Championship, his race suit and bike featured Monster branding. Other notable sponsorships in the fourth quarter included the UFC, Professional Bull riding and the Up & Up music tour in major colleges and universities featuring Monster artists. The Monster Ultra brand family continued its strong performance, enhanced by the viral social media surge of our flagship, Ultra White and further benefited from a digital media campaign centered around Zero Sugar flavors unleashed. Further enhancing the Ultra family growth was a successful introduction of Ultra Wild Passion last fall in the United States. We are also excited to be participating in America250 celebration with LTOs, Monster Energy Ultra Red, White & Blue Razz, Juice Monster, Strawberry Lemonade and Bang American Berry. Turning to tariffs. During the fourth quarter of 2025, the impact of tariffs and the increase in the price of aluminum on our operating results was modest. In general, while our flavors and concentrates are manufactured both in the U.S. and Ireland at the present time, production of our finished products takes place locally in our respective markets. Despite the modest impact on our business in the fourth quarter, the tariff landscape continues to be complicated and dynamic. For instance, tariffs significantly impacted the Midwest premium for aluminum, which increased the cost of our aluminum cans. We also import some raw materials into the United States, export certain raw materials for local markets and export limited quantities of finished goods. We do not believe, based on our business model that the current tariffs will have a material impact on the company's operating results. However, based on current aluminum pricing and the Midwest premium, we expect a further modest increase in our costs in at least the first half of 2026 as compared to the 2025 fourth quarter. We will continue to recognize tariffs on aluminum through the higher Midwest premium and continue to implement hedging strategies across the business where possible. Turning to our Q4 2025 results. Net sales were $2.13 billion for the 2025 fourth quarter, was 17.6% higher than net sales of $1.81 billion in the 2024 fourth quarter. Net sales, excluding the alcohol brand segment, increased 18.3% in the 2025 fourth quarter. Net changes in foreign currency exchange rates had a favorable impact on net sales for the 2025 fourth quarter of $27.7 million. Net sales on a foreign currency adjusted basis increased 16.1% in the 2025 fourth quarter. Net sales, excluding the Alcohol Brand segment on a foreign currency adjusted basis, increased 16.7% in the 2025 fourth quarter. Excluding Alcohol Brands segment, our reported results is purely illustrative as it remains part of our ongoing operations. Net sales for the company's Monster Energy Drinks segment increased 18.9% to $1.99 billion for the 2025 fourth quarter from $1.67 billion for the 2024 fourth quarter. Net sales on a foreign currency adjusted basis for the Monster Energy Drink segment increased 17.5% in the 2025 fourth quarter. Net sales for the company's Strategic Brands segment increased 7.8% to $110 million for the 2025 fourth quarter from $102 million in the 2024 fourth quarter. Net sales on a foreign currency adjusted basis for the Strategic Brands segment increased 4.7% in the 2025 fourth quarter. Net sales for the Alcohol Brands segment decreased 16.8% to $29 million for the 2025 fourth quarter from $34.9 million in the 2024 fourth quarter. Gross profit as a percentage of net sales for the 2025 fourth quarter was 55.5% compared with 55.3% in the 2024 fourth quarter. Adjusted gross profit as a percentage of net sales, excluding the alcohol brand segment, for the 2025 fourth quarter was 56.1% compared with 56% in the 2024 fourth quarter. The increase in gross profit as a percentage of net sales for the 2025 fourth quarter is primarily due to the result of pricing actions, supply chain optimization and product sales mix, partially offset by increased can costs and geographical sales mix. Gross profit as a percentage of net sales increased year-on-year in all 4 geographic regions in the 2025 fourth quarter. Distribution expenses for the 2025 fourth quarter were $88.9 million or 4.2% of net sales compared with $77.6 million or 4.3% of net sales in the 2024 fourth quarter. Selling expenses for the 2025 fourth quarter were $219.7 million, or 10.3% of net sales compared with $193.4 million or 10.7% of net sales in the 2024 fourth quarter. General and administrative expenses for the 2025 fourth quarter were $332.1 million or 15.6% of net sales compared with $350.3 million or 19.3% of net sales for the 2024 fourth quarter. Stock-based compensation was $39 million for the 2025 fourth quarter compared with $22.2 million in the 2024 fourth quarter. The increase in stock-based compensation for the 2025 fourth quarter was primarily the result of a $12.9 million increase in the estimated payout levels for performance-based incentive compensation awards. General and administrative expenses, including $51.2 million and $130.7 million of Alcohol Brand segment impairment charges for the 2025 and 2024 fourth quarters, respectively. General and administrative expenses in the 2025 fourth quarter also included $5.1 million of professional services expenses related to our new AFF San Fernando facility as well as $6.6 million of expenses related to our digital transformation initiatives. We've launched a comprehensive digital transformation initiative in 2025 to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations and supply chain. As part of this effort, we are upgrading our enterprise resource planning system, including the implementation of SAP S/4HANA with a planned go-live date of January 1, 2028, to improve operational efficiency, scalability and overall business management. Operating expenses for the 2025 fourth quarter was $640.7 million compared with $621.2 million in the 2024 fourth quarter. Adjusted operating expenses for the 2025 fourth quarter were $561.6 million compared with $462.5 million in the 2024 fourth quarter. Operating expenses as a percentage of net sales for the 2025 fourth quarter were 30.1% compared with 34.3% in the 2024 fourth quarter. Adjusted operating expenses as a percentage of net sales for the 2025 fourth quarter were 26.7% compared with 26% in the 2024 fourth quarter. Operating income for the 2025 fourth quarter increased 42.3% to $542.6 million from $381.2 million in the 2024 comparative quarter. The adjusted operating income for the 2025 fourth quarter increased 16% to $617.6 million from $532.2 million in the 2024 fourth quarter. The effective tax rate for the 2025 fourth quarter was 21% compared with 29.9% in the 2024 fourth quarter. The decrease in the effective tax rate was primarily attributable to higher stock-based compensation reductions, higher income in lower tax jurisdictions and the release of valuation allowances against certain following deferred tax assets. The effective tax rate for the 2024 fourth quarter included an adjustment to the full year effective tax rate. Net income per diluted share for the 2025 fourth quarter increased 64.9% to $0.46 from $0.28 in the fourth quarter of 2024. Adjusted net income per diluted share for the 2025 fourth quarter increased 30.4% to $0.51 from $0.39 in the fourth quarter of 2024. Turning now to the U.S. and North America. We had a strong finish to the year in the U.S. and Canada with net sales increasing 13.3% in the 2025 fourth quarter compared to the 2024 fourth quarter. Our strong performance reflected healthy category growth, share gains and disciplined execution across the organization. Our Zero Sugar portfolio remained a significant contributor to year's growth led by Monster Energy Ultra. According to Nielsen, the Ultra brand family grew 24% in the 2025 fourth quarter compared to the 2024 fourth quarter with our flagship Ultra White energy drink growing 32% over the same period. Based on Nielsen data, Monster's full sugar portfolio also delivered a meaningful contribution in this 2025 fourth quarter, representing more than 1/3 of the company's total U.S. gains and highlighting the depth of the portfolio. Growth was led by the Juice Monster family, which increased 37% compared to the prior year with Java Monster including Killer Brew, increasing 7.8% despite ongoing softness in the energy drink coffee category. In total, Monster's full sugar offerings grew 9.1% and accounted for the vast majority of full sugar category growth in the quarter. Innovation added momentum through the back half of 2025. Monster's fall innovation slate delivered strong early velocities, rapid distribution expansion and incremental volumes across channels. These launches were supported by coordinated retail activation and marketing execution, helping drive trials, secure high visibility placements and broaden household reach. The performance of late-year innovation further demonstrated the brand's ability to refresh the portfolio while sustaining strength across core franchises. From December 2025 through summer 2026, our innovation launch calendar is strategically staggered across our brand portfolio. These initiatives are designed to drive incremental consumption, expand distribution opportunities and strengthen consumer engagement across channels. We remain focused on complementing our base business with impactful innovation, delivering the excitement today's consumers demand in the energy category while reinforcing our confidence in sustained growth. From a revenue growth management standpoint, pricing actions implemented on November 1, 2025, performed in line with expectations. The approach is targeted by channel and package analytics-driven and designed to better align price architecture across channels. Early read-through indicated limited volume sensitivity consistent with Monster's brand strength and favorable value proposition of energy drinks relative to other nonalcoholic ready-to-drink categories. Turning to sales internationally now. Net sales to customers outside the U.S. increased 26.9% to $903.3 million or approximately 42% of total net sales in the 2025 fourth quarter compared to $711.5 million or approximately 39% of total net sales in the corresponding quarter in 2024. Net sales to customers outside the United States on a foreign currency adjusted basis, increased 23.1% to $875.6 million in the 2025 fourth quarter. Gross profit as a percentage of net sales increased in all 3 of our international regions, EMEA, Asia Pacific and Latin America in the 2025 fourth quarter as compared to the 2024 fourth quarter. Turning to EMEA. Our net sales in EMEA in the 2025 fourth quarter increased by 32.6% in dollars and increased 25.9% on a currency-neutral basis over the same period in 2024. Gross profit in this region as a percentage of net sales for the 2025 fourth quarter was 35.8% versus 32.7% in the same period in 2024. The quarter was driven by strong execution across markets, including accelerated cooler placements and space gains. Sales growth reflects contribution from both existing SKUs and 2025 innovation with growth from across our Monster affordable and strategic brand families, especially the Monster Energy Ultra and Juice Monster families. The energy drink category remains healthy, with Monster outperforming the category in many EMEA markets. Notably, the Monster Energy brand retained its position as the fastest-growing FMCG brand by value and value growth in the 2025 fourth quarter and for the full year 2025, according to Nielsen, in all major channels in CCEP's Western European markets. Within EMEA, we've also seen the continued growth of our affordable brands Fury in Egypt, and Predator in Kenya, Nigeria and Morocco. In fact, Predator and Fury combined to be the #1 Energy Drink brand by value in major countries in Africa. Innovation continues to drive performance in the region, driven by Juiced Monster Rio Punch, Monster Energy Lando Norris Zero Sugar and Monster Energy Ultra Strawberry Dreams. In addition, we launched Bang in Spain and 4 SKUs in the fourth quarter as an affordable proposition. Turning to Asia Pacific, net sales in Asia Pacific in the 2025 fourth quarter increased 11.5% in dollars and 13.9% on a currency-neutral basis over the same period in 2024. A systems disruption and our Japanese distributor negatively impacted APAC region sales. We believe this impact on our APAC region sales was approximately 6% to 7% in the 2025 fourth quarter. Operations have been back to normal since February 1. Gross profit in this region as a percentage of net sales for the 2025 fourth quarter was 41.4% versus 41.3% in the same period in 2024. Net sales in Japan in 2025 fourth quarter decreased 15.2% in dollars and decreased 13.4% on a currency-neutral basis with sales negatively impacted by the aforementioned system disruption at our distributor. We believe net sales in Japan would have increased by approximately 4% to 5% over the prior year quarter without the system disruption. Net sales in South Korea in the 2025 fourth quarter decreased 26.5% in dollars and decreased 23% on a currency-neutral basis as compared to the same quarter in 2024. The decline was primarily a result of bottler inventory fluctuations as depletions increased in the quarter. We remain the market leader in Korea. Net sales in China in the 2025 fourth quarter increased 78.9% in dollars and increased 78.3% on a currency-neutral basis as compared to the same quarter in 2024. Net sales in India in the 2025 fourth quarter increased 54.2% in dollars and increased 62.3% on a currency-neutral basis as compared to the same quarter in 2024. Also notable is our launch of Monster in Thailand in January, which is exceeding expectations, driven by positive rates of sale for both Monster Green and Ultra White. We remain optimistic about the long-term prospects for our brands in Asia Pacific and the expansion of our affordable brands in China and India. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 35.5% in dollars and increased 38.9% on a currency-neutral basis. Turning now to Latin America and the Caribbean. Net sales in Latin America, including Mexico and the Caribbean, in the 2025 fourth quarter increased 90.8% in dollars and increased 15.1% on a currency-neutral basis over the same period in 2024. Gross profit in this region as a percentage of net sales was 45.1% for the 2025 fourth quarter versus 42.7% in the 2024 fourth quarter. Net sales in Brazil in the fourth quarter increased 27.1% in dollars and increased 21.2% on a currency-neutral basis. Notably, we ended 2025 with solid momentum, achieving record high market shares in November and December. Net sales in Mexico increased 11.7% in dollars and increased 3.8% on a currency-neutral basis in the 2025 fourth quarter. Net sales in the quarter were impacted by bottler inventory fluctuations as depletion far exceeded our shipments in Mexico. This dynamic was further supported by Nielsen scanner data that showed growth compared to the prior year of 20.3% for Monster and 28.9% for Predator for the 3 months ended December 2025. Net sales in Chile in the 2025 fourth quarter increased 61.4% in dollars and 61.3% on a currency-neutral basis. Net sales in Argentina in the 2025 fourth quarter decreased 39.5% in dollars and 42.2% on a currency-neutral basis. The net sales decrease in Argentina was due to lower price per case revenue driven by a change to operating model implemented late in the first quarter of 2025 to better manage our foreign currency exposure. Similar to last quarter, while revenues declined, volumes increased in Argentina in the quarter. Turning to Monster Brewing. Net sales for the Alcohol Brands segment was $29 million in the 2025 fourth quarter, a decrease of approximately $5.9 million was 16.8% lower than the 2024 comparable quarter. Our recently launched Hard lemonade line Blind Lemon and Blinder Lemon continues its national rollout. The first subline of The Beast Perfect 10 began shipping in 2026 first quarter. And new national beer Stunt Double and the spirit base ready-to-drink Just Five are among the planned innovations for spring of 2026. Additional seasonal craft beer offerings are planned in 2026. Turning to our share repurchase program. During the 2025 fourth quarter, no shares of the company's common stock were repurchased against our repurchase program. As of February 25, 2026 approximately $500 million remained available for repurchase under the previously authorized repurchase program. Turning to January 2026 sales. We estimate that January 2026 sales on a non-foreign currency adjusted basis were approximately 20.5% higher than the comparable January 2025 sales and 21% higher on a non-foreign currency adjusted basis, excluding the alcohol brand segment. We estimate that on a foreign currency adjusted basis, January 2026 sales were approximately 16.7% higher than comparable January 2025 sales and 70.1% higher on a foreign currency adjusted basis, excluding the Alcohol Brands segment. January 2026 had 1 fewer selling day than January 2025. In this regard, we caution again that sales of a short period often disproportionately impacted by various factors such as for example selling days, days of the week in which holidays fall, timing of new product launches, the timing of price increases and promotions in retail stores, distributor incentives as well as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to own internal requirements which they may alter from time to time for the running business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In conclusion, I would like to summarize some recent positive points. The energy drink category continues to grow globally and consumer demand, as measured by scanner data remained strong. We believe that household penetration continues to increase in the energy drink category due to product functionality and affordable value proposition and lifestyle positioning. We are seeing increases in purchase frequencies as well as usage occasions expanding across dayparts. We gained share in many markets globally in the fourth quarter as our core brands continue to grow and were complemented by innovation. We continue to expand ourselves in non-Nielsen tracked channels with an objective to expand our FSP foodservice on-premise business, we're excited about our innovation pipeline for 2026 and beyond. We continue to review opportunities for price increases, both domestically and internationally. Gross margins expanded in all 4 geographic regions compared to the prior year period. We are continuing our digital transformation in order to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations and supply chain, including our upgrade to SAP S/4HANA with a planned go-live date of January 1, 2028. I would like to open the floor to questions about the quarter. Operator: [Operator Instructions] The first question will come from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: Just wanted to touch on your market share gains internationally. It's really accelerated in recent periods. Obviously, you've consistently gained share internationally over a long period of time. But just was more focused on what you think has driven the recent acceleration and how sustainable that is? And then also within that, maybe you can touch on the affordable energy strategy and how that's performing in emerging markets in terms of incrementality for the category and driving category development? Hilton Schlosberg: Well, Dara, good afternoon. Let me talk a little bit about the affordable energy category. And then we're fortunate we have Guy Carling here, who will be able to talk quite succinctly about what's happening with market shares internationally. So if you look at the affordable energy category, it's a way of positioning energy drinks to markets where the affordability of Monster is somewhat out of reach. And we've always wanted to establish Monster as our lead brand, that is at a particular price point. And we've never wanted to take that down to where the affordable category should be. So the affordable business for us is growing. The last count, our estimates for 2025 and I've never given this number before, but we'll give it now, were in the order of 100 million unit cases. So it's a business that's growing, and we're excited to have it as part of our portfolio. And also, it's important to understand that most of the world's population now lives in emerging developing markets. So it's a really big opportunity for us. And in key markets for affordable is Nigeria, Egypt, Kenya, Mexico, India, China, and we have affordable in a lot of other countries, but those really are our lead markets for affordable energy. I'm just going to pass the call now to Guy, who will talk about market shares internationally. Guy Carling: Thank you, Hilton. The category has seen strong double-digit growth internationally, I think, across the world. People are attracted to the category by the strong value proposition and the multi occasion usage across multiple age groups. 25% of category consumers are new to the category in the last 12 months coming from a wide range of categories. Monster has been able to outperform the category. We've seen growth from both innovation and existing SKUs. In Europe, 2/3 of our growth is coming from the existing business, and 1/3 from innovation, where the rest of the category has been much more dependent on innovation. For example, the Ultra brand platform in the fourth quarter grew by 53% in Nielsen sales headlined by Ultra White, which grew at 59%. So the existing SKUs and especially Zero Sugar SKUs are driving growth. And then innovation, such as Lando Norris Zero Sugar grew usage with existing consumers, but also in itself, 25% of Lando sales were new to the category and 25% of Lando sales were new to consumers. So across multiple occasions, sugar and nonsugar innovation and existing SKUs, we're seeing growth ahead of the category. Operator: The next question will come from Filippo Falorni with Citi. Filippo Falorni: Hilton, I'd love to get your perspective on the U.S. energy drink category for 2026. Obviously, phenomenal growth in 2025, coming off a relatively easier base in '24. But clearly, the momentum is continuing. As you mentioned, there's some long-term drivers. And in terms of distribution gains, do you expect the category to continue to gain distribution space in 2026? And any order of magnitude you're expecting would be helpful. Hilton Schlosberg: Sure. We don't give guidance, but what I can talk a little bit about is, what are the key drivers behind where we are today and where we really do expect to be going forward. The energy drink business presents a value proposition to consumers. Relative to CSDs and relative to coffees, there really is value in the sale of or the purchase of an energy drink by a consumer in terms of pricing, plus there is a need, there's a functional need for energy. So there's a benefit. There's a functional need. It's a product that's there. It's available and appeals to our consumer group. Increasing household penetration is another major factor innovation, which Guy touched on as well. And we spoke a little bit about it on the script earlier, the need state for energy. And what's also important is more dayparts. You're seeing energy consumed across the day, whereas historically, it was not that factor. So for Monster, pricing and innovation, I think, will remain very much a part of where we are going. And FSOP, as I mentioned earlier, is a focus for 2026 as well. So overall, we're excited about the opportunities that are open to us in the space. And looking at space and space gains in stores, obviously, retailers allocate space to the brands that are selling and they do so on a well-measured and analytical basis. So the way this category is growing relative to other categories, I think we see that space will continue to grow. And merchants will give the consumer what they want. And there's also an opportunity to gain space from alcohol, which is underperforming and other products in the beverage category, which are also underperforming. And what we've always said, and I sort of want to stress that space for innovation, we always see that as incremental. We never want to take from our existing space for our innovation SKUs. Operator: The next question will come from Matthew Smith with Stifel. Matthew Smith: I wanted to focus on the margin performance in the quarter, you expanded gross margin across regions, but also called out pressure from tariffs and inflation. Can you just help clarify some of the prepared remarks on margin progression? And also on G&A, that's one area where you saw some deleverage despite the top -- the strong top line performance. You listed a couple of specific items in the prepared remarks, but can you provide a little more detail on G&A and the progress from here? Are some of the investment areas ongoing or more onetime in nature? Hilton Schlosberg: Okay. Good question. So just talking about margin in the quarter, what we normally see and this quarter was no different, that the increase in our gross profit margins was primarily the result of pricing actions, supply chain optimization, and product sales mix. As we develop and sell a larger proportion of Zero Sugar SKUs. On the other hand, we have these aluminum can costs from -- largely driven by the aluminum pricing and the Midwest Premium. And then again, we also have this geographical sales mix as we sell more product overseas. I mean, it's no secret. You guys know what our margins are internationally versus what they are in the U.S. So also, my comment normally is we don't bank gross profit percentages. We bank gross profit dollars, and I want to go back to that as well. So the impact on -- in the quarter on the tariffs and the increase in the LME and the similar premiums that you have in other parts of the world, including the Rotterdam premium. The impact on our margin was modest and I'm not going to give a specific number, but it was largely offset by the increase that we achieved in -- the increase in our selling price. Going forward, we do, as I've mentioned on previous calls, have an active hedging program, and we'll continue to process aluminum on -- with our hedging program. So whatever I talk about our business, talking net of hedging program. And if you look at what happened in the fourth quarter, it's actually quite interesting to aluminum and LME, you'll see that from Q4 to Q5, the LME increased by -- including Midwest premium, including increased by -- in excess of 50%. So that's -- those are the percentage numbers that you're dealing with, and we expect that they'll continue to increase going forward into 2026. I think they'll still be modest. I think Q1 will probably be a little bit higher than what we saw in this quarter, and Q2 will be a little bit higher than that, and then we start overlapping and the rest of the year is overlapping on high aluminum prices in 2025. So I see some impact on in Q1, in Q2, but after that, it will just lap previous increases in aluminum. On G&A, we mentioned in the script a couple of things. We said that we had this $12.9 million increase in estimated payout levels for performance-based incentive compensation. We spoke about the professional services expenses relating to the start-up of a new AFF San Fernando facility, which we booked in the fourth quarter as well as $6.6 million of expenses related to our digital transformation initiatives. So as we go forward on the digital transformation initiatives, some of them will be in -- capitalized, of course. And -- but there will be a chunk in G&A. So if you adjust and you take those numbers into consideration and you adjust the G&A numbers that are in our release and in the script and you'll see in the K, you'll see that we -- the leverage is actually the percentage of G&A as a percentage of sales is actually coming down rather than going up as you possibly suggested. Operator: The next question will come from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: All right. I had a quick follow-up question on the cost portion. Would you consider further pricing actions to offset the cost pressures? And then I did have a couple of questions on innovation. First, maybe Hilton, can you give us a sense of the phasing of your innovation this year? Is it more first half versus second half weighted? Or is it more balanced throughout the year? And then maybe talk to us a little bit about the repeat purchase rates that you've been seeing in some of the recent rollouts. Hilton Schlosberg: Okay. So what I said in the script, and I'll say it again, is we continue to review opportunities for price increases, both domestically and internationally. It's something that's very much in our minds. And if we think there's an opportunity, then it's something that we certainly will consider. As I've said also in previous calls that we run our own playbook and we decide what's right for us and what's right for the company and what's right for our distributors and our consumers, and act accordingly. We also -- our GM plays a very big role in our pricing decisions, and you saw what happened with the price increase that we put into effect in November 1. And we're actually quite pleased with the way that went. And I also said on the script -- in the script that it really went according to plan. And we didn't really see a fall in volumes. And now turning to your question on innovation. This year, we will be seeing innovation staggered across at least the first half of the year for the ones that have already been announced. And then there will be some fall innovation, which we haven't announced yet. But you'll see instead of previous years where we launched everything in the first couple of months, we -- what we're doing this year, what Rob is doing is a more kind of definitive approach where we're staggering our innovation. And then, of course, we have the America250 innovation, which are in selected retailers right now, but they will be opened up to coincide with those celebrations. And we've seen good progress from innovation. I think that's something that we are monitoring, and we're really excited with our innovation. Operator: The next question will come from Carlos Laboy with HSBC. Carlos Alberto Laboy: Hilton, can you please share with us perhaps some more detail on how it's going in India? You have a new bottler there. Can you also please shed some light on how you get the governing principles and the long-range vision rate with such an important new bottler when you have a new bottling relationship, please? Hilton Schlosberg: Okay. Thanks, Carlos. I'm really excited about India. I was there a couple of months ago. And we work very closely with the Coca-Cola team in Atlanta and with the Coca-Cola team in India and with the bottlers to really activate and accelerate our business in India. The new bottler is very excited to be part of the journey with us. I know that and have met the Chief Executive on a number of occasions, and they are very, very excited with the opportunity for Monster and Predator in India and for the ability to compete effectively with famous competition that is in the blue can. Operator: The next question will come from Andrea Teixeira with JPMorgan. Andrea Teixeira: Hilton, would like to perhaps go deeper on the margin question. I know you don't bank margins and you bank dollars. But just wondering how we should be thinking given the hedges and what has been happening with the aluminum prices? And obviously, you had an expansion and which is remarkable, but just thinking of ahead, how we should be embedding the international expansion, the low price energy mix, geography effects, would be very helpful. Hilton Schlosberg: I think I spoke about aluminum that would have an impact on margin. I spoke a little bit about that earlier. So we do see some pressure in the first and second quarter of 2026. And so I'm not sure what else to what else to add to that. Internationally, you've seen what's happened with our gross margins. We've been able to increase margin in each of the territories that we have -- that we participated and reported on. There was a question earlier about affordable and affordable also assists our gross margin. So it's something that we really focused on internationally. As you know, some -- we don't enjoy the same pricing that we have here in the U.S. in many international markets, but we are focused on increasing margin. And I think you saw a little bit of that in this last quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Hilton Schlosberg for any closing remarks. Hilton Schlosberg: On behalf of Monster, I would like to thank everyone for their interest in the company. We're confident in the strength of our brands and the talent of our entire Monster family throughout the world, and I'm excited to be working with them and thank them for their contributions. I'd also like to congratulate the -- Rob, and Emelie, and Guy, for their new positions and really look forward to working with them as we go forward into 2026 and beyond. We all believe in the company and our growth strategy, and we're committed to innovating, developing and differentiating our brands and expanding the company both at home and abroad. We're proud of our relationship with the Coca-Cola system and the opportunity this presents to us. We believe that we are well positioned in the beverage category and are optimistic about the future of our company. Thank you very much for your attendance. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Titan International, Incorporated Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is now yours. Alan Snyder: Thank you and good morning. I'd like to welcome everyone to Titan's Fourth Quarter 2025 Earnings Call. On the call with me today are Paul Reitz, Titan's President and CEO; and Tony Eheli, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued this morning along with our Form 10-K, which was also filed with the Securities and Exchange Commission this morning. As a reminder, during this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risks, uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found within the safe harbor statement included in the earnings release attached to the company's Form 8-K filed earlier as well as our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement, but not be a substitute for the most directly comparable GAAP measures. The earnings release, which accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures. The Q4 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul. Paul Reitz: Thanks, Alan, and good morning. Before getting into our results, I want to take a moment to congratulate Tony Eheli on his promotion to CFO and having him today on his first earnings call. Tony has been a key member of our management team since joining Titan in March of 2021. Our ability to promote from within our organization is really a major plus and a sign of the talent we have on our team. Therefore, this is making for a seamless transition. I'm really enthused to see Tony taking charge as CFO and real proud of what he has done at Titan. I also want to thank David for his accomplishments as CFO. Note that he is hard at work. He's got a new role as Chief Transformation Officer. It's great that we have the depth on our team to make this transition to put David in that CTO role and believe it will bring value to our shareholders. We look forward to sharing more about David's efforts in coming quarters. But let's turn over to our results now and take a look at 2025. We concluded the year with another positive quarter as our Q4 exceeded prior year in revenue, gross margin and adjusted EBITDA. These results are ahead of our revenue guidance and also better than our adjusted EBITDA expectations. As I look back at 2025, this was a year where the diversity and breadth of our business from a product and geography standpoint combined with our new product introductions, our one-stop shop distribution capabilities and the strength and commitment of our team enabled Titan to weather a formidable storm in the ag sector and deal with the evolving trade policies. I'll touch on that point again later into my comments. Broadly speaking, the ag market had a bumpy tough year. It's really due to a number of factors that were weighing on demand. I do want to note that we are optimistic that the resulting OEM finished goods inventory destocking has largely run its course. We've seen that in our internal dealings and then we've all heard it recently from leadership at OEMs. While none of the major OEMs are forecasting any meaningful overall ag growth in 2026, we nonetheless think the bottom is behind us as equipment inventories stabilize, equipment keeps running and aging and the government continues with its support to farmers. Additionally, we are optimistic that trade policy will get a bit more settled in '26 and interest rates do look to be holding steady. This all leading to -- hopefully, leading buyers to start buying more equipment and feeling confident about their purchase decisions this year. With that being said, we do have guarded optimism for the year that's illustrated in our guidance that expresses some growth over 2025. So let's start by taking a deeper look into each of our segments beginning with ag. At a higher level, livestock producers enjoyed a good '25 while row crop farmers had a more difficult time. I want to note that because row crop farmers raising commodities such as corn and soybeans are natural buyers of larger horsepower equipment from tractors to combines and sprayers. Depressed grain prices, higher input costs have weighed on their P&Ls resulting in a reduction in demand for new equipment. The government programs have been really strong in '25 to support the liquidity and balance sheets of farmers and that government support is expected to continue along with hopefully some policy actions to drive biofuels to provide some tailwinds for the farming sector. Of course it also bears repeating that as long as those farmers run their equipment, they continue to need replacement tires to keep their tractors rolling. On the other hand though you got livestock producers. They tend to utilize mid- to smaller -- midrange to smaller equipment and with their operations enjoying better profitability in '25, the resulting demand for their equipment has fared better than row crop. The net result was the market for smaller equipment performed better than large and is forecasted to continue on that path again this year. I do want to note that Titan has a strong business in the smaller equipment sector as we can provide complete wheel tire assemblies to OEMs that they can simply bolt on to equipment thus greatly improving their supply chain and inventory management processes. Moving over to the EMC segment. That enters 2026 as our end market with the most optimism. The end markets we serve such as construction and earthmoving are generally in a good place right now, maybe not the same type of robust growth that we reported in Q4, but they are in good shape nonetheless. Activity in this segment is well supported by infrastructure spend and demand for minerals, which will be a benefit for our aftermarket mining sales. A good portion of our EMC sales are tied to the European construction market and the EU seems to be prioritizing investment in infrastructure. So our business there is well positioned. Moving over to consumer segment. We are optimistic as recent reports from leading powersports equipment OEMs are pointing to dealer inventories having reached a state of equilibrium. So that hopefully means any return to demand will drive production and thus a need for tires. I'll also reiterate that aftermarket sales constitute a significant portion of our consumer segment sales and there is less cyclicality to that part of the business. It's been an important part of how we've been able to drive continued strong margin results through the cyclical trough this time around. Before I hand it off to Tony, I do want to close with some comments on our business and tariffs. Obviously there are a lot of unprecedented global macro issues right now, but I want to emphasize that our end markets are overwhelmingly composed of end buyers that depend on their equipment to make a living. That could be farmers planting and harvesting crops, contractors building roads, miners extracting minerals or residential landscapers mowing lawns. That all equates to very durable long-term demand for our products. In the short term, we've seen a lengthy over 30-month downturn in ag as end buyers defer purchasing new equipment and move towards a philosophy of new to me in the form of used equipment. Even when this is the case, the continued usage of existing equipment in all of our segments drives demand for replacement tires, including our LSWs that make used equipment perform better and undercarriage parts that need to be replaced. At the same time, the equipment those tires and parts are fitted to continue to experience wear and tear driving up demand for new replacement equipment at some point. For Titan, that means we can win now and also win later and the way we maximize that opportunity is by continuing to innovate, expand our product line and stay close to our customers. And finally, regarding tariffs. I've expressed optimism throughout 2025 regarding the long-term benefits to Titan from the implementation of tariffs. My viewpoint was based on a number of factors, but first and foremost were the 3 favorable rulings that Titan received from the International Trade Commission over the past 15 years. In those cases, the ITC ruled that Titan's primary foreign competitors operated unfairly. We felt confident that was happening and that's why we brought the cases forward and that was deemed to be the case in the rulings in favor of Titan. It is clear to us that the administration was also targeting unfair trading practices with our IEPA-based tariffs. However, the implementation of these tariffs in a constantly evolving manner resulted in uncertainty and I know I'm stating the obvious with that. In our industry, there was a surge of imported tires before the tariffs went into effect, especially we saw that in ag. This story is not unique to Titan. It is being played out in many industrial companies similar to us. We also saw many of our import tire competitors absorb most of the remaining tariff cost throughout 2025. They have gone on record stating that. In essence, the potential positive impact from the administration's policies were neutralized in our sector during the past year. I want to note though we still achieved a solid performance in 2025 despite the volatility caused by tariffs. It does look like that tariff uncertainty is going to continue into '26 especially given the recent Supreme Court decision. Even so, we still believe that in the long term, tariffs are important to our industry to mitigate unfair trade practices that have taken place for many years. It is becoming more clear that the administration has options to improve trade policy that go beyond tariffs. That includes quotas, embargoes. These could be useful tools to support U.S. manufacturing as well. Titan has proven for decades and most recently during the pandemic, the resulting post-pandemic supply chain shock and now the evolving tariff situation in 2025 that no matter what may happen in the world, we are very well positioned to serve our customers with our geographical footprint, our network of joint ventures and strategic sourcing partners and our one-stop distribution and dealer network. In closing, I want to reiterate our optimism that we believe '25 was a trough year and with that behind us, we are hopeful to continue to make gains and improvements in 2026. With that, I will hand it off to Tony. Anthony Eheli: Thank you, Paul. Good morning, everyone, and thanks for joining us today. I want to take a moment to thank everyone for their well wishes. I am certainly excited to be in the role of CFO. And as I have noted in conversations I have had with many of you over the last 2 months, we have an excellent team with a well-developed plan. As Paul noted, our results for the fourth quarter were solid with revenues at the top of our guidance range and adjusted EBITDA a bit better than we predicted. There are some important financial metrics to highlight this quarter. Sales grew 7% year-over-year. EMC segment sales were a particularly bright spot growing 21%. Gross margins expanded modestly to 10.9%. Adjusted EBITDA grew 17% (sic) [ 18% ] to $11 million. Unpacking our business by segment, I'll start with EMC as it was our best performer. Segment revenues were up 21% from a particularly weak fourth quarter last year to $141 million. Globally, construction and mining continue to be active end markets underpinning demand for both new equipment and replacement parts. Geographically, the growth was strong in Europe, which is the largest market for the segment sales while the U.S. also delivered solid growth from OE demand in light construction products. The EMC segment also enjoyed a nice contribution from foreign currency translation, which added 5.6% to the relative performance. As a reminder, a significant portion of our EMC revenues are in markets outside the U.S. so a weakening dollar can be a tailwind for the segment. Ag segment revenues were up 2.6% from prior year driven by FX tailwinds, which had a positive impact on the segment adding 3.3%. Digging a bit deeper into the ag segment in the U.S., we are starting to see some variability in demand and volumes as a function of equipment size. Through 2025, much attention was given to the struggles of corn and soybean farmers and how that weighed on demand for larger tractors and combines. On the other hand, farmers raising livestock had a good 2025 and their finance is in a better position on the whole. Demand for mid- and small-sized equipment suited to the operations fared better. Our ag business in Brazil saw activity moderate a bit after being a source of strength in late 2024 and the first part of '25. Broadly, farmers in Brazil are contending with higher input cost and high interest rates coupled with declining market prices for their grains. An upcoming election cycle is also weighing on demand there as people wait for clarity on policy direction. Lastly, in consumer, Q4 revenues were up 1.5% from the prior year as activity was generally slow in the non-specialty part of the segment while the specialty business held up well. Entering 2026, recent commentary from leading off-road vehicle OEMs has pointed to dealer inventories being at desired levels. With that, a resumption of end market demand should flow through to demand for manufacturing inputs as wheels and tires. At the same time, we don't see any reason to expect a decline in usage thereby supporting solid aftermarket tire demand. After all, people will still need to mow their lawns and off-road enthusiasts will still need to ride their ATVs. Looking at margins by segment in the quarter. EMC showed nice expansion as revenue growth allowed for better fixed cost leverage. EMC gross margin in Q4 was 9.3% versus 5.9% in the prior year. Ag gross margin was level to prior year at 9.1%. Consumer gross margin slipped to 15.6% compared with 18.1%. The year-over-year decline in the consumer gross margin was due primarily to the product mix and reduced leverage. Moving on. Our SG&A including R&D expenses for the fourth quarter of 2025 were $52.8 million compared to $55.7 million for the comparable period in the prior year primarily due to lower legal cost benefit and insurance costs. For the full year '25, excluding the impact of the additional 2 months of the Carlstar acquisition, SG&A including R&D expenses increased under $1 million or just 0.3% year-over-year. Operating cash flow in the fourth quarter was $13 million while CapEx was $18 million. For the full year, CapEx was just below $55 million and down substantially from $66 million in 2024. Q4 free cash flow was negative $5 million and was comparable to prior year. We ended the year with net debt of $383 million and a leverage ratio of 3.8x. Managing working capital and CapEx will continue to be a key priority in 2026. During the quarter, we recorded valuation allowances against certain deferred tax assets totaling $40 million. While our long-term strategy and market outlook remain positive, recent cumulative losses and market conditions have required us to have a more conservative view on our accounting guidance. We have commented on our taxes in recent quarters and I'll reiterate as we see a rebound in market conditions, we expect to get back to normalized tax rate levels. We anticipate taxes in Q1 '26 to be in the $4 billion to $5 billion range similar to Q1 '25. On tariffs, as Paul noted, we believe that well-implemented tariffs in the long run are a benefit to Titan and the recent approach to implementing tariffs have not been beneficial to Titan. However, we have still managed through this and protected our bottom line from the impact over the past year by taking appropriate actions to mitigate tariff cost amidst the frequent changes. We expect that our multi-sourcing strategy will continue to provide a competitive advantage as we manage through the fluid nature of the tariff policy. Now moving on to our financial guidance for Q1 '26. Our guidance for the quarter is revenues of $490 million to $510 million and adjusted EBITDA of $28 million to $33 million. Both of those ranges imply relatively flat performance compared with last year's Q1. We are reintroducing fiscal year guidance for 2026 as we believe we have reached the trough in most of our markets. Revenues of $1.85 billion to $1.95 billion and adjusted EBITDA of $105 million to $115 million. This guidance range is reflective of improvement compared to 2025 on both the top and bottom line. We are confident our sectors are starting to move past the cyclical trough. The extensive destocking we saw across our end markets have supply chains fairly tight and this gives us some optimism that an uptick in end market demand will flow through to us. Thank you for your time this morning. We would now like to turn it back over to the operator for the Q&A session. Operator: [Operator Instructions] Our first question comes from Mike Shlisky from D.A. Davidson. Michael Shlisky: Tony, I appreciate your comments here on the guidance for 2026. Could you give us maybe some just broad directional thoughts on each segment's top line and bottom line? It just seems like in the last quarter we had such a different direction and trajectory between construction, ag and consumer. I'd be curious if you could give us some broadly who's going to outperform, who's going to underperform from a segment perspective in 2026. Anthony Eheli: Yes. By segment like we saw in Q4, EMC was the outperforming segment. We expect that to continue into 2026. Ag we expect to be flattish and that's because while we see improvement in small ag, we are yet to see that improvement in large ag. And then for our consumer segment, we also expect improvement both on a lesser note relative to EMC and that's on the top line. Bottom line, we expect improvements in both EMC and consumer. On the ag side, we see more OE pricing pressure there and so that will not have as much improvement as the other segments would. Michael Shlisky: Outstanding. And then just looking at the ag segment on a quarterly cadence basis, you've been positive for a few quarters now in ag. Would you say that ag will have a better second half compared to the first? That's where the OEMs are kind of pointing. And perhaps there's positive, but relatively low growth rates in the first 2 quarters and some better growth in the back half of the year. Is that the right way to look at it for ag for '26? Anthony Eheli: Yes, that's right. You're right on that, Mike. We expect the first half of the year really to be somewhat what we're seeing already flattish. Later in the year we're expecting growth. We're expecting some recovery given what the OEs are saying and that's been hopeful that we will see some recovery on the large ag front. Michael Shlisky: Great. And then lastly, I wanted to inquire about the South America JV and the situation in South America broadly. We've heard some mixed comments from the OEMs. You've got a JV rolling out. Just some thoughts as to how that's been going from your perspective and from a broader market perspective. Paul Reitz: Yes. It's a good question, Mike, on Brazil and South America generally. I mean Brazil gets all the conversation with the emphasis they have on ag. The political turmoil, I would say, is kind of front and center there and when you talk to the Brazilians, it's unfortunate they lived through way too much of that and it's coming to life again. So we have seen the OEMs pull back on their production schedules to start the year coming off a really strong '25 as Tony noted in his comments. So we're watching that closely. But from Titan's perspective, I mean the JV has given us that boost of additional confidence and strength in the marketplace. Our strategy that we've seen play out very successfully for decades in North America with the wheel tire combination is what we're replicating in Brazil. It's obviously early days of that, but the teams on both sides are really in a good position within the marketplace. So it's how do we capitalize on the strength of our 2 positions together. We're starting to see some of that come together. I think it's something that will play itself out more in the back half of the year, again in the early parts of the year with the market conditions. What we don't believe in is using price as a weapon to go chase volume. We have 2 good businesses again in both wheels and tires there to do that. But we are seeing the wheel business gain some momentum by being associated with Titan. Certainly the OEMs like the position that we bring to them. So we'll give you more updates on that as the year progresses, but feel really good about where we're at. And just to note, I mean these 2 companies, us and Rodaros, have known each other for a number of years. So these aren't 2 strangers that just decided to form a joint venture and a partnership. We've been working together for a number of years so great to see it be formalized into a joint venture. Operator: Our next question comes from Derek Soderberg from Cantor Fitzgerald. Derek Soderberg: Just wanted to start on consumer gross margin. I'm wondering how we should think about gross margin for that segment in '26. And I don't know if you can talk about some levers you can pull on this year to bring that margin back up. Anthony Eheli: Thanks for that question. We're expecting some improvement in the gross margin for consumer as I had mentioned earlier and we are also winning new business with the initiatives we're driving that we know would improve the margin. So yes, it will be some incremental margin, something reasonable, but we expect it to stay in a decent range of where it's been with some improvement there. Derek Soderberg: Got it. And then just in the EMC segment performing pretty well, can you sort of detail which specific end markets and geographies you expect to sort of perform well in '26? Just talk about kind of what's going on there and what we should expect for this year. Anthony Eheli: From an EMC standpoint, as you will recall, Europe is a big piece of our business in EMC and the construction there is driven by infrastructure and so we are seeing -- we will be seeing a lot of good performance there from our Europe business. But like I also said, also in North America and the U.S. we've seen light construction as well and that's also improving as well. So it's across our geographies that we are seeing this positive momentum on EMC. Now with the exception of Brazil, which we've heard things about in Latin America and the elections coming up in Brazil and all that, so maybe not so much. They've had such a wonderful year in the last -- the last year was really solid in Brazil so things have softened a bit there. But outside of Brazil, we're expecting that growth to be across the regions. Derek Soderberg: Got it. That's super helpful. And then just 1 quick final question. Just anything we should be looking out for on the R&D front this year? Where is sort of the priority when you look at the product portfolio? Anything you're working on to sort of capture additional aftermarket share adding to some new technologies? Anything on the R&D front that you guys are prioritizing this year? Paul Reitz: Yes. Derek, I mean it's become really the backbone of who we are. So even circling back to your question on consumer margins, one of the ways we have added value to the Carlstar acquisition, which we now call our Specialty division, is by bringing innovation into play. We have significantly increased the amount of new products that they've introduced. We're putting the Goodyear brand on a number of products in that segment. And so when we do that, we're increasing margins. So part of our levers that we're pulling for the margin improvements in consumer are really through the product innovations and R&D. So tying that together to your question, we're looking at 15% of our '26 sales are going to come from new products that we've introduced in the past 3 years. So again this is the backbone of who we are. What we -- where we see that coming into play, we encourage it to be across all of our business. So we got a new Titan forestry line coming out to continue to innovate with deep drop wheels. Our ACES brand we continue to launch and develop further. We have a really cool VPO product that can run without air in the outdoor power equipment segment. So you're competing with airless tires there at a much lower price point. Again as I mentioned earlier, what we can do with just our branding is add value and every time we put a new product into the marketplace, it makes equipment perform better. So it's a win for the end user. And a lot of times we can do redesigns that improve the efficiency in the operations and the construction of those products as well. So again 15% of our sales in '26 are coming from R&D. We don't look to have to spend more to achieve that. So I think the run rate you saw in '25 is where we'll be. But again just in that consumer segment, what we can bring to that acquisition another year behind us, we'll just continue to improve the strength of that business through our R&D efforts. Operator: Our next question comes from Steve Ferazani from Sidoti. Steve Ferazani: Welcome to the call, Tony. Look forward to further conversations with you. Paul, the striking number to me was the real strength in EMC this quarter. I think we discussed this last quarter with the expectation that there might be divergent paths. But even with FX, still surprised by how strong in the seasonally slower, how quickly were you able to meet demand given we didn't see the normal downturn? And if you could just generally give some color around that. I know so much of that's your European undercarriage business. But if you can sort of break that out for us, how quickly you're able to meet demand and where you really saw it. Paul Reitz: Yes. I mean it's one of the challenges that we had throughout '25, but it's also the strength of Titan that when demand surges, business gets complex and chaotic, we do well. That's how we -- I kind of mentioned that in some of my comments during these periods we've seen over the last 5 years. And I continue to believe and we continue to see that's a strength of ours. So when demand surges like it did, as Tony mentioned with EMC in Europe, our aftermarket mining business it continues to perform well. But as demand surges, which you could say with EMC was at a lower level in the prior year. That's why we made the comments about the run rate going into '26, maybe Q4 isn't indicative of that. But nonetheless, it's still in a very good position. But to answer your question, Steve, I mean I expect our team to be able to handle surges and our customers count on us. That's the outline strategy of who we are. We need to stay close to our customers and continue to be able to service them and part of that is an environment where forecasts are tough to necessarily get accurate all the time. We can't expect them to be and so we need to be there when our customers step up. So in a quarter like that where you do see a big surge in EMC, I think it points to the strength of Titan, how we can take care of our customers. We don't turn away from that business. We don't run from it. We figure out how to get it done and that's how we approach. Going into '26, I think you're going to see fits and starts of pockets that are going to outperform and you see some that are still stuck, but we don't sit still when those outperformance opportunities come. That's again what we continue to do. That's who we are and that's what we must continue to be. But I think EMC is a really good example of that coming off a lower level, we saw a nice surge in '25. And again, as Tony said, see that as a really good growth opportunity to continue in '26. Steve Ferazani: That's helpful. The operator had cut me off for a little bit so I apologize if these questions were asked when I was cut off. But on the consumer segment, you noted the softer margins and it seems like it was even lower than what we would expect on throughput. I know you have that rubber mixing business thrown in there and that can be lumpy. Did we see an impact in 4Q that might be onetime given the lumpiness on rubber mixing or was this something else? Anthony Eheli: Yes, Steve, that's right. The rubber mixing business, that was the impact we saw in Q4 that impacted the margins. We had very good margins in that business. The volumes were down in that business and that was the impact we saw. So you're right, it's one-off. It's happened and so we move on from there. We expect the other parts of our business to be accretive in terms of margins and so that's why we expect improvement going forward. Steve Ferazani: Was that a lumpiness issue or a loss of business issue that may not come back? Paul Reitz: Yes. It's an unpredictable business. We don't necessarily have contracts in how we service that marketplace and so I don't think as their volumes go down, we lose that business. But we -- actually there was just an article a couple of weeks ago in one of the trade rags that talked about our custom mixing business. And so we have a lot of strengths. We need to kind of reposition that in the marketplace to win back that business. So to answer your question, Steve, it's not like we lose it. It just goes away because of the volumes of the customers going down and so that's why it is lumpy. We got some hopeful trends we're starting to see in '26 that hopefully will materialize. Steve Ferazani: Got it. That's helpful. Just on, I don't know if you provided it, I missed it, CapEx guidance for '26. Given your EBITDA guide is a little bit better, do you have hope that you can be cash flow breakeven or would that be a little too early for '26? Anthony Eheli: We continue to drive and strive for improvements in our cash flow. Getting to a breakeven just given the moderate top line that we're expecting to see and the requirements for working capital, I think it may be a little bit of a stretch to say we'll exactly get there, but we expect an improvement from '25. Steve Ferazani: Okay. What is your expectation for CapEx in '26? I'm sorry if I missed it. Anthony Eheli: $55 million. Steve Ferazani: Okay. What do you consider maintenance CapEx for you now? Anthony Eheli: It's somewhere in the $30 million to $35 million range. Steve Ferazani: Okay. So the additional investments are going where? Anthony Eheli: We are having some growth investment initiatives, new products -- support new products, support our plant efficiencies as well. We're also investing in those areas. So these are critical areas that we believe we have to invest in so that when the market comes back, we'll take advantage of it. Steve Ferazani: Makes sense. Paul, any color on -- I always like to ask you what should we be looking for to see a more stronger recovery in ag? Is it continued focus on crop prices when we see them move, that's when we can expect your business to pick up? Is that reasonable or any different, any changes? Paul Reitz: Yes, it is reasonable. But kind of looking through that a little bit, input costs moderating. I think that's been a little bit of a surprise to everybody how input costs remain elevated. Looking at the amount of crops that get put into storage is a big driver for obviously pricing. Some favorable trends in inventory and equipment aging as we've talked about. I think that's all coming together, Steve. I really do as you've heard from others. It's been a tough downturn when you look at the length and the duration of it. So we remain prepared to adjust as needed when that uptick comes. But yes, I think you're right. I think the government support though -- I got one more thought though. I mean government support and kind of the timing of it has made it a little bit confusing to start this year. What maybe thought was going to come last year wasn't coming to this year. So hopefully, we get all this stuff behind us, get some moderation and farmers start putting a little more money in their pocket as they should be, whether it comes from government support, input prices coming down and the costs coming down or prices going up. But I certainly believe that the trough is here and behind us and some brighter days ahead. Operator: Our next question comes from Kirk Ludtke from Imperial Capital. Kirk Ludtke: Tony, on the guidance, can you maybe give us a little color as to how -- what you've assumed for Brazil? Is it at least maybe just directionally up, down sideways? Anthony Eheli: Yes. Brazil on the guidance, that's going to be somewhat flattish. But from a quarterly perspective, at the earlier part of the year it's going to be softer, but we expect it to come back in the latter part of the year. Kirk Ludtke: Got it. And I missed the cash taxes for the full year. Anthony Eheli: $20 million. Kirk Ludtke: $20 million for '25 or '26 rather? Anthony Eheli: Yes, similar to '25. Kirk Ludtke: Got it. And working capital source or use? Sounds like it might be a use. Anthony Eheli: Well, because when we think about growth especially in the latter part of the year, Q4 and you think about inventory, your inventory you carry at the end of the year is actually towards the subsequent period, the prospective period. So if our customers are saying this is a trough year, which means there should be growth in '27 for them, we expect to be carrying a little bit more working capital at the end of the year to support that growth next year. But with that, we're still going to manage through for efficiency. Kirk Ludtke: Got it. And you may have mentioned this, but which businesses did you take the tax allowances for? Anthony Eheli: Two pieces of our business, the U.S. and our Luxembourg business. Luxembourg is actually the holding company in Europe for us. And the U.S., like you know, it's primarily because we carry the debt in the U.S. -- the main debt in the U.S. So that's been the situation with the U.S. Kirk Ludtke: Okay. So it's across all the business segments? Anthony Eheli: No, it's not across business segments. Like I said, it's primarily first of all, interest debt driven the cost we have in the U.S. And so that's the big piece of it, not really in the businesses. Operator: [Operator Instructions] We have our next question from Alexander Blanton from Clear Harbor Asset Management. Alexander Blanton: Paul, you talked earlier about the tariff situation in terms of the tariffs that are charged on foreign competitors who are dumping product into the U.S. I would like to ask about the -- and these are input costs that you mentioned being up. How much of those input costs are tariffs that are charged to you on imported raw materials, if any? Paul Reitz: Yes. The answer to that, Alex, has a lot of different dimensions. So let me try to streamline the thoughts in my head and give you a concise answer to that. I mean first, my points about our past with the ITC and understanding unfair practices is just to illustrate that this has been going on in our industry for 15 years and we have cases that have been brought in front of the commission that prove that our industry has unfair practices. So our basis for supporting tariffs is really grounded in facts that have gone in front of a panel of judges and proved to be the case. And so we look at it from the overarching premise of that along with a diversified business that can take care of our customers and we got to be well positioned for whatever goes on in the world and we've done a good job with that. However, in '25, to get to your question, what we saw is that the chaotic nature of how tariffs were implemented creates a lot of discrepancies on the cost or the prices of raw materials and other inputs that goes into our products based upon where you are in the world. Now that at a high level what we read in the media is one thing and what takes place in the real world is something different meaning there's ways to get around tariffs depending on how you switch the location of a company, how you label a product. So we really don't always get clear indication of what a cost is going to be so it gets difficult to price. Now we do believe we have good pricing power in the marketplace. I think that's supported in the margins in the financials we reported for '25. But my point is the tariffs were very chaotic not just in the things that you see with the implementation of tariffs, but how that impacts raw materials getting to your questions. And so the price of steel for example, it used to be a commodity that had more consistent pricing on a global basis. Well, now clearly with tariffs, pricing of steel is all over the map and there's no guarantee that the steel getting into the U.S. is going to face a consistent tariff. Regardless of what the administration tries to say, that is not reality. There are ways to avoid tariffs and we have seen that, we've seen our competitors admit to that. And so we have to just stay close to the marketplace, understanding what is going on in the market, the needs of our customers, price our products accordingly and at the end of the day have a strategy that can be diverse, it can be fluid and it can take care of our customers. But I do believe that the Supreme Court ruling will make the tariffs more stable as far as the nature of how they are implemented and we do look forward to a day that we can answer your question a little easier as far as what the input prices are -- input costs are for the raw materials because right now that is something that the tariffs had a pretty significant impact on. And again you don't read about that in the media because a lot what we call manufacturing in the U.S. is just assembly of finished goods or components and there's less converting raw materials into finished goods like Titan and other industrial companies do. So again it's been a chaotic period in '25 with the tariffs. But my closing thought on it, like I said in my prepared comments, is the Titan team has done a really good job handling that. We have a good strategy to get through that and I think the results are indicative of that. Alexander Blanton: Well 2 of your customers, Caterpillar and Deere, both have published an estimate of what the full year 2025 tariff. Paul Reitz: They're assemblers, Alex. It's what I just said. They're assemblers. They don't convert raw materials into finished goods. They are assemblers that assemble components and sell it to their dealer network. We are not that. Alexander Blanton: Right. But I was just thinking have you a similar number? What's the impact on your earnings of the tariffs that you're paying on imported goods? Paul Reitz: Right. The nature of our company is different than that. Well, just stop for a second. They assemble components so they pay a price for a component and they know what that component costs and what the tariffs were. We are buying raw materials of all different natures from synthetic to natural rubber to chemical to carbon black to steel to all different forms of steel and we're doing that on a global basis in different currencies. And so us being able to quantify it like Deere and Caterpillar do, it's a completely different business not to mention we're not the size of them. I need my financial team focused on how to make our business perform better and take care of customers. And so what we look at is what is the pricing in the marketplace and how can we make sure we have enough pricing power and that's how we look at it. Again we are converting raw materials all over the world on a given daily basis thousands of different SKUs being produced and hundreds of different raw materials being put into those SKUs. We're not buying finished components and assembling them together. So they are 2 different business models. And in the U.S., we have a tendency to read all the headlines from those companies and think that's manufacturing. That's assembling, that's not manufacturing. They're not converting raw materials. Operator: We currently have no further questions. So I'll hand back to Mr. Paul Reitz for closing remarks. Paul Reitz: You bet. Well, thank you, everybody, for your participation in today's call. And I want to end by thanking the Titan team for the strong performance in '25 and where we look to be going in '26. So thanks again, everybody. Operator: This concludes today's call. Thank you all for joining. You may now disconnect your lines.
Ian Brown: Good morning, everyone, and thank you for joining us today for our results webcast. We're delighted to have you with us. Before we begin, a quick note to say that today's session is being recorded, and a replay will be available on our website shortly after the event. Turning to the agenda. We'll start with a brief introduction from our Chairman, Aubrey Adams. He'll then hand over to Colin Godfrey, our CEO, who will provide an overview of the period before passing to Frankie Whitehead, our CFO, for the financial and operational review. We'll conclude with a live Q&A. [Operator Instructions] And with that, I'll hand over to Aubrey. Aubrey Adams: Good morning, and welcome to our full year results presentation. I'm pleased to be opening today with a strong set of results, reflecting a year of significant strategic progress and excellent delivery across the business. We have continued to execute our strategy with discipline, strengthen the platform for future growth and the business enters the year ahead with a real sense of momentum. Before handing over to Colin and the management team to take you through the detail, I would like to take a moment on a more personal note. This presentation marks my final results as Chairman, as I will be retiring from the Board after 9 very rewarding years. It has been a privilege to serve alongside such a high-quality Board, and I would like to thank my fellow directors, past and present, for their insight, challenge and support. I would also like to extend my sincere thanks to the manager and the wider team for their professionalism, commitment and consistent delivery throughout my tenure. Finally, I would like to thank our shareholders for their continued support and engagement. I leave the business in the strongest position it has ever been with a clear strategy of high-quality portfolio and a management team well placed to continue creating long-term value for shareholders. And it's very pleasing that the company's success has been reflected in its elevation to the FTSE 100, which becomes effective on Monday. With that, I will hand over to Colin to take you through the results in more detail. Colin Godfrey: Thanks, Aubrey. Hello, everyone, and thank you for joining us. We entered 2026 with real momentum, improving occupier demand, the successful integration of recent acquisitions and powerful structural trends across logistics and data centers, all of which plays to the strength of our portfolio and our strategy. And it means that we start this year exceptionally well placed to deliver against our 3 growth drivers and our ambitions to grow adjusted earnings by 50% by 2030. This is a business set up for multiyear compounding growth built on capability, discipline and consistent delivery. Throughout 2025, we delivered strong strategic momentum across our growth drivers. We continue to capture record rental reversion, expanded our logistics development platform and advanced our data center pipeline, including launching our power-first model and progressing as planned with the delivery of our first data center project at Manor Farm, Heathrow. We also fully integrated UKCM, generating very attractive returns and further enhanced our urban exposure with the addition of the Blackstone portfolio. At the same time, we executed a significant disposal program to recycle capital and increase returns. This is embedding highly visible multiyear growth and translating into financial performance. Despite significant capital recycling, we grew net rental income by 10.6%, increased adjusted EPS by 4.1% and delivered 4.4% dividend growth. The financial results demonstrate that the strategy is working. And as a result, we enter 2026 with momentum, visibility and confidence. As shown at the top here, our strategy builds on over a decade of consistent value creation and the evolution of the business has been deliberate and cumulative. Since our IPO in 2013, we've sought to create the most compelling supply chain-focused real estate business in Europe. In 2019, we added the U.K.'s largest logistics development platform with the acquisition of db Symmetry, enabling us to create high-quality buildings and compelling returns. And in 2023, we made our first urban logistics acquisition with Junction 6, Birmingham and subsequently further strengthened our offering through the acquisition of UKCM in 2024 and the portfolio of assets from Blackstone last year. And following 5 years of work in 2025, we launched our power-first data center strategy. The combination of the largest logistics investment portfolio and the largest logistics development platform means that we are the largest logistics real estate business operating in the U.K. This gives us many advantages, including deep market knowledge, strong relationships, a lower cost of capital and increased share liquidity. Each phase has broadened our capability and helped to enhance our performance as the data below shows. Over the past 10 years, we've grown contracted rent from GBP 100 million to GBP 361 million and at the same time, reduced our EPRA cost ratio by 220 basis points as detailed bottom left. That combination continued income growth underpinned by an efficient cost base has delivered strong and sustained total shareholder returns as seen bottom right. Looking forward, we're primed to deliver, and we're entering 2026 with growing momentum in each of our 3 growth drivers. Now I'll come back to this later. But first, I'll hand over to Frankie to cover our financial and operational review. Frankie? Frankie Whitehead: Thank you, and good morning, everyone. As Colin said, 2025 has been another strategically important year for the company, and we've delivered excellent progress across our 3 growth drivers. Our active approach to managing the portfolio has resulted in strong operational performance. And with 2 milestone events during the year, the launch of our data center strategy and the acquisition of the GBP 1 billion logistics portfolio from Blackstone. We expect momentum from these events to accelerate our financial performance into 2026 and beyond. So starting with the headlines. We've delivered strong like-for-like rental growth this year of 4.2%. This has supported an increase in our adjusted EPS of 4.1% to 8.38p per share. And the dividend is up by 4.4% to 8p per share. We have deployed capital into a range of attractive opportunities, which along with valuation uplifts, increased our portfolio value by over 20% this year to GBP 7.9 billion. Our EPRA NTA increased to 187.8p with income growth and ERV growth leading to valuation gains and once again generated attractive returns through our development activity. Now turning to look at income and earnings growth in more detail. Our earnings growth drivers are clear, and these underpin our ambition to deliver adjusted earnings growth of 50% by the end of 2030. Firstly, net rental income has increased by 10.6%, driven by a full year's contribution from the UKCM logistics assets, a 10-week contribution from the Blackstone portfolio and strong like-for-like rental income growth, net of our disposal activity. Income from development management agreements or DMAs, was GBP 15.5 million and in line with expectation. We guide to DMA income reverting to our GBP 3 million to GBP 5 million run rate for the financial year 2026. Secondly, our disciplined cost management has further improved our EPRA cost ratio to 12.4%, one of the most efficient platforms in the sector. This reflects the advantages of our externally managed structure and our commitment to cost efficiency as we scale. We continue to exclude the additional element of DMA income from adjusted earnings to maintain comparability year-on-year. Adjusted EPS growth, excluding net additional DMA income, was 4.1%. And with the dividend growing by 4.4% to 8p, our payout ratio is consistent with the prior year at 95%. Looking at the top right chart, you can see the significant embedded rental potential of 37% between current passing rents and the estimated rental values across the portfolio. This provides us with great near-term visibility over the future growth in net rental income, and we'll be coming back to this later in the presentation. Let me now turn to capital allocation and our robust balance sheet. As already noted, the portfolio increased in value to GBP 7.9 billion. Looking at our allocation of capital on the top right, you see that during the year, we deployed development CapEx in line with our guidance of GBP 231 million into logistics development and GBP 209 million into our first 2 data center schemes. In addition, our logistics acquisitions totaled over GBP 1 billion, the majority of which was the portfolio acquired from Blackstone. This portfolio will deliver a 6% running yield in 2026 and is immediately accretive to adjusted earnings. And we've made excellent progress on capital recycling, shown here on the bottom right, with GBP 416 million of assets sold or exchanged to sell in the year, which means we are now 80% through the disposal program of the UKCM nonstrategic assets. These capital movements and the increase in net debt, which part financed the transaction with Blackstone, resulted in a year-end loan-to-value of 33.2%. And with the GBP 62 million of disposals that were exchanged and have now subsequently completed post the year-end, our pro forma LTV reduces to 32.7%. Drawing this all together and including the equity consideration issued in the year, our EPRA NTA increased to GBP 5.1 billion or 187.8p per share, up 1.2%. We have again delivered compelling underlying total accounting returns. Starting on the left-hand side with our 4.7% earnings yield. We added 1.9% and 2.6% to returns from our investment and development portfolios, respectively. And with capital value performance across the whole portfolio at 2.4% over the year, we delivered an underlying total accounting return of 8.5%. We have separated 3 nonrecurring items here from underlying performance, which span the nonstrategic asset performance, an impairment against our land option portfolio, which I covered at the half year and the technical NTA dilution arising from the shares issued as part consideration for the Blackstone portfolio. This results in the reported total accounting return of 5.5%. And it's worth stating here that we have yet to feel the full financial impact of the Blackstone portfolio of assets and to a larger degree, our live data center projects. And so we're expecting a larger contribution from these components to total returns as we move forward. A component of this performance shown along the bottom was our portfolio ERV growth of 4% over the year, which is attractive in the context of underlying inflation. Our portfolio equivalent yield has remained stable at 5.7%. Moving on now to our asset management performance. Colin highlighted this as our first key growth driver, and we've delivered another year of strong progress. Our asset management team has added GBP 10.5 million of contracted rent through rent reviews and other lease events. Open market rent reviews and hybrid reviews performed particularly strongly, averaging a 36% and 21% increase in passing rent, respectively, all aiding our improved EPRA like-for-like rental growth of 4.2%. And as the bottom left-hand chart highlights, we will see a greater proportion of the portfolio subject to review in 2026 and 2027. And this will deliver an acceleration in the rental income capture over the next few years. And finally, moving on to the right-hand side. Our portfolio vacancy has reduced slightly to 5.6%, reflecting the net effect of our portfolio activity and as expected, the greater level of rotation within the urban assets. Before I move on to our development activity, I want to briefly highlight an important component of the Blackstone transaction, which is the innovative 3-year reversionary bridge. There is a lot of detail on this slide, but essentially, the portfolio acquired came with GBP 20 million of cash, acting as a bridge between the passing rent at acquisition and the market-based ERVs across the portfolio. The release of this reversionary bridge will be recognized within adjusted earnings over the next 3 financial years on a reducing annual basis so that it tapers in line with the actual capture of market level rents as set out at the bottom of this slide. This earnings contribution should be viewed as a baseline for performance from the portfolio with upside available through rent review outperformance or an improvement in portfolio occupancy. Our development platform is our second key growth driver and continues to deliver strong returns for us. During the year, we commenced construction on 1.4 million square feet of space, which has the potential to deliver over GBP 13 million in headline rent. We secured 0.4 million square feet of development lettings this year, adding nearly GBP 4 million to contracted rent at a yield on cost right at the top end of our 6% to 8% target range. Finally, it's fair to say 2025 was a year of macroeconomic uncertainty. This continued to weigh on the pace of occupier decision-making. But as Colin will outline in a moment, occupier confidence is improving, and we ended the year with 1.8 million square feet under construction, representing GBP 19.6 million of potential rent, of which 53% was pre-let. The importance of sustainability to our business is clear, and it continues to play a vital role in driving performance and returns. We provide what clients want, highly modern buildings that are powered by clean energy, are energy efficient and have the power resilience to accommodate future automation. Excluding the portfolio of assets acquired in the year, our EPC rating improved to 86% at B or above. And with the portfolio from Blackstone included, this remains stable versus 2024 at 79%. These new assets present an opportunity for improvement where targeted investment can deliver both sustainability benefits and meaningful value enhancement. Our rooftop solar program increased capacity by 4.5 megawatts in the year to a total of 29 megawatts. And we also continue to invest in natural capital and community programs. This year surpassing 62,000 young people positively impacted through our social value initiatives. All these sustainability actions support long-term occupier demand, reduce obsolescence risk and drive resilience across our estates. Turning to our balance sheet. This remains a real strength and provides flexibility as we invest for growth. During the year, we completed several important pieces of financing. We refinanced and upsized our GBP 400 million revolving credit facility. We issued a new GBP 300 million 7-year public bond at a 4.75% interest rate. And we agreed an acquisition facility to part finance the Blackstone transaction. At the year-end, as set out along the bottom of this slide, we had very strong financing metrics, along with a well-staggered maturity profile and access to a diverse pool of debt capital. These metrics supported our Moody's upgrade to A3 stable in the year. And we've shown on the right how our capitalized interest is evolving, reflecting the higher level of capital investment in live development projects, which is around 2.5x greater than this time last year. Interest capitalized against our logistics developments remains modest due to our capital-light land option model and relatively short construction periods. An addition in the year is the interest capitalized against our data center developments, reflecting earlier land drawdowns, greater infrastructure investment and longer construction periods. However, it's important to note that this cost of finance is fully captured within our underlying appraisal return targets. So looking at some forward guidance. Our development CapEx guidance for 2026 remains unchanged. We expect to maintain our GBP 200 million to GBP 250 million run rate for logistics development and GBP 100 million to GBP 200 million into data center development this year. And we expect to achieve returns in line with previous guidance at between 7% and 8% for logistics currently and 9% to 11% across our 2 data center projects. As we highlighted at the point of the Blackstone transaction, we expect disposals to run at an elevated level this year of between GBP 400 million to GBP 500 million to finance our accretive development activity as well as targeting an LTV at the lower end of the 30% to 35% range. This is all part of our disciplined approach to capital allocation, which ensures we remain optimally positioned for the next phase of growth. This discipline, combined with our access to the multiple funding levers set out across the top of the slide, gives us the appropriate financial flexibility to identify and pursue opportunities as and when they arise, enabling us to invest strategically and proactively for growth. And so drawing all of this together, 2025 has been a year of disciplined delivery and strong financial performance. We're entering 2026 in a great position with a strong balance sheet, multiple funding levers and a clear line of sight across our 3 growth drivers. Our considered approach to managing risk, combined with the scale of the opportunities ahead, underpin our potential to grow adjusted earnings by 50% by the end of 2030. And with that, I will hand you back to Colin. Colin Godfrey: Thank you, Frankie. Turning now to our strategy. The platform that we've built strengthened again this year is now positioned for the next phase of growth. It's diversified, insight-driven, operationally sophisticated and capital efficient. And crucially, it's aligned to the structural demand drivers underpinning logistics and data centers. So we're entering 2026 with the right assets, the right people and the right opportunities. And to drive value in this market environment, our strategy has a simple objective: convert structural demand into superior shareholder returns through a focus on high-quality assets, a direct and active management approach and an insight-driven development model. This strategic focus has created 3 clear and powerful drivers in our business. Firstly, capturing record rental reversion, which requires no or limited capital and delivers high certainty returns. Secondly, developing new logistics assets at a 6% to 8% yield on cost, supported by long-dated capital-efficient and flexible land options. And thirdly, developing pre-let data centers targeting a 9% to 11% yield on cost, enabled by our innovative power-first model. These drivers give us resilient growing income, combined with opportunity for substantial capital growth. Let's start by looking at the U.K. logistics market, where demand is strengthening. Take-up increased in 2025 to 25.6 million square feet, up 22% year-on-year and the best level since the pandemic. Demand is broad-based across e-commerce, retail, manufacturing, defense and 3PLs. Lettings are typically still taking extended periods of time to close, which was accentuated in 2025 by elevated macro uncertainty. But importantly, occupier confidence is improving, and this is feeding through into activity with nearly 10 million square feet under offer heading into 2026. Turning to supply. 20.9 million square feet was delivered in 2025. Vacancy ended the year at 7.1% with new space remaining broadly stable and the secondhand component increasing to nearly half of the total. Occupiers are rotating into higher quality modern buildings, exactly where our portfolio is positioned. And looking ahead, supply is tightening. Space under construction is down 28% year-on-year with speculative development almost 50% lower, pointing to fewer completions in 2026. And against that backdrop, rents continue to grow ahead of inflation with market ERVs up 3.9%. Investment capital markets volumes also increased, aiding price discovery with nearly GBP 9 billion of transactions, noting that the prime yield has held firm at 5.25% since 2022. Turning back to our business. Our portfolio has been curated to maximize our opportunities. We now have a broader range of unit sizes with greater urban penetration and more assets benefiting from open market rent reviews, improving pricing power in a rising market. This is all underpinned by long-dated big box income from a modern portfolio let to some of the world's most recognized companies, as you'll see here on the right. It's exactly the right mix heading into 2026. Our first major growth driver is continuing to capture our in-built rental reversion. And this is an exceptionally attractive and growing opportunity. Through rental reversion and vacancy, we have the opportunity to increase rental income by over GBP 100 million, of which 73% can be delivered within the next 3 years. Delivering this increase requires minimal capital, and our team has a strong track record of meeting or exceeding ERVs. This is high certainty, high-quality income growth and is firmly within our control. Frankie updated you on the excellent progress made in investment sales to support our recycling program. This included GBP 299 million of UKCM nonstrategic assets sold since May 2024 and a further GBP 62 million with contracts exchanged, leaving GBP 86 million in 2 assets, representing around 1% of portfolio value to be sold within the next few months. And one of these is now under offer. So in aggregate, these sales are ahead of the effective cost of acquisition. This is disciplined capital recycling, selling noncore assets and reinvesting into high-returning logistics and data center opportunities. But the primary reason for acquiring UKCM was to capture a high-quality urban logistics portfolio with significant in-built reversion. And we've made great strides in capturing this, having increased contracted rent by 18% since acquisition, supported by strong rent reviews, lease regears and new lettings. And this blueprint for success is mirrored in the Blackstone portfolio transaction, which completed late last year, where we have acquired a high-quality urban logistics portfolio at below replacement cost. These assets are now fully integrated into our platform, and we're already making excellent progress with our asset management initiatives, letting up vacancy and capturing significant rental reversion as demonstrated by the examples shown here on the right-hand side of the slide. Our second growth driver is logistics development. This platform is capable of delivering more than GBP 300 million of additional rental income, nearly doubling today's passing rent. It's capital efficient, supported by long-dated land options and can be flexed according to market conditions and our strategic objectives. As Frankie mentioned, some lettings that we expected to close in Q4 2025 slipped into this year, such that 2026 development activity is primed for delivery with nearly GBP 15 million of rent close to being secured. We have nearly GBP 9 million of pre-let rental income in solicitors' hands, over GBP 5 million of rental income in advanced negotiations, strong occupier engagement across the pipeline, including a 55% increase in pre-let inquiries and yields on costs tracking at the upper end of the 6% to 8% range. Our development platform is, therefore, a significant driver of multiyear income and value growth. And our third and most exciting growth driver is data centers. Demand for data center capacity is strong and is expected to grow significantly, noting that colocators dominate the London market. The constraint to supply in this market is power. There isn't enough in the right locations deliverable within the right time frames. Our power-first model solves that constraint, enabling faster delivery, lower risk and materially higher returns. In the 12 months since we announced our data center strategy, we've created an exciting pipeline of opportunities with more than 230 megawatts of power across our first 2 sites and the potential for GBP 58 million of annual rent, targeting an attractive 9% to 11% yield on cost. At Manor Farm, our first DC project, momentum continues to build. We're in advanced negotiations on a pre-let with an occupier, have agreed a contractor and are primed to make swift progress. We're expecting a planning decision imminently with the planning expect indicating a determination on or before the 17th of March 2026, keeping us on track to begin construction as planned. And we have also made good progress at our second data center site, where we expect a planning decision this year. These are just the first of a series of projects in a pipeline of potential opportunities of over 1 gigawatt. When you bring the 3 growth drivers together, the scale of the opportunity ahead of us becomes clear. We can more than double our rental income to over GBP 800 million across the medium and longer term. We show here the contribution from our 3 growth drivers: rental reversion in gold, development in blue and data centers in red. Today's GBP 337 million of passing rent on the left bridges to GBP 361 million of contracted rent through the burn-off of rent-free periods and signed agreements for lease. You can then see how the growth drivers generate a near-term opportunity to increase passing rent to GBP 425 million driven by reversion and development. A medium-term opportunity to increase this to GBP 562 million, reflecting further reversion and development potential plus a very meaningful additional upside from our first 2 data center projects. And finally, there is the significant long-term opportunity within our extensive logistics land portfolio, taking rent to well above GBP 800 million. Key here is that much of this value is already baked into our business. And as you can see at the bottom, none of this includes future rental growth or additional asset management upside. And crucially, it excludes any benefit from our 1 gigawatt pipeline of further data center opportunities. Now this is why we are so confident in delivering sustained earnings growth and compelling returns for shareholders. So to conclude, we have a resilient and high-quality income stream, an attractive and growing dividend and clear line of sight to material earnings growth with an ambition to grow adjusted earnings by 50% by 2030. We have a strong balance sheet, a proven model and powerful multiyear drivers. And critically, the business is primed for delivery in 2026, particularly through the early stages of our data center program. It's a compelling combination, resilient income, strong and compounding growth and the potential for exceptional returns from data centers in the years ahead. Thank you for listening. And with that, I'll hand you over to Ian, who is coordinating Q&A. Ian Brown: Good morning, everyone, and welcome to the live part of our results presentation this morning, where we are opening up the call to your questions. And I'm joined this morning by -- in addition to Colin and Frankie, Henry Stratton, our Head of Research, to the right of me. And to my left, Charlie Withers, our Head of Director of Development. And I'm being supported on the phones by Sergey, who will coordinate calls. [Operator Instructions] So, I'll hand over to you to open up the lines for questions. Operator: Our first question comes from John Vuong from Kempen. John Vuong: On data centers, so it's considered critical national infrastructure, which means that obtaining planning approval shouldn't be a major hurdle. Just trying to understand the Manor Farm progress. Could you provide a bit more color on what has happened and how this impacts your expected time line? And do you see any risk coming from the first expansion plans? Colin Godfrey: Thanks for the question, Jonathan (sic) [ John ]. Catch the last part of that. But I think you're looking for a bit of color on the progress we've made at Manor Farm. So we submitted planning earlier last year. The planning application proceeded to the inspector, where there was a hearing. That process took place and the planning application was called in by the Secretary of State for determination by the government, which we see as a positive move. The inspector's report has been submitted to the Secretary of State. And the Secretary of State has indicated that a decision should be expected by the 17th of March. So we're not far from that date. We should be hearing very soon. We remain positive in terms of the expectation for the outcome from that decision. Ian Brown: And if I just add to that as well, John, I think the key point as well is that we very much remain within the parameters of the original timetable that we outlined to the market back in -- I think it was January of 2025. John Vuong: And just given the risk... [Technical Difficulty] Ian Brown: Sorry, John. I wouldn't get a word, I'm afraid it's a terrible line. Operator: With this, we'll move now to the next question from Tom Musson from Berenberg. Thomas Musson: Just a question on your target to grow earnings by 50% by 2030. Since you announced that initial target, you've obviously acquired the Blackstone portfolio, which is accretive as you've described. Given the visibility you've got elsewhere on the like-for-like growth plus the confidence you have in delivering on new development, including data centers, isn't that 50% growth target now just very conservative? And could it, in fact, be materially higher? Colin Godfrey: Thanks very much for the question. Frankie, do you want to touch on that? I mean we can do a tag team. Frankie Whitehead: Yes. Look, I think we've got lots of embedded growth as we set out this morning, pointing to our 3 growth drivers there, Tom, the rental reversion that's going to be the biggest contributor to the growth over time, logistics development and data center development. Look, it's a medium-term target. We're certainly on track to deliver that. I think as we perhaps get closer to that 2030 date, we may look to revise the guidance. But as we sit here today, very confident in terms of the delivery, but we're still maintaining the 50% earnings growth by 2030. Colin Godfrey: And just to add to that, I think if you think about the context of the Blackstone acquisition and the increase in our urban component to our portfolio and how we've performed on the UKCM acquisitions. We've delivered an 18% income growth in as many months on UKCM. We believe that the Blackstone portfolio has similar attributes in terms of asset management potential. And so we believe that, that has the potential to perform very strongly for the business in the medium term, underpinning Frankie's reassurance in terms of our expectations for that tail growth. Thomas Musson: Okay. That's clear. And maybe just a second one on Manor Farm. Assuming that you do get a positive planning decision there, how will you expect to phase the capital profits? I see you're talking to accounting for some of those in '26. Just to get an indication of how that phases. Frankie Whitehead: I think if you assume that the planning is delivered this year along with the pre-letting, I think a substantial part of that capital profit would come off of the back of those 2 events. So obviously, there's a bit that comes through during the course of construction, and there will be a bit at the back end once the project is fully derisked. But a substantial part as we sit here today, would be expected in the current financial year off the back of those 2 milestone events, the planning and the pre-letting delivery. Operator: Our next question is from Suraj Goyal from Green Street. Suraj Goyal: Just a couple of questions from me. Firstly, does the ERV growth of 4% for the full year versus the 2.3% at the first half suggest a slowdown in rent growth or any concerns in certain locations? And a follow-on from that, what do you see in terms of sort of net absorption of industrial space across the U.K. and your portfolio more broadly? I know you touched on it a bit during the presentation. And then the second question, could you share some color on how the integration of the Blackstone portfolio is going? And 4 months on, there are parts of the portfolio that are perhaps more challenging or asset management intensive. Colin Godfrey: Okay. Well, I think we take that in reverse order, and then I'll deal with the first -- the last question and then hand over to Henry Stratton. The integration has gone very well. It's still very early days. We are really pleased with the quality of the portfolio that we've acquired from Blackstone. Obviously, this early stage has been about reaching out to our clients, engaging with them, understanding what they're looking for in terms of occupational interest, whether or not we can improve the opportunity for them. And just really talk to them about how happy they are in their space. And in acting -- really, we're putting together business plans, which we started actually prior to the acquisition and starting to engage with customers in acting those business plans. Some of that will include refurbishments, et cetera, as well. So early days, but going very, very well and very, very similarly to UKCM acquisition of that portfolio, as I alluded to earlier. Henry, do you want to... Henry Stratton: Yes. So picking up on the net absorption number, first of all, that was GBP 11 million for the U.K. across 2025. And we've actually now seen 3 half years of incremental improvement in that net absorption figure. So we're seeing positive momentum there in terms of what's happening in the market. It was GBP 10 million the year before, but lighter in the second half of that. So we're seeing that improvement. What we would say is that we're seeing a lot of rotation at the moment from occupiers into higher quality, more modern new space. And as they consolidate and rotate, they're also giving up some of those older buildings. So the vacancy number in the U.K., it's secondhand stock now, which is pushing that higher and it's high-quality new space of the type that we own and develop that occupiers are moving into. And then just in terms of the rental growth outlook, you're right, 1.5% rental growth in the second half of this year at a market level. But again, we see a lot of dynamics in the market that are encouraging on that front. So first of all, on demand, we're seeing growth in the economy. We're seeing retail sales increase, online penetration improve. We're seeing occupier confidence build, but we're also importantly seeing occupiers making more use of their networks. And as I said, that's driving the 25 million square foot of take-up that we saw last year, which is a significant improvement. So encouraging trends as we head into 2026. Colin Godfrey: Yes. And I think just to add to that, our ERV growth of 4%, very much in line with MSCI at 3.9%. And I think the tone that we're seeing in terms of conversations with occupiers is increasingly positive, alluding to what Henry said in terms of their desire to make investment in newer high-quality space. So we don't -- we certainly don't see there's any significant trend there in terms of the level of rental growth, and we expect 2026 to be a strong year moving forward. Operator: The next question is from Neil Green from JPMorgan. Neil Green: Two quick questions from me, please. The first one, just on the Blackstone reversion bridge, just to check, if you beat those ERVs, is that all upside for yourselves? Or is there any kind of type of clawback on that, please? And secondly, you've shown a couple of times how your cost ratio has come down over recent years. And looking at the situation today and hearing your comments on the call, it feels like there's a lot of opportunity to go for. Are there any or do you envisage any resourcing pinch points at this point, please? That's all. Frankie Whitehead: On the first point, there's no clawback arrangement. So all of that upside would be to the benefit of Big Box and Big Box shareholders. Colin Godfrey: Yes. And on the cost ratio point, Neil, we have resourced into the UKCM transaction and subsequently and into the face of the Blackstone transaction. So we are fully staffed. But noting, of course, that those costs are cost to the manager and not to the company. So you can rest assured that we are making sure we've absolutely got all of the right people on the ground, high-caliber people that are engaging, and we're getting some really good results as a consequence of that very, very active approach that we're taking to those assets. Operator: The next question is from Paul May from Barclays. Paul May: Just a couple from me. The like-for-like rental growth and the expectation of reviews and revisions -- reversions, sorry, coming up. It looks like like-for-like rental growth could accelerate over the next few years up to sort of 8%, 7% and then back down to sort of 4% from 28%. Is that a fair assumption in terms of how that will flow through? And then second question, can you just remind everyone on your capitalized interest policy? It looks to have doubled or more than doubled year-on-year, now about 7% of recurring income. Just wondered what is the rate that you use? And what is the policy on what is capitalized? Is that on any of the land or land options that you have, for example? Colin Godfrey: Okay. Thanks for the question, Paul. So the first thing is to remind everyone, we have a 28% reversion in the business. That's held firm. So the rate of capture has been broadly in line with the rate at which the market rents have continued to grow. As for looking forward in terms of like-for-like, I mean, Henry might make a comment on this, but we do expect -- I mean obviously, off the back of the current rates, we do expect the potential for that to improve. But we're certainly not guiding 7% to 8%, Paul, for the near term. We think that a range in the sort of 4%, 5% in the current market. I mean obviously, we'll have to keep an eye on how that progresses. We are seeing improved sentiment occupationally. Henry, do you want to make any comment on that? Henry Stratton: Well, I think just to add on the market side, we're still seeing that rental growth building the reversion side of it. So it's a positive picture there, which obviously the business is then aligned to capture that reversion over time. Colin Godfrey: Frankie? Frankie Whitehead: Yes. So on capitalized interest, obviously, the new feature is the data center investment that we made during the course of the year. The level of capital invested in development activity is about 2.5x greater than this point last year and hence, why that number has grown during the course of the last 12 months. The policy is we capitalize from the point of land drawdown. So nothing pre that. So we're not capitalizing interest on the land option component. Obviously, for the data center, the capital intensity is going to be slightly higher. We're drawing down land earlier. We're investing into infrastructure earlier and the construction cycles are slightly longer on that. So that's where we are. Paul May: So just to follow up on that, what's the rate that you use on capitalized interest? Is it the actual cost of debt? Is it marginal? Is it your average? Frankie Whitehead: So on logistics, we are borrowing from a general pool. So it's the blended cost of debt, the actual blended cost of debt on that. For data centers, we're thinking about that from a sort of project finance perspective. So it's the actual cost of finance that is going into that project at the moment. So we're borrowing under the RCF currently for the first -- the early phases of those 2 projects. So it's the cost of borrowing under the RCF for the data center component. Paul May: And sorry, just a quick one on the like-for-likes. I mean the 7% to 8% you get to from looking at the reversion that you highlight and the portion of the rent that is being pushed through in terms of the rent reviews, is there then a risk that you're not -- are you saying you're not going to capture the full reversion on those reviews? Is that why it's more 4% to 5% than 7% to 8% for the next couple of years? Or is it just a timing factor? Colin Godfrey: No. I think this -- look, we're not giving any specific guidance on any particular period, Paul. But we are confident in the earnings bridge over the medium term. 2026 is expected to have a higher level of rent reviews. I think it's 32%. And you'll see on Slide number -- Ian's got it there. Ian Brown: Slide 22. Colin Godfrey: We've set out the levels of rent that is capable of being captured in that period. What we're not saying is that we're definitely going to capture each of those amounts in each of those periods. So it could ebb and flow a little bit over the course of those years, but we are pretty confident in capturing that over that period of time more generally. Ian Brown: And to put that into context, we reviewed about 21% of the portfolio over the course of 2025. So 32% up for review over the course of 2026 with that GBP 27 million of rental reversion that we think is potentially capturable within the period. Colin Godfrey: So it could be 7% to 8%, but if we capture all of that, to your point. Operator: Our next question is from Max Nimmo from Deutsche Bank. Maxwell Nimmo: I had one question on like-for-like rental growth, but I think you've kind of answered it there. Maybe just on the second data center, I know it's early days, but is there anything you can kind of tell us on that front roughly in terms of timing and your thinking on that one? Colin Godfrey: Charlie, is that something you'd like to? Charlie Withers: Yes, yes. We are -- it's a plot we acquired last year, which we are running on the planning process at the moment, which we're looking to achieve consent during the course of this year. Discussions are going well, and we will look to bring that forward again in a similar fashion to Manor Farm with a pre-let backed construction program. Operator: [Operator Instructions] The next question is from Jonathan Kownator from Goldman Sachs. Jonathan Kownator: Actually, just a follow-up to Max's question. Any discussion already on the site with potential occupiers? And also, can you help us understand how you're thinking about bringing forward the rest of the DC pipeline? Any progress there? And would you consider, again, any joint venture partners, things like that? Colin Godfrey: Sorry, John, is that the occupier question? Was that relating to the second site? Jonathan Kownator: Yes, correct. I don't think you touched upon that, maybe it's a bit early. Colin Godfrey: Charlie, would you like to? Charlie Withers: We are quite early in the process there, but we have had initial engagement with a number of parties. So it's encouraging. Colin Godfrey: Ian, would you like to? Jonathan Kownator: And is it hyperscaler as well? Or what type of occupiers are you targeting for that? Charlie Withers: Similar operators to the people we're engaging with at Manor Farm. Ian Brown: And just with regards to the pipeline, I mean it's very analogous to what we're doing on the logistics development pipeline where we are taking the sort of the gigawatt potential and working each of those schemes through and securing the necessary steps to turn those into what we would call kind of credible delivery state. So again, we'll update the market in due course as we continue to progress that. But as Colin mentioned in the presentation, there's a lot there for us to go for. Colin Godfrey: And it's -- all of these sites are following our power-first strategy. where we're looking to control and deliver a significant amount of power that would be attractive to major DC operators. All of these sites are within the key locations within the U.K. and focus primarily on the London availability zone. Jonathan Kownator: And maybe just one follow-up to that then. How are you finding bringing on that power? Obviously, you have secured agreements, but is bringing on the power effectively upon your schedule? Or are you finding still having secured the principle that it's not that easy to convert into hard infrastructure? Colin Godfrey: Yes. So the point here, John, is really the way we go about what we're doing. And this is something that we've been working on for 5 years, the power team, progressing the power delivery. It's -- I think one needs to think about it from the context of the fact that we are not a typical consumer of power. We're working collaboratively with a JV partner power generators. And so we are, if you like, partly in control of the process and the delivery time lines, which gives us a much stronger conviction in terms of the ability to deliver that power when we need it. So we're not at the whim of the power industry and if you like, sitting in the queue, as is ordinarily the case for most property developers who would acquire a site, then look to achieve planning and power subsequently, hence, hitting the buffers with potentially in the context of [ slow ] by way of example, up to a 10-year wait. So we're not doing that. We are taking a very, very different approach, which we believe is very innovative and it's something that isn't capable of being replicated in the near term because it's taken us several years to where we've got to in that journey. Operator: Thank you. It seems there are currently no further questions over the phone. With this, I'd like to hand the call back over to you for any webcast questions. Over to you, Ian. Ian Brown: Great. Look, I think we'll turn to the webcast. So thanks for submitting your questions through that as well. So starting from the top, a question from John Vuong at Kempen. He asks, what's the size of development starts that you're expecting for 2026, given that you're seeing high inquiries? Second point to that, on the lettings in solicitors' hands and in advanced negotiations, how much of it is new post budget and how much is more from delayed decision-making? And how have you seen occupier demand progress at the start of the year? Colin Godfrey: Okay. Charlie, I don't know if you've got all of those... Charlie Withers: I missed the middle one. I got... Colin Godfrey: We'll brief you. So development starts '26, is the first question. Charlie Withers: Development starts 2026. I think we've guided previously that our CapEx for this year is somewhere between GBP 200 million and GBP 250 million, which is in line with previous years. Square footage will vary depending on the customers that we're talking to. So -- but our CapEx guidance is in line with previous years. In terms of occupier demand, which I think was your final question, we are seeing increased levels of occupier demand across both the standing stock portfolio with those buildings that we've got recently completed or currently under construction and a substantially increased level of pre-let build-to-suit inquiries compared to 12 months ago. So we're encouraged by the level of occupier demand and the prospects for increased lettings and development this year. Colin Godfrey: And that's really reflective of what we're seeing in the market more generally that Henry alluded to earlier. And I think the other question, the mid-question was of the amount in solicitors' hands and in advanced negotiations. The question was about how much of that has been delayed essentially in terms of decision-making, Charlie? Charlie Withers: Well, the square footage that we have in solicitors' hands is 0.9 million square feet, GBP 8.9 million of rent. That -- all of that we were expecting or hoping would slip into last year. But as with build-to-suits, it's -- they're more challenging to get over the line than deals on standing stock, and those have slipped. So I hope that answers that question. Colin Godfrey: And I think Henry has touched on this a little bit later. We have seen in recent times, occupiers, we've sort of used the expression sitting on their hands. There has been reticence from C-suite to make really significant investment. And some of these buildings, as Henry alluded to, if you're coming out of a secondhand building to a very large significant facility and you are investing in automation, that is a long-term, very significant investment you're making in the business. And companies have been holding back as a consequence of geopolitical risk, some of the economic shocks that they've seen. But we are now starting to see more positive sentiment with occupiers planning for these major decisions. That's the mood music coming through. That's what we're now seeing on the ground in terms of the letting activity. And that's why we're pretty confident in terms of the outlook for the market moving forward. Next question? Ian Brown: Just checking. I think that might be it. I think we might have exhausted our questions, Colin. Colin Godfrey: Okay. Well, it remains then for me to thank everyone for joining. I'm very thankful for you taking the time to join us. The Chairman mentioned our entry to the FTSE 100 at the start of the presentation. And I just wanted to take the opportunity to thank all of our stakeholders, advisers, everyone that's helped us along the journey of the last 12.5 years to reach this milestone, which we're very proud of, and we're really thankful for your support over that time and also for my colleagues that have worked tirelessly alongside me over that period. So thanks to everyone. I hope you have a great day, and we look forward to catching up with you soon. Thank you. Bye-bye.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 DENTSPLY SIRONA Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Wade Moody. Please go ahead. Wade Moody: Thank you, Shannon, and good afternoon, everyone. Welcome to the DENTSPLY SIRONA Fourth Quarter 2025 Earnings Call. Joining me for today's call are Dan Scavilla, President and Chief Executive Officer; and Mike Pomeroy, Interim Chief Financial Officer. I'd like to remind you that an earnings press release and slide presentation related to the call are available on the Investors section of our website at www.dentsplysirona.com. Before we begin, please take a moment to read the forward-looking statements in our earnings press release. During today's call, we may make certain forward-looking statements that reflect our current views about future performance and financial results. We base these statements and certain assumptions and expectations on future events that are subject to risks and uncertainties. Our most recently filed Form 10-K and any updated information in subsequent Form 10-Q or other SEC filings list some of the most important risk factors that could cause actual results to differ from our predictions. On today's call, our remarks will be based on non-GAAP financial results. We believe that non-GAAP financial measures offer investors valuable additional insights into our business' financial performance, enable the comparison of financial results between periods where certain items may vary independently of business performance and enhance transparency regarding key metrics utilized by management and operating our business. Please refer to our press release for the reconciliation between GAAP and non-GAAP results. Comparisons provided are to the prior year quarter unless otherwise noted. A webcast replay of today's call will be available on the Investors section of the company's website following the call. And with that, I will now turn the call over to Dan. Daniel Scavilla: Thanks, Wade, and good afternoon, everyone. 2025 was an important year for DENTSPLY SIRONA. We took meaningful steps to position the company for the future by building out a world-class board and leadership team, enhancing discipline and execution and aligning the organization around our Return to Growth action plan. Thanks to the hard work of our employees, we ended the year with strong momentum underfoot and financial results in line with our expectations. In 2026, we are fully focused on executing our return to growth action plan by putting the customer at the center of all we do. We are going deeper, moving faster and being bolder to drive sustained profitable growth. I'm confident in the path we've set and in our ability to deliver. The potential for DENTSPLY SIRONA has never been greater, and we have everything at our fingertips to achieve this. On today's call, Mike will review our fourth quarter and full year 2025 financial results. I will then provide an overview of the progress we've made over the past several months in advancing our return to growth initiatives and strengthening execution across the business. Several of these key developments are highlighted on Slide 3 of our online presentation. I will then outline this year's priorities and walk through our 2026 financial guidance. With that, I'll turn the call over to Mike. Michael Pomeroy: Thanks, Dan, and good afternoon, and thank you all for joining us. Overall, we had a solid finish to the year in Q4 2025, in line with revenue, adjusted EBITDA margin and adjusted EPS expectations that were provided on Q3 earnings call. Let's begin on Slide 4. Our fourth quarter revenue was $961 million, representing a reported sales increase of 6.2% and constant currency growth of 2.5% against the lower prior year comp that included a onetime Byte customer refund and distributor pre-buys related to our ERP implementation. Foreign currency positively impacted sales by 370 basis points compared to the prior year quarter. The onetime customer refund and distributor pre-buy impacts were an approximately 570 basis points of tailwind on constant currency growth in the quarter. Adjusted EBITDA margins declined 10 basis points to 14.1%, resulting from a 300 basis point decline in gross profit, driven by lower volume, change in sales mix and tariff impacts. Tariffs had an approximately $15 million impact to gross profit in the quarter. This was partially offset by the benefit from Byte comparable in the prior year quarter. Adjusted EPS in the quarter was $0.27, up $0.01 or 4.9% from the prior year. During the quarter, we recorded a $144 million noncash net of tax charge related to the impairment of goodwill and other intangible assets within the CTS and OIS segments. This impairment was primarily driven by the impacts of tariffs and volume declines partially reflecting competitive pressures. In the fourth quarter, operating cash flow was $101 million, and we generated $60 million of free cash flow. We finished the quarter with cash and cash equivalents of $326 million. Net debt-to-EBITDA ratio was 3.0, consistent with the prior quarter. During the quarter, we paid $32 million in dividends, bringing total dividends returned to shareholders to $128 million for the full year of 2025. Now let's turn to fourth quarter segment performance on Slide 4. Starting with the CTS segment. Constant currency sales declined 1.9% due to lower sales in CAD/CAM in Rest of World and Europe. This was partially offset by solid performance in the U.S. with high single-digit growth across equipment, instruments and CAD/CAM. The U.S. distributor inventory levels remain low relative to historical averages. Turning to the EDS segment, which includes Endo Resto preventative products. Sales on a constant currency basis increased 4% with growth in Rest of World in each product category. Growth was led by preventative, which increased 17% with strong performance in the U.S. and the Rest of World. Moving to OIS. Sales in constant currency increased 6.9% with the issuance of customer refunds for Byte in Q4 2024, accounting for the increase against the comparable quarter. IPS declined high single digits in the quarter driven by lower implant volumes across all 3 regions. We saw single-digit growth of the implants in China in the first half of the year and a double-digit decline in the second half of the year expectation as expectations for the second phase of volume-based procurement in 2026 shifted buying behavior in the region. Premium implants declined and value implants were slightly down, primarily due to China and partially offset by 11% growth in Europe. SureSmile, our clear aligner offering declined low single digits in the quarter with a 10% decline in the U.S., partially offset by 15% growth in Europe. Wrapping up the segments with Wellspect HealthCare, constant currency sales increased 1.9%, including 15% growth in the U.S. and continued strength in Rest of World, partially offset by Europe. Now let's turn to Slide 6 to cover our full year 2025 performance. Sales for the full year were $3.68 billion, representing a reported sales decline of 3% and a 4.3% on a constant currency basis. Byte negatively impacted constant currency by 1.9% on a full year basis. Foreign currency positively impacted sales by 130 basis points due to a weaker dollar versus most major currencies. The largest challenges we saw in 2025 were lower volumes for CAD/CAM and implants across all regions. Key highlights for the year included EDS growth in Rest of World across all 3 product categories, high single-digit growth of imaging in Europe and Rest of World and double-digit growth of SureSmile in Europe and growth for Wellspect Healthcare across all 3 regions. EBITDA margins expanded 150 basis points to 18.1% and primarily driven by lower SG&A, partially offset by the decline in gross profit due to geographical mix and tariffs. Tariffs represented $23 million of headwind to gross profit across the balance of 2025. Adjusted EPS was $1.60 for the year, down $0.07 or negative 4.6% year-on-year, driven by a higher tax rate. Full year EPS includes approximately $0.13 of income from Byte as we wind down the Byte business in the first quarter of 2026, income from Byte will not recur and will represent a headwind going forward. Adjusted EBITDA margins of greater than 18% and adjusted EPS of $1.60 were in line with guidance provided on the Q3 call. And finally, Full year operating cash flow was $235 million and free cash flow was $104 million. Overall, our fourth quarter results demonstrate early progress as we enter 2026 with a very clear strategy, improved execution and focused investment priorities. With that, I will turn it over to Dan to share further business updates and our 2026 financial guidance. Daniel Scavilla: With 2025 behind us, it's time to move forward with urgency. Our 24-month return to growth action plan is designed to restore momentum, strengthen execution and deliver sustained profitable growth. This is not a short-term reset, it's a focused transformation built on going deeper, moving faster and being bolder. The plan is anchored in 5 pillars: first, customer-centric mindset, placing the customer at the center of every decision to improve experience, service and loyalty; second, reuniting sustainable growth, sharpening our portfolio focus and accelerating innovation in the markets where we can win; third, empowering performance, driving accountability, productivity and commercial excellence across the organization; fourth, scaling the organization, simplifying how we operate to increase speed and efficiency; and fifth, financial strength, strengthening margins, optimizing capital allocation and enhancing cash generation to support shareholder returns. Each pillar has clear actions to find milestones and measurable outcomes. Together, they create a road map to improve performance and unlock the full potential of DS. Let me walk you through our focus areas in more detail and give an update on the progress we are making across each. Customer-centric mindset. I've learned that when the customer is at the center of everything we do, we win. While that may sound obvious parts of our company can serve customers more effectively than others, and that has limited our enterprise growth. We define the customer as any practitioner who uses our products, whether they purchase directly through a DSO or through a dealer. They are all our customers, and we will continue partnering with DSOs and dealers to ensure customers receive timely, consistent and high-quality support. Last quarter, I shared that we created a global customer service and technical service organization to deliver high-quality support worldwide while remaining agile to meet local market needs. As we continue to build that capability, we're taking additional customer-centric actions such as creating strategic dentists and lab advisory councils within each business segment to work directly with the DS leadership team for innovation and strategy development. Increasing investment in clinical education by 50% starting this year, we believe peer-to-peer education grounded in clinical data is one of the best ways to partner with our customers and fully leverage our portfolio. Investing in comprehensive sales force training focused on dentist workflow and connected dentistry to elevate the value we bring to the customer through our representatives. The field team is and will increasingly be a strength of our company and a critical competitive advantage. Reigniting sustained growth. Innovation and execution will define our path forward in the last 6 months, we entered a new market with the launch of the Wellspect Surity female external catheter, a new noninvasive solution designed to support women living with severe urinary incontinence. We've also further enhanced workflow efficiency by bringing CEREC onto DS Corp and introduced new products in our EDS and IPS portfolios. In 2026, we're increasing R&D investment by double digits to accelerate DS core capabilities, advance connected dentistry and drive innovation across the EDS, implants and ortho. We plan to sustain and expand this elevated investment level. At the same time, restoring the health of our U.S. business is a top priority. We have a comprehensive plan to reignite growth and strengthen our commercial foundation, positioning us to compete and win more effectively in this key market. We have made meaningful progress in the past 3 months in our U.S. business. We reorganized and unified our commercial teams to better compete in our markets. This realignment has been well received by our sales force and is already driving strong field engagement. We hired Mark Bezjak to lead our North America sales force. Mark joins us from Zimmer Biomet, where he led high-performing commercial teams and drove sustained growth through disciplined execution and customer focus. Mark has hit the ground running and is already making an impact. We also strengthened U.S. commercial leadership with a mix of competitive external hires and internal promotions, adding deep expertise across implants, orthodontics, endogonics and connected dentistry solutions. We are encouraged by our ability to attract top-tier talent who believe in our strategy and portfolio. These leaders bring extensive dental experience. Recently, we entered into new or expanded agreements with key partners, including Benco, Patterson, Burkhart and A-dec while continuing to advance discussions with additional dealers. As I've highlighted before, reengaging the dealer channel is a critical lever to broaden our reach and improve go-to-market effectiveness in the U.S. And our sales teams are excited by the opportunities this creates. This multichannel approach allows us to maintain a strong direct presence in specialty segments while expanding our dealer network in CTS to drive growth and market penetration. Our business segments are -- we are #1 or #2 in all categories, except implants and ortho. We are initially focusing on implants in our Return to Growth plan, leveraging the best-in-class and wide range of implants we have to meet customer needs and using our deep history of clinical data, coupled with our expanded clinical education and sales training program. For our comprehensive ortho offerings, our initial focus will be on the modernization of our software, empowering performance. To lead DS through this turnaround, we're strengthening our organizational foundation, we're aligning leadership, sharpening priorities and selectively adding expertise to accelerate progress. This balanced approach builds on the strength of our existing teams while adding leaders with deep experience in global transformation, sustained growth and consistent financial performance. Some of the key actions we are taking. We established a transformation office responsible for coordination of the Return to Growth action plan. This team will also lead our enterprise AI strategy and lean operating principles, fundamentally improving how we work. The transformation office is focused on delivering cross-functional improvements that enhance efficiency and agility. We continue to progress in our search to identify the right CFO for DS. Mike has been an outstanding partner in his interim role, allowing us to thoughtfully evaluate candidates while we execute against our 2026 priorities and financial outlook. We also strengthened our board with the creation of the new Growth and Value Creation Committee and the addition of 3 new independent directors: Jim Forbes, Former Vice Chairman of Investment Banking at Morgan Stanley; Brian McKeon, former CFO of IDEXX Laboratories and Don Zurbay, former CEO of Patterson. These additions, coupled with an already strong board, will increase our governance and strategic capabilities. In connection with the Board's ongoing refreshment process, Willie Deese has informed the Board of his desire to retire and not stand for reelection at this year's Annual Shareholders Meeting. Willie has been a valuable member of the Board and we want to thank him for his leadership and many contributions. Scaling the organization. To fund our investments, we're initiating a restructuring program to streamline functions, improve efficiency and support a more competitive cost structure. The program is expected to unlock approximately $120 million annually across the P&L, which will be reinvested in the Return to Growth action plan. We expect to incur approximately $55 million to $65 million in nonrecurring charges, the majority of which will be expensed and paid in cash in 2026 and 2027. Building a faster, more scalable and profitable manufacturing and distribution network. This includes consolidating resources, standardizing packaging and implementing advanced planning and forecasting capabilities to favorably impact working capital and reduce product cost. Financial strength. The fifth pillar is focused on strengthening our financial profile and driving shareholder returns. With that, we are initiating changes to our capital allocation approach. Following a strategic review, we have eliminated our dividend. These funds will be reallocated to our debt retirement and share repurchases. I want to emphasize that this decision reflects an assessment of an optimal capital deployment strategy and feedback from many of our shareholders. We remain committed to maintaining investment-grade credit metrics by prioritizing debt reduction and over time, deploying excess free cash flow toward disciplined share repurchases. Now let's move to Slide 8. For 2026, we expect net sales to be in the range of $3.5 billion to $3.6 billion, reflecting a negative 3% to negative 1% operational growth. While we do not provide quarterly guidance, we anticipate positive sequential sales momentum in the second half of this year. Operational growth excludes a negative 2.1% for the 2025 Byte headwind and the 2026 onetime dealer capital equipment inventory sell-through as we work with our dealer partners and adjust inventory models. We expect adjusted earnings per share to be in the range of $1.40 to $1.50, reflecting our accelerated investments in innovation, clinical education, Wellspect market penetration and commercial investments to drive sustained profitable growth globally as we move forward. In conclusion, we've moved quickly and accomplished a great deal to position the company for a stronger execution in 2026 and beyond. I will close my formal remarks where I began. I believe that the opportunity ahead of us is substantial. This is a moment for bold change and decisive action rooted in ownership and urgency. With the full support of our Board, we are confident in our ability to unlock the company's full potential. Before I turn it over to Q&A, I also want to express our respect for Don Casey, former CEO of DENTSPLY SIRONA, who passed away last week from natural causes. Don and I were together for many years at Johnson & Johnson, and I'll always appreciate his leadership and mentorship. DENTSPLY SIRONA employees will remember him for his passion for improving health care. We extend our condolences to Don's family and loved ones. Now let me turn it over to the operator so we can start Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from Vik Chopra from Wells Fargo. Vikramjeet Chopra: Maybe just two for me. You've talked about the dividend elimination freeing up $128 million annually for capital deployment. Dan, maybe just talk about the optimal mix of debt retirement and share repurchases and at what share price levels do you view the stock as compelling? And then I had a quick follow-up, please. Daniel Scavilla: Thanks, Vik. So a couple of things. We do have debt that is coming up to be retired. And I think we want to take advantage of that. I also want to make sure that we don't cross the line and move below investment grade. So right now, we do have our eyes focused on that. I will tell you, I think that we are an attractive stock price right now with the potential that I see. And so my goal is to really work through this return to growth plan, free up the cash, execute that restructuring plan and get as much cash as we can. But first out of the gate is going to be just controlling the debt. But then as soon as we can in this year, if all works well, I want to move in to actually get into buying back shares. I really can't say when exactly. I've got to work through some of the plan, but that's my targets. And then just ongoing, I may not have a structured cadence. But at these prices, I want to move into next year to really remove shares at what I consider a bargain price. Vikramjeet Chopra: Great. And just a quick follow-up, if I can. You called out the impact of the new dealer inventory model for products in your operational growth. Can you just talk about the estimated revenue headwind when we should expect this in 2026? And how much of this is timing versus structural? Daniel Scavilla: Yes. It's a great question, Vik. And I really didn't elaborate. But what we're doing is rather than selling into dealer inventory like we've done in the past, we're going into a drop-ship model. And so in particular, with the vendors who do have capital, we expect them to sell that through. My guess is within the first half of the year. That's really what I would think would occur. And it's in the range of about $30 million approximately that we think is in the inventories they would sell through before we move to a drop-ship model. My goal as a company is to be into that full drop-ship with all vendors by the time we're walking into the fourth quarter. Operator: Our next question comes from Allen Lutz from Bank of America. Allen Lutz: Dan, I appreciate the Return-to-Growth action plan, a lot of great details in there. My first question, how do you think about the timing around some of the recent announcements you made, the expansion with Patterson, Benco, Burkhart, is there any way to size or provide commentary on the size or timing? And is any of that benefit included in the guide? Daniel Scavilla: Yes, it's a great question. Not a major part is in the guidance. It is built in a Return-to-Health plan for certain Allen. What I would tell you is just a logical thought, we're signing people up early in the year, call it first quarter. We have the reps to train and get on board for the most part and bring them up to speed. And then they've got to go out with the customers and start building a natural pipeline for capital, which you know is out there. So for me, activity now in the first quarter and into the second quarter, I think, should bear fruit closer at late third quarter, early fourth quarter. I don't really have a breakout in dollars to give you. It's just a natural flow from having sold capital for so long that I don't think this comes out of the gate in the first quarter or the first half. I think it's more of a later second half story where we really see the lift of signing all of these good folks on. Allen Lutz: Okay. And then for my follow-up, around the EPS guide, $1.40 to $1.50. As we think about everything you talked about, accelerated investments in innovation, commercial investments, clinical education, should we think about 2026 being the peak year for those investments? Or would you expect those investments to ramp up over the next couple of years as we think about the cadence of your SG&A over the next couple of years? Daniel Scavilla: Yes. Again, a really good question. I think that this is a strong year to do it. I would think it's about the same, not meaningfully different in 2027 and then really, I'm looking at that point from a lift in the health of the business to become self-funding. And I want to see something, quite frankly, outpacing EPS growth as we get back to top line growth. Operator: Our next question comes from Elizabeth Anderson from Evercore ISI. Elizabeth Anderson: I heard that you said on the call about the increase in R&D spend by double digits to drive DS core, EDS and ortho. Obviously, you've continued to launch a bunch of new products that we saw in Chicago last week. How do you think about sort of the cadence about where we are setting sort of like brand-new development cycles, so we should expect these kinds of products to come a couple of years from now? Are you thinking like there is something sort of in process and this just helps to speed them up and maybe there's something that launches in late '26 or '27. Help us sort of think through your -- maybe broadly your R&D philosophy and sort of how we should expect these benefits to start to phase in as part of the growth plan? Daniel Scavilla: You got it, Elizabeth. So you almost answered it with your question, so it is multifaceted. So bear with me. DS core is an amazing platform and one of the long-term potentials of this company. Part of that funding will go in to accelerate some of those applications. So we talk about moving into implants or into ortho or deeper into Endo, we're going to go do that at almost a simultaneous rate and bring those functionalities into our customers at a faster rate. I'm not going to commit to dates just yet because as you know, some things require FDA approval. But nonetheless, to accelerate funding can bring us further along the curve. At the same time, there are several things in our EDS portfolio that we were funding at a slower rate or even possibly outside that we can now bring in and accelerate as well as products go that way. We also have some interesting opportunities within our implant business that having this funding. We'll bring those in, I would arguably say 1 year sooner than planned in this approach. I really can't lay out the cadence of it I think, but part of it is going to be an acceleration in pull forward in the software and creating that environment while we come up and have stronger product offers for our customers. Some of them are brand new, some of them are acceleration and some of them are things that were delayed that we can bring back. So it's really the mixed bag based on your question. Elizabeth Anderson: Great. And maybe as a follow-up, you talked about obviously reorganizing the commercial team. Is that done now? Or is that sort of still in process and sort of should we think about it in terms of the benefits of that? I think you mentioned we're just starting, but we should think about those happening over sort of 2 to 3 quarters before they really start ramping. Is that a fair way to think about it in this circumstance as well? Daniel Scavilla: Again, good question. I'll be honest with you. I am amazed at the speed and professional approach the team took in designing and reorganizing itself quickly. It is done. And they're out there now forming is up at the end of the first quarter. And they're going to be active in these new structures really honestly into March and April that soon. And again, to me, it further flexes the potential of this company and the capability of it once you put the right focus on it. Operator: Our next question comes from Michael Cherny from Leerink Partners. Daniel Christopher Clark: Great. This is Dan Clark on for Mike. Dan, just wanted to ask about how you're thinking about the pacing of the sales improvement here as the different pieces of the Return-to-Growth action plan get implemented? I mean it sounds like we should start to see sequential growth starting in the back half of the year. How should we think about first half, second half weighting of sales? And then should we expect to see more sequential acceleration as we think about the early parts of 2027? Daniel Scavilla: Yes. So Dan, I'll stay away from '27 because that is so far off in the distance given what's in front of us right now. That's a later conversation for us for sure. What I would tell you and what I'm trying to signal out is this doesn't change overnight. And I think most people respect that. I think we have a consistent velocity perhaps in Q1 and Q2. I want to start seeing a noticeable change with what we're putting in place in that third quarter. And I really want to see at least the U.S. come out with a plus sign in front of it, albeit small in the fourth quarter. So we do set the stage correctly for 2027. That's where we're aimed right now. It's early innings, but I'm just telling you that's the way I'm looking at it as I drive this plan. Operator: Our next question comes from Jeff Johnson from Baird. Jeffrey Johnson: Hoping I could ask 1 kind of clarifying question that doesn't count as my question then 1 other question. But on the clarifying front, to your SG&A answer, I just want to make sure I understand what you're saying. SG&A as a percentage of revenue up this year, but did you think you can start to kind of grow it just more in line or even below sales going forward? And I think at JPMorgan, you had talked about R&D going from 4%, maybe even pushing up towards 6%, feels like with what you're saying you'll maybe get towards 5% this year. So should we still expect that R&D ramp kind of eventually getting up to that 6% range or so? Daniel Scavilla: Yes, you got it. So a couple of things just to point to clarify, I think SG&A will have some influx. It shouldn't be a large pop. Going forward, one of our rules as we control expense and really look to free up cash flow is probably to grow some of our expenses at half the rate of sales growth. And so again, I don't see G&A growing big and suddenly getting bigger. That's not really the intent. The majority of the spend back to your point, Jeff, is really going into R&D. And we're hovering around 4% in 2025 and earlier, I would expect that to be up around 5%. And as we are successful with this plan, I'll put even more in this year. I'm not saying the target is up to 6%, but that is in the sights. And so what I would think even naturally is a lift this year and the lift next year in R&D, while we continue to get growth and we have to obviously have the rest of the plan working in order to make that second piece happen. Jeffrey Johnson: And then conceptually, I guess, the real question I wanted to ask, this is a year where, obviously, you're going to get some leeway to really put these big turnaround plans in place and try to reestablish a growth profile here. One thing I've always thought on DENTSPLY at least recently, and I know you probably don't care that much about my thoughts, but when I look across the board in imaging in iOS, in 3D printing, you guys have some fantastic products there, but we've also seen competition at lower price points, really improve their product suite over the last call it, 5 years, 7 years, something like that. Has there been any thought in kind of taking a reset year and maybe kind of bringing some of those price points down to more competitive levels? Or is this really going to be about investing to kind of drive innovation and go about it the way you're saying there? Daniel Scavilla: Yes, it's a great question. Listen, just a couple of thoughts here. First off, the investments that we're doing will drive innovation. And with that, we're also assigning cost targets that allow you to be more flexible in future price and future products. But that said, I'm going to give you a different industry analysis, right? In the auto industry, you have Mercedes and you have Hyundai. We're the Mercedes and we'll stay that way. We're not going to suddenly come down to be something we're not pull out of a core competency. What we're going to do is offer differentiating and meaningful inputs so that the customers will want to use us. We have to earn that through innovation, and that's why we're increasing our investment in R&D. Operator: Our next question comes from Jon Block from Stifel. Jonathan Block: Great. Dan, when we think about 2026 versus 2025, which of the 4 revenue segments do you think are maybe call it poised to see the biggest year-over-year improvements or strength versus the segments that just might take some more time and investment to go ahead in turn when we look at further out? Daniel Scavilla: Yes. Great question. I mean if you think about it by signing on the dealers and getting that active, I would lean towards CTS is the one that I'm thinking is the first mover. At the same time, as you know, we've got great products in EDS and we're launching those things out both in Chicago and what we're investing in, I think that should be growth and maintaining strength there as probably secondarily. The focus, as I said in my script as well is, we don't like where we are with implants, and we have yet the best implants in the market. We have to do a better job in how to bring them out through education and application. So I think that would kind of fall third in line. Ortho will take longer because we're going to spend our time this year modernizing the software. I think that's a longer play outside of this calendar that I would expect to see. Jonathan Block: Okay. Very helpful. A lot of detail. And then maybe if I could just ask as a follow-up. You get a lot of great color. One thing that I haven't heard you elaborate much on to date is the company's DSO strategy. And obviously, those DSOs are really important to the industry and are fast growing. And DENTSPLY SIRONA, I feel has always lagged a bit on penetrating the DSOs. And maybe part of that is just due to the company's higher end product portfolio. So maybe if you can touch on how you can get better traction with the DSOs despite arguably the higher ASP? And can you prove out the favorable returns to these DSOs in order to get the traction? Daniel Scavilla: Yes, you got it. And again, really honestly, a great question. And the answer is I am looking there. The reason I didn't call that out yet is I'm not really in a position to talk about it further. We're in exploratory thoughts, but I will talk about it further. We can go on and fill out an entire suite with everything we have, and we can offer them hundreds of suites to be filled out. So we're in a position to truly partner with them in a meaningful way for all of the capital needs they have in addition to providing the disposables. So all I would tell you is we're in talks, you can figure out with all of them who they are, and we're looking at what our plans are as part of that return to health. I don't think there's a meaningful '26 move, but you're taking some of my thunder away for that '27, '28 years based on where we're headed. Operator: Our next question comes from Michael Sarcone from Jefferies. Michael Sarcone: I guess, Dan, you mentioned, and I think this is a reiteration that you'd hope to see a positive sign in front of the growth for the U.S. business in 4Q. I think you had previously mentioned you could get there without any turn in the market. Is that still the case or the thought? And I guess if you could just quickly comment on what you're seeing in the underlying markets, that would be great. Daniel Scavilla: Yes. I do think it's regardless of the market. One of the things I was saying before and at JPM is our return to health is not market-dependent. We need to do a better job in what we have and executing what we have. And I think with that we should be capable of doing that. That said, the market to me does not look radically different. I think it's fairly stable. I think similar to what our counterparts have said, I would agree with those comments that they've made with it. And while there's some increasing optimism, I'm not seeing a spike of any notes. And again, just to reiterate, we're not hoping or praying for that market to suddenly spike up in order to get to our point. We have to do that on our own. Should that occur, that's an additional benefit. Operator: Our next question comes from Brandon Vazquez from William Blair. Brandon Vazquez: I wanted to go back to the increased R&D spend and kind of the focus on accelerating innovation. It feels like that's probably 1 of the key pillars here to keep driving interest and demand. Then maybe you can level set us like what's the cadence of this? Is this -- you start putting money in today, and it doesn't start coming until '27, '28? Or are some of these going to kind of get pulled forward already and we get to start to see some? So maybe give us the latest on what new product is we might be expecting within 2026, more specifically? And then what are the longer-term projects that might be going into the R&D bucket? Daniel Scavilla: Yes, Brandon, it's a good question. So a couple of things. The spending that we are accelerating today would not meaningfully pull anything into 2026. So I would tell you that a historical one. It's a matter of actually closing the gap once you get into '27 and '28. That's really probably the first part of it that way. New product launches that we have out there or planned out there, given that we don't have approvals, I'm probably not going to comment on. I would just tell you that once we reach FDA approval, we start talking about things. So while they are out there, and we have them scheduled, given the fact that we don't have the approvals needed, I'm going to refrain from saying here's what I think and when I think it. But nonetheless, we have products planned. We just have to get through the FDA and regulatory requirements to get out there. And this lift in spending that I'm doing, I think, is something that is a bit longer term outside of the '26 calendar year. Brandon Vazquez: Okay. Maybe as a quick follow-up. Another quarter in now just kind of getting your feet here into the portfolio. Any noticeable gaps that you're noticing that you think you need to fill? Or I mean, portfolio rationalization as well, but I feel like we've talked about that. But any gaps that you need to either launch products or acquire? Daniel Scavilla: Yes. I would say no significant gaps right now. I look at our portfolio, and it's very abundant. How we organize the portfolio and strengthen our brands and focus clinical education and rep education on those are, I think, what's needed more than new widgets. I think the transitional move from selling implants or other products into a dentist workflow through connected dentistry. I think that's something that we have, and that's one of the things we're spending our money on. And so I think the journey is really about the digitization, which I can't say is out into the dentists to go drive it that way. Operator: Our next question comes from David Saxon from Needham & Company. David Saxon: Great for us. Just wanted to ask one on the commercial team. Your old firm obviously is in -- was a really strong competitive rep hire. So is that a lever you can pull this year? Or do you need to kind of fix the foundation first and the approach before that becomes a meaningful option for execution? Daniel Scavilla: I would say we may have the potential later this year. We've got to get the teams formed and functioning first. But it's on the list for Otto and Mark to actually look at it that way in the U.S. in particular. And that you're right, we are going to take from that playbook and use that in a great way. I just don't know if I can do it as soon as the second half. Certainly, as we exit the year, that's going to be a key for us. Operator: Our next question comes from Lily Lozada from JPMorgan. Lilia-Celine Lozada: In the prepared remarks, you referenced BBP and ortho and implants this year. So can you talk through how you're thinking about that? To what extent is that factored into the guidance? And do you see it being a net negative or potentially a positive to revenues, ultimately, if you can get volumes to offset price? Daniel Scavilla: Are you talking about the accelerated R&D where we're going to focus, I just want to make sure I answer it the right way. Lilia-Celine Lozada: No. China BBP. Daniel Scavilla: China. I'm sorry, I didn't hear that piece of it. Thanks. I'll tell you, we have our eye on China. Certainly interested. We understand the strategic impact there. But to be honest with you, the return to health plan right now is focused on first getting the U.S. up and on its feet, going through these processes first this year. We'll pay attention to China, make no doubt about it. We have an interest in it. But if you look at where that falls currently, even in our overall sales, it really evolves into low single digits as a percent of our total pie. And so we're just, I would say, prioritizing more of the U.S. Health first, keeping feeding Europe as it is EMEA, I mean by that second and then we'll take a look and see as the news evolves to China, what our best move is. We are evaluating things. I don't want to sound like we're in have plans. We have 2 or 3. We just haven't really made a conclusion yet as to which direction we want to go in there. Lilia-Celine Lozada: Got it. That's helpful. And then as a follow-up, can you talk about how you're thinking about free cash flow this year? We know Dental is a business model that's capable of generating really strong free cash flow conversion. So what are some of the headwinds and tailwinds we should be keeping in mind for this year? And how are you thinking about where that metric can go for you in 2026? Daniel Scavilla: You got it. Well, 2 things. We don't really call out free cash flow with our guidance. So I'll stay away from that. We do think it can improve. I think that we need to move into our working capital exercises that we have in play, and that cuts across all of those type of items. And my long-term view of this company is to be a cash engine, like you said, and I think the potential is there. It will take us a bit of time to get there. But everything in our return to growth plan is focused on turning this into a much stronger cash flow engine. Operator: Our next question comes from Michael Petusky from Barrington Research. Michael Petusky: Thanks for the question, Dan. Again, I think it was in November on the third quarter conference call, you've sort of called out some of the things you want to do in implants to sort of turn that business around and that you talked about adding more reps, better training, adjustments in branding, leveraging infrastructure, et cetera. And I'm just curious, have you been able to sort of implement any aspects of some of the steps you feel like you need to take to turn that business around? Daniel Scavilla: Yes. The answer is yes. And so treating the focused sales force from top to bottom within implants is one of the other things we're talking about within our commercial engine and we have that done. The expansion of clinical education because I think that's a very viable part and needed part that's out there. That's number two. A pull forward of some of the innovation that we're doing with R&D as part of that funding that's up there as well. And where we are currently working on and not yet ready to talk about is just our brand strategy and how we put everything that we have together and come out with all of the power of not only the implants but our assortment of abutments and how best to use them with the crowns, whether it be chairside or through our labs and so that piece is really working through, and I expect to have a better answer in the second quarter. We're just in mid-stride finishing that up yet. But we have all of the firepower of the team, the education now. We just have to finish up some of these other modes to get it active. Operator: Our next question comes from Glen Santangelo from Barclays. Glen Santangelo: Dan, I just wanted to follow up on the free cash flow question. I understand you don't want to pin down to an actual free cash flow number. But by suspending the dividend, it seems like you're going to free up roughly $130 million. And if we have free cash flow something generally in that neighborhood, it looks like a starting point of cash to work with might be roughly, call it, $250 million. And then I think in the release, you talked about charges in the $55 million to $65 million range. And so when I sort of net all that out, is it reasonable to think that maybe you'll have almost $200 million when I think about splitting that capital deployment across investments, debt pay down, and share repo. And I think in your prepared remarks, you seem to suggest that there was some specific debt that was coming due this year. I don't know if you can just give us any -- put a finer point on any of those numbers just so we can think about how the capital structure may change in 2026? Daniel Scavilla: Yes. You got it, Glen. Listen, I think that might be an after-hour call thing, just because there's a lot of math that's out there. What I would tell you is the dividend elimination is going to be repurposed into both debt retirement and share repurchases, right? That's really the main gist that we just know that we can have an increased total shareholder return, applying the cash that way versus the dividend. And so we can factor that out. But just back to your point, even if you took the math, the $130 million with that being eliminated, we're going to turn it around to these other areas. We're not looking to build up the cash that way just yet. So I'll leave it there. And like I said, those other puts and takes we could take a look at your model offline and figure that out. Operator: Our next question comes from Steven Valiquette from Mizuho Securities. Steven Valiquette: Yes. Just had a question just around the renewal and/or expansion of the Patterson agreement. I definitely appreciate you can't go into details on new contract terms, et cetera. But I guess, at a high level, do the new contract terms move the needle materially for you one way or the other just for 2026. I mean on the one hand, you might have a little bit lower pricing, but maybe more volume? Also you cited 3 other renewals as well, just curious if any of those are equally important versus the Patterson renewal? Daniel Scavilla: Yes, you got it, Steven. So a couple of things. It really is a new contract with Patterson. It's not a renewal. There are many different terms in there that actually benefit both parties. To be honest with you, it was a great conversation with the team, and I think this will come out well for both parties. For us it's going to be favorable just again, because they know us, they know our products well. They're key, especially with our CEREC systems. And I think what excites me is the ability to get the training of their team and opening those doors with them. I do think that can be a meaningful lift coming out with that new contract with them. I believe with the other vendors, these existing or these new contracts will be even more beneficial because you're getting all of that expanded feet on the street, while you're creating your new vertical sales force teams to focus on specialty. And so I just feel like it's a faster way to penetrate the market going through that pathway. Operator: I'm showing no further questions at this time. So this concludes the question-and-answer session. Thank you for attending today's conference. This does conclude the program, and you may now disconnect.
Operator: Good morning, and a warm welcome to the earnings call of Alzchem Group AG. I would like to introduce the company's CEO, Andreas Niedermaier; and CFO, Andreas Losler, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Niedermaier. Andreas Niedermaier: Yes. Thank you for the very warm introduction. Good morning together, and thank you for joining us today, and welcome to our quarter 4 and the year-end analyst call. As always, we will go through the presentation first, and then we are available for questions at the end. Let's skip the first slides and go directly to Page 5. So how do we see the financial year 2025 here? The chemical environment is very challenging, at least here in Europe. There are really difficult conditions in Europe. But nevertheless, 2025 was again the most successful financial year for us. We are broadly positioned. And yes, we also make basic chemicals, which yield little profit, but we urgently need for the supply of... [Technical Difficulty] Operator: We cannot hear you right now, unfortunately. Andreas Niedermaier: Okay. I'm very sorry. Operator: Now it's better. Thank you. You are still gone. We cannot hear you. Sorry. [Technical Difficulty] Andreas Niedermaier: So now we should be back. Operator: Yes, you're back. Thank you so much. Andreas Niedermaier: Yes. Okay. So then I go back a little bit to make sure that we have all information in our broadcast. Yes. So we think that we are really broadly positioned. And yes, we also make basic and intermediates chemicals, which yield little profit, but we really urgently need that for our supply chain and for the raw materials. So this broad market, the product tree and the focus on our niche markets has allowed us to grow against the industry trend. So with consolidated sales of EUR 562 million, the corridor for the sales forecast of approximately EUR 580 million was largely achieved. Group EBITDA increased disproportionately to sales and exceeded the forecast at around EUR 116.5 million. So what else is to report about the year-end? [Technical Difficulty] Sorry, I see that the technic is really bad. Do you hear me? Operator: Yes, we can hear you. Andreas Niedermaier: Okay. So let's go to the next page, which is our page, let's say, 6. I will be here again, yes. So overall, we achieved our growth targets very well with growth in Specialty segment, in particular, leading to disproportionate earnings growth of 11% in EBITDA for the group as a whole. For the first time, we are really proud to present. We have achieved and even slightly exceeded our long-term target of over 20% EBITDA margin, and we reached 20.7%. Our after-tax profit, which is relevant for a dividend, also grew by 17% from which we also derive our dividend proposal of plus 17% to EUR 2.10. A lot has also happened on the stock market with our shares and the free float. In the meantime, we have reached about 74% of free float, and this now puts us to the top of the SDAX or the beginning of the MDAX range already. In 2026, we will now mainly be busy with our investment programs, which will then deliver another real growth potential from 2027 onwards. To this end, we released about EUR 120 million for the expansion of creatine in quarter 4 2025. More on that in a moment. So the nitroguanidine growth project is entering its final phase and the interior work is currently underway with the installation of all the reactors, piping and at least the control system. Our goal is to put everything into operation by the middle of that year and then gradually ramp it up in quarter 3 and quarter 4. So far, we see ourselves absolutely in the schedule here. Our U.S.A. site selection process is almost finished. We have already started to select engineering companies for basic engineering. So you can see that things continue quickly here too as well. In summary, we can proudly report Alzchem has delivered again. But now more about the creatine information and the creatine CapEx project. Creatine is going through the roof right now. The level of awareness of Creapure is growing exponentially. In principle, we have all the prerequisites in-house, but the capacities for supplying the market need to be updated and to be added. In quarter 3, 2025, for example, we put an incremental expansion into operation, which will lead to a further growth in 2026. But that's not all. We decided on a comprehensive investment program at the end of 2025 to secure the growth strategy. In the long term, around EUR 120 million will be invested in the construction of a largely automated production plant for creatine and its precursors as well as in the necessary upstream and downstream infrastructure. Phased commissioning is planned from the second half of 2027. At full capacity, we expect the investment to generate additional annual sales potential in the initial 3-digit million range with correspondingly positive earnings contributions. The focus is on the application areas of sports, nutrition and health, in which we successfully act as a quality leader made in Germany with the premium brands, Creapure and Creavitalis and probably more to come. But let's now analyze the year 2025 a little more and go to the segment reports. Let's start here with Basics & Intermediates segment. The sales amounted to approximately EUR 155 million, which was approximately EUR 19 million below the previous year's level. Unfortunately, this development corresponds to our expectations and assumptions here. The decline in sales is mainly due to the volume effects. The main reasons for this was a weak economy in the European and German steel industries, which led to a noticeable decline in demand in the steel and product area. The decline in revenue also resulted in a reduction in segment EBITDA, and this amounted to approximately to EUR 5.6 million and was thus about half of the previous year's figure. The EBITDA margin fell accordingly by 2.6 percent points to 3.6%. In addition to weak economy in the steel sector, the significantly higher electricity price level, in particular, contributed to the decline in EBITDA compared to the previous year here. Nevertheless, the segment is very important as a supplier of raw materials for the specialties. This makes it all the more important to trim this segment for profitability in order to at least generate the cost of capital in the long term. This requires stable, calculable long-term framework conditions, which we are very much calling for in Berlin and Brussels actually, but we are also working on closer customer relationships and higher volumes in order to be able to ensure the main important utilization of the product plants. So let's now go here where we are already much more successful to our next segment. This is the Specialty Chemicals, and it's much better to report that figures because we have been very successful. So here, we grew sales by 9.2% in the quarter and 8.8% for the year as a whole, reaching almost EUR 380 million in absolute terms. This increase was driven by a combination of positive price and mainly volume effects. This also successfully offset negative effects, as you can see here, from the weak U.S. dollar compared to the previous year. The human nutrition, custom manufacturing and defense product areas, in particular, made a positive contribution to the year-on-year sales development. In Human Nutrition, the high sales level of the previous year was further increased. As already mentioned, the current trends in the global creatine market are providing additional growth influences in all application areas. An example of this is the cooperation with Ehrmann, which is very successful, concluded last year. With Creavitalis from Alzchem at the center of the new high protein creatine product line. We have already presented the further capacity expansions for the creatine case, which will support further growth here as well. In Custom Manufacturing, the positive trend reversal stabilized, and we see a further increase in demand contribution positively to the utilization and therefore, to the segment's results. In the course of the positive development, EBITDA also increased by 13.6% from approximately EUR 94 million here to up to EUR 107 million. What comes next? In 2026, with the commissioning of nitroguanidine, defense capacities will grow and will also develop very positively in 2027 then. And in 2027, creatine capacities will then gradually come online. So we will continue to see nice growth there and here in that segment as well. So much for the specialties. Now a few words about our third segment, which is very small and delivers only services on the sites. So sales were down here by 12% compared to the last year, mainly as a result of reduced regulatory grid fees, which we were allowed to charge to our external customers. And these price reductions also had the same impact on our segment's EBITDA here. The segment EBITDA was additionally impacted by some onetime year-end closing effects in connection with the reduced grid charges. So that was all for our detailed review and detailed view on the segment development. Let's now take a look at the overall group figures. And let's hear some more detailed analysis from my nice colleague here, Andreas Losler. Andreas Losle: Yes. Also good morning from my side, and thank you, Andreas, for the insights in our segment development in 2025. As always, I'll start my analysis with looking at our P&L. Sales amounted to EUR 562 million in '25, an increase of EUR 8 million compared to last year. Compared to our guidance, we have to admit that we ended up at the lower end of our anticipated sales level. The different developments within our segments caused the situation and have been discussed already by my colleague. On a regional basis, the major sales increase could be achieved in the U.S. and Europe and can be allocated to the Specialty Chemicals segment. Our EBITDA grew by almost 11% or EUR 11 million, which means that EBITDA grew more than our sales did. Again, as we sold more within our higher-margin segment, Specialty Chemicals, we could also increase our EBITDA, while the sales decline within the other segments did not have so much impact on our group EBITDA. While reaching EUR 160 million, we slightly exceeded our guidance for '25. Cost-wise, we have to report increased personnel expenses based on increased union tariffs and slightly increased number of employees, which support our growth. Our operating costs increased mainly resulting from much higher FX losses due to the weak U.S. dollar and maintenance cost. All put together, we managed to increase our EBITDA margin to impressive 20.7% after showing 19% last year. The actual margin development also exceeded our guidance, which assumed 19.5% EBITDA margin. With stable depreciations and supported by an improved financial result, we ended up on a group net result of EUR 64 million, representing an increase of 18%. The same applies to our earnings per share. That was the big picture of our P&L. Now let's move on to the balance sheet and cash flow figures. Our balance sheet and cash flows are still very healthy, but further influenced by some special impact. By the end of '25, we showed EUR 134 million more balance sheet total as 1 year before. On the asset side of the balance sheet, this increase was mainly driven by increased CapEx spending for our nitroguanidine expansion in Germany, customer grants received and planned increases in our stock level as preparation for our furnace maintenance shutdown. On the other side of the balance sheet, major impacts came from an increased equity, the initial recognition of contract liabilities as counterpart for our customer payments and receivables for nitroguanidine expansion and such contract liabilities amounted to approximately EUR 90 million at the end of the year. While our equity increased in total by EUR 51 million, our equity ratio dropped slightly to 41.8%. This was also part of our guidance as we anticipated the huge increase in total balance sheet. Operating cash flow was highly above prior year, but was influenced by almost EUR 60 million customer grants and EUR 20 million increased working capital resulting from our scheduled stock level increase. Investing cash flow was highly above prior years and clearly shows the progress we made in our current CapEx programs, especially for the nitroguanidine expansion. Despite this highly increased CapEx activities, we can still report a positive free cash flow. As of our reporting date, by the end of '25, we can again report a positive net cash position of EUR 31 million. And again, we were able to shortly invest our liquidity surplus in order to earn interest, also the reason for our improved financial result. Our financing cash flow shows regular loan repayments and increased dividend payments to our shareholders. Furthermore, we paid out EUR 4.5 million for our share buyback program, but received EUR 3 million from the sale of our treasury stocks to our employees in course of an employee participation program. As you can see, Alzchem is in a very healthy cash position and ready for future growth. Future is a good keyword. Let's now discuss our outlook for financial year '26. From today's perspective, we see a further growth for '26. Sales are expected to grow to approximately EUR 600 million and EBITDA is expected to grow to approximately EUR 126 million. This represents a sales increase of approximately 7%, while EBITDA is expected to grow by approximately 8%. The planned sales growth shall continue to be achieved organically. The fundamental growth drivers are expected to be volume effects within segment Specialty Chemicals. We do expect further volume growth in the area of Human Nutrition and Defense. The increase in our creatine business will be supported by our last incremental capacity expansion back in Q4 '25. Our recently announced major capacity expansion will not add quantities in '26, but in the second half of '27. For our Defense business, we expect volume and revenue growth from our expansion within the second half of '26, but we are not yet assuming a full utilization of the new facilities before '27. For the Basics & Intermediates segment, we expect overall sales to be at the previous year's level. We expect the prices for key raw materials, energy and logistics to remain stable at the level of '25. The sales growth in the Specialty Chemicals segment leads to a further increase in the sales portion of this segment in our total sales. Consequently, the EBITDA of this segment and the EBITDA margin of Alzchem will also grow. EBITDA in '26 will be impacted once due to the 6 months maintenance shutdown of one of our carbide furnaces, and this measure will also result in lower energy cost reimbursement. If we look 1 year ahead, our huge investments in '26 will lay the foundation for our next phase of growth. With the completion of our ongoing and planned investments, we see a significant potential for additional growth in '27 in the lower double-digit percentage rates for our sales and EBITDA. As you can see, we have interesting times ahead of us. At this point, we would like to thank you for your appreciated attention and are now at your disposal for possible questions. Operator: Thank you so much for your presentation. [Operator Instructions] And with that said, we have already received risen hands by Mr. Faitz. Christian Faitz: Yes. Alzchem team, I hope you can hear me. Congrats on the results. Two questions, please, for now. First of all, can you share with us how the refurbishment of the carbide oven in Hart is going given the fact that this is, my understanding, an H1 project, and we are today essentially 1/3 through H1? And the second question would be, which growth assumptions do you have for creatine products for '26? Andreas Niedermaier: Yes. Let's start with the first topic with the carbide, let's say, CapEx or maintenance project. So the oven is already removed and will be built up the next month. The project costs approximately EUR 10 million, between EUR 9 million to EUR 10 million. But what you have to take into consideration is that we can't produce for the first 6 months. And for that, we prepared our balance sheet, as you have already seen that we increased the stock level to a decent level to support all the sales for that year. From today's point of view, we think that oven will come back into production by the half year, approximately in July. But the process is in time and in cost calculation from today's point of view. No surprises. Yes. And what was your second question, sorry? Christian Faitz: So the growth assumptions which you have for creatine products for '26... Andreas Niedermaier: Yes. So as already reported, we will see the additional capacities online, what we ramped up in autumn last year. And from that point of view, we have additional 20% to 25% additional quantities available for that year, and that will really support our growth. But if you look at the overall year, the first half of the year, we expect a little lower in sales than the second half of the year. The one reason is that the carbide kiln is down, but the second reason is that the ramp-up of the nitroguanidine will happen in the second half of the year and then will really support sales side. Yes. Operator: We are now moving on to Mr. Schwarz. Oliver Schwarz: Firstly, let me congratulate you on the good results. A couple of questions remain from my side. Mr. Niedermaier, you stated that you are, let's say, in the finalizing rounds of your U.S. investment. As far as I know, there is a subsidy from the DoD pending in the amount of USD 90 million if you are able to finalize that new production site by the end of 2029, the latest. Can you quickly talk us through whether that USD 90 million will be sufficient to cover your CapEx? Or is there additional CapEx required from your side? And secondly, the timing of the subsidies, will they paid after the production has started? Or is that helping you along the way using milestones? That would be my first two questions. Andreas Niedermaier: Yes. Okay. So in principle, the project is going on very healthy, and there are no interruptions. As you can imagine that there are some interesting communications around between U.S., Europe and China or so on. So as a project, it's really in a healthy situation. It's ongoing. Site selection process is close to the end, and we will start up all the planning with the engineers in the months to come. So we have invoiced the first cost to the DoD as well, and they went through quite well. For sure, there will be a little delay to get the costs back from the DoD. We calculate some months, let's say, what we have to finance by ourselves. But in principle, we are not talking about USD 90 million project costs. We are talking about USD 150 million, and that USD 150 million should cope the overall project and should be sufficient. If not, then we have to do the definitization of the project more with the DoD, and we have to report additional costs to the DoD and then probably we can be reimbursed or can get back that cost as well. Oliver Schwarz: Another question is on Creamino. Maybe I missed it, but I didn't hear anything about the performance of that product. Could you elaborate on Creamino performance in 2025, please, and what do you expect for 2026? Andreas Niedermaier: Yes. Creamino was not the most successful situation, but it was successful as well. So the most successful situation for us was creatine and the multipurpose plants that year and defense business with nitroguanidine as well. Creamino, we saw a small growth effect. [Technical Difficulty] I'm very sorry, it seems to be that we have some technical issues here and technical problems. Can you hear me, Oliver? You do? Operator: Yes, we can hear you perfectly, actually. Andreas Niedermaier: I'm very sorry because I have seen that my mic could be not really in the right order. Yes, Creamino, we saw a small growth, but not as big that we have to elaborate too much on it. Yes. Oliver Schwarz: And your expectations on that product for 2026? Andreas Niedermaier: So we will see additional growth because we have some customers out there, especially in the U.S., they like the product more and more. And from that point of view, we see a good growth in the low single-digit numbers, let's say. Operator: We're moving on to Mr. Hesse. Constantin Hesse: Really great win, congrats. Look, three questions from my side. One would be on the cadence of the ramp of the creatine facility. I'm assuming that based on your commentary that you made around 2027 growth and beyond being in the low teens, we're probably looking at a pretty good utilization of that new creatine facility already in 2028. So if you could confirm that, that could be interesting. Question number two, actually, let's just start with that question, and then we'll go to number two. Andreas Niedermaier: Yes. So for the creatine ramp-up process, we said that we want to do that step by step because we have to ramp up some infrastructure topics as well. But from today's point of view, the additional capacity for creatine itself should be available for the second half of the year. And therefore, we will see a good growth, let's say, for the second half. And then we will be fully available for the full capacity in 2028 then. Constantin Hesse: And from the demand perspective, you're probably looking at a pretty good utilization already in '28? Andreas Niedermaier: Sure, we are completely sold off actually, and we have to take the customers to the year 2027 when we have additional capacities available. Constantin Hesse: Yes. Great. And then just on the furnace maintenance, the shutdown, what is roughly the impact on the profitability in 2026? Andreas Niedermaier: Yes. So the repair and maintenance costs summarize approximately up to EUR 10 million, but it's already included in our forecast for sure. And we can't produce, but the stuff is there. And from that point of view, we calculate with additional approximately EUR 5 million standstill costs. And we try to lower our stock level and to use our stock level, what we have built up for that half year. And from that point of view, we will receive costs from the balance sheet in the P&L for that year. But the overall effect will be approximately EUR 15 million additional cost. So that would have been -- if you add that, but I don't really like that discussions, then we would have been more at the level of EUR 140 million EBITDA than EUR 126 million, yes. Constantin Hesse: That is exactly what I wanted to get to. That's great. And lastly, on the U.S. So you basically said that you're basically going towards the end around the site selection. You already contracted the EPC. What's currently holding off the project from going ahead? Is it -- have you already put in -- I'm assuming you already put in all the applications for the permits. So now it's all about waiting until the state provides you with the final permit. Is that it? Andreas Niedermaier: So to be honest, nothing is holding us off from the project. All things from our point of view are ongoing. So we are talking about the permits. Yes, that's a normal process. We have to elaborate on and we have to manage. And we have already had contacted the engineering companies to translate, let's say, German plants to the Americans. And yes, from our point of view, we are really on line and on stream, and we have no real problems, only the day-to-day business to do. Yes. Operator: We're moving on to Mr. Speck. Patrick Speck: Congrats from my side on the very solid results in 2025. My first question is about the free cash flow development. I mean, is it fair to assume that the free cash flow might turn negative this year? I mean, on the one hand, okay, inventories will come down. But on the other hand, I think also the prepayments from customers will be lower. And with CapEx spendings rising, yes, you could end up with a negative free cash flow. Is that right? Andreas Losle: No, it's actually not right. And it's -- as you mentioned, we still expect some more customer grants for our nitroguanidine expansion in the next year, which will increase our -- or this year, which will increase our operating cash flow. On the other hand, we will have the final payment of the European Union subsidy for our nitroguanidine expansion once we commission the new plant. So those 2 figures will impact our cash flow. So we -- and clearly, we will increase our CapEx again this year, but we expect the cash flow to be maybe, let's say, even at 0, the free cash flow to be at 0 by the end of the year. Patrick Speck: Okay. Good to know. But a follow-up question on that, if I may. What's the overall sum of prepayments that you expect from your nitroguanidine customers? Because I thought it would be EUR 75 million or roughly EUR 75 million, and you already got roughly EUR 70 million -- or EUR 60 million, sorry, EUR 60 million, so what's the overall sum? Andreas Niedermaier: So Patrick, you could calculate that the project costs between EUR 140 million and EUR 150 million. And all that is prepaid on the one hand from customers or on the other hand, from the EU. All that should be covered at the end. Patrick Speck: Secondly, a follow-up on my colleague's question on the outlook for 2027. I mean, in your press release, you mentioned that you see yourself well positioned to achieve growth in the low double-digit percentage range. So what does low mean from your point of view? Is maybe a 20% jump in sales a bit too much? Should we expect a bit less? Or is this still in the range you assume? Andreas Losle: Yes. I would say don't overspeed here. The lower double digit end, in our case, would be between, let's say, 10% to 20% for both KPI figures, which we mentioned. Andreas Niedermaier: But we imagine that we can take another EUR 100 million to our P&L in turnover. That could be a good figure. Andreas Losle: Yes. Patrick Speck: And thirdly, I wonder if your business or your supply chain, at least is in any way affected by the carbon border adjustment mechanism in the EU, which was sharpened since January 1. Is there anything you -- we should expect any financial burden from that instrument? Andreas Niedermaier: Financial burden, let's say, definitely not. At the end, it could help us a little. But actually, we don't really see any additional effects from that point of view. That's the same as for the customs in the U.S. -- for customs duties. We have not really placed any additional burdens on us so far. According to our analysis, this is due to the high importance of our really nice products for the Americans, let's say. Operator: We're having another risen hand by Mr. Hasler. Mr. Hasler, we unfortunately cannot hear you. You have the permission to unmute yourself now. Peter-Thilo Hasler: Yes. Am I not unmuted? Operator: Perfect. Now you are. Now we can hear you. Peter-Thilo Hasler: Okay. So first, my apologies. I'm in train right now, and there's a lot of noise around me. So the first question is about the inventories that you built up in the last year. And I remember that you always spoke about shutting down your ovens if the electricity price is so high. So the question is, has this buildup of the inventory had an impact on your profitability because you did not shut down the oven because you needed that inventory? And the second question would be if you could tell us in which segments the U.S. revenues increased the most. Is it also creatine, in nitroguanidine already? Or is it something else? And finally, an update on Ehrmann. Last time, you mentioned that the quantities are already sold out. We think -- and do you think that -- you think of another extension. Are these thoughts still around extending the cooperation with Ehrmann? Andreas Losle: Yes, in the first -- your first question, Thilo, about the P&L impact of the carbide furnace shutdown. As we increased the stock level, it did not impact so much our flexibility of taking the oven out if the electricity prices are high just because in the period when we increased our stock level the most, the electricity prices were pretty much stable, and there were actually no need to take the oven out of operation due to extremely high electricity costs. Andreas Niedermaier: Let's say that could be more an advantage because what we have seen in the first weeks in that year that the electricity costs have been much higher than in the previous year, and we can use our material from the stock. Yes. Peter-Thilo Hasler: So the electricity prices are already up again? Andreas Niedermaier: Yes. Yes. Andreas Losle: The second question about the sales increase in the U.S., you are right. They were mostly allocated or coming from the creatine business in the U.S. Andreas Niedermaier: And your question, if we have enough material available to fuel the growth of our customers, for sure. So we will grow with creatine that year, for sure, with 20% approximately or hopefully a little more. And therefore, for the existing customers, we can fuel all the growth, hopefully. Peter-Thilo Hasler: And Ehrmann? Andreas Niedermaier: Yes, for Ehrmann as well. No, it's an existing customer, and we have planned the material for them. And from that point of view, it should be no problem to fuel that growth as well. Operator: We have another question by Mr. Schwarz again. Oliver Schwarz: First, a housekeeping question. Mr. Niedermaier stated that sales in the Basics & Intermediates segment were according to plan and expectations. So let's say, the EUR 18 million shortfall between the midpoint of your guidance of EUR 580 million for 2025 and the actual number seems to come from Specialty Chemicals, if I'm not mistaken. Could you elaborate where that shortfall actually happened due to the fact that earnings-wise, you exceeded expectations, but not on the sales side. And as you said, that was not the case in Basics & Intermediates. I'm just wondering about Specialty Chemicals. That will be my first question. Second question, if I may. The U.S. tariffs, you stated that there's hardly any impact on changes in the U.S. tariffs on your company. However, this change in U.S. tariffs also affects your Chinese competitors due to tariffs on China also changing. Do you expect an increase in competition in the U.S. on some of your products, namely Creamino creatine as a result of lowered tariffs on China from the U.S.? That would be my second question. And lastly, if I may, once again, back to nitroguanidine. Sales in 2026, I heard you say that you will be ready with your expansion by mid-2026, but your customers maybe not. And hence, there's only a small -- or small batches will be delivered to the customers. I was under the impression that the, let's say, additional volumes that you are able to produce might go into other products. Is that still the case? Or are you stockpiling? Or are you just, let's say, use a low capacity at your new site to match supply and demand? That would be my third and final question. Andreas Niedermaier: Andreas, do you elaborate a little bit on the Basics? Andreas Losle: Yes, I will take the first question, Oliver. Your thinking is not really correct. On the Specialty Chemical segment, we ended up with the sales, I would say, on the expected level. And the major, let's say, downfall we had in the fourth quarter was in the Basics & Intermediates segment and was allocated again to the steel industry and maybe a bit to the pharmaceutical and agrochemical industry. So the whole segment was a bit less than anticipated. And as you can see, margin-wise or EBITDA-wise, we developed exactly as anticipated. And as I mentioned in my analysis of the P&L, we lost revenues in an area where it did not have so much impact on the EBITDA. So let's summarize, Specialty Chemicals was expected and Basics & Intermediates a bit less. Andreas Niedermaier: Yes. And the U.S. tariff topic is very interesting. So it can change every day as we have seen, and there is no real forecast possible. But what we saw is that we don't have to take any additional burdens. If you go to the situation of creatine, creatine from the Chinese resources already available in the U.S. So we deliver the highest quality, the best product to them, and they like that product much more than the Chinese basis because it's reliable and a reliable basis, and that's the basis of our growth, what we see and what we will see in the future. And from that point of view, we don't have to fear about that issue. And we are talking about humans taking creatine, and they are thinking about qualities more than in the past. If we talk about Creamino, then we are talking about farmers and animals and there, the quality aspect is not as high as in the creatine. From that point of view, yes, the growth of Creamino could be a little lower because of the competition with Chinese material, but we don't fear about that as well. So we are good, prepared. We have good customers there. We are good in sales, and we have our people in the market and our product is well recognized. And from that point of view, it should not be a bigger problem for us. And Q sales for 2026. Yes, we are a little ahead of the wave as we already are used to say. But to be honest, we have to be ahead of the wave because we are completely sold out of our material and every additional ton we want to grow and the market want to receive has to be from the new production plant. And thank God that if I think about my production staff, we don't have the -- yes, let's say, the other way around. We have time to ramp up the production, and we have time to take care about a safe ramp-up of the production from today's point of view. And then we are really prepared for all the big growth in 2027. So then I take one question from the webinar chat. Here is the second question, you benefit from loss carryforwards in your cash flow statement. Where do these loss carryforwards come from and what years and what losses? So Andreas, I would like you to answer that, but I think it's very easy. Andreas Losle: It's actually very easy. We do not have any loss carryforwards and especially not in the cash flow statement. So this is a wrong understanding. Andreas Niedermaier: Yes. So if you see additional information required, then you could precise your question, then we can elaborate on that a little more. Then the second question was, can you walk us through the CapEx phasing of the EUR 120 million creatine program? Do you expect it to fully close the supply-demand gap? And how should we think about pricing dynamics as additional supply comes online? So yes, thank you for that question. That's always very important to think about pricing. But to be honest, we don't see that prices will come down a lot. Probably for some customers could be that if they take more quantities that we have to reduce the prices a little bit. But at the end, the contribution margin will cover that much more from my point of view. How do you expect it to fully close the supply-demand gap? Yes, we think that the market growth is big enough that we can ramp up the capacities quite well, and we can sell that to the market. And to be honest, we should think about additional capacities next year from today's point of view, how the market will demand and how the market will develop, and then we should be prepared for that kind of discussion. Then I have a next webinar chat question. How do you expect evolving antidumping measures in Europe targeting Chinese chemical producers to impact your P&L over the next 12 to 24 months? Which product lines are currently most exposed to China's competition? And what would be the expected financial impact once tariffs are in place? So Andreas, do you have a first idea about that? Andreas Losle: Yes. My first idea would be our customers in the steel industry for our carbide business. We know that authorities are thinking about putting tariffs on Chinese steel imports. So this could help our customers in the steel industry. And as we mentioned, at the moment, we do not expect a lot of growth in the Basics & Intermediates segment for '26. But if our steel customers are recovering a bit coming or resulting from this tariff situation, we can imagine that we could deliver more into the steel industry in '26 than expected at the moment. Andreas Niedermaier: Yes. So then next question is, what is your current level of ETS exposure? Do you have a hedging strategy in place? And how would relaxation of EU commission reduction rules flow through to your cost base? Very interesting question for sure. So we have some points where we have to take into consideration ETS exposures. The first is the raw material lime. So with the raw material lime, we have to purchase ETS here and to run our steam production, we have to purchase ETS as well. I think we have to -- how much ETS do we have to purchase a year? I question my back office here. So approximately 40,000 pieces we have to purchase. We purchase some in advance, but we don't really have a hedging strategy for, let's say, the next 3 to 5 years. So we have enough ETS available for the next, let's say, half year or for the next 6 to 12 months. That's our idea about that. So from that point of view, if there is a lowering prices or something like that, then we would not have any problems. We would have positive effects in the P&L then. Operator: Perfect. Thank you so much for your questions and your answers, of course. Ladies and gentlemen, we have not received any further questions so far. So I guess we're at the end of today's earnings call. So thank you so much for your interest in the Alzchem Group AG. And a big thank you also to you, Mr. Niedermaier and Mr. Losler for your presentation and your time, of course. Should any further questions occur at any given time, please feel free to contact Investor Relations. I wish you all a successful day and hand over to you, Mr. Niedermaier, once more for your final remarks. Andreas Niedermaier: Yes. Thank you. I have additional technical issues, but will be solved. No problem. Yes. Thank you very much for your questions. We can now offer the opportunity, as always, to visit us again virtually or in person at the conferences as shown above, as shown here on the slide. Otherwise, we will be back with our quarterly statement in first quarter 2026 on April 30. Stay safe, stay sound and stay in our good graces and then good bye.
Hung Hoeng Chow: Good morning, and a warm welcome to Olam Group's annual briefing for the results ended the year 2025. Happy Chinese New Year to all of you. Our full year results delivered at this time of the year always marks the beginning of an auspicious year. I'm Hung Hoeng, the Olam Group Investor Relations, and it's always my pleasure to host this briefing along with our senior leadership team at Olam, led by, on my right, Olam Co-Founder and Group CEO, Sunny Verghese; to his right, CEO of ofi, Olam Food Ingredients, A. Shekhar; and our Group CFO, N. Muthukumar, at the end of the table. But before Muthu will deliver a presentation of our group consolidated financials for the year, Shekhar and Sunny will present the segmentals of the respective operating groups, Shekhar, ofi; and Sunny as CEO of Olam Agri for the Olam Agri results. Sunny will also cover the same for the Remaining Olam Group before moving on to our reorganization plan update and also telling us what he thinks of the future outlook and prospects for the group. And before we begin, please read the cautionary note on forward-looking statements carefully. I thank you for your attention. I'll hand over the voice to Muthu. Neelamani Muthukumar: Thank you, Hung Hoeng. Good morning, and a warm welcome once again to all of you for our 2025 annual results briefing. I would like to start with wishing you all [Foreign Language] the Year of Horse. So we all have an auspicious beginning. As you all know, there is changes to the presentation because of the imminent demerger of Olam Agri, which we had announced as a sale of 44.53% to SALIC, a subsidiary of PIF, the sovereign wealth fund of the Kingdom of Saudi Arabia. So the presentation is on 2 slides. As per accounting standards, we will be presenting a combination of ofi and the Remaining Olam Group. But for all of us to understand the real business as a combined Olam Group, we would be taking the liberty of presenting as one consolidated group, including Olam Agri. So the first slide, as you are seeing, is excluding Olam Agri presentation. We are at 4.4 million tonnes of full volume for the full year 2025 with roughly $30 billion of revenue, up 29%. And as you all know, we had historical high prices of the commodity that is in the ofi portfolio, particularly cocoa and coffee, and that has resulted in a significant increase in revenue to $30 billion, converting into an EBIT of $1.26 billion and a PATMI of $444 million. More importantly, the important metric that we track and report, which is operational PATMI, up 136% year-on-year at $511 million. The huge swing to the positive side on the free cash flow to equity, reflecting the normalization of prices in the ofi portfolio, resulting in a significant reduction in usage of working capital and automatically resulting in a positive free cash flow to equity of roughly $360 million in the year ending 2025, and that has resulted in a significant reduction in gearing, down from 2.79x in 2024 to 1.87x. Now with combined Olam Group, including Olam Agri, you can see that the volume is an overall of 59 -- 58 million tonnes, up 17%, resulting in a revenue -- combined Olam Group revenue of $67 billion, up 19%. And an EBIT from $1.26 billion, excluding Olam Agri, resulting in a $2.2 billion EBIT, up 13%. PATMI and operational PATMI remaining the same because regardless of however we see as discontinuing operations or combined operations, the resulting PATMI is $511 million, up 136% year-on-year. And gearing with Olam Agri down from 2.79x to 2.69x. So no surprise here on the volumes. 92% of the 58 million tonnes has been contributed by Olam Agri, the remaining 6% from ofi and roughly 2% by the Remaining Olam Group. However, as you all know, because of historical high prices in the ofi portfolio of commodities, that has resulted in a significant contribution in the revenue of ofi at 42.5% with Olam Agri contributing 56% and the balance roughly 2% from the Remaining Olam Group. In terms of the $2.2 billion of EBIT, 42% came from Olam Agri, 49% came from ofi and the balance 9% from the Remaining Olam Group. As you all will notice, the Remaining Olam Group has performed very strongly during the year. We had talked about it in the first half results that we presented in August of 2025, and that trend has continued for the Remaining Olam Group, contributing to 9% of the total EBIT of $2.2 billion. We have a $25.5 billion of total invested capital, roughly 61% coming from ofi, 30% contributed by Olam Agri and the balance, roughly 9% from the Remaining Olam Group. This is again a detailed presentation of the results, excluding Olam Agri. You can see that a PATMI of $444 million, out of which $170 million contributed from the continuing operation comprising of ofi and Remaining Olam Group, and roughly $274 million being contributed by Olam Agri. However, the operational PATMI is up from $511 million compared to $216 million year-on-year, which is represented to appropriately reflect the apple-to-apple comparison, contributed by the continuing operation of $224 million and the balance $287 million contributed by discontinuing operations. As I had highlighted earlier, you can see that in the continuing operations, it was a negative results last year of $105 million, has swung to a positive of $223 million, mainly because we had strong results contributed by the Remaining Olam Group businesses. Volume increased from roughly 49 million tonnes to 58 million tonnes, primarily from Olam Agri of 8.6 million tonnes increase in the cash trading business, primarily contributed by grains, oilseeds and edible oil trading. In terms of overall core operating profit, which is EBIT, we grew from $1.9 billion to $2.2 billion. As I had highlighted earlier, it was a swing of $350 million year-on-year contributed by the Remaining Olam Group businesses. In terms of operational PATMI, we talked about a significant increase from $216 million last year, a growth of $295 million year-on-year, resulting in an overall operational PATMI for the group at $511 million contributed by strong operating growth of $255 million from the EBIT growth. We had less exceptional items during the year that contributed to $63 million of profits as well as lower finance cost on the result of lower interest rates of -- and resulting in a lower interest cost of $53 million overall, moving from $216 million to $511 million of operational PATMI. In terms of invested capital, we talked about a margin reduction at $25.48 billion, primarily because of lower working capital utilization of ofi, resulting in the normalization of commodity prices, especially cocoa and coffee during the year of 2025. Gearing accordingly, excluding Olam Agri, dropped significantly from 2.79x to 1.87x nominal net debt to equity. However, more importantly, what we track and report, adjusting for RMI and secured receivables, dropped from 0.68x to 0.55x and including Olam Agri on a combined basis, adjusted for RMI, the net debt to equity was at 0.58x. This resulted in a significant swing in the free cash flow to equity. As I had highlighted earlier, we had a negative free cash flow to equity last year, primarily because of significant usage of working capital, particularly in ofi and with the normalization of commodity prices in the ofi portfolio had resulted in a positive free cash flow to equity of $360 million, primarily a swing of $6.3 billion year-on-year. Needless to add, some of the bankers are here and who are hearing us, thank you once again for your continued support. We have sufficient liquidity with diversified pools of capital with a healthy headroom of $7.6 billion over a total available liquidity of $15.5 billion, contributed by roughly $2.2 billion of cash, $8.8 billion of readily marketable inventories, roughly $0.5 billion of secured receivables and more importantly, $4 billion of unutilized bank lines. With that, I will hand over to Shekhar for presenting the ofi segmental results. Thank you. Shekhar Anantharaman: Thank you, Muthu, and a warm welcome from my side, too, and a happy Lunar New Year to you. I hope it is successful -- healthy, happy and successful for all of us. So as always, I'll kick off the ofi segmental results. This is a slide all of you have seen for a long time, but I'm always very happy to share it at the start of every presentation because this is a strategy that we embarked on when we created ofi 5 years ago, now 6 years ago. And we have stayed true to the strategy. The market has done many things. The world has gone through many things. All of us are aware of that. But we have stayed focused on backing the strategy, investing behind it in brick-and-mortar, greenfield as well as acquisitions, but more importantly, creating the capabilities and deepening our customer and supplier franchise, which is really what finally matters. And even this year, if I look at the full 25 year, has demonstrated the resilience of this model, the validity of this model and the deepening of our relationships under what -- I mean, the word "unprecedented" has been used many times, I've used it myself. But it has been quite a unique set of circumstances in the marketplace, not just the commodity prices that specifically impacted 2 of ofi's largest platforms, but all the other macroeconomic uncertainty, the tariff pressures, which caused significant and still a moving goalpost for all businesses. And it is the integrated scale, size and footprint that ofi has built over many decades, not just at the start of ofi, but many decades. And the things that we have done over the last 6 years to build on top of that, getting closer to our customers, offering them even more varied capabilities from innovation to solutioning to private label, which was kind of a start -- a few experiments that we started with in 2020, in '25, I'm pleased to say that, that business across nuts, spices and coffee has really come to age. We are sizable in terms of our retailer presence, in terms of the segments that we -- and categories that we play in, in North America, Europe and Asia. So it is now a very significant part. So it was, therefore, a reinstatement of that what we said we did. And '25 was really, again, a year of continuing to do that under fairly tough circumstances. So when you look at the results in terms of EBIT and overall results -- I'll come to the segment in a little bit. The overall results were broadly flat for EBIT, but this is on lower volumes. Last year was not about increasing volumes. It was about really using capital in a very calculated, deliberate, disciplined way and ensuring that we can meet our customer contracts and under prices that were changing up and down, and with amplitudes that have not been seen before by the industry, and with the frequency of up and down moves that are also quite remarkable. So last year, cocoa hit a high of $12,000, ended the year at around $4,000. In the last 8 weeks, it's half of that. Coffee started the year at below $3, went up to well above $4, almost $4.50, ended the year at $3.50. In the last 8 weeks, it's gone up to $3.80 and is trading at $2.80 today, $1 off the highs in the last 8 weeks. So we're not talking here about small moves. We have seen that over 35 years, and we always manage commodity pricing. That is a big part of our capacity and capability that we have. But this has been testing. And so in that situation for us to be able to execute our contracts, ensure that the pricing is passed on to our customer in a fair, transparent and a reasonable way, and ensuring that we can use capital in a disciplined form and manner to ensure that we can maintain our returns, which were tested during this period, that has really been the focus for the business. And beyond that, what is hidden in these numbers is the big changes that have happened in -- like I mentioned about private label, but also in our Food & Beverage Solutions, which is a relatively new segment, but we are moving forward. These things take time, but we are moving forward and deepening our relationships and our solutioning capability with our customers. So if you look at our invested capital, you'll see that directionally, it's coming down. Now this is not reflective of the amount of change that has happened in the last 3 to 4 months. For most of the last year, invested capital, we started high. In the middle of the year, we went up higher. And the changes that have happened to pricing has happened more in Q4 of last year. And you can see that trend in terms of the lowering of closing invested capital, and this will -- over the H1, this will go down further if these prices remain at where they are or where they are headed. And so when we look at our returns, we look at average returns, which is a 3-point average over the year. So that's where you will see that the returns are falling, but this should change, because as we are releasing higher-priced inventory, which is happening already, you saw the changes in cash flow that Muthu pointed out. So the working capital will come down and the returns will improve. What's important to note here is that we are able to pass on the pricing, and that's the critical thing. As long as we can retain our margins, pass on the pricing, maintain our EBIT and ensure that we can get the cost of capital and the risk premium that is required in these markets, that is the important thing, and that's where we believe we have done well, and that's what gives us confidence for the future as the capital comes down, that these returns will improve as well as the earnings will hopefully continue on the growth path. So if you look at the 2 segments in which we report, Global Sourcing remains the foundation on top of which we are building a value-added single ingredient and solutions business. And Global Sourcing was tested. And Global Sourcing came out very well during this period. Small growth in volumes, but almost a 6.5% growth in EBIT being able to showing that -- actually, it's on lower volumes, higher EBIT. So therefore, ability to not only price but also price for risk on a risk-adjusted basis. And therefore, the EBIT per tonne growth that you see is, I think, again, very important part of that we are able to not -- we are able to maintain our earnings and EBIT per tonne. And on capital, again, it deployed a lot of capital for most of the year. That capital is coming down. It's coming down further in Q1. So that's again a good sign that we will be able to ramp up returns on this business as we go through the next year. On the Ingredients & Solutions, we were slightly off on our EBIT. Our volumes have been lower in this business, but -- and in terms of the lead lag in pricing, we have had lower price -- the higher priced contracts are yet to be -- because in the -- in this segment, we have much longer-term contracts and they take time to pass through. So we -- in terms of our pricing and our ability to price these contracts, we have been able to make our earnings, but they will pass through the books as we go through the shipments. A couple of areas which were affected during this period. Certainly, our IS business in coffee was affected because of the sharp increase in coffee prices as well as the change in the -- between the Robusta and Arabica pricing, which impacted margins in the soluble coffee business, but that is now correcting. We were also affected somewhat by the tariffs because of the steep tariffs on Brazil. And therefore, we had set up a new plant there, and that also got impacted. The soluble coffee has been impacted cyclically, but that business is on a very strong footing. And already we see in Q1 and late Q4 of last year and Q1 that the volumes and margins are picking up. So we don't -- we believe that, that will correct itself. And the real big growth in this year across nuts and spices has been on the private label side. So yes, it's been a tough year. It's been, in a sense, a flat year and a year of consolidating, managing risks, managing capital. But the way we are positioned at the end of year and the way the markets are headed and the way we are positioned in those markets, we feel very confident of both improving earnings as well as returns in '26 and beyond. With that, I'll hand over to Sunny and happy to take questions later. Sunny Verghese: Thank you, Shekhar, and good morning to all of you. I have -- I will cover 4 things. First, how Olam Agri, as one of the new operating groups has performed for the year. Second, I will talk about how the remaining group outside of ofi and outside of Olam Agri has performed. Third part is we will provide you on the updated Olam reorganization plan that we shared with you, various elements of that. So we will cover that. And finally, we'll conclude with looking at outlook and prospects. And then the 3 of us will be available to take any questions that you might have. So we'll start with the first part that I described, which is about discussing Olam Agri's performance for the full year FY '25. I won't split it into the first half and second half. First half, we have already briefed you. So I'll just now look at what is the full year performance of the business. But before we go into the details of Olam Agri's business, just to take a lead from what Shekhar articulated for ofi as the direction of travel and the strategy for ofi, I'll just spend a couple of minutes on talking about where Olam Agri is in that context. So first, we are in the business of providing living essentials -- daily living essentials to customers across the globe. So what are these living essentials that we depend on, on a daily basis? It is a provision of food, it's a provision of feed, it's a provision of fuel, it's a provision of fiber, which is clothing. It's a provision of shelter, which is wood for furniture and for building materials. It is for mobility, which is our rubber business, which is about helping support mobility solutions in a market where demand for natural rubber is growing. So these are what we consume on a daily basis. Our job and our business is to provide you those daily living essentials. So that's number one. Number two, in order to provide you those daily living essentials, we have to solve major challenges or gaps in our food and agricultural system. So first, we have to solve the food gap. There is a big and growing gap between the demand for food raw materials and the supply of food raw materials in terms of calories. So we believe that there's going to be an emerging gap of roughly 7,500 trillion calories. In Singapore, we all consume about 3,200 calories of food per day. So if you take all of the globe's population and the population growth, et cetera, per capita calorie consumption, you're going to see an emerging gap by 2030 of roughly 7,500 trillion calories. That's a lot of calories. So our job as part of this ecosystem is to help provide and bridge the gap in terms of food consumption needs of the global population. Secondly, there's a huge gap in terms of land gap. How much of land do we need to provide this 20,000 trillion calories or this 7,500 trillion calories of gap. So we need land of roughly 584 million hectares, which is more than the size of India. So every year, we need to add land that is equivalent to the size of India to be able to bridge that land gap. So if you had to provide reliably daily living essentials to the world's population, we have to solve for the food gap, we'll have to solve for the land gap. Third, we have to solve for the climate gap in terms of emissions. We will have to reduce our emissions from roughly -- by roughly 11 gigatons. That is -- just from the food sector. Food accounts for about 30% of the world's carbon emissions, including land use change. So we have to address how do we produce more food that people need or feed that people need or other agricultural products that people need without destroying the planet and consuming unsustainably. So that is the third challenge, a third gap. The fourth gap that we have is the biodiversity and nature gap. So we are losing a lot of land because of deforestation, as an example. So how do we fulfill the nature gap and how do we also preserve the species that are essential for food production. So whether it's bees, there are 10 million species around the world. We are losing -- we lost almost 1 million of those species, and we are continuing to lose these species at an alarming rate. And they are very essential to make sure that enough food and feed and fiber is produced. So that is what we call the biodiversity gap. There's a water gap. To produce 1 calorie of food, you need roughly 1 liter of water. And 71% of the world's water is coming or going to agriculture. So agriculture is the biggest consumer of water. So if you want to provide all this on a sustainable basis, we need to address the water gap. We also need to address the livelihood gap. So a lot of the small farmers who produce our food, particularly the small farmer systems, they're not at even the poverty line definition. Fifty five percent of our smallholder farmers do not earn enough to subsist in ag. And 90% of them are below a living income. The minimum economic line of poverty is not enough to live a reasonable quality of life. So if you want to access to health and transportation beyond just the basic necessities of life, there is a threshold that you have to meet, which is significantly higher than just the poverty line definition. And that gap today -- almost 90% of the world's smallholder farmers, I'm not talking the large farming systems, are below a living income. And therefore, we are trying to find how we can address and solve that problem if we have to fulfill our business description of supplying daily living essentials to the global population. And then there's the innovation gap. In order for all this to happen, in order to solve for all these challenges and gaps, we need significantly additional capital to innovate production increases, productivity growth without which -- and manage all the climate change issues and the water-related issues and the nature loss issues, we need a lot of money going to research to find the next wave of productivity breakthroughs. So we believe that we are -- our folks in Olam Agri are challenged and motivated by the fact that our mission is quite transformational in terms of us meeting the daily necessities of life. So we have, therefore, developed over the years a differentiated business model that allows us to provide these solutions and that allows us to address the long-term secular drivers in terms of how do we produce and provide sufficient food, feed, fuel, fiber, rubber, wood, all of these products to help meet the growing needs of a growing population. So we have developed a very differentiated business model and the proof of the pudding in the successful execution of this business model is that by the sale of 100% potentially of the Olam Agri business to SALIC, which is a 100% owned PIF subsidiary, and they valued this business at $4 billion plus the closing adjustments. So it could be anywhere between $4 billion to $4.2 billion valuation for Olam Agri, which is about 3.5x our book when we did this transaction, is a clear vindication and demonstration and a proof point that our differentiated model that has helped us to generate these excess returns. We have very high capital efficiency, return on invested capital. And we have very high return on equity, both in return on IC -- return on invested capital and return on equity, we are #1 in our industry, amongst our peer group. And even this year, when our return on equity has come down to 26%, 26% is 2x, 2.5x our peer group average of return on equity. So that is because the model is differentiated. And we have gone through in the past sessions how Olam Agri is very differentiated. So the first thing I want to say about our results -- Olam Agri's result is that, Muthu and his executive team have done a phenomenal job in navigating some of the substantial headwinds that confronted our industry this year. So we had historically low commodity prices across almost our entire portfolio with the exception of palm. So if you look at everything else, soybean, wheat, corn, cotton, they were all at historically depressed prices. So when you have very depressed markets, you also have very poor volatility. A combination of lower prices and lower volatility means that there will be pressure on our margins, and that is what we confronted this year in 2025. So we have to look at our performance in the context of how we have performed on an absolute basis, but how we have performed relatively compared to our competition who are also confronted with these challenges of low commodity or depressed commodity prices and low volatility. So our EBIT, operating profit has come down by 9.2% compared to last year. But this is in the industry context where operating profits have declined for our peer group between 16% and 44%. So against a 16% to 44% drop in the industry peer group and all of you have access to the data because most of them are published results, and we are, I think, amongst the last companies to publish full year results. You will see that the whole industry has had a fairly significant lower performance compared to the last year. In the context of that, a 9.2% decline in operating profits, we are quite pleased with that performance under those challenging circumstances. There's also the issue of -- we were confronted with a lot of macro issues facing us, not just our sector in particular, but it has a very direct impact. So, for example, the trade and tariff wars and the last week's striking down of the Trump administration's tariffs by the Supreme Court, particularly the tariffs, which comes under what we call IEEPC (sic) [ IEEPA ], which is the [ International Economic Emergency Protection Act ]. Under the IEEPA, the Trump administration had targeted to collect $150 billion of import tax revenue, which they are well on the course to achieving it. They will probably exceed the $150 billion target they have. And while they have announced the tariffs from April of last year, it has distorted world trade quite a bit. It has also seeped into U.S. inflation because unlike what Trump and his administration is saying, most of these tariffs are borne by consumers and by the industries who are providing these goods and services. So if this 150 billion tariffs is now going to be cut, then they have now immediately responded by coming up with new kinds of tariffs, which cannot be struck down by the Supreme Court. One is the Trade Act. The trade under the Trade Act under Section 122, they can impose a minimum tariff, which does not need and which cannot be appealed to the Supreme Court. They cannot abolish the Trade Act tariffs. So immediately after the Supreme Court decision was taken, Trump has announced a 10% tariff on a Tuesday -- on a Friday or a Thursday, I think. And then within a day after that, he raised the tariff from 10% to 15% because 15% is a maximum tariff that can be imposed for a limited period of time. It can be imposed as a tariff for about 6 months. So he has said that he will now go up from 10% under the Trade Act, Section 122 to now 15% and is hoping that this set of tariffs, and then what they call Section 232 and Section 302, which is to -- against restrictive trade practices or against -- another provision, they can impose these taxes. So he has now imposed additional taxes through the Trade Act and Trade Expansion Act, different sections, that will allow them to compensate for the loss of revenue as the Supreme Court strikes down the IEEPA tariffs. All this will have -- so for example, on the $150 billion the U.S. administration expected to receive, he's already promised the soybean farmers in the U.S. that out of these tariffs he's collecting, he'll give them $12.5 billion of subsidies to be able to compete and supply their soybeans to the world's largest soybean market, China. Because Brazil and Argentina and other countries were therefore substituting the loss of soybean imports from the U.S. with soybean imports from Brazil, and Brazil has substantially increased its production by increasing its productivity and acreage under cultivation that China does not need to now depend on the U.S. In the past, if they wanted the soybean, they had to depend on the U.S. Now they can avoid not buying anything from the U.S. And as a result of that, the U.S. farmers are facing very depressed soybean prices and therefore, depressed profitability. And they are a big voting lobby for him. So he suggested that he will give them $12.5 billion of subsidies. So if all these subsidiaries are being struck down by the U.S. government, how will it be just one industry. And it's not one industry, one product, soybean, where he has promised $12.5 billion. So against potentially collecting $150 billion of tariff, I think they have already committed for various interest groups and various sectors well in excess of $150 billion they're going to be collecting. So all this will impact how these trade flows are going to be, and we have to be very nimble, very dynamic, very understanding of the specific trade flows and how they will be impacted. We have to position our assets. We have to be, therefore, largely asset-light so that we have the flexibility that if U.S. is not the largest exporter of soybeans, we have to be in those trade flows, which are going to take over that gap that is going to emerge as a result of that. So in that context, I'm spending a little bit of time explaining this context because what I wanted to show is that, the 9.2% reduction in the operating profits of Olam Agri has to be seen in light of the industry headwinds and how everybody has navigated that set of headwinds and how we have accomplished our results differentially. So I'm very pleased with this performance. Our business is cyclical and volatile and that we have to respect and accept. And in order to navigate the inherent cyclicality, structural volatility in this business, the way we do it is to be diversify. So we are diversified across food and feed and fuel and fiber and rubber and wood. That diversification helps us navigate the cyclicality and the inherent volatility in the business. And that is demonstrated by the fact that despite all of these headwinds that we face and what I described to you, we have had a very creditable performance in only having a lower operating profit of 9.2%. And within that there are different stories. Of course, we are a diversified portfolio and diversified across the supply chain that our cash trading business, which is one of our 3 important segments, has contributed only 15% of our operating earnings compared to last year having contributed 21% of our operating earnings. But our processing and value-added business has hit the ball out of the park in terms of -- under all of these challenges, going up in its share of contribution to operating earnings from roughly 59% to 66%. So it has had a very, very good year, and it has made up for some of the challenges that we had in the Origination & Merchandising business. And the Fibre, Agri-industrials & Ag Services business has remained more or less flat, just a 1% decline in share of operating profit this year compared to last year. You can see at the bottom, we have shown that our EBIT per tonne, our operating profit per tonne has declined about $6 from $23 last year to about $17 this year. And that is a reflection of all that we have had. We have compensated for the drop in margins by significant growth in volumes under these circumstances. So we have moved volumes from 45 million tonnes to about 53.5 million tonnes, 8.5 million tonnes growth in our volumes, which although we had lower margins per tonne was able to compensate somewhat for the absolute operating profits that we generated. There are other parts of the Olam Agri portfolio, which has done very well this year. The edible oil trading business has had a very, very good year. The cash trading business in grains, oilseeds lower than last year, but still a very creditable performance. We've had poor performance in the rice business. Very difficult time in the freight business. But there were other performing parts of the business across the 3 segments that have helped us to compensate for some of that loss in those businesses. We have grown our invested capital by about 11%, largely driven by the growth in volumes by about 19%. We have had growth in -- and that is because prices have come off, and therefore, it has not gone proportionately with the volume growth. I'll now just look at it segmentally very briefly. In the Food & Feed segment, we have 2 subsegments. One is the Origination & Merchandising business and the other is the Processing & Value-added business. In the Origination & Merchandising business, as I talked to you about the industry environment and the headwinds, we have actually had almost a 35% decline in the Origination & Merchandising segment. But within that, the various SBUs have performed differentially. Some have performed better than last year, better than budget. Some have performed at plan or at budget and some are below budget with a couple of profit centers and SBUs, which are loss-making in '25 compared to '24. The invested capital in this segment has gone up quite considerably because much of the volume growth that we talked about, the 8.5 million tonnes, a large proportion of that volume growth happened in this segment, requiring us to deploy more capital as far as the Origination & Merchandising business is concerned. Moving on to the next subsegment, which is Processing & Value-added, where I said operating profit has gone up slightly by about 2% from $601 million to $611 million. But you can see the margin per tonne has grown quite significantly from $115 per tonne EBIT per tonne, it has grown to about $127 of EBIT per tonne. And there has been a slight decline in total invested capital from $2.5 billion to about $2.4 billion, so about 4% reduction in total invested capital in the Processing & Value-added. So this has performed well, and this has performed well even compared to the prior year. We had a very good prior year, a very strong prior year in the Processing & Value-added segment. We have continued to improve on that position this year. So overall, this was one of the standout performances amongst the 3 segments. And finally, if you look at the Fibre, Agri-industrials & Ag Services segment, our operating profit has declined 13.6% on the back of a decline in operating margins per tonne of $65, coming down from the prior year of $81 per tonne. And that has contributed in the lower operating profits in the Fibre, Agri-industrials & Ag Services segment. Invested capital has been more or less flat, that's marginal decrease of 1%. But this was the story of the Fibre, Agri-industrials & Ag Services. But within that, some of the businesses have done very well like the rubber business has had its excellent year, again, on the back of a very strong prior year as well. And we have given you some colors in terms of highlights as far as the summary is concerned on how different categories have done within this broader segment of Fibre, Agri-industrials & Ag Services. With that, I want to move on to the Remaining Olam Group. The Remaining Olam Group, as you know, is what is not in ofi, what is not in Olam Agri, that is the part of the Remaining Olam Group. When we started this restructuring, in '24, as you remember, we had roughly 12 businesses and assets under the Remaining Olam Group. In '24, we sold 2 out of the 12 where we are left with 10. So last year, we started the year with 10 remaining assets in the remaining group. And during the course of the year, we have sold or shut down 3 out of the 10. So what we are now left with is 7. So in '26, our role is to try and find the right long-term home for these balance 7 businesses that we have, which as we explained to you when we provided you the reorganization update in April of 2025, we explained to you what we are seeking to do. What we are seeking to do is to responsibly divest these 7 remaining assets to the right long-term owners of these businesses who want to be in these businesses and will, therefore, invest to further grow these businesses. For the Olam Group, it wants to now focus on Olam Agri, which has been sold 100% to SALIC, and it wants to focus then on the remaining main business, which is ofi and prioritize that business. And that will then complete our restructuring journey, which we have been embarked on over the last 4 to 5 years of splitting the Olam Group into 3 individual parts, ofi led by Shekhar and Olam Agri led by Muthu and his executive team, and the Remaining Olam Group, where we are making arrangements once the separation and demerger of Olam Agri happens for a continuing management team to oversee the responsible and orderly divestment of the 7 remaining assets in the group. So how did this RemainCo assets perform last year? So there has been a remarkable turnaround between '24 and '25 in the RemainCo Group. So in '24, we had $152 million of operating losses. We have had a massive positive swing of $342 million from last year's loss to this year's profit number -- operating profit number of $198 million. So the swing was a positive $349.2 million in this business. As Muthu explained when he was introducing the overall performance of the group, he did mention that we had reported a first half non-operating profitability coming from the revaluation of our euro-dollar loans provided by the parent to the remaining group assets. And that was a significant driver to this turnaround. But if you remove the non-operational gain, which we described in great detail in the first half results, the operating performance of each of the remaining assets has been a solid improvement over the prior year. So we are very pleased with this turnaround, and we expect continuing improvement in performance of the remaining 7 assets. This has also reduced our invested capital in this business by 4%, but also dropped our volumes and our revenues by 5% and 7.2%, respectively, because we are discontinuing some of these operations, and therefore, we have loss of volumes and loss of revenues as a result of that restructuring. But this has been quite pleasing because for the last several years, as the reorganization started and was evolving, this was a drag on the consolidated profits of the group. But now we see light at the end of the tunnel in terms of the positive improvement in the operating performance. And if you look at the next 3-year plan that the constituent 7 businesses here have shared, we see good, strong prospects for a sharp turnaround, continuing improvement in the Remaining Olam Group businesses. So I want to move on to the third segment, which is on the reorganization update. As you all know, you are aware of what the reorganization update is. I just want to reinforce the core elements and the core parts of our reorganization. The first element of our reorganization was to create greater focus by splitting the Olam Group into 3 simplified operating entities, with more coherent underlying logic that makes each of these 3 operating groups and the constituent products within those operating groups hang together. So from a very large business, very diversified business, very complex business with lots of moving parts, the first element of our reorganization was to simplify our business, and by sharply focusing these businesses and splitting that into 3 groups, we expected and we have now demonstrated with the Olam Agri sale that we can get the full potential value of these underlying businesses without suffering any multi-business discount, or a conglomerate discount as they call it, or even a Holdco discount. So we can preempt being saddled with a very complex, difficult-to-understand business with being accorded a multi-business operation discount or a conglomerate discount. So that is the first principle of why we did this reorganization. Second is we believe that these 3 businesses are going to be desired by different investors. So the folks who want to be part of the ofi journey are potentially largely different from the folks who want to be part of the Olam Agri journey, and similarly for the RemainCo businesses. And within the RemainCo, the 7 businesses appeal to different sets of investors. Of course, they will all have some common investors group, but largely, they would be preferred to be owned by different investors. And this gives them now an opportunity. When we were one company, there wasn't the opportunity for an investor, A, who wanted to be part of the ofi journey to get an opportunity to invest only in ofi. They could only invest in all the 3 pieces together. Now our investors can decide whether they want to invest in ofi or Olam Agri or OGL, and that will be better aligned to their objectives and their desires. The third part of this was to eliminate the stand-alone intrinsic value because our valuation was co-mingled and people didn't know what would be the underlying value of each of these operating entities. The sale of Olam Agri to SALIC has demonstrated that we can eliminate the stand-alone value of a pure-play kind of company rather than a conglomerate company. And that's why we got the valuation that we got or the rating multiples that we achieved when we sold Olam Agri. And we expect the same uplift and elimination of value when ofi seeks to get new investors in the public markets or capital markets -- private markets whenever it deems it is the right time and opportune time to do that. And that also appeals to the sale or divestment of the remaining assets or businesses of the remaining group. And as we said, we want to, by that, remove any conglomerate and Holdco discount that we will be confronted with. And finally, we are trying to make sure with this reorganization that the rest of the Remaining Olam Group will be made to be debt free. By the steps that we described to you -- the 5 steps that we described to you, we will be able to make it debt-free. And therefore, we can resolve and optimize the overall goals that we have from this reorganization plan. So you'll recall, in April, we provided an update to the reorganization plan and where we stand. And we said we had 3 objectives. One was to delever the Remaining Olam Group. We allocated $2 billion of capital to degear and make Olam Group debt-free and self-standing. And in order to do that, we were counting on different sources of capital, which I'll come to in a minute. We also felt that ofi has a lot of promising growth prospects, and we should re-equitize ofi by providing additional $500 million of equity capital injection in ofi. So that has also been done and accomplished in the first half of the year. That was the second, its $2 billion to make the Olam Group -- Remaining Olam Group debt-free, $0.5 billion to support the growth prospects of ofi. And then we said we want to responsibly divest progressively over time, the remaining 7 assets that we are now left with -- or 7 businesses that we are left within the Remaining Olam Group. We had 2 sources of funds to meet these $2.5 billion requirement, which is the proceeds of the [ Inara ] sale, where we are expecting at the minimum $2.58 billion based on closing adjustments and time when Phase 1 and Phase 2 or Tranche 1 and Tranche 2 of the deal would be done. There could be some potential gains over and beyond this $2.58 billion, which is the basic proceeds that we will collect as a result of this reorganization. And finally, just a quick note on what is the progress since we have communicated this updated reorganization plan is that we are now close to completing the sale of the proposed 64.57% stake in Olam Agri. 35.46% is already held by SALIC. So what is not held by them is 64.57%. And we have now sold that to them in 2 tranches, 80.01% in Tranche 1 and the balance 19.99% in Tranche 2. But there is no -- in the Tranche 2, which is secured by a put and call option, there is no uncertainty about the price for Tranche 2. That has been fixed, and it will not change. And therefore, it is a completely secure transaction from the selling shareholder OGL standpoint. We have only got -- we had 21 approvals to get -- regulatory approvals to get. We have got 20 out of the 21. So we are waiting for the last approval to be got. We hope that will be obtained in the next -- by the end of March, potentially the first fortnight of April, which will bring close to the completion of [ Inara ]. The second update is we sold a 32.4% stake, which we already announced in our ARISE Ports & Logistics business for $175 million, which is at a small premium to our carrying value, our book value. This is our port and logistics business in the Rest of Africa. It is multiple ports in different parts of Africa. We currently own remaining stake of 32.5%. We have already sold the stake. We expect completion and receipt of proceeds from the sale sometime towards the end of April. So that is the second one. The third is, we have completed the $500 million equity injection into ofi, which has helped ofi invest in value-accretive meaningful projects that is in the broad direction of travel that Shekhar described to you that ofi has embarked on. We are also seeking to responsibly divest. As I said, we had 12 assets in '24. It came down to 10 in '25. Out of the 10 in '25, we are now left with 7. And we will see good progress in '26 based on where we stand today and the development of the transactions that we are trying to execute, there should be good progress, material progress that we achieved in '26 on the remaining 7 businesses and assets as well. We have given you some of the examples of the 3 that we have divested or shut down this year. And unfortunately, we didn't have much of an opportunity to initiate share buybacks. The best use of our capital will be to buy back our own shares because our shares are, in our view, extremely dislocated. And that will -- the value will only get crystallized once all of these actions that we are taking is executed. So when [ Inara ] completes, that's 1 data point. When ofi shows progress in all its growth that it is -- profitable growth that it is seeking, that could be another. When we sell the remaining assets of the RemainCo, that will be another proof point. As these proof point, people will begin to understand what is the value of the Olam Group. Till that time, it will be a little bit confusing for people to really discover and understand that value. So we would expect that to happen. So a good time for us to buy back our shares. But because all these things are happening, all these restructuring is happening, all these things are happening in Olam Agri, in ofi and the Remaining Olam Group, we are mostly, all through the year closed, in that we have privileged information that you, as shareholders, do not have. And therefore, we get very limited opportunities. No window, practically no window with the heavy activity -- corporate activity that we are in, which we have knowledge of. And therefore, we cannot get any clear windows, which you might be wondering why we are not -- the reason we're not able to buy is we can't buy without taking the risk of any fiduciary exposure because of the proprietary knowledge and information that we have on these businesses. So that, therefore, completes the third part. I want to then address a specific issue of dividend. It looks like the market is not very happy that we did not pay a second half or final dividend. It's not that we didn't pay a dividend in 2025. We have paid a first half dividend of $0.02 already earlier this year, in August of this year. But in view of the ongoing execution priorities that we have, we want to be conservative in terms of conserving cash. And as we start completing the various things that we mentioned to you, the completion of [ Inara ], the divestment of the RemainCo assets, all of which we are very confident we will get a lot of traction this year. And as we had already reiterated to you at the AGM and the EGM for the permission for the sale of Olam Agri, we had both times mentioned to you that whatever proceeds we get from the RemainCo businesses, so we sell any of those assets, we will pay a special dividend to our shareholders as and when we divest assets. We know that we cannot divest all these assets on 1 day to one customer -- one buyer. So this will be divested at different points in time to different buyers. But each time we divest, the proceeds that we collect from the divestment will be distributed to the shareholders as a special dividend. So we just urge that you're able to see and understand why we have not paid a final dividend and only paid an initial dividend is largely on account of the fact that we want to be prudent, we want to conserve cash till some of these milestones are met as far as the updated reorganization plan is concerned. So if you have a little bit more patience, you should be pleased with the outcome as we implement and execute this plan. With that -- just quickly, I think we have already covered this. Shekhar has covered it in the ofi. I have covered it for the group -- Muthu has covered for the group. We have talked about this for Olam Agri. So this you can read at your leisure in terms of what we see as the full year business prospects and outlook. All of the macro issues are common to all the 3 businesses. So we believe we have a point of view that we will have a continuing weakening U.S. dollar because of the huge fiscal drag in the U.S. and a growing fiscal drag in the U.S. And depending on the tariff uncertainty of what is passed through, what is going to be the final shape and form of the tariffs that is going to overcome this tracking down of the IEEPA tariffs, sticky inflation, because we are seeing the tariff flowing into product inflation already. So we will see sticky inflation. I think it's going to be a bit of a juggling walk even for the new Fed -- with the new Fed Chair, to dramatically reduce interest rates. So we see sticky inflation and potentially some reduction in interest rates. But if there is sticky inflation and there is all of these issues about the weak dollar, et cetera, I think the prospects for a dramatic reduction in interest rates, unless some developments happen, is going to be difficult. Specifically for ofi and specifically for Olam Agri and specifically for the RemainCo assets, we have slightly different perspectives on what the outlooks in each of these businesses will be, which is what is summarized here in this slide. And finally, the key takeaways that I want to summarize is, firstly, very strong PATMI growth on the back of operating profit growth in 2025. Reported earnings growing by 414% over -- compared to last year, and operating earnings growing by 162%. So that is a fantastic year for us. Secondly, completion of the sale of Tranche 1 of Olam Agri, what we call project -- sorry. Sorry. This is about the sale of our Port & Logistics business, ARISE business. That is progressing. We have various regulatory, but also financing and banking arrangements. We need to get consent from all the creditors, et cetera. So all that is progressing well. We hope by the end of April, we should be able to complete the transaction. We have -- the plan to divest the other assets in the Remaining Group, as I said, is making progress. We have nothing to announce today in terms of the completion of sale. But over the course of the next 10 months, the year, we would expect to see some progress and traction and the shareholders can expect to then receive whatever proceeds we're getting from the divestment of these assets as a dividend to shareholders. While I recognize that not announcing a final dividend for the full year has disappointed our shareholders, but I think it is the right thing we do -- we are doing for the long-term interest of the company. And finally, there's an exciting growth that ofi is planning. I'm not -- and the same applies to Olam Agri. I'm not talking about Olam Agri because it is in the final stages of being demerged. But the team in Olam Agri, Muthu and his team are very confident about the stand-alone independent prospects of Olam Agri under the new owner. So ofi, Olam Agri and all the assets of the RemainCo that we are trying to spin off to the right long-term owners of these businesses, all of the teams -- all of the teams including the RemainCo team, which knows that it is going to be sold to different potential investors, all understand that, that is the right solution because they will go to homes and investors and owners who want to further reinvest and grow the business. So I'm very satisfied and pleased that there is a very bright stand-alone independent prospects for ofi and equally strong, if not better prospects, in Olam Agri under the new ownership because SALIC is entirely focused on food security. And therefore, they are the ideal sponsors and future owners of our business. So it is an important change of -- and transformation of the Olam Group portfolio and its 3 operating entities, each of which is looking forward and excited about the long-term future of those businesses. We're happy to now pause here and take any questions that you might have. Hung Hoeng Chow: Thank you, Sunny, Shekhar, and Muthu for the presentation. And we'll move on to questions from the floor. Hung Hoeng Chow: Let me start with you on the floor if you have questions. Yes, Alfred. Can you take a microphone from my colleague there? Alfred Cang: Alfred Cang from Bloomberg News. Could you please update us about the ofi's IPO preparation? Are we still -- is the company still pursuing it? The second part of the question is about cocoa and coffee market. So how would you frame the market structure at this moment? Do you see the market basically is transitioning into surplus? Or it's still a bit tight at this moment for both? Shekhar Anantharaman: Okay. Let me probably answer in the reverse order. All markets are different. But broadly, both cocoa and coffee seem to be headed into a surplus year. The timings are different, the seasons are different and the situations are quite different. As far as cocoa is concerned, there is probably some uncertainty about the mid-crop, which is coming up in West Africa. So therefore, there might be some short-term pressures. But otherwise, from the way the crop is growing and the way the demand/supply has been and where the previous crop has been, clearly, there seems to be a surplus. And I think the entire industry feels that. That's already reflected in prices, probably also a little bit of overcorrection. But that is -- I think the surplus is reflected in the market. In coffee, it's quite clear that the new crop, the '26-'27 crop is going to be a very big crop, significantly higher from less than 40 million bags in Brazil. We are looking at potentially 70 million bags plus, Robusta and Arabica combined. So again, that supply surplus is going to hit. Some impact on demand is already there. But coffee, probably that surplus will hit the markets a bit later when the new crop starts in July, August. So we think directionally, both markets are headed into a surplus with the impact of the last almost 24 months of demand impact as well as supply tightness. But both markets are slightly different in terms of timing and when the surplus will really reflect in prices. Cocoa is reflecting. Coffee, it's probably yet to reflect fully. It's also directionally headed there, but yet to reflect. On your first question, again, a question that we have asked many times, and the answer remains the same. We are clear as part of the whole reorganization that the objective was to create value and unlock value. ofi remains absolutely confident about the path. I mentioned that in my presentation. The pathway for creating value is clear, and we stay focused on that. And the pathway to unlock value, whether it's in the public markets or private markets, both options remain open. We'll do that at a point of time when we need. The business is solid in terms of what it needs to do to kind of grow its pathway. We need to wait for the right. We will never time the market, but we want the right solution, long-term solution, which is right in terms of not just monetizing the value or exiting the business, it's about finding the right long-term value solution for the company. So we're not kind of holding our breath for IPO, but we remain prepared for all alternatives in the public and private markets. Hung Hoeng Chow: The lady in front? Benicia Tan: I'm Benicia from The Business Times. So I'd like to ask, what do you think are some of the key hurdles for the sustainability of the earnings moving forward, given that this is quite a significant rebound? And separately, are you able to comment on the remaining jurisdiction for the SALIC deal, for the divestment of Olam Agri? Like what are some of the requirements of that last jurisdiction? Sunny Verghese: Yes. As you know, we don't normally give short-term forecast. So we're not going to start a new trend by telling you exactly what we expect each of these businesses to do because it is based on many conditions and market conditions, et cetera. But we are, as I mentioned, remain confident about the prospects of all the 3 operating entities. So firstly, ofi, you heard from Shekhar already. And there is expectation of continuing improvement to the financial and operating performance in ofi for the full year. The same thing we are expecting in Olam Agri that we will -- we look forward to significant profitable growth in Olam Agri. And post the completion of [ Inara ], whenever that happens, we think that will provide significant catalysts in how we pursue that profitable growth. We have quite a few ideas, and Muthu and his team is looking forward to the coming year as far as that one is concerned. The third, in terms of the Remaining Olam Group, we want to first focus on the operating improvement of the 7 businesses that we are left with. And your question about whether -- so the non-operational gains that we had in terms of the currency gains -- currency-related gains that we had might not be repeatable, and we don't expect it to be repeatable. But you have seen a distinct improvement in operating performance of the remaining 7 entities that we have in the Olam Group, and we expect that trend will continue in 2026 as well. So we are confident about the prospects of all these 3 businesses for different reasons. For Olam Agri, it is continuing to deliver the solid profitable track record that it has demonstrated over the last 4, 5 years. But now it has got an additional catalyst of a sponsor -- a new owner that's wanting to significantly grow this business. And in the case of ofi, as you've already seen, after the capital injection, some of the initiatives that ofi has taken to grow the business, and they see continuing prospects for the ofi business. So I think it is an inflection point. I think for us, '26, in many aspects and respects, will be an inflection point. And we are looking forward to '26 with some confidence. Yes. Yes. So the regulatory approval, we don't want to specify the country. We also don't want that regulator to be taking their own time because they know that they are the regulator who is holding us up. So we won't be public about that. But when we talk about the 21 approvals that we needed, one approval is from the European Union. European Union is a combination of 27 countries. One regulator that has to approve for us is ECOWAS. ECOWAS is a combination of 21 countries. Then there is COMESA, which is a combination of 6 countries. When we talk of 21, we only count 3. There's actually multiple countries under that jurisdiction. So we have made good progress. This is also a new requirement -- this one that is pending for us is a new requirement. So the application for that regulator also was the last application we made because it is a new requirement, which we are one of the first few companies that are being processed under this new requirement, this new regulation in this regulatory work. But as you know, we announced this deal in 24th of February, 2025. And if it completes as we expected in the next couple of months, next 2 months or so, then it is a remarkable progress in execution. As you've seen, some of the other deals in our industry have been delayed by more than 18 months after they said it will close. It's complex because food is sensitive. Food and water and all these things are very sensitive. And because of the tensions in trade and everything else, China, U.S., all of these issues, the approvals take time. But we are very pleased with the way we have progressed this and Muthu has been responsible for getting this over the line. So we are quite pleased with all that has happened, the progress that we are seeing as far this is concerned. Hung Hoeng Chow: Thank you. I don't see any hands. So I would like to move on to questions from the webcast. I see 2 questions, one for Shekhar and the other for Muthu. Shekhar, the question is regarding the company's ofi's invested capital. How has -- how do you see that going down with the decreasing prices for cocoa and coffee in the coming half year? Can you talk about that? Shekhar Anantharaman: Like I mentioned, obviously, a big part or most -- entirely the part of increase in invested capital was on working capital. And in that, it was also across our secured inventory and receivables. So as prices come down, as they have been coming down, you saw the year-end numbers were lesser, but that happened only for a few months of the year. And as we go through the first half of the year when the higher price inventory and secured receivables is received, that will come down. So we -- it will depend on where prices finally settle down in the 2 products where we have the significant chunk of our working capital and RMI. But we would expect, based on current pricing and current expectation, that it will come down fairly sharply in the second half. But I won't put a number to it. Hung Hoeng Chow: The second question is for Muthu. On the SGD perpetual, the 5.375% coupon that's callable in July, is there any plans to refinance with another SGD perpetual or redeem it with the proceeds from the sale of Olam Agri? Neelamani Muthukumar: So first of all, the perpetuals as and when they are due, and we will take the call in July in terms of calling when it is due. And as far as the refinancing is concerned, whether we want to pursue with the replacement by the same instrument, that is something which we will consider and as appropriate. Because as Sunny had highlighted for the Remaining Olam Group, we have 7 businesses that are remaining. And as and when the sale of Tranche 1 of Olam Agri is complete, as well as some of the divestments which are already on the pipeline, Remaining Olam Group is targeting to be debt-free. And if that objective is achieved, let's say, by July, there may be no requirement for us to refinance the SGD perpetual, and we will take it as it comes. Hung Hoeng Chow: Okay. The third question is on the succession plan for Olam Group. Sunny, would you like to comment? Sunny Verghese: You've already seen a succession plan announced and has taken full effect. So Shekhar was our first succession, becoming the independent CEO of ofi and reporting to an independent Board and an independent Chairman. And Olam Agri successor has been identified. We are not in a position to selectively reveal the name, et cetera. So based on what is going to be the succession plan, we are very confident that Olam Agri is going to be in very good hands. And we will make a few announcements at the time we have the AGM with regard to the succession plan as far as the RemainCo companies are concerned. So all this, you will have to have some patience. We will make all these announcements. But you know that we will do it thoughtfully and carefully. And we have already done the succession in ofi. We are ready for the succession in Olam Agri. We are also ready for the succession in the Olam Group. So you can be rest assured that when we are ready to make those announcements, we'll make those announcements. But we are very comfortable that we have found the right candidates to lead these businesses independent future. Hung Hoeng Chow: There's question on dividend. With the Board's decision not to recommend a final -- second and final dividend, how is the outlook for dividend payouts in the following year? Sunny Verghese: Yes. That will -- so there are 2 kinds of dividends that we can look forward to our shareholders. One is the normal dividends that we pay based on our operating performance. And therefore, being in a position to guess or even discuss what that will be would mean that we give you a forecast on what the operating performance of each of these groups are going to be going forward. And that will not be appropriate. So the remaining or the continuing group, as Muthu presented, the Olam Agri is now a disposable group and a discontinuing business. And the continuing business is ofi and the RemainCo. How much dividends we'll be able to pay from RemainCo and from ofi is a function of ofi's operating performance and contribution to the bottom line. And secondly, with regard to the RemainCo, it is largely from the divestment of these assets and the return of the divestment proceeds to shareholders as a special dividend. So for a normal dividend, we need to make a forecast on what is ofi's growth in profits. And for the special dividends, it is -- you have to make an assessment of what assets will be sold when, how much of divestment proceeds we'll get in a year. We will not wait for half yearly or full year, end of the year, for the special dividends. The special dividends will be paid out to you progressively as and when those transactions are completed. The Olam Agri, the existing shareholders have sold 100% of the business. So the existing shareholders will not partake in the future dividends or profit distributions as far as Olam Agri is concerned. So we cannot be specific about that question. You will get to know more as we announce the first half results and the second half results, and you will know what the improvement in operating profits, et cetera, are going to be, and that will determine the capacity to pay dividends. So the other factor is really how much capital is required to grow and if that growth is value accretive. So we want profitable growth. We want to grow more than our cost of capital. And if the returns by growing that way is something that the shareholders see and the shareholders want you to actually deploy more capital to find that profitable growth. If you're not generating profitable growth, the shareholders rather you return the money to them as dividends. So all those factors will be taken into account and consideration, but we cannot forecast specifically what the dividend prospects of the RemainCo will be today. But we can tell you what we will do. And you can hold us to account that, yes, we have sold an asset, we have distributed the proceeds as a special dividend, that you can hold us to account. Neelamani Muthukumar: And if I might add, really, as shareholders, we should feel confident about the earnings prospects of ofi. The turnaround in the RemainCo that Muthu and Sunny highlighted, again, the operating turnaround of the RemainCo until they are divested is also on a strong trajectory. And that should give you confidence about the dividend paying capacity of the continuing operations after the sale of Olam Agri. And that's what I would like you to take. And then, of course, the actual dividend decision will be happening on a yearly basis or half yearly basis. So I would like to leave you all with a positive disposition with the earnings capacity and trajectory of the continuing operations, and that's what I'd like you to take. Hung Hoeng Chow: Shekhar, there's a question for you on the outlook and what you see as the factors that will affect or increase the EBIT per tonne for ofi. Can you comment on that based on the investments you have in place for ofi as well as the changes in the prices for cocoa and coffee? Shekhar Anantharaman: Sure. I think the markets, I'll leave, because markets can go up and down, and we will price appropriately. So our real medium-term to long-term EBIT per tonne growth is coming from the investments we have made in our value-added ingredients and solutions part of the business. There is modest growth in the global sourcing because as we are doing more specialty, more sustainable, more certified volume tonnage. But to customers, there will be some EBIT per tonne growth. But most of the global sourcing that is getting processed, the value add is really coming out of the EBIT per tonne growth in the Ingredient & Solutions side. There, I would probably split it into 2 -- 3 parts. One, there are investments that we have made recently, where they will come up to full capacity, investments in New Zealand dairy Phase 1, which is coming to capacity this year, but a second expansion is already underway. It's a very high margin, high EBIT per tonne business. Similarly, Brazil coffee that I mentioned is now fully commissioned, is not yet up to full capacity. We're already looking at a fourth phase of our Malaysia dairy. And then there are other investments that we have made in private label, which are still not operating at capacity. So as these come up to full capacity between '26, '27 and '28, there's going to be EBIT per tonne growth coming out of that. So that is investments made, which will take a natural time to get there. And we feel very confident. These are in businesses that we know. These are in businesses where we are making those EBIT per tonnes, incremental EBIT per tonnes. The second area is there are a couple of areas, like I mentioned, where cyclically or structurally, we have had lower EBIT per tonne, I talked about soluble coffee or industrial spices in the past. Those are where performance trajectory has to correct, and we feel again that the actions that we are taking, either -- if it's cyclical, it will correct automatically. If it's structural, we are taking actions. There again, we see EBIT per tonne improvements on this area. The third would be where we'll invest going forward, and we see or where we have invested in capabilities, specifically the Food & Beverage Solutions business, which is all about higher margin, higher value-add items, where it's not so much of more fixed asset investment, there will be, but there will also be more additional solutioning. So there are investment opportunities that we have identified over the next 3 years, which is the other area. So it's not going to be a high volume. So if you look at our guidance, we always stated we are going to look at low- to mid-single digit volume growth. But in terms of EBIT growth, we are looking at high-single digit EBIT growth, signaling clearly that's EBIT per tonne growth that we are looking at. Market prices might have some impact on short-term lead lag. But otherwise, it is the core EBIT growth. There, I want to leave you with the confidence that with what we have invested in, there is growth, with what we are correcting where there's a performance trajectory, which is not performing at level, there is growth, and then there is new investment that we will make in the coming years. So we see -- we feel quite positive. And that's why when the question was asked, we feel that there is enough value creation optionality that we have created in ofi and that we have already invested behind, and that's what we'll be trying to extract in the coming months and years. Hung Hoeng Chow: I think this next questions can be answered by each of you from a strategic, operational and financial standpoint. What are the biggest risks for Olam, or Olam Agri, for Olam Food Ingredients and the Remaining Group in the coming year? Sunny Verghese: I'm delegating to Muthu 2 of those questions, Olam Agri and Olam Group, and Shekhar will take the other one. Neelamani Muthukumar: Thank you, Sunny. So obviously, as we are entering into 2026, the macro climate is challenging. We are seeing unprecedented intervention, especially in the U.S. that is -- can create issues on interest rates, can create continued tensions in terms of the trade flows that can happen, particularly between U.S. and important geographies like India, Brazil and China. Because there were independent trade agreements that were entered into or anticipated and then with this new development after the U.S. Supreme Court had struck off, what Sunny had talked about, again, all bets are off. And that's something that we have to wait and watch. And so apart from the normal supply/demand of the commodities in Olam Agri portfolio that we are well positioned to anticipate and navigate successfully, the macro climate condition is something which we have to be nimble, agile, flexible and have the ability to react very quickly. And that will determine how Olam Agri will perform especially in 2026. As far as the Remaining Olam Group is concerned, Sunny talked about the remaining 7 businesses. The primary objective is continue to look for long-term right owners of these 7 businesses while concurrently ensuring that these businesses continue to improve operational performance. And that we have already demonstrated in 2025. And we believe that these businesses are on a strong footing to continue to improve their operational performance in 2026 as well, while we are pursuing divestment opportunities that will result in the right long-term owners to own these 7 businesses. Shekhar Anantharaman: Yes. I don't think risks are very specific to business. Again, if I oversimplify it, there are controllable risks and uncontrollable -- non-controllable risks. Controllable risks remain the same. Market risk that we have to manage, you have seen what we have done over the last couple of years. And that is a day-to-day business. That is a business as usual. It's very critical that we manage it well and manage it better than the rest of the industry partner or at least as well as that. There's operational risk, which is, again, with the spread and complexity that we have, we need to manage that. And those risks are controllable, have been in the business. I don't think there's anything new. There will be new things happening in different parts, but I think we have to adjust our systems process, people. That's really our risk mitigation there. On the uncontrollable, I think that's what has been impacting the larger industry and grabbing all the attention, geopolitical uncertainty, potential war, all the supply disruption that can happen because of that, we don't know. There, you can only say with a diversified footprint and speed to action, can you respond as well or better than the rest of the industry? So again, that is -- there is a lot of that on the tariff side, on the current situation in the Middle East. And we will have to see how that impact happens. And all we have to be sure is that we can manage it as well as anybody else or as fast as others. So yes, we have to kind of stay cautious, but we feel cautiously optimistic that across the board, across all 3 entities, we have the people, processes and systems in place and the experience over the last 25 years, which is really what will hold us hopefully in good stead. Hung Hoeng Chow: Thank you. This is the last question from the webcast. And is there any other questions from members on the floor? If there's none, I will not stop you from going for your lunch, and I thank you for being here for the last 1.5 hours. It's very cold here. You can see I'm freezing, chattering. So thank you for your patience, and we look forward to seeing you in August, if not earlier. Thank you. Sunny Verghese: Thank you very all much. Neelamani Muthukumar: Thank you. Shekhar Anantharaman: Thank you.
Lars Jensen: Good morning, everyone, and welcome to Royal Unibrew's presentation of our annual report for 2025. My name is Lars Jensen. I'm the CEO of Royal Unibrew, and I'm today joined by our CFO, Lars Vestergaard; and Flemming Nielsen, Investor Relations. We will take you through the highlights of the year, performance across our segments, the financial development and our outlook for 2026. After the presentation, we will open for questions. Now please turn to Slide #2. And before we begin, please note the usual disclaimer regarding forward-looking statements and risk factors that may cause actual results to differ from expectations. And with that, let's move to Slide #3 and the highlights of 2025. On Slide #3 here, we summarize 2025 in a few key points. '25 was a year where disciplined execution really made the difference. We delivered 5% revenue growth in line with our guidance of 5% to 6% and EBIT increased by 12% at the top end of our 8% to 12% guidance range. Our EBIT margin expanded by 90 basis points to 14%, reflecting continued improvement in operational efficiency across the organization. We also made good progress on our sustainability agenda during the year, both within our environmental and climate initiatives and within employee safety, which has been a key priority for us in 2025. At the same time, we continue to strengthen cash generation and the balance sheet enabled shareholder returns, including share buybacks executed in '25 and a new program launched -- just launched and running until mid-August 2026. Importantly, this performance was delivered in a market environment that remained characterized by cautious consumer sentiment and ongoing macroeconomic uncertainty. What makes the results particularly encouraging is that progress was broad-based across all segments and supported by stronger quality of revenue and continued operational efficiency. Based on this solid foundation, we have provided guidance for 2026 of 6% to 10% organic EBIT growth, which we will come back to later in the presentation. Now please turn to Slide #4. If we step back, our performance in '25 rests on 2 key pillars: category focus and operational efficiency. Over the past 5 years, our growth category framework has guided how we allocate capital, management attention and commercial resources. This focus has become increasingly important in a market environment characterized by soft consumer demand and changing consumer preferences. In 2025, approximately 60% of group net revenue was generated within our defined growth categories, no/low sugar CSD, enhanced beverages, RTD and premium beverages. This category exposure supported growth ahead of the market. During '25, we also sharpened revenue quality by exiting certain lower-margin activities. While this reduces top line in isolation, it strengthens the group's earnings profile going forward. From '26, this step will reduce group revenue by around 3.5% with no EBIT impact and with no volume impact. The revenue decline is predominantly related to snacks and will mainly affect the Northern European segment. Operational efficiency remains deeply embedded in our culture. Across production, logistics and back-office functions, we continue to optimize our footprint, simplify processes and capture operating leverage. This is both in our established markets and in our newer markets. The strong EBIT margin development in '25 demonstrates that this mindset is delivering results, not only in our established markets, but also in the newer ones. Finally, our long-term ambitions remained unchanged. We continue to target an organic EBIT growth of 6% to 8% per year, double-digit earnings per share growth and continuous improvement in return on invested capital, which improved to 13% in '25. Please turn to Slide 5. Our growth category framework continues to guide our resource allocation. These are categories with stronger growth, driven by changing consumer trends. Today, around 60% of group net revenue sits in 4 growth categories, and we achieved average growth of 6% across the categories. No/low sugar carbonated soft drinks grew 9% in '25. We continue to see strong growth as consumers prefer drinks with less calories or no calories. Growth is driven by both local brands like Faxe Kondi and our partner brands like Pepsi. Enhanced beverages grew 5% in '25. The category includes energy drinks and beverages with added vitamins and similarly. The growth is mainly driven by our local brands like Faxe Kondi Booster and Sourcy Vitamin Water in the Netherlands. Across markets, we continue to see strong demand for functional propositions. Ready-to-drink with alcohol grew 1% in '25. The category includes ready-made cocktails and also ciders, so in many different shapes and forms. Our portfolio includes both partner brands and local strong propositions, including Original Long Drink in Finland, Shaker in Denmark and [indiscernible] in Norway. Premium grew 4% in '25 and includes beer brands like Ceres in Italy and our premium beer portfolios across markets. The category also includes malt drinks and lemonades and other premium soft drinks. The framework ensures that we concentrate investments where long-term demand trends are the strongest, and that discipline continues to pay off. Now please turn to Slide #6, and let's focus on the regional developments. Northern Europe is our largest segment, accounting for around 2/3 of group net revenue and EBIT. In '25, we delivered a solid performance in what remains a relatively flat market environment. Full year revenue grew by 2%, while EBIT increased by 4% and with the strongest momentum in the second half of the year. In Denmark, we gained value market share across most categories. Faxe Kondi continued to outperform in no/low sugar soft drinks, Booster maintained strong momentum in energy and Shaker delivered solid growth in ready-to-drink. In beer, both Royal and Heineken grew despite an overall declining beer market. Finland remained impacted by cautious consumer behavior across both on and off-trade. Even so, we maintained a slightly improved market position in key categories, including no/low soft drink, premium beverages and enhanced beverages. The acquisition of Minttu and other spirit brands also contributed positively in '25. In Norway, commercial momentum improved through the year, particularly the RTD and beer, but also Faxe Kondi that has been launched in '25 is showing promising rates of sales out of the stores. We completed key integration milestones and production has now been consolidated in Bergen, supporting long-term efficiency. In the Baltics, the market was affected by relatively cold summer and an intense price environment. Despite this, we gained share in premium beer, energy drinks and enhanced waters while maintaining a strong cost discipline. Overall, Northern Europe continues to demonstrate the strength of our multi-beverage model, supported by strong execution from our local teams. Now please turn to Slide #7. Western Europe was our strongest performing segment in '25. Revenue grew by 12% up for the full year. BeLux contributed 9 percentage points to that growth, reflecting that it was not included in the comparable base for the first 9 months. EBIT increased by 55%, driven by operating leverage, efficiency initiatives and strong profitability improvements in Italy and France. In Italy, we continue to gain market share with Ceres and Faxe beer and with Crodo in soft drinks. As previously communicated, we have reduced the private label production to prioritize our own brands. This supported price mix, while higher local production also helped reduce logistic costs. Underlying growth of own brands was about 6% in volume terms. In France, Lorina and Crazy Tiger delivered continued value share gains, supported by focused brand activation and expansion into new consumption occasions. In the Netherlands, margin improved through price pack and promotion optimization. And despite exiting unprofitable promotions, we delivered net revenue growth for the year. With a strengthened sales organization and enhanced production capability, the business is well positioned for continued progress. Finally, in BeLux, execution is progressing in line with the plan, and we estimate that we increased value market share. As expected, BeLux was loss-making in '25, but we remain confident that our strategic initiatives and strong local engagement will drive long-term value creation. Western Europe illustrates the operating leverage in our multi-niche models when scale mix and discipline align. Please turn to Slide #8, and let's have a look at International, where growth accelerated strongly towards the end of the year. Volume grew 33% organically in Q4 and 16% for the year. Net revenue increased by 15% in Q4 and 7% for the year. Full year volume growth was slightly ahead of sell-out as we build in-market inventory to support the higher growth. As a reminder, this business is inherited more volatile with quarterly volumes influenced by shipping timing and distributor inventory movements. U.S. tariff developments drove inventory buildup in late '24 for the first half of -- and for the first half of '25, followed by inventory reductions in the second half. Price and mix in '25 was negatively impacted by strong growth in beer in African markets, most notably in Q4. Africa remains a structurally attractive growth region, but carries lower net revenue per hectoliter due to our distributor-based model. Net revenue in '25 was also impacted by unfavorable currency movements and tariffs. Growth in '25 were driven by Faxe beer, soft drinks, including Crodo and the malt beverages with brands such as Vitamalt. For the full year, EBIT increased by 14% to DKK 239 million with a 100 basis points margin expansion to 15.5%, which reflects a solid underlying performance. EBIT declined in the second half, driven by earnings phasing related to the tariff-driven inventory buildup earlier in the year and subsequently unwinding in the second half. And with that, I will hand over to Lars for the financial review on Slide #9. Lars Vestergaard: Thank you, Lars, and good morning to all. First, I will briefly walk you through the group P&L. Net revenue increased by 6% in Q4 and by 5% for the full year. Growth accelerated into the fourth quarter. And importantly, Q4 was on a fully comparable basis with BeLux also in the comparison number in '24. Gross profit grew faster than revenue, up 9% in Q4 and 6% for the year. This reflects our continued focus on profitable growth with mix improvements and efficiency delivering solid margin expansion. Gross margin increased by 120 basis points in the quarter and by 50 basis points for the year. The cost base developed in a disciplined manner in '25. Cost growth reflects the impact from BeLux and recent acquisitions, while the underlying development demonstrates continued focus on efficiency and cost control. As we have seen during the year, efficiency has mainly been achieved within sales and distribution expenses, while we continue to invest in sales and marketing to support our growth ambitions. We are seeing clear benefits from our improved production footprint and initiatives to streamline logistics and distribution operations. Admin cost is increasing compared to '24 as we are investing in digital and have added BeLux to our footprint. The level in '25 is a good baseline for your modeling. This needs to be looked at on an annual basis as there can be some quarterly differences. EBIT increased by 9% in Q4 and by 12% for the full year. The EBIT margin expanded by 90 basis points to 14%, driven by operating leverage and ongoing optimization initiatives with Western Europe contributing strongly, as discussed earlier. Net financial expenses amounted to DKK 254 million for the full year, fully in line with expectations. Tax rate was 20.7%, impacted by the capitalization of tax loss carryforwards. Our normalized underlying tax rate is 22%. Overall, this delivered a 25% increase in adjusted earnings per share in '25. This excludes the impact from the sale of shareholdings in 2024. Now let's move to Slide #10 and look at the cash flow. Let me start with a few key messages on cash flow and capital discipline. We delivered strong cash conversion in '25. Financial gearing remains in line with our targets and ROIC continues to improve. Cash flow from operating activities increased by 9% to DKK 2.4 billion, driven by higher earnings and continued discipline in our net working capital management. CapEx amounted to DKK 1 billion or 6.4% of net revenue. This was below our expected level, mainly reflecting the delay of certain investments into '26. Free cash flow for the year was DKK 1.4 billion. While this is broadly in line with last year, it is important to know that 2024 benefited from the proceeds of sale of shareholdings in Poland. Adjusted for this, underlying free cash flow increased by 12% in '25. Net interest-bearing debt ended the year at DKK 5.7 billion with leverage at 2x EBITDA, fully in line with our capital structure ambitions. Finally, return on invested capital improved to 13%, supported by higher earnings and improved capital efficiency. As previously communicated, Norway and Benelux remains on track to deliver around 10% cash ROIC by the end of 2026. Overall, the number reflects strong cash generation discipline in our capital allocations and continued progress on return. Now please turn to Slide #11. Our capital allocation priorities have been the same for a number of years. We want to maintain financial flexibility, gearing below 2.4 -- 2.5, investment in organic growth with attractive returns, pursuing value-accretive acquisitions when relevant, and finally, return excess capital through dividends and share buyback. This disciplined approach continues to support both growth and shareholder returns. The last couple of years, we have been running at -- a CapEx program above normal level. For '26, we expect CapEx around 7% of net revenue and some delays into '27 as it looks at this point in time. In other words, the lower CapEx in '25 will impact '26 and '27, same projects, same costs, but a slightly different timing. Proposed dividend per share is DKK 16 per share. And today, we start a share buyback program of DKK 400 million. This runs until mid-August, so this is not a full year number. Please turn to Slide #12. Our growth and value creation formula is unchanged and straightforward. We aim to deliver volume growth ahead of underlying markets, value growth through disciplined mix and price pack management, continued operational efficiency and cost control and disciplined capital allocation, including M&A and share buybacks. Together, these drivers support our long-term organic EBIT growth targets of 6% to 8% and 10% to 14% earnings per share growth. Naturally, each year is different. The relative contribution from volume, value and efficiencies will vary over time depending on market condition. And as always, the timing of M&A is inherently difficult to predict. Please turn to Slide #13. So if we look -- if we should conclude on our performance on organic EBIT growth, then we have delivered solidly since 2022, the year where inflation impacted earnings. The drivers of high organic EBIT growth is, to a large extent, the growth framework that delivers volume growth. The teams have also been good at value management and focusing on the parts of the portfolio with good margins. And finally, cost efficiency is a substantial contributor. These numbers also reflect good progress in acquired companies. Our guidance suggests that our plans for 2026 are solid, and we continue the strong trend we have had in the recent couple of years. ROIC is also on a positive trajectory, and we expect this to continue in the coming years as we harvest the benefits from acquisitions in the past years and solid organic growth in earnings. Please turn to Slide #14 and the 2026 outlook. We continue to expect a challenging consumer environment across our markets, and our guidance reflects a cautious and disciplined approach. For 2026, we expect organic EBIT growth of 6% to 10%. This is ahead of our long-term target of 6% to 8%, building on the strong margin and efficiency improvements delivered in '25. We no longer guide on net revenue, but if you model net revenue for '26 to be broadly in line with 2025, then that would be a fair assumption. This reflects continued underlying growth in our beverage business, offset by the exit of lower-margin activities. As previously communicated, these exits are expected to reduce reported net revenue by around 3.5%, impacting mainly the Northern European segment with no impact on volumes or expected EBIT. Net financial expenses are expected to be around DKK 250 million, excluding currency effects, and the effective tax rate is guided to be around 22%. CapEx is expected to be around 7% of net revenue, including repayments on leasing facilities. We expect limited commodity inflation, which we plan to offset through efficiencies and improved net revenue per hectoliter. Profitability in 2026 may, as always, be influenced by changing consumer sentiment, channel mix, the competitive environment and weather conditions during the peak season. And with that, I'll give you the word back to Lars. Lars Jensen: Thank you, Lars, and let's move to Slide #15 for sustainability, which remains an integrated part of how we run the business. It supports our efficiency, our resilience and long-term value creation. On this slide, we have listed some of the most important targets. We will not go into details with those now, but there's a comprehensive 70 pages in the full year statement for the ones that are interested in the details. Now please turn to Slide #16. Looking ahead to '26, our management agenda is clear and a continuation of '25. We continue executing on growth strategy across our markets. Innovation remains a key priority as we expand and refresh our beverage portfolio to stay closely aligned with the consumer trends. At the same time, we will maintain a strong focus on operational efficiency. Sustainability remains firmly embedded in how we run the business, and we will continue to make progress on our agenda here. And finally, everything we do is geared towards delivering on our long-term financial targets. The picture here shown the Norwegian Uno-X Mobility Cycling team we just announced a partnership with. Looking forward to see the effects for our Faxe Kondi Hero brand on that one. Now please turn to the final slide, which is Slide #17, and let me wrap up with the key takeaways. We delivered a solid financial performance in '25, fully in line with our guidance. Performance was strong across markets, supported by disciplined execution and continued growth in our priority categories. Operational efficiency remains a key driver, and this is clearly reflected in the margin expansion we delivered during the year. At the same time, strong cash flow generation and a robust balance sheet gives us the flexibility to continue investing in the business and returning capital to shareholders at the same time. Looking ahead, we expect organic EBIT growth of 6% to 10% in 2026, reflecting continued focus on profitable growth and efficiency in a still challenging environment. Thanks for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] We will now take the first question from the line of Aron Adamski from Goldman Sachs. Aron Adamski: I have 3 questions. First, on Netherlands. Can you give us an idea of where your EBIT margin stands right now? Is it still around high single digits? And given you're launching new pack formats there, can you give us some color on how the single-serve mix in that country compares to your other Pepsi businesses? My second question is on the efficiency agenda. Could you give us some color on how much EBIT uplift do you expect the new warehouse in Denmark and the site closure in Norway to deliver within the guidance that you announced? And also what other efficiency projects are on the agenda for this year? And how do you expect them to be phased? And third, the last question on M&A in light of the press headlines we've seen yesterday. Can you please give us an update on what type of deals are on top of your M&A agenda? And if you were to add a new country platform, what are you looking for in a potential asset? Lars Jensen: Yes. If I start maybe with the last question, our M&A priorities have not changed at all. So we would always -- if you rank them in terms of optionality, profitability, likelihood of success, it's always the optimal to bolt on to what we already have. And we have previously highlighted a number of countries in that respect where the organization is ready and where our market positions is not so big that it will be difficult for us to put anything on top. So the priorities have not changed. I would say just one thing, and that is that in this environment that we are seeing out there and when the ones that was rumored to be acquired by us, the Brewdog business, when assets like that or other assets locally come up for sale, there's often -- if you can move fast, there's often a relatively big upside to these type of businesses, assuming that you have an organization in place that can turn these businesses around. We have done it to a smaller extent with assets in our multi-beverage markets. So we will continue to be scouting for those, and we have to be very opportunistic with that kind of M&A activity. If we move to Netherlands, I'm not going to give you a specific number on the margins, but the EBIT margin is moving upwards. We have had a strong focus on moving in a direction where we become competitive. The efficiency levels in the acquired business was not at a level where we were competitive in the marketplace. It's a bit of the same exercise as we went through in Finland more than 10 years ago, which was also the case when we bought that business, we were not competitive in the market. So we have put a big focus on the people agenda, on the efficiency agenda. And that is one of the reasons why that we are building the business. And then the other one that we mentioned in the call is obviously our price pack promotion architecture that we build into it. The first layer was to look at the promotional activity and seeing what is value adding, what is not value adding. And then building the capabilities with, in particular, the new canning line so that we can move into the single-serve propositions, as you mentioned. So we are -- and you say in Pepsi businesses, it's not just about Pepsi businesses, it's all the brands, including Pepsi. And there's no doubt about that the Dutch business is under-indexing on single-serve pack formats. And that is one of the potential drivers for the next many years that we see. So the market is behind compared to the most developed markets in terms of the mix between small pack and big pack. And then we are even under-indexing on that one. So that is a key pillar for the future. Now negotiations, some of them are already done. Some of them are being close to being finalized and so on. So for the Dutch business, I think we need to look at the numbers when we report on Q3 and it's through the high season, then we know if our initiatives have really paid off. And then I'll let you, Lars. Lars Vestergaard: On the efficiency piece, the way we look at the market right now is that consumers and customers are looking for affordability, and we have been under pressure for a number of years. This means efficiency is super important across our business, and that is a theme that we have been running. If you look at the guidance we have for '26, if you just look at our normal growth framework, then you would have 1/4 coming from volumes, 1/4 from value management effect and then half of it coming from efficiencies. This year, we are expecting to deliver more than half from efficiency. So there is a substantial number in our bridge that comes from efficiency this year. Of course, it's early in the year. So things can change, and we remain flexible to ensure that we take the opportunity that presents itself. So we are across the business, looking very intensively into ways of working. We have been trimming on people across the business. We have been looking at complexity, how can we do things simpler. So it's an awful lot of initiatives. The 2 major projects you mentioned, so site closure in Norway as well as investments into efficiency in the main site in Norway is a substantial contributor to the 10% cash ROIC in Norway. If you look at the warehouse in Denmark, this will have a substantial impact on EBITDA as a lot of the costs that we used to use on external warehousing and logistics costs from our site, and Faxe 2 other sites that converts into depreciation. So it has a very attractive impact on EBITDA and a very nice impact on EBIT as well. So it is a substantial contributor, but we don't want to give you the numbers. But I would say in terms of the warehousing, it's also a way to make certain that we are in control of the business because with the growth that we have seen in volumes coming out of the Faxe side over recent years, you cannot be in control if you have products standing all over the country. So this is a way to really get our hands around the business and get in control with an extremely streamlined logistics setup in Denmark. Operator: Our next question is coming from the line of -- one moment, please, Thomas Lind Petersen from Nordea. Thomas Lind Petersen: Also 3 questions from my side. So the first one is regarding your EBIT guidance, 6% to 10%. And then maybe just following up on the previous question, I guess. Could you help us with a bit of the EBIT growth driver elements in that 6% to 10%? You're saying a lot about efficiency here, Lars, but more specifically, is it freight costs from Italy? Is it Benelux, Norway? If you could help us quantify some of that, that would be great. And then a question regarding consumer sentiment in, I guess, the Nordics is probably the most relevant. And just your expectations here. You're still seeing a challenging consumer sentiment, but we are getting tax cuts in some countries and various stimuli from governments. So just wondering here if you don't see anything that could sort of at least help a bit with the consumer sentiment in -- at least in the Nordics. And then the final question would be regarding your EBIT margin. I think if everything pans out as you now guide for 6% to 10% EBIT growth and then basically no top line growth, then we are getting close to an EBIT margin around 15%. I think I remember you mentioning that you have previously worked internally with a 15% EBIT margin as a target. So just wondering where we could go from here. I know you obviously previously had a 20% to 21% long-term EBIT margin, and we will probably not go there at least in the short term, but just try and help us a bit how far can we go? Is 18% or 17% is that realistic in a long-term scenario? Lars Jensen: Thank you, Thomas. The sound was a little bit bad. So I hope we got all the details of your questions. When we look at the consumer sentiment, I think it is generally consumers are a bit reluctant still to go out and spend a lot of money and that's the same scenario as we have seen for a number of years. That said, there's a number of categories where the consumers are actually willing to pay, say, an extra money because they see that they get an added benefit to what they buy. And that may be a perceived value or it's a real value. And that goes straight along with our growth category framework. So if you look at a category like energy drinks, consumers are less price sensitive than they are in a category like carbonated soft drink or mainstream beer. So when we're talking about this, it's as an overall assumption because that is what we see in the marketplace. But there is ways around how to play this in the market, both by category but also by price pack and promotion. So we try as much as we can to -- in the environment that we have today, we try to cater for that in many different aspects. And that's the reason why that you would also see that our bottom line is increasing a bit more than our top line. So that is a whole smart thinking and on top of that, of course, the efficiencies. So that's the environment that we see. People are saving more money than spending more money. It's not a catastrophe, but it's a different toolbox that we need to use. So stimuli or not, it's not something that we see immediately convert into to a different consumer behavior. And then on the EBIT margin, before I hand over to Lars, what we have said is that we believe that with the current makeup of our business, with the mix of the segments that we will be able to take to mid-single teens in terms of EBIT margins. And it's always a balance between absolute earnings growth and EBIT growth from a margin point of view. And so it's difficult to give you a clear answer to that. And this is actually not how we manage the business. That is not towards a specific target. We manage the business towards the growth rates of the EBIT bottom line. And at the same time, as we do that, we want to make sure that the quality of our earnings is intact or is improved. So that's the way that we operate. So we do not have an internal or have had an internal target of hitting 15%. Lars Vestergaard: Yes. So I would say in terms of efficiency and where it comes from, it actually starts in a slightly different place. And as Lars mentioned, quality of earnings and how we run the business is where it starts. So we have a number of people. We have a number of assets, and we really want to make certain that people spend their time on something that generates profit. So in terms of the revenue lines, we're not guiding on it and revenue is not the key driver for us. It is really how can we make certain that the time and the assets we have are utilized in the most effective way to drive organic EBIT growth and make certain that we don't overinvest so that we make certain that if you have low-margin business that requires CapEx that we really put very low down on the priority list. So in terms of the theme that we are running, it is really to make certain that we have clear priorities everywhere in the business about initiatives that you spend time on that they are generating high-margin business. We exit promotional activities with no value. And that, of course, have an effect on the whole cost line. So if you don't spend your time on low-margin business, then you can be more efficient in your salary lines and the assets are used in a better way. And that will give us a higher EBIT, so return on capital employed. So it's not -- what you can say, EBIT margin is not our ultimate target. If we can make a lot more money by compromising EBIT margin a little bit and not investing too much, we will do that. The ultimate target is that we have a high return on capital employed and solid cash conversion. Operator: We will now take the next question from the line of Matthew Ford from BNP. Matthew Ford: I've got 2 questions. The first one is just on sales. Obviously, you just touched on it. And clearly, the sales guidance for the year has sort of -- is a bit more informal than in previous years. But if we think about the sort of flat revenue progression in '26, obviously, you have the impact from the exit of the Snacks business. So underlying, it's sort of 3.5% growth. That implies a bit of a step-up versus the momentum we've seen in 2025. So it would be interesting just to get your sense of where across the business would you expect that to be driven from? Are there any areas of the business markets or categories where you would expect a sort of sequential improvement for any reason in '26 to hit that sort of underlying number? And then the follow-up is just on pricing specifically, obviously embedded within your top line growth. But great to get a sense of your expectations for pricing for 2026 and anything that we should be thinking about in terms of the contribution there? Lars Jensen: Yes. On the net revenue side of things, I think if you look at the quarter, we are organically delivering 3.7% organic net revenue growth. So we are flying faster out of the year than the start of the year. And remember that BeLux now is fully comparable when it comes to Q4. So with the guidance of around where we ended the year for '25 is actually a continuation of the flight attitude that we have established going out of the year. So we don't see the discrepancy that you're alluding to here. With the mix of markets and what we have also said during the call, we have a strong underlying momentum in the business in international. We have it in Italy. We are growing beyond the market in France. We are seeing top line growth is strengthened in the Dutch operation during the second half of the year as our changed, I would say, strategic focus is paying its way. Norway is back to growth since June. We are gaining share. We are winning in important categories, and we have launched soft drinks into that market as well. And then you have the old markets, so to speak, the big markets. And that's, as Lars is saying, that's a choice. We are -- in those markets, we are generally around 30% market share by value in those markets. We are big enough. So of course, we want to gain more volume. But if it's a better choice, not to push too hard on volume and get more from a price pack promotion architecture optimization, then that's the choice. And that brings me into your second question around pricing, which I'm not going to give you any details to that. But I think it's fair to say that when you look at the total market for beverages, there has been a period of time, in particular, in alcohol, where prices have probably, I would say, gone too high and where consumers tend to see that it is becoming more and more expensive and affordability is an element that needs to be thought about. Whereas when it comes to the soft drink side of things and the growth categories with enhanced, they will drive the mix in a higher position of net revenue per hectoliter. And then you have a lot of market mix that you need to put on top of that. So when we look at it, we are not in a super inflationary period. We see consumers that are reluctant to spend and have been that for quite some time and is hunting more for offers. And it's in that environment that we will do our best effort to try to massage the average up, and that can be done by hard price increases, smart price increases, changes of price pack and promotion. And we have all in play and in particular, in the multi-beverage markets. Operator: We will now take the next question from the line of Richard Withagen from Kepler Cheuvreux. Richard Withagen: First question on Finland. Yes, maybe -- I mean, you probably assume that, that will continue to be a challenging market in 2026. Are you changing anything in terms of commercial tactics in Finland in 2026? And maybe you could also give some sense of how the sugar tax or the change in the sugar tax will impact your business in Finland in 2026? And then the second question is on a bit longer term, but you obviously have the medium-term 6% to 8% EBIT growth objective. And Lars Vestergaard already talked about some of the M&A that contributed to growth in the last few years. So what are the opportunities you are looking at to at least deliver on the higher end of this 6% to 8% range in the next, say, 3 to 5 years? Lars Jensen: Good. If I take Finland first. Commercial tactics, we are always massaging and changing our commercial tactics as we go along. We are not changing anything, I would say, significantly compared to what we have done in the second half of '26. So that's a lot along the same lines. I think the biggest thing that we see is in the alco space, where first, that's more like 1.5 years ago, we saw the change in legislation. We saw these fermented beverages with less than 8% alcohol or 8% alcohol coming into the retailers. They took a fair chunk of the market. That is now churning, I would say, back again. So growth have gone out. Shelf space is shrinking and that shelf space is moving more into the hard seltzers and alike, cocktails and with less calories and slightly less alcohol. And in that category, we have done a magnificent job, I would say, over the last 6 to 9 months. After one of our competitors came in with a sharp price point and moved the market, we are now close to being market leader in that category. So a magnificent job done by the Finnish organization. So yes, so this is where we see the biggest change, I would say. And then in general, we still see on-trade in Finland being on the soft side. affordability in on-trade is an issue. So this is also where we are working on how together with the outlet owners and how to increase traffic. And when consumers have entered the bar, the restaurant that they stay for longer. So we are working on various initiatives to help our customers in that. And then I would say, finally, on the sugar tax, if you look at our non-alc portfolio, it is skewed much more towards no/low than the general market. So if anything, it is going to be an advantage for us, but too early to do any conclusions on that as it is fairly early. Lars Vestergaard: And the 6% to 8%, I think the recipe is pretty clear. It is -- make certain that we continue to focus on the growth framework, as Lars explained. And this is a key driver across all our business that is to make certain that we move our business more towards categories that are in growth. They typically also have better margin dynamics than the ones that are in decline. An awful lot of work, as Lars mentioned, on value management, make certain we focus on the SKUs that have higher margin, and we are very cognizant of how much deep promotional activity we participate in. Operating leverage is a key thing for us. We are on top of the cost in all markets. And then we try to do a few structural projects again and again that takes structural cost out of our business. We've mentioned a few today with closing a brewery in Norway and optimizing our logistics footprint in Denmark. But we are building a pipeline of these things, and we need to execute a few of these. And then, of course, we have a strategy to do bolt-on acquisitions. So in the markets where we already have an operation, when we buy businesses, these normally generate not only in the first year, but also in the years following that, good opportunities to deliver EBIT margin -- EBIT growth. So bolt-on acquisitions is a key enabler for continued high organic growth. So this is the way we look at it. And I would say, I think we have been given a gift from our predecessors who made certain that we had a portfolio that was skewed towards growing categories. And I think the work that has been done over the last years to really focus on that, that is a very, very strong enabler of our future growth. Operator: We will now take the next question from the line of Nadine Sarwat from Bernstein. Nadine Sarwat: Yes. So just one question from me, circling back on the topic that was discussed earlier is M&A. You spoke about having previously discussed countries that are attractive from your perspective to potentially enter. Could you refresh our memories to your latest thinking on which of those markets are the most attractive and then more specifically, how the U.K. might fit within that? Lars Jensen: Yes. So on the M&A side, we -- I would say, we have seen -- the Italian team, as an example, have done an excellent job on the LemonSoda acquisition. We have changed totally the business from being a one legged beer business to now have multiple legs. We acquired the brewery in San Giorgio that has been also with help from group supply chain have been totally transformed in a fairly short period of time, has taken over the production for the market and is now a stand-alone operation. If the right proposition would come or pass by in Italy, I think we will be very curious. We have an organization that can deal with it, and we have a strong trajectory that can support that. And then bolt-ons, as I also talked about earlier on, those are highly valuable. We have seen recently the bolt-on of the spirits portfolio in Finland. And I think you can see on the inorganic numbers in Q4, how strong that proposition is building up. So it was an asset that was a part of a really worldwide international business where local brands were squeezed. And by getting them into our portfolio, it really enhances the thinking around the brand, enhance the distribution, the quality of implementation and so on, and it immediately delivers results. So those type of acquisitions, we are, of course, super curious on. There's not a lot of them, but we are very curious on them. And then there's a couple of other markets. Take the Dutch market as an example, we have seen a buildup of profitability. We are seeing that the revenue generation is now going up. We bought a business that literally was flat to declining. So the turnaround is -- I wouldn't say almost completed, but at least the trajectory is totally different than what we acquired. At a certain moment of time, we believe that, that business would potentially be ready to be a consolidator in the Dutch market, which is not a very consolidated market. So depending on the maturity in the different markets, the performance in the market, the organizational stability in the market, we evaluate all the time what is doable and what is doable. And at the end of the day, it always relates to an active seller. Are we super keen on moving into new markets as we speak only if it is something that can deliver a high return on invested capital fairly fast and with not too much risk. So that's the way that we look at it. Operator: We will now take the next question on the line of Mitch Collett from Deutsche Bank. Mitchell Collett: Lars, I think you talked about admin expenses stepping up the digital investments. So could you give some color on where those digital investments are being targeted? And I think you mentioned that it might impact -- there might be some phasing impacts of that admin step-up. So can you maybe talk about what those phasing impacts are? And any other thoughts on how we should think about phasing across fiscal '26? Lars Vestergaard: Yes. So actually, when I talked about phasing, it was actually more a comment on the comparison quarter in '24 where admin expenses in Q4 was pretty low. If you look at admin expenses across '25, they are, I would say, fairly stable and at a level that we believe is the level we look at going forward. So that is what you say, the level that we expect into the future. To drive efficiencies, digital investment is super keen because that's really the place where you can drive a lot of efficiency. So we are looking at a number of tools that can help efficiency across the business, and that drives some IT costs, but also IT has been used to integrate some of the acquisitions we've had. So BeLux have been integrated in '25 into our SAP platform, and there was a number of projects in Norway and in Denmark that we have been executing. So we have been investing more into IT programs to deliver on the efficiency agenda. It's not something that's going to be a material step up from here. So it's just to explain why the number is increasing slightly from '24 into '25. '25 is a good baseline for modeling going forward. Operator: We will now take the next question from the line of Andre Thormann from Danske Bank. André Thormann: I just have 2 questions. First, maybe can you elaborate a bit on how this goal of reaching 10% cash ROIC in 2026 for both Benelux and Norway will contribute to EBIT growth in '26? And maybe the second one on your long-term guidance of the 6% to 8%. Now you have delivered 10% in '25 on organic EBIT growth and you can potentially deliver 10% in 2026. So does this target seem maybe a bit conservative to you? That's my questions. Lars Vestergaard: So if we start with the long-term targets, then we've been above for a couple of years. I would say that it is the synergies from acquisitions that are starting to help us. So we are getting good help from Norway, Sweden and from the Netherlands on these numbers. And then, of course, we have a few CapEx investments that are also helping into '26. And on Norway and the Netherlands, we -- the plans are very clear. We have a lot of good initiatives in, and we can see the run rates are improving in both markets. So we are on target to deliver 10% cash ROIC in both Benelux as well as Norwegian plus the Swedish and parts of the Finnish assets because when you look at the cash flow target for Norway, it includes the business in Sweden as well as a small piece in Finland from the Solera acquisition. So all plans are clear, clear building blocks from -- that is already paying off in '25. And then in '26, there are a few big items that really moves the needle in both Norway and Netherlands. André Thormann: Okay. And maybe just a follow-up on BeLux. Do you still expect that will be a positive EBIT in 2026? Lars Jensen: We are assuming with the initiatives that we are taking currently, we will be assuming not that it's going to be positive, but it's going to be quite neutral on EBIT level. So that's the core assumption for the year. Operator: We will now take the next question from the line of Soren Samsoe from SEB. Soren Samsoe: Just a follow-up on Norway and Holland. So if you could update us a bit on the commercial improvements you're seeing in Norway and Holland and how that's progressing? That's the first question. And then an update on the platform and also the cost base in those countries where you have done restructuring during the second half. Where does this leave you in terms of cost base and operational leverage going into 2026 if you see more volume growth in these markets? Lars Jensen: Yes. We -- so I wouldn't call it restructuring. Soren, that's a big word. We are always adjusting our organizations, as the market changes and our performance is changing and we see opportunities in the market, and we are massaging in some areas, we are taking some admin people out and then we are putting more people into the field. So we do that all the time, and that's also why we do not have anything that we call extraordinary costs because what we do is ordinary course of business. It is changing the flight attitude. Lars talked about efficiency initiatives. So it is changing the flight attitude of the fixed cost in relation to net revenue, and thereby, we create the operational leverage. So we're well positioned, assuming that volume will grow a little bit. We are well positioned to take the benefits of that. And that goes across all countries. It's not just relating to the newer markets like Norway and Netherlands, yes. Soren Samsoe: Okay. So it sounds like we could see some improved operational leverage there. But also another -- just a second question on Italy, where you've seen very good progress and also France, I guess. But Italy is, of course, a much bigger market. The exit rates we're seeing there and the flight attitude as you call it, could that continue into '26 as you see now? Lars Jensen: When we look at the Italian business, we are growing both share and beyond the market in volumes, and it is about a 6% growth, which is not what you would see reported because we have less private label. Now private label over time is, of course, less and less of the totality. We will still keep ourselves open-minded in terms of, I would say, sweating the assets. But what we -- so what we are exiting is the glass bottle private label because chillers is growing rapidly. So in that respect, we are taking one in and one out, but with a much, much higher margin. There is, of course, a limit on how much we can take out of private label because then it's not there anymore. What is left now is what we would call strategic private label because this is with customers where we also do business on our branded portfolio. So this is the status of the Italian business. Operator: We will now take the next question from the line of Andrea Pistacchi from Bank of America. Andrea Pistacchi: I have 3 probably quick, quick questions. The first one, going back now to Netherlands and Belgium, the improving top line trajectory that you're starting to see and the commercial initiatives there. Can you just highlight where your main wins are? And then what -- I mean, over the medium term, as you do better revenue management there, you probably gain share, what sort of top line growth would you expect from Benelux? Can it grow, I don't know, 3%, 4% for you? What do you have in mind? Second, probably a very quick one, costs of exiting Snacks. Have there been any -- have you booked anything in Q4 for this? And how much, please? And the third one, in the last 6 months or so, you've alluded to probably more difficult pricing environment in carbs in Denmark, mainly and probably also Finland. Just an update on that. And is this connected in any way? I think your price/mix in Northern Europe was flattish or thereabouts in the quarter. I mean there's clearly lots of mix effects in there, yes, but if you can comment a bit on pricing in those markets. Lars Jensen: Yes. So second question first, exit cost of Snacks. We have had none. So that has been done in a very smooth way, both from us, PepsiCo and the partner that has taken over. So well done for everybody. When it comes to pricing in general, I think what we see is, again, back to what I said earlier on that in the more mainstream parts of the market, we do see from time to time, and it changes from market to market, some activities that is more volume-driven than value driven. What we, of course, do not have insight into from a competitive behavior point of view, is this is driven by the brand owners or the brand implementers or is this is driven by the trade that wants more traffic in the outlets. It's probably a combination. And when you look at the pricing in the fourth quarter, it has, from a consumer point of view, been more attractive. So slightly deeper on promotional pricing than what we have seen. We have -- so our average pricing for our main categories is not very different than it was a year ago, but where we see some of our competitors have been with average pricing out of the stores at a lower level upon their choices or upon the store's choices, we don't know. But it's not something that is new. It's something that happens occasionally in markets and in categories, yes. Lars Vestergaard: Okay. Just on value management, I think one of the things that is a key, what do you say, tool in the -- right Unibrew toolbox is that we have very granular data on how much money we make on individual screws, on promotions, et cetera. And I would say when we have acquired companies, one of the things we often do is to really make certain that we have that data available for the acquired companies and really make certain that we move the focus towards the segments where we do make money. So that's the first step we do when we start to integrate acquisitions. And that is giving us some good wins in Benelux and Norway as we get more granular insights into where we make money. And then we have a team that takes best practice across the markets and work together with the local organizations to ensure that our price pack architecture is strong in each market, and then we are very focused on the segments where there is money to be made, and we deprioritize the segments where profitability is low. So this is very much about the basic financial ways of working that you focus on where money is made. But of course, when you look at some of the markets and the market share gains we've had in some of the Nordics, we have seen reactions from competition in terms of price because our market shares are growing very strongly over a number of years in -- particularly in Denmark and Finland, where we have been very successful. Andrea Pistacchi: And if I may, sorry, my sort of first question on Benelux, would you expect, as you do more of the revenue management as you've got everything in control now, would you expect the top line trajectory to improve there? And what's the sort of growth ambition in these markets? Lars Jensen: Yes. But I also said it a little bit earlier, Andrea. I think we're doing a lot of changes on price pack. That's predominantly in Holland. We are changing our promotional priorities, which we have seen the effect of positively in the second half of the year mostly. And the success of the new strategy, we'll have to rely on seeing what is happening over the summer in the conversion of selling less big pack sizes at low prices, converting into smaller and instant size consumption occasions. We have had, I would say, a really strong reception by the trade. But of course, the next layer is the consumers. So we'll have to be a little bit patient to conclude on that. But our overall idea about BeLux and Holland and for that matter, Norway is that the trajectory that we bought, which was more kind of like flattish and even to declining businesses is something that we can fix, will fix. Some of it we have fixed. And thereby, we should be able with those relatively small market shares that we have in those markets, we should be able to outgrow the market. So that's what we want to achieve. And with that, I would like to thank everybody for participation. As usual, you know where we are, give us a ring, write to us, and we will be available. Thanks a lot, and enjoy the day.