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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.
Operator: Greetings, and welcome to Pebblebrook Hotel Trust Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. Please go ahead. Raymond Martz: Thank you, Donna, and good morning, everyone. Welcome to our fourth quarter 2025 earnings call. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer; and Tom Fisher, our Co-President and Chief Investment Officer. Before we begin, I'd like to remind everyone that our remarks are as of today, February 26, 2026, and comments may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of any non-GAAP financial measures mentioned today. Now let's jump into the fourth quarter and full year results. We wrapped up 2025 with stronger-than-expected fourth quarter growth despite the demand disruption from the government shutdown. Same-property total RevPAR increased 2.9% and same-property hotel EBITDA grew 3.9% to $64.6 million, $2.2 million above the midpoint of our outlook. This was led by continued strength in San Francisco and better-than-expected performance in Boston, Chicago and at our recently redeveloped resorts. Year-over-year, adjusted EBITDA climbed 11.1% to $69.7 million, about $6 million above the midpoint, supported by strong hotel results, lower corporate G&A and slightly higher-than-expected business interruption income related to LaPlaya. And with the benefit of a reduced share count from buybacks, adjusted FFO per share increased to $0.27, $0.05 above the midpoint of our outlook and up a robust $0.07 and 35% higher than the fourth quarter of 2024. From a full year perspective, 2025 was defined by 2 very different storylines. Our redeveloped resorts and our urban recovery markets, especially in San Francisco, drove strong tangible growth while markets like Los Angeles and Washington, D.C. weighed on the headline numbers due to unexpected events that obscured the underlying strength across much of our portfolio. The key point as we enter 2026 is simple. The hotel demand growth engines are getting stronger and several of last year's headwinds are fading and should increasingly become tailwinds. Looking at fourth quarter operating performance, same-property occupancy increased 190 basis points, while ADR declined 1.6%, resulting in a 1.2% RevPAR increase. Importantly, out-of-room performance continued to do the heavy lifting with non-room RevPAR climbing 5.5%, which drove total RevPAR growth of 2.9%. These results reflect a deliberate revenue management strategy we executed on throughout the year. We prioritized growing occupancy when it was a higher return lever because higher occupancy at our properties, especially our resorts, drives incremental profit across food and beverage, banquets and catering and other ancillary revenue streams. That occupancy level-led approach remains a core part of our 2026 playbook because it improves both revenue quality and profitability for our portfolio. Our fourth quarter results reinforce 3 important themes that matter most for 2026. First, leisure demand remains resilient and noticeably improved from Thanksgiving throughout the end of the year, and weekday business travel continues to recover, especially in markets like San Francisco. Second, out-of-room spend remains healthy and continues to be an important profit driver for us, and our strategic reinvestment program is helping capture more group catering, outlet and ancillary spend on property. And third, expense growth remains well contained through an intense focus on creating operating efficiencies, which positions us to expand margins as revenue growth accelerates in 2026. We saw that relationship clearly in Q4. Same-property revenues grew by 2.9%, while expenses increased 2.6%, supporting modest margin expansion and representing an encouraging setup as demand continues to recover further in 2026. And if you exclude L.A. and D.C., total RevPAR growth was 4.2% up in the quarter, reinforcing that the underlying trend line improves as we exited the year. Now let's turn to where we're seeing -- where demand show up across the portfolio, starting with the resorts. Our resort portfolio continues to benefit from our completed multiyear strategic reinvestment program. In the fourth quarter, resort occupancy increased by roughly 160 basis points, driving total RevPAR up 4.9% and same-property resort EBITDA up a strong 17.4%. For the full year, resort EBITDA increased 1.3%. Importantly, many of our redevelopment resorts are ramping towards stabilization, and we see further meaningful growth ahead. For example, Newport Harbor Island Resort in its first full year post redevelopment ramped extremely well with total RevPAR increasing 38.5% and EBITDA increasing a significant $9.3 million to $17.7 million with additional upside in 2026 as this property stabilizes. Turning to our urban markets. Performance remained mixed quarter-to-quarter, but the overall direction improved in our recovery cities where business group and transient are rebuilding and leisure demand is returning. San Francisco led the portfolio again with fourth quarter total RevPAR increasing more than 32%, which was driven by a broad-based recovery across all demand segments, including business transient, group, convention and leisure. For the full year, our San Francisco portfolio grew RevPAR by 15.1% -- total RevPAR by 15.1% and RevPAR by an even stronger 17.5%, with hotel EBITDA increasing by 58.5%. These were great results, and we're very encouraged by the 2026 set in San Francisco, which Jon will provide more color on. Outside San Francisco, we saw steady improvements in 2025 in select urban markets like Portland and Chicago. Market-specific disruptions such as fires, ICE raids, national guard deployments, government shutdowns and softer convention calendars impact markets like San Diego, Washington, D.C. and Los Angeles. Encouragingly, L.A. improved sequentially as the year progressed with RevPAR finally turning positive in Q4 and early 2026 trends are improving further, which Jon will touch on later. And from a demand standpoint, fourth quarter leisure transient demand was a bright spot with transient room nights up 5.9%, aided by strength in consortia and wholesale channels. Group occupancy declined slightly, primarily due to lower attendance and cancellations from government and government-impacted segments. On the cost side, the story remains disciplined and consistent. For the full year, same-property expenses rose 3%. And excluding last year's real estate tax and other credits, total expense growth was just 2.2%, with cost per occupied room basically flat. Energy cost growth was held to roughly 2% for the year, reflecting continued progress on property level operating initiatives, investments and productivity programs. We're applying that same efficiency mindset at the corporate level as well. We made progress streamlining our organizational structure, reducing corporate staffing levels by about 10% year-over-year and lowering run rate costs through process improvements, automation and productivity initiatives. As a result, we expect total run rate corporate cash G&A to decline modestly in 2026. So when you put it together, we've got revenues improving, non-room spend positive and resilient and costs staying well controlled. We like the trend line heading into 2026. Turning to LaPlaya Beach Resort and Club in Naples, Florida. Our weather resiliency improvements are complete, and the resort is fully restored following Hurricanes Helene and Milton. We finalized our insurance settlement before year-end and recorded $3.1 million in business interruption proceeds in the quarter, about $1.1 million above our outlook, bringing total BI proceeds for 2025 to $12.7 million. With our claims now settled, we don't expect additional BI income in 2026. We're currently forecasting LaPlaya to generate hotel EBITDA of $28 million to $30 million in 2026 as resort continues to recover from the extended weather and rebuilding disruptions. Let me shift now to our capital allocation and balance sheet actions because that's where our increased flexibility shows up. On the capital side, we invested $74.6 million in 2025, including weather resiliency improvements at LaPlaya, refreshes at Argonaut and Hyatt Centric Delfina, the guestroom refresh that commenced at Revere Boston Common, the renovation of the conference center and meeting space at Paradise Point Resort and various sustainability investments across the portfolio. For 2026, we expect capital investments of $65 million to $75 million, reflecting the second year in a row of a more normalized lower capital investment run rate now that our multiyear redevelopment program is largely complete. This lower capital run rate is an important tailwind for 2026 as it supports higher discretionary free cash flow for debt paydowns and share repurchases. On the transactions front, we completed 2 strategic dispositions in the fourth quarter for gross proceeds of over $116 million, selling both Montrose at Beverly Hills and the Westin Michigan Avenue Chicago and redeploying those proceeds towards debt reduction and repurchasing common and preferred shares at very attractive discounts. Regarding share repurchases in 2025, we retired $13.3 million of preferred shares, buying them back at an attractive 24% discount to par. We also repurchased approximately 6.3 million common shares at an average price of $11.37 per share for a total of $71.3 million. We believe these repurchases represent an attractive discount to the underlying value of our portfolio and a high return use of capital that directly increases value per share. Turning to our balance sheet. Earlier this month, we refinanced our near-term maturities by closing on a new $450 million senior unsecured term loan due in 2031 and repaying the remaining Margaritaville Hollywood Beach Resort loan using cash on hand. These proactive measures extended our debt maturity profile, increased our unencumbered asset base and provided a clear fully funded path to address the remaining $350 million convertible notes due December 2026. And as a result, we have $150 million of cash on hand and roughly $640 million of revolver capacity. Outside of the convertible notes, we have no significant debt maturities until 2028, and our weighted average interest cost of 4.1% is the lowest in the hotel lodging REIT sector. All told, the important takeaways from the fourth quarter are about the trend line. The urban recovery is gaining traction. LaPlaya is back online and ramping. Total revenue quality remains strong, especially out-of-room spend, and our underlying cost discipline and search for efficiencies continue to position us for margin expansion as revenues grow. Combined with a lower capital investment run rate, we expect free cash flow to grow again in 2026, providing us with more momentum and capital flexibility. And with that, I'd like to turn the call over to Jon for more on the 2025 performance trends and our outlook for 2026. Jon? Jon Bortz: Thanks, Ray. I believe that we may finally be reaching a favorable transition point in the industry and for Pebblebrook. I'm going to detail the fundamentals behind that view. So I'm going to spend a little time providing some color on Q4 of last year, but my focus will be on the setup for 2026 and what we're already seeing happening here in the first quarter. After all, we're already at the end of February, so it's important that you understand how we think the full year sets up for Pebblebrook and how the first quarter is going so far. In Q4, our operating performance turned out better than we expected despite the government shutdown and the resulting travel disruptions that followed. This better performance was primarily driven by 3 factors. First, stronger leisure demand throughout our upper upscale and luxury leaning portfolio, and that strength more than made up for the negative impacts from the shutdown and the softer group demand. Second, San Francisco outperformed our expectations. And third, we again delivered strong growth in out-of-room spend, which is being led by the performance of our resorts, particularly our more recently redeveloped resorts. Our RevPAR in Q4 increased 1.2%, not bad considering the impact from the government shutdown, while the industry's RevPAR declined 1.1%. San Francisco RevPAR increased a massive 37.9%. San Francisco is benefiting from a recovery in all travel demand segments, leisure, business transient and group and convention. For those who believe it's being driven by the recovering citywide convention business, that is true, but it's only part of the story. And as an example, in December, with 0 conventions in San Francisco, that's right, 0 conventions, RevPAR for our San Francisco portfolio climbed 16.2% while the rest of our portfolio, excluding our San Francisco properties experienced a RevPAR decline of 2.5%. San Francisco has gone from a doom loop to a boom loop with all facets of business and real estate benefiting from a cleaner, safer city and governmental policies and leadership that support the city's recovery. San Francisco, along with the bounce back in Los Angeles, will lead our growth in 2026. And San Francisco showed very well over Super Bowl week with huge positive publicity that will help drive an even faster and stronger hotel recovery. Before I turn to 2026, I think it's important first to summarize what happened last year as it provides a foundation for our views on this year. Recall that a year ago, we were very excited about the setup for the year with a new business-friendly President, an already well-performing economy, essentially full employment, inflation and interest rates declining, and we were coming off an improving quarter in our industry at the end of 2024, where we saw demand re-correlate to GDP growth. Historically, that relationship holds best when policy noise is limited. We were expecting good things for the economy, for travel and our company. Well, as we all know, it didn't quite turn out as we expected. So what happened? Well, government policies that created economic uncertainty or downright negative impacts like the freeze on government travel got in the way, along with the government shutdown later in the year. This is very evident in the STR industry numbers. Industry demand started out the year well, but began to weaken in February following a deterioration in our relations with Canada. Then it turned negative in April, coinciding with Liberation Day and heightened policy uncertainty then worsened in October and November with the government shutdown, cutback on airlift and fears about flight safety. Fortunately, once the shutdown ended, travel began to recover with strong leisure trends arriving with Thanksgiving and continuing all the way through the Christmas and New Year's holidays. The industry also faced a worsening international trade imbalance all year with international outbound travel from the U.S. continuing to grow in 2025, while international inbound travel to the U.S. declined. International outbound travel now sits well above 2019 levels and inbound sits well below 2019 levels. Government travel was also lower than 2024 throughout the year as was government-related travel and government-impacted travel, such as travel associated with health care, universities, research and defense. So the so-called K-shaped economy developed during the year with the upper half of the socioeconomic spectrum seeing their financials improve and therefore, spend more and the bottom half pulled back and focused more on necessities instead of discretionary purchases like travel. This created a clear bifurcation of performance in the hotel industry, with the upper half performing significantly better than the bottom half. Our portfolio, which almost entirely consists of upper upscale and luxury properties performed better as a result. But the true underlying performance of our portfolio was obscured by the 9-month impact of the L.A. fires and our then 9 properties in that market and by the negative government-related impact on travel to D.C. and San Diego. Excluding L.A. from our calculations, highlights that the rest of the portfolio performed 180 basis points better in RevPAR and 160 basis points better in total RevPAR. D.C., which is a smaller market for us with 4 properties, negatively impacted RevPAR by 30 basis points and total RevPAR by roughly 60 basis points. These are not excuses. We're just providing the facts and the math so you can understand the performance of the underlying portfolio. As we look at 2026, we believe both the industry and our portfolio are set up extremely well for the year. Yet our outlook is appropriately cautious given policy and geopolitical risks. If not for the surprises we experienced last year, we'd be more confident providing an outlook for the industry and for Pebblebrook that would be much higher. So our outlooks are cautious and therefore, conservative, but our setup is not. That said, while we're building conservative into our outlook, we're staying nimble with revenue management and cost controls. But consider the following positives for 2026. Broadly, we have very easy demand and performance comparisons to a very disrupted 2025. Industry demand declined 0.5% last year, and RevPAR was down 0.3%, both of which are historically inconsistent with a growing economy and limited supply growth. Forecasts are indicating an improving macroeconomic environment with less uncertainty, supported by a stable and fully employed labor force, significant increases in business investments and substantially higher income tax refunds. [indiscernible] World Cup in many cities throughout the U.S., including 4 of our cities that will drive compression and longer stays. America250, which is broader than just July 4th events, will be very beneficial. For Pebblebrook, we already had the Super Bowl in San Francisco in February and it performed exceedingly well. NBA All-Star week in L.A. in February, which also performed well. We have upcoming NCA Men's basketball tournament rounds in 4 of our markets and numerous other special demand-generating events in 2026 throughout our markets. The year also has the best holiday calendar that I can ever remember, with most major holidays falling on or adjacent to weekends, which helps both weekday business travel as well as leisure on the weekends. We've already seen benefits from this favorable holiday calendar, starting with New Year's Day and then the Valentine's Day President's Day combined weekend and the rest is still unwritten. Assuming no big macro or geopolitical surprises, we believe demand will re-correlate to GDP as it did in Q4 2024 and early 2025 before all of last year's disruptions, and we're already seeing signs of that this year. Although Winter Storm Fern obscured that reconnection in January, when we look at the first 24 days before the storm hit, industry room demand improved to plus 1.5%. We're definitely seeing that reconnection in February with industry demand in the first 3 weeks up 3.5%, though this week's winter storm will depress the full month numbers somewhat. We have very easy comparisons in Los Angeles and Washington, D.C., and we've already been seeing the snapback in L.A. from the beginning of the year with RevPAR at our L.A. properties increasing 33.1% in January, basically recouping all of the lost room revenue in that month from last year. We're also on track to recoup last year's losses in February, so we're on a good trend so far. San Francisco is going through a very powerful recovery, and we're expecting another year of double-digit RevPAR growth this year. We're off to a very strong start with RevPAR climbing 12.2% in January, even with a year-over-year decline in citywide rooms on the books for the month. And we're heading for a 65%-plus RevPAR increase in February with the benefit of a very strong performance from Super Bowl and its almost week-long events. We have extremely limited supply growth in the industry to the point of it being a nonfactor, especially in our markets. We also have further ramp-up to go from our recently redeveloped and repositioned properties that benefited from the huge capital investments we made over the last few years, including at LaPlaya, which has been rebuilt and is even better and more resilient than before the last hurricanes. And finally, our portfolio is essentially all upper upscale and luxury with half of our EBITDA coming from our high-end resorts, all of which should continue to benefit from the strength of the more affluent consumer. Our first quarter performance so far and our outlook for Q1 illustrate the benefits of the setup that I just described. January RevPAR grew 4.6% and would have been almost 7%, but for Winter Storm Fern, which severely disrupted travel in the last week of January. We also were up against a tough comparison in Washington, D.C., which hosted the inauguration in January last year. February is on pace to achieve RevPAR growth of 15%-plus. As a result, our RevPAR outlook for the first quarter is 7.5% to 9%, with total RevPAR growing 6% to 7.5%. We're still seeing healthy growth in out-of-room spend by both group and transient guests, but the range for total RevPAR revenues -- for total revenues in the first quarter is lower because these non-room revenues have a harder time keeping up with room revenue growth when RevPAR growth reaches such a high level. For the full year, we're more cautious given the policy and geopolitical risks. We'll take it a quarter at a time. Our outlook provides for RevPAR growth of 2% to 4% for the year, with total RevPAR forecasted to grow between 2.25% and 4.25%. As of the end of January, our combined group and transient pace for the year was ahead of the same time last year by $21 million. That represents an increase of 2.4% over last year's final same-property room revenues. Pace growth is widespread and is up throughout our markets, except for D.C., which compares against the inauguration in January last year. We were encouraged by the revenue we picked up in January for the full year, which was favorable by $8.1 million over last year. But to be clear, that $8.1 million is part of the $21 million pace advantage for the year. The key takeaway is we're starting the year ahead. January was a very good pickup month, and we're watching pickup closely. But we believe our outlook is prudent given the risks and uncertainties. For 2026, we expect to continue delivering operating efficiencies and keep total property expense growth well controlled as indicated in our outlook. As a result, we're forecasting same-property EBITDA to increase by 2.1% to 6% with the midpoint at 4%. So even at the 2.25% bottom of the range for total RevPAR growth, we still expect growth in EBITDA. To wrap up, I hope you can tell that we're very excited about the setup for Pebblebrook for 2026. Now we just need the year to cooperate and provide a more stable environment. So with that, we'd now be happy to take your questions. Donna, you may proceed with the Q&A. Operator: [Operator Instructions] Today's first question is coming from Smedes Rose of Citi. Bennett Rose: Jon, I appreciate all your opening remarks. And I guess I was just wondering on kind of the one piece where there is maybe some better visibility. Could you just talk a little bit about what you're seeing on the group side and sort of maybe sort of the composition of those groups in terms of kind of who's coming? Jon Bortz: Sure. Well, when we look at our pace, most of our pace advantage is in transient, both leisure and business transient and contract business. So group itself, group room nights right now are down 0.6% for the year. ADR is up 2.4% and group revenue is up 1.8% whereas transient room nights up 11.6%, ADR plus 0.6% and revenue plus 12.2%. Now the one thing I'd say about the group pace, it's still very widespread. We do continue to see the same softness when it comes to government and government-related government-impacted industries. But one of the things our properties are doing based upon their experience last year is the group that's on the books is washed to a greater extent than it was going into last year. So I think it's a little bit more realistic when you consider what the trends were in terms of attrition and attendance compared to this year where at least right now, I think it's more representative of the trends that we were seeing late last year. Operator: The next question is coming from Rich Hightower of Barclays. Richard Hightower: A question on your resort portfolio and specifically the portion that's been -- that's had sort of heavy renovation CapEx over the last number of years. I guess if we look to the end of 2026, embedded with the guidance, what sort of unlevered cash returns do you anticipate on that spend? Or what's baked in the guidance? And then obviously, those assets are still ramping to stabilization. So what's sort of the ultimate stabilized target on that spend, if you don't mind? Raymond Martz: Sure, Rich. Yes. and we updated some good detail in our investor presentation, which I encourage you to look at, which talks a lot about these redevelopments where we lay each of these out. The good news is on the 2023 and '24 projects where we invested a little over $100 million of ROI capital, we've realized already about $20 million of that, some of it we talked about today with Newport, a pretty phenomenal improvement during the year. And we have a remaining kind of $4 million to $8 million that we expect here in the next 2 to 3 years as it's further realized. So we've been -- and for these projects, that's actually closer to an ROI -- a cash ROI in that 22% to 26% range. So that's... Jon Bortz: Annual cash yield. Raymond Martz: Yes. Annual cash yield. So that's the ROI increased cash that we're generating the properties. And then when you look at the projects, overall, our strategic reinvestment program, and that's the one where for the last several years, we invested since 2018 in number of projects, we're averaging closer to that 16% to 17% annualized cash-on-cash ROI return. So these projects that were done recently from these resorts, it's adding on a lot of additional areas where we have additional food and beverage outlets, other revenue-generating areas that creates a lot of out-of-room spend. And that's where we touched upon earlier, our focus has been the occupancy-driven approach, especially at our resorts because when the guest comes to the resort, they stay and they spend a lot of money. That's why these returns have been very healthy and encouraging, and we feel good about the progress. We expect more in '26. Operator: The next question is coming from Cooper Clark of Wells Fargo. Cooper Clark: I appreciate the color on the strong first quarter. Curious as we think about the lower implied RevPAR guidance for 2Q through 4Q despite your higher exposure to really strong calendar events. Can you walk us through some of the puts and takes embedded in guidance with respect to leisure trends in the year for the year group pickup or other items where you maybe started a bit more conservatively, as you mentioned earlier, given the macro uncertainty? Jon Bortz: Sure. So when we look at last year, we went from a very significant advantage in pace when we reported same time last year to a decline in pace by the end of the year. And that all had to do with events, starting with the fires, the first week of the year that -- where the impact really lingered through much of the year, really 9 months. And so our outlook for this year, and I'm trying to be clear in my comments that we're being very conservative where we don't have full visibility, knowing that there are disruptions that can pop up that we don't anticipate pretty much any given day of the year. And so when we look at the last 9 months of the year, it really is an implied RevPAR growth of 1% to 2% for our range. And that really doesn't take into account significant benefit from World Cup, from America250, from other events, from the benefit of the holiday calendar. And it doesn't really take into account the assumption that demand re-correlates with GDP because otherwise, with forecast of GDP in the 2%, 2.5% range, our forecast for the industry would be higher than the range that we laid out at 0% to 2%. So we're being very conservative. We think very prudent right now given our experience last year with our outlook for the last 3 quarters. In terms of the trends we're seeing right now, they're all positive. I mean, other than the weather, where we had a second weather event, a blizzard with Winter Storm Hernando, which really put a damper on what was looking to be a really great month in February for the industry and clearly impacted travel all over the country. So we're still seeing the trends be positive. We are seeing this re-correlation with GDP, but for the weather. And we think so far, despite all the things that have happened geopolitically so far this year, it hasn't really had a big impact on the underlying demand trends. So from that perspective, despite all those things, travel demand seems to be continuing to improve. Does that address your question, Cooper? Operator: [Operator Instructions] Our next question is coming from Aryeh Klein of BMO Capital Markets. Aryeh Klein: Jon, maybe just on the transaction market. You did sell a couple of hotels late in the year. Just curious what you're seeing about the out there, how you're thinking about the portfolio and just the potential to maybe sell a few more assets this year? Thomas C. Fisher: Aryeh, it's Tom. Yes, I mean, obviously, what you've seen is the market is becoming certainly more constructive. You've been reading about more trades, especially kind of the bid for luxury. And I think a number of the trades that have been announced recently have also skewed to much larger transactions. So I think that's a trend that you're going to continue to see. And part of that is the debt markets and the cost and availability of debt continues to improve. Brokers are certainly more optimistic. Buyer debt seems to be improving. There's a lot of equity capital out there looking for opportunities. But as we've talked about for the last 18 months, they're looking for conviction. And what does that mean? That basically means growth. And as we all know, performance or capital follows performance. So I think everybody is kind of waiting to kind of see if the setup that we've set out for 2026 kind of comes to fruition, you'll continue to see momentum as it relates to the transaction and trades in the market. And I think you'll continue to see us be engaged and be heavy participants in the market as well. Jon Bortz: Aryeh, one other thing just to add on the transaction side. We did do those 2 transactions in November. And there were quite a number of sell-side analysts who never updated their numbers for 2026 for the lost EBITDA from those assets sold at the end of 2025. And at least for the community that's on the phone, we'd ask if you could please update your numbers because it's inappropriately skewing consensus numbers for 2026 and then really doing a disservice to the investment community out there. So if the sell side could keep their models up, particularly for these material events that occur that impact future numbers, we think that would be much better for the investment community. That was not directed at you, Aryeh. Aryeh Klein: For what it's worth, it was out of our numbers, but... Operator: The next question is coming from Michael Bellisario of Baird. Michael Bellisario: Sort of along those same lines, just relative to your very positive outlook, good start to the year. I mean how do you balance that better performance with those potential asset sales you talked about and further deleveraging in the balance sheet? I guess, maybe said another way, do you rely a little bit more on organic growth to delever in 2026 as opposed to maybe selling a few more hotels to get you to your balance sheet targets? Jon Bortz: Yes. I mean I think our strategy continues to be a dual approach. First, it's how do we create value for the shareholders. And one of the ways we do that is by buying our existing assets back at a big discount to what they would trade for in the marketplace. And so I think what the improving underlying performance does is it's going to have an impact on the buyer community. And as Tom said, help it become more constructive because to date, the buyer community, one, has been in no hurry and two, hasn't really been underwriting growth in the future. And for the most part, for the last couple of years, that -- those assumptions have been right. We haven't had growth. We've had shrinkage. So I think as we get on this positive trend, I mean, remember, we have extremely limited supply growth for the next 3 to 4 years. If you don't start this year, you're not delivering for 3 years at a minimum in the major urban markets and in the resort market. So I think for us, as long as this public-private arbitrage opportunity exists, we're going to continue to sell assets. And we're going to -- we'll pay down debt in order for our ratios to remain the same with the organic growth in EBITDA really driving down the overall ratio because we're not at a stabilized level of EBITDA given the impact on the markets during the pandemic and post pandemic, particularly the urban market. So we think that will naturally recover as we laid out in our investor presentation in a very significant way. Start -- some of it started over the last couple of years, and it's accelerating, particularly in markets like San Francisco and with the snapback in L.A. from the fire impact last year. So we're really going to focus on taking advantage of the public-private arbitrage opportunity. We'll continue to sell assets as the transaction market allows, if you will, as a functioning market. And we'll use that capital to do 2 things. One is pay down debt related to the EBITDA that we're selling and two, to buy back our stock, both common and preferred, trading at material discounts. Michael Bellisario: Got it. If I could just sneak in a quick follow-up. Just the new slide in your deck on the brand management encumbrances that you added. What drove that? And what should we read into that data? Jon Bortz: Yes. I mean I think the reason we put it together are some misconceptions out in the industry about what unencumbered means and what the impact of being unencumbered has on values. A lot of times, people have this tendency just to look at cap rates, which our industry doesn't really trade at cap rates. Cap rates are really the result of how people are underwriting the future performance of an asset. And as I said in my earlier comments, the buyer community hasn't been underwriting any growth in the future. And that's not normal, but it is consistent with an operating environment that hasn't been increasing. And so as I said, the buyer community is right. But we wanted to lay out the fact that the vast majority of our portfolio is unencumbered by both brand and by operator, 77% of the portfolio. And those assets trade historically at a 10% to 20% premium on EBITDA multiples or on underwriting future because the buyer community is as broad as it possibly can be. So you get the greatest competition, you get strategic buyers, you get capital being provided by strategic buyers that increases transaction values. And you have upside that people assume from being able to put a flag on or changing operators that improves future performance that also leads to higher values. So we wanted to provide that detail so people could understand it. It's not always clear, particularly in cases where we have rights like termination on sale that will free an encumbrance that is otherwise a long-term encumbrance for us. But to a new buyer, it becomes free and clear. So we've laid that out here. We also wanted to clarify the understanding about ground leases from 2 perspectives. First, there's some out there who actually take the future liability of ground leases and put that as a liability in calculating NAV. And that's -- it's double counting because we're already reducing EBITDA by the ground rent payments, and therefore, it's factored in. They do tend to trade at higher cap rates, resulting cap rates or lower EBITDA multiples in some cases, because it's not fee simple, and that, of course, makes sense. But also, the ones that have public entities, those tend to get extended on a regular basis over time because the public entity has no interest in owning the asset. It wants the income and it wants the income to increase over time. So there is a difference, just like there's a difference in debt between CMBS and bank debt. There's a difference between ground leases depending upon whether they're privately -- the landlord is a private entity or whether it's a public entity. And so we wanted to call that out, Mike. Operator: The next question is coming from Gregory Miller of Truist Securities. Gregory Miller: I wanted to ask about the Boston market. I was looking on Page 12 of your investor presentation, where you analyze market level anticipated upside from a continued urban recovery. And one of the parts of that slide noted that Boston ranks third on the implied EBITDA recovery despite 2025 occupancy already at 80%. The anticipated EBITDA recovery is almost as big as San Francisco, which remains a more depressed market. So I'm curious where you see Boston's EBITDA growth coming from in the next couple of years? Just general thoughts about the upside in the market going forward. Jon Bortz: Sure. Thanks, Greg. So first of all, it's a couple of things. And when comparing it to San Francisco, it's a much bigger market for us in terms of the asset base that we have in that market. We have 5 assets, but they tend to be larger assets and they tend to be higher ADR assets in the marketplace. So those assets have historically run in the upper 80s, mid- to upper 80s and in '19, ran at 88%. Our forecast is to get it to 80%. So Boston as a market and those properties as well have historically run at a higher level. I think when we look at San Francisco, we're being very -- we're still being conservative with where we think that market can run at. But you can see in the slide, it's very similar to Boston in terms of the recovery range that we've laid out, 80% to 85%. We also think there's more growth in total revenues in that market. We have a lot more meeting and event space in that marketplace. We have a lot more ancillary revenues in that marketplace. And those we think will continue to grow and drive a significant operating leverage in that business because while we've had a decent recovery in Boston, our assets were still running below '19 from an EBITDA perspective, we think there's a lot more upside there. Operator: [Operator Instructions] The next question is coming from Chris Darling of Green Street. Chris Darling: Thinking about your CapEx outlook for the year, obviously, a lower near-term run rate there, and that is supportive from a free cash flow perspective. But the flip side of that equation is obviously the potential over time for deferred maintenance and/or loss of market share. So hoping you could speak to how you balance that trade-off. And maybe you could speak to balancing that trade-off both from sort of a corporate level financial perspective, but also from the standpoint of maximizing value with any future dispositions. Jon Bortz: Yes. So first of all, we don't have the issue. We're not doing a trade-off in capital. We're not deferring capital. In fact, we continue to do what we've always done, which is protect the real estate, do all the infrastructure improvement and capital investing, improve systems when new technology comes out and we can lower operating expenses. A significant part of our overall capital relates to that infrastructure, whether it be HVAC systems or modernizing elevators or new roofs or new windows in -- at our properties. And as it relates to the ongoing -- and of course, there's little to no revenue that we get from those infrastructure investments, but it obviously protects the downside. So the trade-off is if you don't do that stuff is exactly what you're talking about. As it relates to maintaining the interiors, we do that on a regular basis. The major redevelopments that we've done, we did because we bought the asset or we bought LaSalle, and we saw that there was very significant opportunity to reposition those assets. And in some cases, we had to invest capital because capital was deferred. And so we did that. So we don't wait around for 8 years or 10 years to do major renovations in order to catch up on deferred maintenance or deferred investment in the interiors. We're doing that constantly within the portfolio. And fortunately, because we do it at a very high-quality level, we invest very significant dollars in the kind of case goods we buy, the quality of the fabrics that we buy, the lighting, et cetera. Those generally are fairly limited in terms of how much capital we need to invest. They last longer because we're designed forward in our hotels, they tend not to go out of style. And so in our portfolio, you really don't have deferred capital. We don't have a trade-off issue as a result of that. And we see it 2 ways, Chris, and this is to understand how we do, we're always looking at our customer reviews. We're looking at our rankings on TripAdvisor, on Expedia, on Yelp and the different rating services. And they tell us whether we need to do refreshes or not. They confirm what we're doing or they don't. And if there are issues that come up there with customers, we see it. We obviously also get the customer reviews that our operators do, but we really look at the public ones because we think, one, they're skewed, they tend to be more negative than positive anyway. But at the end of the day, we look at our rankings and how we compare to the competitive sets. And what we've seen over the last 3 and 4 years is we continue to gain in our rankings with our customers. So we continue to go higher. We continue to increase customer service. We just find more efficient ways to do it. We have better training programs. We provide better service levels. We get more individual employee comments from our guests about the higher quality level of service and more personalized service that they're getting. So it's really critical to gaining share over time, which is what we've been doing. And that's the other way to see how does your property compete. And if you're gaining share, it's another indication that your property competitively is in the best shape in the marketplace. Raymond Martz: And Chris, also, what we found is this leads to better ROI and look at a lot of the capital we've invested into our resorts since we don't have any branded resorts. We have complete discretion on how we want to choose to invest the capital versus a brand telling us, oh, you need to replace that door lock because this is a new brand standard, which has no ROI. So we can really target the capital, which is why in our investor presentation, we detailed some of those returns, and I encourage our investors to look at that. It's some really high returns because, again, a lot of that capital is areas where, to Jon's point, it's going to speak to what the customer is looking for. It's going to lead to higher revenues and other revenue sources, and that also leads to higher ROI and EBITDA growth. Operator: Unfortunately, that is all the time we have today for questions. I would like to turn it back over to Mr. Bortz for closing comments. Jon Bortz: Thank you all for participating today. Look, we're -- we'll be back to you in the next 60 days. And of course, we're going to see many of you down at the Citi Conference down in Hollywood, Florida. And let's all continue to root for a more stable environment because that will have a big positive impact on the industry and our own performance over the course of 2026. And we look forward to catching up with you in the not-too-distant future. Thank you. Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Operator: Good day, and welcome to Vallourec's 2025 Full Year Results Presentation hosted by Philippe Guillemot, Chairman of the Board and Chief Executive Officer; and Nathalie Delbreuve, Chief Financial Officer. [Operator Instructions] And now I would like to hand the call over to Daniel Thomson, Director of Investor Relations. Please go ahead, sir. Daniel Thomson: Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Vallourec's Fourth Quarter 2025 Results Presentation. I'm Daniel Thomson, Director of Investor Relations at Vallourec. I'm joined today by Vallourec's Chairman and Chief Executive Officer, Philippe Guillemot and Vallourec's Chief Financial Officer, Nathalie Delbreuve. Before we begin our presentation, I would like to note that this conference call will be recorded. A replay will be available following the call. You can find the audio webcast on our Investor Relations website. The presentation slides referred to during this call are also available for download here. Today's call will contain forward-looking statements. Future results may differ materially from statements or projections made on today's call. The forward-looking statements and risk factors that could affect those statements are referenced on Slide 2 of today's presentation. They are also included in our Universal Registration Document filed with the French Financial Markets regulator, the AMF. This presentation will be followed by a Q&A session. I'll now turn the call over to Philippe Guillemot. Philippe Guillemot: Thank you, Dan. Welcome, ladies and gentlemen, and thank you for joining us to discuss Vallourec's fourth quarter and full year 2025 results. You can see today's agenda on Slide 3. I will move directly to Slide 5, where I will start by discussing the highlights of 2025. 2025 was another transformative year for Vallourec. We progressed several major strategic initiatives and achieved key financial milestones. We continue to drive operational excellence through the organization, including the execution of our cost reduction program in Brazil completed in Q2 ahead of schedule. We significantly narrowed the profitability gap with our primary peers, demonstrating the effectiveness of our strategy and execution. We stayed true to our value-over-volume operating model, securing a new and enhanced long-term agreement with Petrobras, winning major high-value tenders across the Middle East and driving market share and margin growth in the U.S. through our domestic footprint. We continue to streamline our sources and uses of capital, executing the sale of our non-core Serimax welding operations and redeeming 10% of our long-term notes. Importantly, we also positioned the company for profitable growth. We successfully acquired and integrated Thermotite do Brasil, adding to our line pipe coating capabilities. These are increasingly serving as a key differentiator in deepwater projects. In the U.S., we broke ground on a USD 48 million premium threading line investment in Youngstown to increase capacity to thread VAM high-torque connections, which are increasingly used in onshore wells with long laterals. We made further progress on the Phase 2 extension of the mine ahead of expected completion in 2027. As Nathalie will discuss, we built on our growing track record of consistent cash generation with over EUR 400 million of total cash generated in 2025 for the third straight year. These improvements in our profitability and financial resilience were recognized with investment-grade credit ratings across all 3 rating agencies, setting the stage for further optimization of our balance sheet on more favorable terms. Finally, in May, we paid a substantial dividend to shareholders for the first time in a decade, executed a minor buyback and work to enable our much more significant 2026 share buyback. Let's turn to Slide 6 to discuss our results and outlook. In the fourth quarter, we delivered solid results once again with group EBITDA of EUR 214 million, above the midpoint of our guidance. This came with a robust 21% margin. We delivered excellent total cash generation of EUR 177 million, thanks to robust collection and inventory management. In the first quarter, we expect tubes EBITDA per tonne to remain stable sequentially, while volumes will be below the Q4 2025 level due to slower international bookings in H2 2025. In Mine & Forest, production sold is expected to be around 1.4 million tonnes. As a result, we expect Q1 EBITDA to range between EUR 165 million and EUR 195 million. In the U.S., our assets remain highly utilized and recent booking activity remains strong. Industry pricing has softened slightly, but we are encouraged by the downward trend in imports and the resilience of our customers' activity. In international markets, commercial activity remains somehow subdued in H2 2025. But in the Middle East, we are now seeing clear signs of acceleration, especially in markets with higher level of unconventional activity. We see potential for activity to increase in the second semester and beyond as the oil market rebalances, gas-related activity increases and our customers face accelerating decline rates. Turning to capital allocation. We are making good progress with our EUR 200 million buyback announced in January with EUR 150 million remaining under the current program. We have purchased 3 million shares year-to-date. Now let me provide you with an update on 2026 shareholder return on Slide 7. Today, I am pleased to announce Vallourec's expectation to propose in addition to the EUR 200 million share buyback, an interim dividend of approximately EUR 450 million to be distributed in the third quarter this year. This would take the total return to shareholders to approximately EUR 650 million between January and August 2026, representing a year-on-year increase of around EUR 280 million. This distribution represents approximately 90% of our 2025 total cash generation and 100% of the proceeds of the warrants, which are expected to be exercised before the end of June. We have adopted a balanced distribution framework, limiting warrant dilution through buybacks, growing our dividend and maintaining a defensive balance sheet. Based on our current share price, this distribution represents a potential interim dividend of EUR 1.75 per share including the anticipated dilution from the exercise of warrants. This is a healthy increase of EUR 0.25 compared to last year's EUR 1.5 per share. Turning to Slide 8. We show the usual comparison versus our primary public peer. The trend is clearly positive over the past year, and we remain focused on eliminating the gap entirely. We continue to outperform in terms of return on capital, which is a key focus of our medium-term road map. And on that note, let's turn to Slide 10 for an update on our strategic priorities. We have made substantial efforts to streamline our core asset base over the past several years, but there is still work to be done. Our key strategic priorities in 2026 are directed at unlocking this potential. First, we will continue to drive operational excellence throughout the group. This is not a passive process. We are actively implementing a new management system, which is firmly results-driven and embedded in daily operations across all business functions. Bertrand Frischmann, our Chief Operations Officer, is responsible for its implementation. We look forward on sharing more about this program with you in the coming months. Secondly, we will continue to optimize our asset base to drive improved return on capital. And third, we are actively investing to position ourselves for profitable growth. Let me talk about a few examples on the later 2 initiatives now. Let's turn to Slide 11. Here, you can see the targeted set of high-return projects we have executed since the launch of the new Vallourec plan in 2022. You will recall we began with a major downsizing of our rolling capacity in Germany and rightsizing in China and ultimately Brazil. We made the strategic decision to close loss-making capacity and exit low-margin business. More recently, our focus has turned to the upstream and downstream elements of our value chain and is more about enabling profitable growth than shrinking our assets. In our upstream process, we have invested to expand capacity for high-quality iron ore production at our mine in Brazil. Production from the Phase 1 extension started at the end of 2024. We are now working on Phase 2 with completion still scheduled for sometime in 2027. We are now undertaking projects to reconfigure our steelmaking assets in Brazil to reduce complexity and maximize operational flexibility, including the ability to run our steelmaking operations without the use of our blast furnace. In our downstream operations, we are investing heavily in our flaring and coating capabilities where technology barriers and returns on capital are higher. We are adding to our threading line capability in the U.S., adding both large diameter and high torque capabilities. Meanwhile, we see significant opportunities in advanced coating solutions and we'll be investing in both line pipe and OCTG coating line this year. All of these projects will be executed within our expected CapEx envelope of EUR 150 million to EUR 200 million on top of significantly increased spending on safety initiatives as laid out in our capital allocation framework. Let's turn to Slide 12. to discuss one way in which we are positioning for profitable growth. At our Capital Market Day in 2023, we highlighted our favorable positioning in the conventional geothermal market and the upside that could materialize in more advanced technologies. We are now seeing clear signs that these next-generation technologies are moving towards widespread adoption. The momentum is driven by rising demand for low carbon baseload and dispatchable power with AI hyperscalers investing heavily to secure supply. The IEA has recently highlighted a fivefold surge in next-generation geothermal financing over the past 3 years to $2.2 billion in 2025. The increase in financing has been underpinned by rapid technological progress, much of which relates to learnings from the shale industry. With drilling and well costs representing up to 80% of total cost, significant improvements in drilling speeds are dramatically improving geothermal project economics. You can see the high potential of this market in the chart on the right, which comes on top of expected growth in conventional geothermal. We are already experiencing a significant increase in our geothermal bookings as our customers begin to execute on development pipelines that are orders of magnitude above today's installed capacity. We are uniquely positioned to benefit from this growth, thanks to our domestic footprint in the 2 largest markets for geothermal today, the U.S and Indonesia. Our cutting-edge research and development expertise has allowed us to continuously improve our product offering to meet the high demand of geothermal wells placed on tubular products. And we can pair these products with our world-class service offering. Let's look more closely at the next-generation geothermal opportunity. I am on Slide 13. You can see the elements that differentiate traditional geothermal from next-generation applications. On the left, you have conventional geothermal, which has seen steady growth over time but is restricted by the requirements for hot water reservoirs and sufficient subsurface permeability. In the middle, enhanced geothermal mitigates the permeability constraint by using Shell like technology to add subsurface fractures into deeper conventional geothermal systems. In closed loops or advanced geothermal, the only requirement is hot rock with no need for an external water source or permeable rock. Naturally, this opens up the resource potential exponentially. Turning to Slide 14. You can see the typical characteristics for each geothermal development type. Much like the oil and gas industry use rapidly advancing technology to tap into unconventional and ultra-deepwater fields in the early 2000s, the geothermal industry is pushing technological boundaries that open new markets. Vallourec is ideally positioned from its expertise in shale development to serve enhanced geothermal market. Similarly, our unique vacuum insulated tubing solution is ideal for closed-loop system. This is not a fantastic. We are already serving customers across all of these product categories. Clearly, though the growth potential in next-generation solution, coupled with Vallourec's higher revenue opportunity per megawatt makes the growth in advanced and enhanced applications quite compelling. As you may have seen, in January, we announced an exclusive partnership with XGS Energy to support their delivery of a 3 gigawatt pipeline of commercial advanced geothermal projects across the Western U.S. We hope this will be the first of many such fruitful relationships in this industry. Now let's turn to our usual discussion on the OCTG market. I am on Slide 16, where we focus on the U.S. market. On the demand front, the horizontal oil rig count has been stable since mid-2025. Gas-directed drilling activity has increased through 2025 and into 2026. A wave of LNG project start-ups and growing domestic gas demand is supporting market expectations. Rigs drilling for gas now account for 1/4 of the total count, up from 17% a year ago. Looking at the supply side, imports continued to decline for the fourth quarter following the administration's increase in Section 232 steel tariffs in June. Notably, we can see from the chart that the tariff has been more effective in curbing seamless imports compared to welded imports. On the right, seamless spot pricing has moderated slightly since the third quarter, though prices increased in both January and February alongside improving sentiment. Overall, we are encouraged by the improving supply side dynamics and the resilience of our customers' activity. Let's move to the international OCTG market on Slide 17. Demand remained stable in international markets, but was somewhat subdued in 2025 compared to the beginning of 2024. We saw slower tender activity in the second half of 2025 that will cause us to start 2026 at a slower shipment cadence. In most of our core regions in the Middle East, Africa and Latin America, we have continued to perform well, in part due to our strong positions in high-value markets like unconventional gas and deepwater. Looking ahead, in the Middle East, we are seeing some signs of an activity acceleration, especially in markets with higher levels of unconventional activity for which we are supporting customers today with our high top premium connections. Our premium portfolio often allows us to outperform the price indicators we show on the right side of this slide. That said, the latest outlook from Rystad does show an improvement in market pricing in January. I confirm that our average booking prices for international markets have remained at healthy levels due to our ongoing focus on value over volume. I will now hand the call over to Nathalie to comment on our financial results. Nathalie Delbreuve: Thank you, Philippe, and good morning, everyone. So let me now lead you through our key figures and results for Q4 and the full year 2025. So let's turn to Slide 19 to discuss our full year results and the key figures. As you can see, tube volumes were 1,244 kilotons for the full year 2025, so down slightly year-over-year with lower tubes volumes in South America and Eastern Hemisphere, not fully offset by stronger volumes in the U.S. The full year EBITDA was EUR 819 million versus EUR 832 million for the full year 2024. This slight decline includes a significant adverse foreign exchange impact of EUR 47 million. Tubes volume decline was more than offset by positive price/mix effect in tubes, stronger contribution from mine and forest and continued cost reduction initiatives, maintaining a strong 21% margin. Net income was EUR 355 million versus EUR 452 million in 2024. Let's remember that 2024 was impacted by positive one-offs with the sale of the Rath site in Germany, generating a gain of sale of EUR 139 million and with our refinancing last year. Overall, we continue to build on our track record of generating consistent net income. Net cash ended the year at EUR 39 million, slightly higher than end of 2024 and after EUR 370 million having been returned to shareholders. So moving to Slide 20, we can see that we continue to build on our track record in Q4. It has now been 13 quarters that the EBITDA margin has been around 20%, showing the strong resilience of the group, its ability to adjust costs and maintain a strong margin. Since 2022, we have been reducing our working capital requirements in number of days, as you can see on the top right. In Q4 2025, we further improved our working capital requirement with robust collections and inventory management. You can see on the bottom left that we have a track record of healthy positive total cash generation with EUR 177 million total cash generated in Q4 2025, which leads to positive cash at the end of the year, as you can see on the right. Let's turn now to Slide 21 to start discussing our Q4 results and key figures. So revenues were EUR 1.043 billion, down 2% year-over-year, but again, impacted by negative currency effect of minus 6%. So revenues at constant foreign exchange rates are up 4%. Reduction in volumes sold were more than offset by improvement in price/mix and minor positive effect in Mine and Forest. EBITDA was EUR 214 million or 20.5% of revenues, stable compared to Q4 2024. Foreign exchange impact quarter-over-quarter is negative by EUR 10 million. So like for the full year, the positive price/mix effect in tubes across all regions as well as lower costs and cost savings did offset the impact of lower volumes, which I will comment in the next slide. Adjusted free cash flow in Q4 2025 was EUR 204 million to be compared to EUR 178 million in Q4 '24, which I will comment in more details later. And this led, as we saw to a net cash position, it's EUR 39 million achieved at the year-end. We will now look at Tube performance in Q4 on Slide 22 and also 23. So looking at volumes, Page 22, you can see that volumes were stronger quarter-over-quarter as we guided. They were lower year-over-year, mainly due to our U.S. import business in the Gulf of America as expected and certain regions in Eastern Hemisphere. Average selling price was higher year-over-year as mix shifted more to international in Q4. Overall, Q4 Tubes revenue was 2% higher year-over-year and even 8% higher at constant foreign exchange. Revenue mix by geography that you see in the bottom left shows a reduction in North America contribution due to the decrease in imports versus Q4 2024, but also to a strong contribution from Middle East. Slide 23, we can see the Tubes profitability. So Tubes EBITDA was EUR 183 million and 18% of revenue. So as you can see, our margin is very stable and resilient. Tubes EBITDA per tonne at EUR 548 increased by EUR 37 per tonne year-over-year and even EUR 65 if you consider constant foreign exchange rate, confirming again, the positive impact of our value over volume strategy. The decrease versus Q3 2024 EBITDA per tonne is due to a less favorable mix this quarter and a lower proportion of services. So let's move now and look at the Mine and Forest performance on Slide 24. The production sold in Q4 '25 was close to 1.5 million tonnes, outperforming our expectations voiced during our Q3 call, leading to full year volume of 6.2 million tonnes. Mine and Forest EBITDA, as you can see on the right bottom, reached EUR 38 million and 48% of total revenue, increasing sequentially by 10%. This reflects higher iron ore market prices, partially offset by seasonally lower volumes. For the full year, EBITDA reached EUR 171 million, up significantly year-over-year, reflecting higher quality in ore after the start-up of the Phase 1 extension in late 2024. So let's look now on Slide 25 at our net income key drivers and evolution. We continue to deliver a solid bottom line, as you can see on the right. In Q4, net income was EUR 96 million, that is 9% of total revenue, net income group share. You can see that Q4 2024 net result was higher at EUR 163 million. Again, as already explained, in 2024, the group net results had benefited from the one-off book gain on sale of the Rath site in Germany for EUR 139 million. Looking on the left at Q4, you can see that -- and the bridge from EBITDA to net income group share, you can see that depreciation and amortization amount to minus EUR 52 million, very much in line with previous quarters and Q4. Financial result is minus EUR 16 million. In the other pillar of the bridge includes restructuring and some one-off impacts such as in the quarter, a positive reversal of impairment of assets in China for plus EUR 38 million, reflecting the good operational performance and evolution of China. Income tax is minus EUR 35 million. Effective tax rate was 26% in Q4 2025. Let's look now at cash flow analysis on Slide 26. We can see how we convert EBITDA into cash flow for the quarter and for the full year. We had excellent total cash generation in Q4 of EUR 177 million, resulting in over 80% conversion of EBITDA to cash, thanks to robust collection and inventory management, driving the change in working capital that you see on the left. CapEx was minus EUR 55 million, a bit elevated versus prior quarters as work continues on our growth projects. And as you can see on the right, we did remain within the EUR 150 million to EUR 200 million range as disclosed in our CMD in the full year 2025 with total CapEx for the year of EUR 176 million. So for the full year '25, we delivered over EUR 400 million of total cash generation for the third straight year with restructuring costs halving year-over-year and continued structural improvement in our working capital as we optimize our operations. And in the last slide, let's look at our debt and liquidity. So thanks to the excellent net cash generation I just commented, we turned net cash positive in Q4 with plus EUR 39 million on the balance sheet -- of cash on the balance sheet at the end of the year. As you can see on the right, we have significant liquidity above EUR 1.6 billion, of which nearly EUR 1 billion in cash. Philippe Guillemot: Thank you, Nathalie. Let's turn to Slide 29 to discuss our outlook. Starting with our tubes business. In the first quarter, we expect volumes to decrease sequentially. EBITDA per tonne should remain similar to the fourth quarter level. For the full year, we expect our North America tubes business to see sustained strength in volume, thanks to market share gains during 2025. We expect a slight near-term decrease in U.S. market prices with improving industry supply-demand conditions, setting the stage for potential improvement later in the year. In our international tubes business, we expect lower sales volume in H1 2026 due to slower booking in H2 2025. We see activity recovery in the key Middle Eastern markets, setting the stage for higher second half volumes. We expect market pricing to remain broadly stable versus the second half of 2025 with discrete customer contracts driving selective price upside. For Mine and Forest, we expect production sold to be around 1.4 million tonnes in the first quarter. We expect full year production of around 5.5 million tonnes, slightly lower year-over-year due to an improved production process focusing on value over volume. At the group level, we expect our first quarter EBITDA to range between EUR 165 million and EUR 195 million. Let's conclude on Slide 30. We are driving further improvement in return on capital through a relentless push towards operational excellence and asset streamlining. We are positioning for future profitable growth through targeted research and development and capital investments to solve the energy challenges of today and tomorrow. Finally, we are delivering on our commitments to shareholders, targeting a substantial EUR 650 million in shareholder returns in the first 8 months of 2026 while maintaining our crisis-proof balance sheet. Thank you again for your attention. Nathalie and I are now ready to take your questions. Operator: [Operator Instructions] We have a question from Paul Redman from BNP Paribas. Paul Redman: I just wanted to ask 2 questions. Firstly, was about the buyback and the distributions. And you've guided EUR 650 million of payout to shareholder in 2026. I just wanted to ask about the allocation and why you've allocated the -- well, additional cash to dividend rather than to buyback to kind of offset some of the dilution impact of the warrants in 2026? And then my second question was on working capital. You've had a big release this quarter. I want to go into a little bit more detail on what the drivers of that is. And also, how do we think about working capital into 2026? Philippe Guillemot: Okay. First, I will take your first question. As you know, we have launched a share buyback plan for EUR 200 million to be executed by end of June. But given the daily volume credit and obviously, how we can execute share buyback, I think we were a bit capped -- and that's why we only allocated EUR 200 million out of the EUR 650 million to share buyback. Remaining being, as you have seen, the sum of the proceeds of the share buyback -- of the warrants and what was not used for the share buyback from the total cash generation of '25. Second, on the return on capital employed and working cap, you clearly understood that since I joined, my main focus was on deleveraging the balance sheet of Vallourec, and we reached the zero net debt end of '24. And again, end of '25, we have a positive net cash of EUR 39 million but the levers we have used to achieve such performance was obviously to work on every aspect of our capital employed, starting with the working cap. And by the way, there is a nice slide in Nathalie's presentation, where you can see that our working cap in days of sales continue to decrease, and we still see further room for further improvement. And on our asset base, as I have mentioned in my presentation, we continue to question and challenge any asset we have in Vallourec, which is not absolutely needed to generate, obviously, the performance we are contemplating. Operator: We have a question from Matt Smith from BofA. Matthew Smith: I wanted to start on the mine, if I could. You talked to a new strategy, sort of value over volume there. I wonder if you could give us any update in terms of where you might put new guidance perhaps for annual EBITDA for that business versus what you've presented in the past? What is the net-net of that strategy? And I suppose a follow-up would be, does that have any implications for future mine expansion plans that you've talked to before, please? That would be the first one. And then the second one would be -- thank you for the updates as ever around the U.S. sort of OCTG market. I can see those seamless imports coming down. I think the one sort of topic that scratch my head out a bit is domestic supply in the U.S. There was actually a source of a lot of supply growth in 2025, which doesn't seem to get much airtime. And I just wondered if you could talk to the drivers of increased supply, domestic production in '25. And if you saw the picture any differently for '26, your insights there would be really appreciated. Philippe Guillemot: Okay. Thank you. So let's start with the mine. First, we are very consistent with what we said in September 2023 about what we expect from the mine. You remember, Phase 1, now fully executed around EUR 100 million EBITDA. Phase 2 completed EUR 125 million. So there is no deviation versus what we said in 2023. What has changed in the meantime is that we have applied our recipe for success, value over volume to the mine too. So today, we extract less [ ROM, ] but we are able to generate -- to produce more iron ore, more high-quality iron ore and obviously, the EBITDA we are looking for. So that's the logic behind this. So again, I insist no change versus what we said in September '23 about what we expect from the mine. As far as the U.S. -- OCTG U.S. market is concerned, several -- yes, first, imports have declined since the implementation of the 232 import tariff, which obviously led customers to buy more from domestic capacity. So in fact, First effect is a better use of existing domestic capacity, starting with ours. And as I said, we have nice volumes, and we are well loaded with our capacity today. On top, what we see is a better sentiment and as you have seen, Pipe Logic slightly going up in Jan, in Feb again, which obviously give us confidence that at some point, the balance between supply and demand will translate into upward pressure on prices. And this is likely to obviously happen in '26. On top, as we mentioned, we have invested in additional capacity to produce high-torque connection for unconventional drilling. That's a change in the market. And the market is becoming more premium. As you have seen, our customers are able to produce as much oil with less rigs, less wells, thanks to this technology. Obviously, there is a real appetite for this technology that we have developed and for which we have gained market share. And obviously, we intend to continue to gain market share. Operator: [Operator Instructions] We have a question from Kevin Roger from Kepler Cheuvreux. Kevin Roger: I have 2, if I may. The first one is maybe to understand a bit more the Q1 guidance because at the time of the Q3 earnings, we were mentioning some shift in volumes from Q4 '25 to H1 '26. So I was wondering if the lower volumes that you mentioned for Q1 means that those volume has been shifting to Q2 and maybe to understand a bit more the implication that we saw between the 2 quarters. And the second one, you talked about the geothermal activities during the presentation quite a lot. And recently, you signed a deal with XGS. When we make some math with the elements that you shared with us, this framework agreement could represent quite a lot of revenue, maybe something like EUR 1.5 billion. So I was wondering if you can share a bit with us how you do see this XGS partnership impacting the revenue for Vallourec in '26, '27 and '28, please? Philippe Guillemot: Yes. Going back to Q1 volume being lower than Q4, I remind you that our volume in Q4 were much higher than Q3. So obviously, this has to be put in perspective. When oil price started to go down, we have seen last year in H2 customers not canceling investment plans, but taking more time to decide on their investment and placing orders. And that's what's reflected in our bookings and will translate in H1 in our invoicing. But again, as I said, we see clear pickup since the beginning of the year as, by the way, oil price went up $10 since. So that's why I think the profile of this year volume-wise is likely to be similar to the one of '25. As far as geothermal is concerned, thank you for noticing, obviously, to bouncing back on what we said on geothermal. It's a new market which is opening. And again, 3 years ago, obviously, we had -- we decided to obviously invest time and money on research and development on new application for our know-how. And this geothermal and advanced technology was the right bet. And yes, today, and again thanks to the data centers, which are popping everywhere and the huge need for baseload electricity, this technology now have obviously a good prospect. And as I said, there is more project in the pipeline than the existing installed base, and we are positioned on it. We mentioned about XGS for which we provide unique technology with -- we are the only one able to provide the famous VIT technology, vacuum insulated tubes. And when you do the math, yes, I think your conclusion is the right one. I think these wells because geothermal is based on wells require technologies, premium technology we have. And obviously, this will come on top of our technologies to support our customers on unconventional, more gas-directed production. Kevin Roger: But sorry, if I may follow up, how would you, in a way, see the phasing? Would you consider that those opportunities will mostly materialize in '28 because those guys needs to get a lot of financing? Or you do see already a lot of stuff in '27, for example, or even sooner? Philippe Guillemot: Data centers need electricity now and in the next few years. So there is no time to wait and geothermal project can be executed as fast as they can drill. So it's already today. And obviously, it will ramp up nicely over the next years, but it's not something for the future. It's already something for projects which are currently in execution phase. Operator: [Operator Instructions] We have a question from Baptiste Lebacq from ODDO BHF. Baptiste Lebacq: Two questions from my side. First one is, if I look at your slide, Page 11, I see you still have, let's say, a quite tense investment program for 2026. Does it mean that in terms of CapEx, we should be in the upper range of your, let's say, CapEx guidance that you gave into 2025? And second question is on the geothermal market versus hydrogen market. It seems that you are more bullish right now on geothermal than, let's say, on hydrogen market. What is your view on the hydrogen market? Is it, let's say, the next wave after geothermal in terms of sequence for you? Philippe Guillemot: Yes. As far as CapEx is concerned, yes, we gave you on Page 11, a sense of what we have been doing since 2022. Many projects, obviously, are in execution phase in '26. But nevertheless, we will be within the envelope we shared with you between EUR 150 million to EUR 200 million. So no risk to go beyond what we said. So we stay obviously very disciplined on our capital allocation. The good news is that, obviously, the return on investment of all these projects is fairly consistent with our will to increase over time our return on capital employed. As far as hydrogen and geothermal is concerned, it's true that 3 years ago, nobody was talking about Gen AI. Nobody was talking about data centers, hyperscale. Today, that's a fact. There is a lot of investment. There is need for basal electricity and geothermal is one of the solution to provide these huge quantities of basal electricity. So it's clear that it's come now faster than hydrogen and green hydrogen. Nevertheless, on green hydrogen, we are in talks with many customers whose projects are in the FEED phase, so engineering phase, which sooner or later will reach the FID stage, investment decision stage. So that's something to come that will come on top. And as you remember, our Delphy storage solution is the only one available today to store between 1 and 100 tonnes of hydrogen. So more to come. And as you remember, we have decided to manage this business as a turnkey business. So obviously, it could be a nice addition to our revenue and profitability in the future, and it's fully part of our 5-year plan. Operator: Now we have a question from Julien Thomas from TPICAP. Julien Thomas: I have 2, please. The first one would be about maybe your take on your German partners' agreement regarding HKM JVs. Do you have something to share with us or something like that? And the second question about your improvement in EBITDA per tonne. Could you give us what come from downstream investment versus, let's say, historical restructuring of existing capacities? Philippe Guillemot: Well, first on HKM, yes, yes, the agreement between thyssenkrupp and Salzgitter opened the door for us as thyssenkrupp will do to sell our shares to Salzgitter and terminate our shareholding of HKM. Obviously, there will be -- we'll have to provision for all the work Salzgitter will have to do when they will be. But this is fully already covered by our balance sheet provision. So I think we are -- there is -- I think it's -- for us, it's a good news. I think thyssenkrupp and Salzgitter have reached this agreement and that now we can execute this transaction. As far as the EBITDA per tonne is concerned, EBITDA is a result of obviously, average selling price, which is driven by our value over volume strategy. You remember, when I joined Vallourec volume were 1.850 million tonnes. We are now slightly above 1.2 million tonnes. So drastic change with the past, but average selling price has significantly increased. And EBITDA per tonne is a consequence of cost. And we have worked a lot in the last few years, and we continue to do so to continue to lower our cost structure and ensure it's a very highly flexible industrial footprint. So whatever the volume, we protect our margin, thanks to our ability to flex cost whenever we need it to adapt to the sequence of bookings and the cycle of this industry. So that's why we are able to -- we have been able to close the gap with our primary peer on EBITDA per tonne. And you've seen the data on the slide showed earlier. And we will obviously continue to do so, and we have projects in order to continue to improve on that front. Operator: We have a question from Mike Pickup from Barclays Capital. Mick Pickup: It's Mike here from Barclays. Just a quick one. You talked about the international business improving in the second half. Is there anything significant that we should be keeping an eye on something like the big Kuwait orders? Or is it just a general pickup across the regions? Philippe Guillemot: Well, first, 2 things. One, when barrel of Brent is going up USD 10, it's clear that there is an incentive for our customers to go a bit faster on executing their plans. Second, what we see is that there are major unconventional oil field opening, which require many wells using our technologies, starting with iDRAC. So that's something which seems to pick up significantly since the beginning of the year. And we may -- yes, you -- we may communicate more widely in the future. Operator: We have a question from Paul Redman from BNP Paribas. Paul Redman: Am I able to ask one more? Philippe Guillemot: Yes. Paul Redman: I just want to touch on Venezuela quickly. One of your peers spoke in length about opportunity in Venezuela. I kind of wanted to ask about your position in the country and whether this is a market you think you'll be able to sell volumes into in the relatively near future. Philippe Guillemot: So we used to sell to Venezuela years ago. What has changed in the meantime is now thanks to all the investment we did in Brazil, we are able to make the pipe which are needed for Venezuela in Brazil. So obviously, much closer than it was in the past coming from Germany. The onshore oilfield in Brazil are sour. So you need sour service pipes, which we make and which are obviously very premium pipes. So from a product standpoint, I think we are uniquely positioned. And on top, as you know, given our strong presence in the U.S., we are the #2 player on onshore business in the U.S. We have close relationship with the U.S. customers. So today, we have a task force, which is a mix of our U.S. sales team and Brazilian production team in order to seize any opportunities that may come in Venezuela. So more to come, will depend, obviously, how fast our customers go forward with their project. Operator: We have a question from Jean-Luc Romain from CIC CIB. Jean-Luc Romain: My question also relates to geothermal. You mentioned rightfully that the product you will deliver is very specific with kind of pipe in pipe also. What's the limiting -- do you have a limiting factor which will be the capacity to produce those pipes in terms of your growth in sales? Or do you have a strong capacity to do this? Philippe Guillemot: We have available capacity. VIT is a process in itself because we need to weld pipe inside another pipe. So that's a specific industrial setup that we have and for which we have capacity available. So no, obviously, it's clear that if we double our volume, thanks to this new market, at some point, we will reach our capacity limit, but it's not yet the case. And anyway, it's good to know that whatever to be on more than one market and obviously, to mitigate any up and downs on any market, there is the one oil and gas. Jean-Luc Romain: Understood. And from what you said, the EBITDA associated to the growth in geothermal could rapidly become in the tens of millions? Or could it be maybe at a later stage in the hundreds of millions. Philippe Guillemot: In 2022, I said that we were expecting between -- maybe in 2023, that we were expecting between 10% and 15% of our group EBITDA coming from this new energy applications. So it's fully part of it. It's fully part of it. And obviously, we are very strict with our value over volume strategy, and I can guarantee you that it will not be dilutive to our EBITDA per tonne. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Philippe Guillemot: Thank you. Thank you all. I'm very pleased to be in the position we are today. Vallourec is a fully transformed company, evidenced clearly by our investment-grade balance sheet and the robust returns we are delivering to our shareholders again in 2026. Meanwhile, we continue to see opportunities as we drive operational excellence across our organization and position for profitable growth. We are well positioned to serve the energy challenges of today and tomorrow. Operator, you may end the call.
Operator: Good afternoon. Thank you for attending the FIGS Fourth Quarter Fiscal 2025 Earnings Conference Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Tom Shaw, Senior Vice President of FIGS. You may proceed. Tom Shaw: Good afternoon, and thank you for joining us to discuss FIGS' fourth quarter and full year 2025 results, which we released this afternoon and can be found in our earnings press release and in the shareholder presentation posted to our Investor Relations website at ir.wearfigs.com. Presenting on today's call are Trina Spear, our Co-Founder and Chief Executive Officer; and Sarah Oughtred, our Chief Financial Officer. As a reminder, remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations or estimates, including about future financial performance, market opportunity or business plans. Forward-looking statements involve risks and uncertainties, and actual results could differ materially. These and other risks are discussed in our SEC filings, including in our 10-K we filed today. Do not place undue reliance on forward-looking statements, which speak only as of today and which we undertake no obligation to update. Finally, we will discuss certain non-GAAP metrics and key performance indicators, which we believe are useful supplemental measures for understanding our business. Definitions and reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our shareholder presentation. Now I'd like to turn the call over to Trina. Catherine Spear: Thanks, Tom. Good afternoon, everyone, and thank you for joining us today. We are incredibly excited to have closed out 2025 with such a strong quarter, the culmination of clear strategic focus and disciplined execution that gained momentum throughout the year. Our vision is to be the leading premium healthcare uniform provider in the world by winning the hearts and minds of healthcare professionals. And we have never had greater conviction in the impact our brand can drive. FIGS reinvented scrubs and after 13 years, our product engine continues to lead and define the healthcare apparel category. In 2025, we delivered improvements across our product engine from function and fit to category expansion and merchandising, and we delivered even more wins through how we inspire our community beyond products. Over the past year, we created the most powerful combination of messaging, connection, and action in our company's history. This progress reflects the collective effort of an extraordinary team, one that we have fortified with exceptional talent, perspective, and heart. Simply put, I've never been prouder of or more energized by our tremendous leaders and partners. As we look closer at our results, our Q4 performance was nothing short of remarkable. We knew we had an incredible foundation for success coming into the quarter with strong brand heat and operational momentum. We telegraphed these early trends during our prior earnings call, supported by the carryover success of our late Q3 breast cancer awareness campaign and continuing through our business as usual days ahead of the holiday season. Our growing success during these core selling days is one of the best signs of our overall health. For holiday, we fueled even more success through strong inventory positioning, newness across color and style and impactful marketing, combining for results that dramatically exceeded expectations for the Black Friday, Cyber Monday period. And we are excited to keep this strong momentum going for the balance of the quarter as we sharpened our focus on full price selling. All told, Q4 net revenues grew at our strongest quarterly rate in more than 4 years, surging 33% and surpassing $200 million in a quarter for the first time in our history. This growth was driven by an impressive acceleration in active customers, jumping 5% sequentially and 9% year-over-year. At the same time, we experienced strong productivity gains across nearly every selling occasion as well as record AOVs driven by healthy trends in AUR and UPT, a superlative quarter all around. Our Q4 performance punctuated full year net revenue growth that returned to double digits for the first time since 2022, and exceeded our initial outlook by nearly $90 million. We also had 2 other big milestones with scrubwear crossing the $0.5 billion mark for the first time and our international business surpassing $100 million. Our success was not limited to the top line. Showing the power of our model, we paired soaring net revenue growth with strong profitability, overdelivering our original full year adjusted EBITDA margin target by over 200 basis points. And we did this even while absorbing the impacts of tariffs and our Q4 action to write off pockets of older inventory. Finally, we built a record net cash and investment position of just over $300 million, even as we stayed on the offense with key investments across the company. It's important to reflect for a moment on how we reached this critical inflection point. The COVID pandemic created a truly unique environment where healthcare professionals were stretched beyond their limits. The need for scrubs was paramount and demand spiked. Once the pandemic eased, closets were stocked, which we believe led to an overhang impacting demand. At FIGS, we navigated through these changes by calibrating our operational framework while doubling down on the game-changing products and brand connection that we knew healthcare professionals love and that we were truly uniquely positioned to deliver. And with the COVID overhang now behind us, we're thrilled to see our strategies pay off and position us for even larger opportunities ahead. The structural advantages we see in healthcare remain firmly intact with the growing needs of an aging population and ongoing focus on wellness and aesthetics and an industry in need of support so that it can keep up with the outsized demands of both patients and the labor force. This dynamic was on full display with the January jobs report, where the healthcare and social assistance industry powered nearly all the gains in the labor market with 130,000 jobs added. This all bodes well for strong sustained demand for FIGS. Looking back, it's clear that we've expanded our leadership position, capitalizing on the opportunity to widen the moat and better unlock the powerful dynamics that have been there all along. We believe the onus is on us to sustain and extend this edge. Our strategic house framework governs how we operate our business and expand on our mission. Our success is measured against 3 strategic priorities: product innovation, community engagement, and market expansion. A year ago on this call, we outlined a similar set of priorities designed to better serve our community. This continuity is intentional. It is shining through in our performance, and it reflects conviction that we remain on the right path forward. Let's now go deeper into these priorities and how we plan to measure progress in 2026. Starting with product innovation. Our efforts in 2025 focused on building a repeatable and scalable product foundation. In practical terms, that meant adding discipline and focus across all facets of the product engine, delivering impactful newness, shortening development cycles, driving calendar rigor, and improving FIGS. We're excited to see wins across the board in all of these areas. In 2026, we plan to leverage that strong framework to up our game even more. First, we are elevating our core through fabric innovation. This year, we plan to have 3 fabric solutions in scrubwear to address a range of needs. This starts with our hallmark FIONx fabrication designed as our versatile everyday solution. We also added FORMx in 2025 to emphasize stretch and comfort and have been encouraged by the growing love many have shown for it. And in conjunction with the Winter Olympics, we introduced FIBREx to emphasize structure and durability, and we are excited to expand this line as we move deeper into the year. Second, we are continuing to build out the layering system. We have seen success in moving beyond scrubwear with head-to-toe solutions on shift and off, and you will see expanded efforts this year in areas like underscrubs, outerwear, lab coats, compression socks, and loungewear. Finally, with a sharper strategic focus on long-term product planning, we are developing new categories for beyond 2026. We are excited with our team's efforts to develop a more robust and integrated development process and are actively looking at several categories that can expand on our existing work to serve healthcare professionals in new and differentiated ways. Now on to community and engagement. Building real connection with healthcare professionals has always been at the heart of FIGS. It is why we exist and it is why we continue to lead this industry. In 2025, we created some of our most meaningful and memorable top-of-funnel moments to date from our viral International Women's Day and Nurses Week campaigns to our collaborations with Noah Wiley in Washington and at the Emmy to our breast cancer awareness campaign, all which resonated deeply within our community. I highly encourage you to check out the sizzle reel linked in the shareholder presentation we issued today to experience the incredible energy we've built across the brand throughout the year. We expect that momentum to continue in 2026, as we expand our reach and deepen the connections that matter most to our communities. We are proud to begin the year by continuing our support of the Team USA medical team at the Winter Olympics, renewing our belief that it takes heart to build bodies that break records. We celebrated the awesome humans behind Lindsey Vonn's return to the world stage 7 years in the making. Her journey reflected unmatched courage, grit, and perseverance, something the world saw firsthand and served as a powerful reminder that no athlete ever stands alone. In moments of both triumphs and challenge, it is the medical community that shows up with expertise, care and heart. That is the community we are honored to stand alongside. That same perseverance lives in healthcare every single day. Healthcare professionals show up with purpose and humanity regardless of the outcome through wins and losses, progress, and setbacks. Their commitment to putting others first does not change even when the work is hard or unseen. This truth anchors our upcoming Never Change campaign, which will guide our storytelling through 2026. We see Never Change as a natural evolution of our Where Do You Wear FIGS campaign in 2025, which resonated deeply by capturing both the breadth of healthcare and the deeply personal journeys within it. Moving forward, we have designed our platform with greater flexibility, so we can show up across more moments throughout the year that truly matter to our community. The first Never Change campaign focusing on women in medicine is scheduled to launch next week ahead of International Women's Day, and we could not be more excited. We are also continuing to expand how we activate and support our community. When we center the world on the impact made by healthcare professionals and tell their stories, we strengthen the long-term impact of our brand. You will see FIGS continue to show up across key moments in healthcare and be a leading force in advocating for them. Finally, we are investing in how we serve our customers more personally and meaningfully. Our D2C model has always kept us close to our community, and we will continue to test, learn and refine our personalization efforts this year to create more relevant and thoughtful experiences. We are also excited to keep evolving the FIGS app, which we are positioning as our most elevated digital experience built to drive the ultimate engagement within our healthcare community. Our third strategic priority centers around market expansion. We are proud to have reached a record 2.9 million active customers globally in 2025, but know that's still just a fraction of the global healthcare community. As we drove the bulk of last year's success in our core businesses, we are also making important strides in our 3 market expansion opportunities, international, our TEAMS B2B business and community hub. Starting with international, where we continue to execute our go deep and go broad strategy for market development. This framework prioritizes how and where we invest in areas like community engagement and localization, while also leveraging technology for more efficient market expansion. And the success of this strategy was on full display in Q4, with international net revenue growth accelerating to the highest level in more than 2 years at 55% year-over-year. With our go-deep markets, our strategy spans some of our more established markets as well as those with higher market potential. Key markets like Canada, Australia, Mexico and the U.K. are further along the journey as we look to match the incredible brand experience established in the United States. Other countries with high potential are earlier in development, and we are investing strategically there to build awareness and consideration. Examples include South Korea and China, both of which we are excited to enter in Q4. And while we're taking a longer-term view of success, we are encouraged by the early signs across the broader Asia Pacific region. With our go broad markets, we are leveraging newly developed e-commerce functionality to accelerate market entry strategies. These improved capabilities are designed to drive efficiency and localization at a regional level, opening untapped opportunities to serve more markets and redefine expectations. These efforts were instrumental in nearly doubling our total market reach in 2025 to 58 countries, highlighted by new launches across the Middle East and Africa as well as Latin America. As we look to 2026, we expect to surpass 80 total markets, led by a deeper focus across Europe and Asia Pacific planned in the first half of the year. Moving on to TEAMS. In 2025, we took a great foundation and positioned it for scale through new leadership, investments in our team and the development of our go-forward strategy. This strategy centers on building deeper relationships with healthcare organizations and operating as an even more embedded partner to help them invest in their teams. We are prioritizing higher impact growth accounts. And with more resources and focus, we are seeing early success. In 2026, we're excited to roll out the next evolution of our TEAMS Store experience. This platform is designed to give organizations greater flexibility and functionality to purchase in ways that work best for their teams, delivering a seamless self-serve experience for administrators and employees. Importantly, this functionality will also expand access to the FIGS assortment and support our international TEAMS customers, which we expect will unlock meaningful new growth opportunities over time. Finally, on Community Hubs. We ended 2025 with a flurry, expanding our small fleet of retail locations to 5 following openings in New York, Houston, and Chicago in Q4. As we strive to meet healthcare professionals where they are, we continue to see hubs having an early impact in reaching new customers, driving higher LTV and expanding the impact of our ecosystem. Our first focus this year is to continue optimizing our 5 existing hubs. These efforts include further refining assortments, store flow, and fixtures, standardizing in-store operations and driving thoughtful community activation. We are also implementing a store development engine to help drive how we strategically map out, design and build our future community hubs. Leveraging these dynamics, we plan to expand our presence by opening our next 4 locations in the second half of 2026. Overall, we are in a powerful position to harness our brand momentum, build on our strengthened executional foundation and confidently pursue the opportunities that lie ahead. These actions position us to approach $700 million in revenue this year, a great stepping stone to our $1 billion aspiration and beyond. We also plan to continue rebuilding our bottom line while continuing to invest. This means at least holding our adjusted EBITDA rate in 2026, even adjusting for last year's inventory write-off, inclusive of this year's Olympic spend and assuming tariff impacts remain in effect. Importantly, this margin target is substantially higher than the commitment indicated on our last call. And finally, our capital allocation plans will continue to prioritize growth opportunities across the business while leveraging our ongoing share buyback program to be opportunistic and help offset stock dilution. In closing, we entered 2026 with a clear sense of direction and purpose, confident in the progress we've made and the foundation we've built. We remain deeply grateful for the opportunity to serve a community that continues to inspire our work every day. With that, I'll turn the call over to Sarah to review our results and our 2026 financial plan. Sarah Oughtred: Thanks, Trina. Our strong fourth quarter outperformance demonstrated both the sustainable power of our brand and the increased sophistication in how we deliver greater impact to more healthcare professionals. We believe the important foundation work we have undertaken across the business positions us to unlock stronger growth and profitability in the years ahead. Diving into our Q4 details, net revenues increased 33% year-over-year to $201.9 million, significantly ahead of our outlook. We were positioned for a strong Q4 as the culmination of our extensive efforts and execution across product and marketing drove tremendous brand momentum into the quarter. Adding fuel to this momentum, our Black Friday, Cyber Monday strategy helped generate substantial upside in our business, and we carried this momentum through the balance of the quarter as we moved past the holiday promotional period. Importantly, our performance in Q4 came despite our deliberate plan to pull back on overall promotions, including a reduction in the number of promotional days and a lower discount rate for the period. From a measurement standpoint, average order value increased 9% to $126, primarily driven by increases in both average unit retail and units per transaction. Active customer growth accelerated to 9% year-over-year after posting consistent 4% growth in prior quarters. This drove our active customer count to a company record of over 2.9 million. Encouragingly, we saw meaningful improvements across our customer cohorts, including accelerated growth in new customers and resurrected customers as well as a meaningful increase in retention. Our trailing 12-month measure for net revenues per active customer strengthened, posting 4% growth in the period to $216. By category, scrubwear surged 35%, representing 77% of net revenues for the period. Growth was strong and well rounded, continuing to benefit from many of our recent merchandising efforts and strategic inventory investments. Color continues to play an important role, and we drove impactful seasonal pallets and optimally aligned launches with key calendar moments. Both carryover and new limited edition color offerings resonated well while also contributing to strong growth with our core offerings. Across styles, we continue to see success with our investments in our wider life options, including core styles like the Isabel as well as new limited edition offerings. We are also pleased with the growing momentum of our FORMx fabrication since its early 2025 debut. Non-scrubwear increased 26%, representing 23% of net revenues. Underscrubs continue to be a great opportunity, and we remain encouraged with our recent expansion across our Salta, Mercado and Grid styles. Outerwear posted strong growth led by our high-pile bombers, and we are even more excited with how this category is planned to evolve later this year. Category expansion and strength was also apparent across a number of emerging opportunities, including bags, loungewear, and our Archtek compression socks. By geography, U.S. net revenues increased 29% to $164.2 million, while international net revenues increased 55% to $37.7 million. Encouragingly, both U.S. and international growth were supported by balanced performance across new and returning customers. On the international side, while we added key long-term markets like China and South Korea during the period, the majority of growth came from existing markets, including a sharp return to growth in Canada, triple-digit growth in Mexico and ongoing success in the existing markets across the Middle East, Latin America, and Europe. Better illustrating the strength of existing markets, our entry into new markets in 2025 impacted our Q4 international net revenue growth by only 500 basis points. Gross margin for Q4 contracted 440 basis points to 62.9%. As expected, we had 2 planned headwinds for the period, including sequentially higher tariff pressure and the lapping of a sizable onetime benefit from duty drawback claims in the year ago period. Partially offsetting these pressures, we experienced a lower discount rate as well as favorable freight costs. While these net impacts were generally in line with expectations, we made the decision to take a $5.6 million inventory write-off during the period, which I will detail shortly. Our selling expense for Q4 was $42.9 million, representing 21.2% of net revenues compared to 25% last year. Our optimization efforts continue to yield meaningful expense leverage at our fulfillment center, while our team continues to be effective in driving outbound freight mix and rate improvements. Marketing expense for Q4 was $28.3 million, representing 14% of net revenues, up from 13% last year. The higher marketing rate was planned to support production costs for our Winter Olympics campaign, while we also increased investments across digital marketing, international and other strategic initiatives. However, with sales leverage and CAC efficiencies, the overall marketing rate was lower than planned. G&A for Q4 was $37 million, representing 18.3% of net revenues compared to 23.4% last year. Consistent with prior quarters, the lower G&A expense rate was primarily due to meaningful net revenue leverage and lower stock-based compensation expense. In total, our adjusted EBITDA for Q4 was $26.7 million with an adjusted EBITDA margin of 13.2% compared to 13.9% last year. Net income for the quarter was $18.5 million or diluted EPS of $0.10 compared to net income of $1.9 million last year or diluted EPS of $0.01. Recapping the full year, net revenues reached a record $631.1 million, an increase of 14% year-over-year. Gross margin contracted 110 basis points to 66.5%, largely due to the 120 basis point headwind from tariffs. Operating expenses leveraged to 60.5% of net revenues compared to 67.2% in the prior year. This sharp expense rate reduction primarily reflected the $16 million year-over-year decline in stock-based compensation as well as improved fulfillment efficiencies in our selling lines. Adjusted EBITDA margin was 11.8% as compared to 9.3% in the same period last year. On our balance sheet, we finished the year with a record net cash, cash equivalents and short-term investment position of $300.8 million. Inventory increased 11% year-over-year to $128 million or up 7% on a unit basis with two important dynamics. First, our investments to support product introductions and go deeper into key styles and colors were key to supporting the strong upside we generated in Q4. We also normalized the higher level of in-transit inventory experienced at the end of Q3, even as the impact of tariffs increased quarter-over-quarter. Second, and separate from these actions, we took a $5.6 million write-off during the period related to broken and aged inventory that had accumulated over a number of years. This action, along with our improved rigor around our supply and demand processes, puts us in the best inventory position we have been in from an aging and quality perspective. Overall, we expect to make additional inventory management progress throughout 2026, and position inventory days closer to 200 days. On the capital allocation side, we did not repurchase shares this period and have $52 million available for future repurchases under our current share repurchase program. Capital expenditures for the year were $8.2 million, primarily related to the addition of 3 new community hubs. Now turning to our outlook. Our overall approach to our outlook balances our ongoing enthusiasm across the business with a desire to remain prudent in this consumer environment. Additionally, with an evolving tariff environment, we are incorporating the U.S. administration's latest announcement that call for 15% global tariffs and are not contemplating any relief from previously paid tariffs. While the tariff environment likely remains fluid, we are adamant that the strategic changes we have made across our business are appropriate and durable as we look at our long-term opportunity. Now on to fiscal 2026 details, where we expect net revenues for fiscal 2026 to be up 10% to 12% year-over-year. As we build upon our product road map and marketing engagement efforts from 2025, we expect sustained active customer momentum to be a significant driver of our growth in 2026. We also wanted to frame up the expected impacts of pricing and promotions. Considering our pricing action implemented in early January and informed by our early elasticity read, our full year outlook assumes only a modest net revenue benefit from pricing. We expect pricing to result in higher AURs, though largely offset across UPTs and order frequency. Finally, given our efforts last year to reset our promotional cadence, we expect relatively consistent year-over-year positioning in 2026. As we think about the cadence of the year, we expect strong first half net revenues growth, particularly with strong demand trends continuing year-to-date. As such, we are planning for Q1 growth to be up in the low 20% range year-over-year. Comparisons will build in the second half, though we still see the opportunity for driving growth against the strong Q4 performance from 2025. On to gross margins, we expect full year gross margins to be up modestly year-over-year from the 66.5% level in fiscal 2025. Inclusive of 15% global tariffs, the largest factor weighing on results is the planned unmitigated tariff impact of approximately 280 basis points on top of the 120 basis point impact incurred in fiscal 2025. Offsetting this pressure, we expect to see the benefit of pricing, improved product costing and favorable returns. Additionally, we expect some full year benefit as we lap last year's inventory write-off in Q4. For Q1, we also expect a modest year-over-year increase in gross margin from last year's 67.6% performance. Notably, with the negative impact of tariffs continuing to build to start the year, we expect Q1 gross margin to be the highest quarterly rate of the year. Looking at expenses, we expect total SG&A leverage for the full year, reaching the lowest percentage of net revenues in the past 6 years. In selling expenses, we expect full year leverage will be driven by continued efficiency efforts with shipping costs at our fulfillment center. In marketing expenses, we expect the Q1 Olympics investment as well as support of our market expansion strategic priority will drive a moderately higher expense rate for the full year. In G&A, we expect some expense leverage given a more modest reduction in stock-based compensation to approximately $25 million. Overall, we expect full year 2026 operating margin of between 7.6% and 7.9% compared to 6% in 2025. We believe it is important to begin highlighting this GAAP measure as our stock-based compensation impact continues to normalize. Importantly, this would be our best operating margin performance during our time as a public company. Our full year 2026 adjusted EBITDA margin is expected to be between 12.7% and 12.9% compared to 11.8% in 2025. For Q1, we expect adjusted EBITDA margins of approximately 7%, largely reflecting the outsized marketing expenses for the period. Below the operating line, we expect the effective tax rate to be approximately 25%, down from 27.4% last year as we continue to drive improved pretax income, combined with an additional reduction in nondeductible stock-based comp. Looking deeper at our capital allocation plans, we entered 2026 in an incredibly strong financial position. We do anticipate a step-up in capital expenditures this year to approximately $17 million as we invest across community hubs, system upgrades and at our headquarters. Outside of investments, we plan to use our share repurchase program to be opportunistic in the market and help offset stock dilution. Before we open the call for Q&A, I want to reiterate what an exceptional year this has been. Our disciplined execution across the organization enabled us to accelerate growth while delivering meaningfully stronger profitability. Just as important, the action we've taken positions us for durable long-term success in a growing and important industry. We believe the brand has never been stronger, and we look forward to updating you on our continued progress throughout 2026. We are now happy to take your questions. Operator? Operator: [Operator Instructions] The first question comes from the line of Dana Telsey with Telsey Group. Dana Telsey: Congratulations on a tremendous fourth quarter and year. Very good to see the progress. Can you talk a little bit about the flow-through from the just completed Olympics, what you learned there? How did the product do? And then also the strength of the community hubs, how many you're planning to open this year and how you're thinking of that contribution to top line and margin? Catherine Spear: Sure. I can kick it off. Thank you so much, Dana. It was definitely a great quarter, a great year. So yes, I was just actually in Milan and Cortina for our Winter Olympics. We were super excited to support an outfit Team USA's medical team during the Winter Olympics. And it was a great way -- it was great for how we showed up and how we supported the team. I think you probably saw it but our campaign really centered around Lindsey Vonn and her medical team. And I think we really illustrated the extraordinary journey that she's been on and how she came back coming out of retirement to come back and compete. I think we're even bigger -- the bigger story that we were looking to highlight was the story around Dr. Hackett and Lindsey's full medical team and what they did in terms of the heart that they brought to rebuild her body to go out and break records. And she broke a lot of records this past season. And so we're super proud to be a part of her, her story, Dr. Hackett, the entire medical team story. The product that we brought forth was really incredibly technical. We launched an entirely new fabrication, FIBREx, which was an amazing fabric that's super durable. It works in a variety of different environments, both on shift inside, outside, on top of mountain, which is what you saw with the Olympics. So really incredible product. It was incredibly successful, and we're really excited about continuing to show up in these large ways, top-of-funnel marketing is the story that we've been talking about quarter after quarter over the past year plus now, and you're seeing that investment pay off. You're seeing the investment we've made in product, the investment we made in marketing. You're seeing those -- all of our efforts starting to pay off, and we're really excited about the future. In terms of Community Hubs, I know you asked about, so we're opening 4 Community Hubs this year. And so I'll let Sarah speak to some of the economics behind that, but we have seen amazing strength in our 5 Community Hubs that we now have. Century City, Philly, Chicago, Houston, New York and a lot of learnings, mostly that they're too small, which is a great problem to have. We call them champagne problems, but I'll pass it over to Sarah. Sarah Oughtred: Yes. So we opened our 3 Community Hubs in the quarter. All of them are exceeding our top line expectations, which is a great way to open with those. We are going to be moving to some larger square footage stores targeting around 2,500 square feet. Really happy with the payback that we're seeing, looking to target those next 4 in 24 or fewer months payback. And we'll also set up our economics that these Community Hubs will be profitable in year 1, accretive to both operating margin and adjusted EBITDA. The 4 stores that we will open in 2026 are expected to open in the back half of the year closer to Q4. So we'll get the run rate of these 3 new stores, the growth of the 2 existing. And then there will only be a smaller revenue impact given that the 4 stores will open more towards Q4 of 2026. Operator: The next question comes from the line of Matt Koranda with ROTH Partners. Joseph Reagor: It's Joseph on for Matt. Congratulations on a good quarter. Just want to see if you guys can give us a little bit of color on the progression of 4Q and into January. Anything you guys want to highlight in terms of continuation of growth in your international markets or specific pockets within certain products that you guys are seeing? Catherine Spear: Sure. Yes, I mean, I think we're continuing to see strong momentum, and it's really exciting. We're building this business the right way, the hard way for the long run. And so a lot of the things we've been discussing with you all, like I mentioned, around our product, around our assortment, around our cadence of launch, around how we are connecting with our community. We're really connecting on deep levels, both online and off in our Community Hubs. And so it's -- and then international, it's just been incredible to see how our healthcare professionals are engaging with our brand in Mexico, Canada, all across Europe, Australia, our go deep, go broad strategies are working, and we are doubling down on them. And we didn't just see it in Q4, right? We're seeing it through Q1 and you're seeing that in the incredibly strong guide that we're giving you for Q1. And so leading indicators are really important at FIGS, engagement, organic traffic, direct traffic, all of these are incredibly powerful indicators of what our long-term growth will be, and they are strong and positive across the board. Joseph Reagor: Then just if I could squeeze in a follow-up. Just your orders per active, look like they're growing very nicely, up in the mid-teens. Can you guys talk about what's driving the more frequent purchase behavior? Sarah Oughtred: Yes. So I would say that across Q4, we were really pleased with both growing our average customer base that really came from growth in new customers, growth in our resurrected customers and also a decline in our churn or an improvement in our retention. We also saw really great growth in AOV. And then on top of that, we also saw a really strong improvement in orders per customer. And I think it's really reflecting everything that we laid out for Q4, which was really at the forefront with our product and our marketing. We provided excellent marketing campaigns that really resonated with our customers, and we had a really strong product assortment. And we saw the strength really throughout the quarter. Really great to see that overall broad-based improvement across all metrics. Operator: The next question comes from the line of Brian Nagel with Oppenheimer. Brian Nagel: Congratulations. Great quarter. Great year. The question I want to ask, clearly, sales momentum built throughout '25 and then culminate here in the fourth quarter with a significant inflection stronger. So Trina, in your prepared comments, you talked about like kind of the post-pandemic dynamic and some of those pressures easing. So as you look at the sales acceleration, how much is it do you think with the specific efforts that FIGS has taken on the product side, the marketing side versus maybe some easing of those sector pressures? Catherine Spear: It's both. I think, first and foremost, it comes down to execution. We have an incredible team, and we've been working hard to really invest across the business. And like I said, we're doing it the hard way, the right way. We've dug deep on creating an incredible assortment that aligns with our community. We've put together some of the most incredible campaigns, what you just saw with the Olympics, but also what we -- the work that we did with Noah Wyle for the Emmy's, I don't know if you saw that, what we -- our breast cancer awareness campaign, Nurses Week, International Women's Day. Then to your point, it's great to have this tailwind where the COVID overhang is now behind us. We are operating in a more normalized environment. And the strong fundamentals of this industry are really shining. This is a replenishment-driven industry. It's nondiscretionary. It's nonseasonal. It's noncyclical. And so all of that is really a tailwind behind our execution. And it is -- and you saw that even in the recent jobs report, I mentioned in the prepared remarks, all of the employment gains in the market are coming from healthcare. And the demand for healthcare professionals has never been higher given the significant staffing shortages. So I think it's all of the above. It's execution, product, marketing and a normalization in the industry. Brian Nagel: Then my follow-up question, I guess, maybe more for Sarah, on the gross margin side. So clearly, there was some disruption here in Q4, then you have this wildcard with new tariffs and FIGS potential mitigation efforts against those tariffs. But as you think about -- how should we be thinking about the underlying -- where gross margins for FIGS should get to? What's the -- I guess, the normalized gross margin for FIGS now taking all this in consideration? Sarah Oughtred: Yes, I mean, as it pertains to tariffs, obviously, a very fluid dynamic that we're going to continue to monitor in the months ahead. I would say if there was no change in tariffs from where we're at today, we are getting more clear on what that longer-term margin looks like. I would say that we've talked about how we continue to expand into non-scrubwear, how we continue to innovate with product and with fabric. And we do think that, that will have a negative impact on margin going forward, but we feel very confident that we can more than offset that through continued improvements in G&A. And you've seen a lot of those efforts this year, and we think that there's still opportunity ahead. So as we think about the longer-term algo, we expect sales to continue to grow, and we are setting it up so that our earnings will grow at a faster rate than sales growth. Operator: The next question comes from the line of Bob Drbul with BTIG. Robert Drbul: Let me add my congratulations on an incredible finish to the year. I guess, the two questions that I have, I think the first one is on the international front, you added, I think it was it China and Korea in Q4, and you have some big plans for '26. What have you learned on the new country launches? What have you learned? What will you change this year as you keep adding countries? And I guess, any big surprises so far in the international piece? Then I guess the second question, if I could just throw it in there is around like customer receptivity to the price adjustments that you're making. Have you seen any pushback? Or is there any concerns around that? Catherine Spear: Yes, I mean, I think international has been an incredible bright spot. We grew 55% in the quarter. And the vast, vast majority of that was the markets, existing markets that we're already in. And what's really paying off here is our go deep, go broad strategy. And so it's been great to continue to invest in storytelling, in top-of-funnel brand initiatives, in deep localization in markets like Canada, Mexico, the U.K., and Australia. And some of the newer markets, you mentioned Japan and Korea and China, we're really excited to see the results so far. It's been -- they've exceeded our expectations. The brand is resonating. We've seen incredible success. Even we launched in China in December and we're already seeing -- we're emerging as the top brand for our industry there, which is great to see. Japan and Korea, really excited about how our product is resonating. I think these are markets that have healthcare professionals that really care about technical functional product, and we could not be more aligned with how we are going to market there. And we're really investing in driving awareness to reach new healthcare professionals across Asia Pacific. Much more to do. It's early days. But like I said, we're exceeding our expectations, and that's great to see. Sarah Oughtred: Yes. And then I think your other question, just in terms of customer response on pricing. So we did take pricing in January on the vast majority of our core products. Without any meaningful history of measuring price changes, we wanted to be prudent with our assumptions. We did indicate that top line impact of pricing would be slightly positive for 2026. And it's still very early days in terms of measurement and observation for that. But we are seeing some demand inelasticity in these early stages, and that's what we've incorporated into our outlook. Operator: The next question comes from the line of Rick Patel with Raymond James. Rakesh Patel: I'll add my congrats on the amazing execution as well. So can you dig deeper on customer acquisition, particularly in the U.S.? It's a market that stagnated in recent years, but it's growing again. I guess how much of the growth is due to new customers that are completely new to the brand versus those that may be reactivated customers? And then can you also unpack your expectations around new customer growth in 2026 a little bit more? Sarah Oughtred: Sure. So as I sort of said before, the growth in our active customer base broadly came from all 3 components. So we saw growth in new customer acquisition. We saw growth in our reactivation, our largest growth rate of the year. And then we also saw an increase in our retention rate. So very broad-based. I would say in terms of acquisition within the U.S., in particular, we've seen acceleration throughout the year, which has been really great to see, all a testament to both our upper funnel marketing that is continuing to work as well as our continued improvement within lower funnel. We've done lots of work to really improve those areas, and we're seeing the fruits of those efforts. So really happy to see all of those trends. But overall, it's very broad-based. It's not just one of the components. It's all of them coming together, and we're really happy with what we're seeing there. We do expect that to continue into '26 with really growth being driven across all components of our business in the same way that we've been seeing the trends here in 2025. Rakesh Patel: Can you also talk about margins for international markets? How did '25 shape up versus the prior year? And what are your expectations going forward given you're still expanding in some newer markets, but still seeing strong growth in the existing ones? Sarah Oughtred: I mean, for our international markets, I think it's really important to know that all of our international markets are profitable other than just the markets that we entered this year, given outsized investment. But after year 1, they will be profitable. So we're really happy with the economic profile of our international markets. We do have some higher selling costs and higher marketing costs just given the geographic impact and the higher proportion of new customers. And we expect over time, there's opportunity to bring down those selling costs as we expand our distribution network and strategies around that. And expect that we will see leverage in marketing costs over time as we shift into a higher portion of that being a returning customer base. Operator: The next question comes from the line of Brooke Roach with Goldman Sachs. Brooke Roach: Trina, Sarah, can you elaborate on the drivers of the sequential acceleration in U.S. growth momentum that you delivered in the quarter? Did you see a proportional step-up in each of your direct TEAMS and Community Hub businesses? Or was one of these businesses driving an outsized portion of the momentum? Specifically within your U.S. customer, are you seeing any shift towards a different demographic, whether that's household income, age, gender or even healthcare professional type? Sarah Oughtred: I would say it's all balanced growth in the U.S. When we look at it across our different customer cohorts, we're seeing very consistent trends. When we look at our customer cohorts across occupation, we're seeing relatively steady performance across healthcare occupations. We do see a slight step-up in students, which is the building blocks for future growth. So we like that. When we look across our spend levels, we saw growth spend across our quartiles. We didn't see any trade down. We're seeing growth across all of the quintiles, which is really great. And same at income levels, good growth across each of the different income slices we look at, which we think speaks to both the value proposition and the strength of the brand. And then when we look specifically at our new customers, the customer value remains strong. And even when we look at that over several months after they've entered the brand, we're seeing really good LTV dynamics. So again, all very balanced growth even within the U.S. business. Specific to your question on TEAMS and Hubs, keep in mind, these are still relatively small businesses that will deliver in the long term, but really the growth is being driven by that U.S. e-com business within the core pieces of that business, which is really great to see. Brooke Roach: Great. And then just a follow-up for you, Sarah, on the selling expense. You saw some nice leverage on that line item in the last few quarters, and it sounds like you're guiding for some additional efficiency opportunities here. How should we be thinking about the opportunity for that selling expense line item, both in '26 and on a multiyear basis? Sarah Oughtred: Yes. So we have guided that we'll have full year leverage in 2026, and that will be driven by continued improvements in shipping costs and at our fulfillment center. I think as you look at each quarter, we would expect year-over-year bps improvement each quarter. I'm happy to share that we expect the annual rate will be lower than our 2022 and 2023 rates, which was before we transitioned to our new DC, even with an increase in the higher cost international shipping. So great milestone there earlier than what we had anticipated. So exciting progress there. So I think over the longer term, there will be continued opportunity to see leverage in that line item. We will make investments into expanding our distribution network at a later time. But overall, we're going to continue to find opportunities to bring that cost down. Operator: The next question comes from the line of Adrienne Yih with Barclays. Adrienne Yih-Tennant: Really nice to see the acceleration and the surprise to the upside. Trina, I was wondering, can you talk about just the composition of marketing as you enter into new international markets, how do you think about marrying sort of top of funnel marketing to get the brand awareness versus some of the more performance marketing? So that's kind of my first question. Then kind of a follow-on just to that is kind of using and investing in all these AI tools. How do you think about that? It seems like you're perfectly primed with all of the data that you have. How are you primed to think about that over the next 1 to 3 years? Catherine Spear: So I think what we've seen has been our story from a marketing perspective in the U.S. is kind of what's playing out internationally as well. And so we really built this company and grew our brand awareness from a digital marketing perspective. And as we grew and scaled, we invested more deeply into top of funnel and storytelling. And only the best brands in the world can really invest in brand and storytelling the way we do. And I actually don't know another brand that does it exactly and uniquely the way we do in terms of really connecting on a deep, deep level with our community. And so the word-of-mouth dynamics are strong. As you learn about the brand and you work in a hospital or any healthcare institution, you're in a densely populated environment and you're talking about FIGS and you're talking about our products and you're talking about our campaigns. And that's actually what the largest driver of acquisition is this word-of-mouth dynamic. And so then people come to the site and they engage and then we drop a new product, we drop a new color. And then once again, they're talking about us in the break room or on their way to their next patient. And that's once again acquiring that next customer for us, because FIGS is a walking billboard around every healthcare institution, not just in the U.S. but around the world now. And so those dynamics where we're able to take the gains, right? We see these tipping points in markets where we're more mature. CACs fall dramatically in those markets and we're able to take those gains and invest in the next market. And then we scale and we get really efficient on marketing and then we take those gains again and we invest in the next market. So we're seeing that now, those word-of-mouth dynamics, those customer acquisition tipping points across institutions around the globe. We're seeing that dynamic work on a global level, and it's really, really exciting. From an AI perspective, you're right, we have an incredible amount of data, probably more data than others because when we started this company and how we're a D2C brand. And so we're utilizing this data. We're utilizing the AI tools at our disposal to become more and more personalized with our community. And that's why the retention, our repeat frequency it's just has come back incredibly, and not just in the quarter, right? You saw it throughout last year. Healthcare professionals are coming back over and over again, not just to replenish their uniform. They're coming back to see what's new, to see what's interesting, to build out their uniform. Uniform builders has become a big category, and that's going to be a huge driver in the future. And so it's very exciting to be able to have this incredible base of millions of healthcare professionals that we're interacting with on a daily basis. And now to be able to layer on top of that, all of these different AI tools and utilize a lot of our insights around the differences between healthcare professionals across our community and personalize on such a detailed level that we know exactly who you are and where you work and what you do and what you bought before and what you're most likely to buy again, and that's really powerful. And that is the future. We are at the forefront of this. We're at the forefront of this personalization wave, and we're really excited about how it's going to generate even further gains for us in the future. Adrienne Yih-Tennant: Fantastic. Sarah, my last question for you is, can you just help us out with kind of sourcing diversification, where you are in that journey? And then for me, just a tariff clarification on what you said. So if is the change in sort of like guidance or what we should be thinking about is the movement from the Southeast Asian nations would have assuming would have been around 20%. So are we now assuming that they're 15%? Or just some clarification there. Sarah Oughtred: Sure. So we source from Vietnam and from Jordan and the tariff rates that were previously in effect were 20% for Vietnam and 15% for Jordan. And so as of today, we know the 10% level is in effect and the 15% level has been pledged. We think it's appropriate to take the more conservative assumption here at 15%. And so we've reflected a 15% rate for the rest of the year. Obviously, that will be very fluid in the weeks and the months ahead, and we will continue to monitor that. But we remain confident that our full year guide regarding top and bottom line are just going to continue our sharp execution and stay on top of any changes that happen. Operator: The next question comes from the line of Ashley Owens with KeyBanc. Unknown Analyst: It's Victoria on for Ashley. And I add my congrats on a strong finish to the year. So I wanted to start off on mix. Scrubwear was up 35% and non-scrubwear up 26% in Q4. Can you talk about the puts and takes inside non-scrubs, whether it's underscrubs, outerwear, socks and footwear? What carried the quarter and which of those you expect to be sustained contributors into 2026? Sarah Oughtred: So in the prepared remarks, we did talk about non-scrubwear benefit. So we're seeing improvement and great growth in our non-scrubwear, that's our Salta, Mercado, and our Grid styles that we're really pleased with the performance that we're seeing there. Within outerwear, that's being driven by our high pile bombers, and we are continuing to have category expansion into outerwear, which we're excited about for 2026. We've also introduced bags, our new Archtek compression socks and other accessories that are all performing well, and we're excited about the continued momentum there as we expand category and outfit the full closet of the healthcare professional. Unknown Analyst: Then my next question was just on TEAMS. What is the 2026 pipeline visibility? And how should we model teens as a percent of revenue and its gross margin versus OpEx profile? Sarah Oughtred: So TEAMS today is still single-digit penetration to total revenue. I'm really pleased with how we're continuing to grow that business. So just keep in mind, it is still small today and the economic profile of TEAMS, it does have a slightly lower gross margin just due to the wholesale pricing with a discount there, but we more than make up for that with it being a higher profitability overall with lower OpEx costs. And yes, really excited about the strategy going forward and the plans. We've just launched our new TEAMS Store and lots of exciting progress and upcoming for our TEAMS. Operator: There are no further questions waiting at this time. I would now like to pass the conference back over to Trina Spear for any closing remarks. Catherine Spear: Thank you so much. What I want to just end this with is that it's been a long road to get to this point, but you've now seen that we've stacked great quarter after great quarter, and it's super exciting. But it pales in comparison to the opportunity ahead, and we're so excited to go after that. So I just want to thank you all for joining us today. More to come. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Hello, and thank you for standing by. My name is [ Bella ], and I will be your conference operator today. At this time, I would like to welcome everyone to Lindblad Expeditions Holdings, Inc. 2025 Fourth Quarter and Full Year Financial Results. [Operator Instructions] I would now like to turn the conference over to Rick Goldberg, Chief Financial Officer. You may begin. Rick Goldberg: Thank you, operator. Good morning, everyone, and thank you for joining us for Lindblad's fourth quarter 2025 earnings call. With me on today's call is Natalya Leahy, our Chief Executive Officer. Natalya will begin with some opening comments, and I will follow with details on our 2025 results and 2026 expectations before we open the call for Q&A. As always, you can find our latest earnings release in the Investor Relations section of our website. But before we get to all of that, I'd like to remind everyone that the company's comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of any forecast or estimates, and we undertake no obligation to update any such forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company's SEC filings. In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company's earnings release. With that out of the way, I'll turn the call over to Natalya. Natalya Leahy: Thank you, Rick. Good morning, everyone. Well, we are very excited to share our progress and results today. As we begin this call, I'd like to start with the words from our founder, Sven Lindblad, "We have always had a very distinct North Star. If we can provide people with extraordinary experiences in the world's most charismatic places, they form a connection with the natural world that is truly profound." This year, as we celebrate the 60th anniversary of the very first nonscientific expedition to Antarctica led by Sven's father, this North Star feels as relevant as ever. It guides us in every decision every day. Rick and I recently marked our first year in the company, aboard National Geographic Resolution in Antarctica and standing on a bridge as Captain Martin noted that we were the southern most passenger ship in the world for days. And latest came with expedition leader, Stefano towards a glacier with emperor penguins nearby. It's moments like this that remind us what truly sets Lindblad Expeditions apart, unmatched expertise, intimate shifts and deeply authentic experiences. That commitment is not only philosophical, it drives results. In 2025, we delivered record guest satisfaction scores and record financial performance while strengthening our operating discipline and accelerating progress across all 3 strategic pillars. To that end, we've also rounded up our strong leadership team with the recent addition of a new Chief Marketing Officer, Mike Fulkerson, who brings extensive experience across hospitality, luxury, expedition and cruising sectors. Turning to our results. Full year revenues reached a record $771 million, representing 20% growth year-over-year. We achieved record growth in yields to $1,335 per guest night, the highest in the company's history. Our adjusted EBITDA increased 38% to another record of $126.2 million with margins expanding 220 basis points to 16.4%, reflecting our operational discipline and the scalability of our business model. We also strengthened our balance sheet position, improving our net leverage from 4.6x at the end of 2024 to approximately 3.1x by year-end 2025. These full year achievements were punctuated by our strong fourth quarter results with revenues increasing 23% to $183.2 million. The Lindblad segment delivered 28% revenue growth, driven by an 11% increase in net yields to $1,279 per guest night, while occupancy rose to 87% from 78% in Q4 2024. Our Land Experiences segment maintained its momentum with 16% revenue growth, underscoring strength across our entire portfolio. Let me walk you through how we achieved these results across our 3 strategic pillars. Our first pillar focuses on maximizing revenue generation through occupancy, pricing, and deployment optimization. I'm proud to update you on our progress across multiple initiatives in this area. Our relationships with Disney continues to expand our reach through broader distribution to broader audiences, contributing to strong performance across key channels. As an example, bookings from earmarked Disney travel agents increased 35% for the full year. Our onboard expedition sales program rollout resulted in nearly 3x as many bookings in 2025 compared to 2024. Importantly, the percentage of guests booking within 30 days from a voyage has doubled since the launch of the program, leading to expanded booking curve and higher repeat rate. Our outbound sales program gained significant traction with sales increasing 97% for the full year. We continue to see this as a high potential channel that is in its early stages. Our online bookings increased 52% year-over-year, fueled by strong demand generation through our National Geographic partnership as well as significant enhancements to our web platform. Our extension revenues increased 45% for the year. We are pleased that we are seeing customers take full advantage of our full range of expedition offerings as they travel with us. I just returned from London, where our team hosted a series of travel advisers and journalists. We are very encouraged by the progress in the U.K. market and the momentum we've been building. In just the first 6 weeks of the year, we already booked half of our 2025 revenue. Our second pillar focuses on optimizing financial performance through cost innovation and fixed asset utilization. During the year, we made significant strides in building cost innovation pipeline throughout our organization. A key highlight in our 2026 capacity growth strategy is that we are now realizing the benefits from last year's fleet optimization work. We expect mid-single digit capacity growth in 2026, driven almost entirely by our dry dock and deployment optimization that reduced non-revenue days by over 100, enabling us to release additional voyages and drive incremental sales. We've extended this work into our 2027 deployment and beyond, and are pleased to see that we expect further efficiencies to be unlocked. Looking ahead, we've also built another strong pipeline of cost innovation initiatives for 2026 and beyond, positioning us to realize continued operational efficiencies over the long term. Our last strategic pillar focuses on exploring and capitalizing on accretive growth opportunities. Last January, we acquired 2 Galapagos ships, as you know, expanding our presence in the core market, reinforcing our leadership position there. We also expanded charter portfolio, including a new 3-year agreement with Greg Mortimer, increasing and modernizing our Alaska capacity through a capital-light approach. Additionally, we completed the small tuck-in acquisition of Earthwatch under Natural Habitat, adding a respected citizen science brand to our portfolio. As we look ahead, a key focus of 2026 will be on identifying accretive growth opportunities, both across the fleet and by adding to our portfolio of brands. As always, I want to reiterate our purpose, our why. Our commitment to responsible exploration remains central to who we are and a defining differentiator for our company. For us, it's more than a trip. It's a mission. In 2025, we made a record $3 million investment through the Lindblad Expeditions-National Geographic Fund, the largest in its 18-year history, supporting critical conservation, research and education initiatives worldwide. We supported 36 scientists' education and storytelling projects, including hosting visiting scientists on 25 voyages and welcoming 35 teacher fellows. I'm especially proud of our teams whose grassroots efforts raised over $50,000 to support gray whale research, a powerful reflection of our culture and action. Turning to our outlook for 2026. Our bookings momentum remains very strong. We had a record wave season and booked revenue for '26 has already exceeded revenue for 2025. We are seeing similar positive trends for 2027 bookings, both across land and expedition segments. We are guiding full year revenues and adjusted EBITDA in the range of $800 million to $850 million and $130 million to $140 million, respectively. Rick will provide more details on the pacing of our earnings build this year, but we are excited by our momentum and are optimistic about the opportunities ahead of us. In closing, 2025 was a foundational year, laying the groundwork for sustained profitable growth in years ahead. We delivered record revenue, record yields and record EBITDA alongside a significantly strengthened balance sheet, clear evidence that our strategy is working. These results reflect our team's disciplined execution and long-standing commitment to our North Star. Thank you for your continued confidence in Lindblad Expeditions. I'll now turn the call over to Rick for the financial results. Rick Goldberg: Thank you, Natalya. It's been a privilege to partner with you and the entire leadership team at Lindblad Expeditions over the past year. And traveling with you to Antarctica aboard the National Geographic Resolution and to Churchill, Canada to see the polar bears with Natural Habitat were 2 personal highlights. 2025 was a record-setting year for Lindblad Expeditions. We achieved the highest guest satisfaction scores in our history, the highest net yield, and the highest EBITDA, a testament to the strength of our brand, our strategy and our team. Total company revenues for 2025 were $771 million, an increase of $126.3 million or 19.6% versus 2024. Lindblad segment revenues were $495.6 million, an increase of $72.3 million or 17.1% compared to the prior year. Occupancy increased 10 percentage points from 78% to 88% and net yield per available guest night increased 14.1% to $1,335, the highest in company history. Land Experience segment revenues were $275.4 million, an increase of $54 million or 24.4% compared to 2024, driven by a 16% increase in guests and a 7% increase in revenue per guest. Turning now to the cost side of the business. Operating expenses before stock-based compensation, transaction-related expenses, depreciation and amortization, interest and taxes increased $91.3 million or 16.5% versus 2024. Specifically, cost of tours increased $55.4 million or 15.3%, driven by operating additional voyages and trips and the inclusion of a full year of the results for Thomson Group. Fuel costs were 4.8% of Lindblad segment revenue, which was down 150 basis points versus 2024. Sales and marketing costs increased $27.7 million or 31.8%, primarily due to higher royalties and commission expenses and investments in demand generation efforts. General and administrative costs, excluding stock-based compensation and transaction-related expenses, increased $8.2 million or 7.8% versus a year ago, driven by higher personnel costs and the inclusion of a full year of results for Thomson Group, partially offset by $5.3 million of employee retention tax credits. 2025 adjusted EBITDA was $126.2 million, the highest result in our history and an increase of $35 million or 38.4% versus the prior year. This was driven by a $20.4 million or 34.3% increase in the Lindblad segment and a $14.6 million or 46% increase in the Land Experiences segment. EBITDA margin improved 220 basis points from 14.2% in 2024 to 16.4% in 2025. Net loss available to stockholders was $34.6 million or $0.63 per diluted share versus $0.67 per diluted share in 2024, driven by improved operating income, offset by a $23.5 million loss on extinguishment of debt related to our August refinancing and higher depreciation and amortization, primarily from the addition of the National Geographic Gemini and Delfina to our fleet. Looking quickly at the fourth quarter of 2025, revenues increased $34.6 million or 23.4% compared to the same period in 2024. Lindblad segment revenues increased to $25.2 million or 27.8%, driven by a 9 percentage point increase in occupancy to 87% and an 11.2% increase in net yield per available guest night. Land Experiences revenues increased $9.3 million or 16.1%. Adjusted EBITDA for the fourth quarter was $14.2 million, an increase of approximately $700,000 or 5.4% from the fourth quarter a year ago. This was driven by a $2.5 million increase in the Land Experiences EBITDA, partially offset by a $1.8 million decline in Lindblad segment EBITDA. As we previously shared, Q4 EBITDA was impacted by an increased number of dry and wet docks, and a shift in the timing of our marketing spend to set the stage for wave season. Turning to the balance sheet. We ended the year with total cash of $289.7 million, an increase of $73.6 million versus the end of 2024. The increase reflects $111.6 million in cash from operations due primarily to the strong results of the business and increased bookings for future travel. We used $67.3 million of cash for investing activities, which includes the acquisition and refurbishment of 2 Galapagos vessels. For the full year, we generated $63.8 million in free cash flow. On January 20th, we announced the mandatory conversion of our 6% Series A convertible preferred stock. Following the refinancing of our debt in August, this transaction further simplified our capital structure and strengthened our balance sheet by eliminating our interest obligation and removing the risk of needing to repay the preferred stock in cash at maturity. With this conversion behind us, we remain focused on pursuing accretive growth opportunities, including fleet expansion through charters, acquisitions and potential newbuilds, as well as continuing to expand our portfolio of world-class land-based experiences. Turning to full year guidance. I'm pleased to share our outlook for 2026. Available guest nights are expected to increase 4.5% to 5%, about half of which is driven by optimizing our deployment and minimizing our non-revenue days. We also benefited from the full year contribution of our 2 new Galapagos vessels and additional charter offerings. This capacity growth will be weighted towards the first half of the year. As Natalya mentioned, booking momentum remains strong. We delivered a record wave season and booked revenue for 2026 has already surpassed full year 2025 revenue. We are also seeing encouraging trends in 2027 with bookings pacing ahead of 2026 at the same point last year. Net yield per available guest night is expected to increase 4% to 5%. As a result of heavier capacity growth in the first half, mainly outside of our core most profitable geographies, we anticipate a more modest net yield growth early in the year with stronger performance in the second half. For 2026, we expect total company tour revenue in the range of $800 million to $850 million. We remain focused on cost innovation with more than 20 targeted initiatives designed to enhance efficiency while preserving our commitment to a world-class guest experience and responsible exploration. At the same time, effective January 1st, we reached the final step-up to the run rate royalty under our National Geographic agreement. Taking these factors together, we expect adjusted EBITDA in the range of $130 million to $140 million. We expect EBITDA growth to be slightly stronger in the second half, supported by a more favorable deployment mix and the first half impact of lapping the majority of the employee retention tax credits. We also anticipate approximately $10 million lower capital expenditures year-over-year, reflecting our work to optimize capital spend and the onetime impact in 2025 of refurbishing the National Geographic Gemini and Delfina. After 1 year at Lindblad Expeditions, Natalya and I are even more confident in the long-term potential of this business and remain firmly committed to executing against the strategic pillars we outlined a year ago: first, maximizing revenue generation through occupancy, pricing and deployment; second, optimizing financial performance through cost innovation and fixed asset utilization; and third, exploring and capitalizing on accretive growth opportunities. Now we would be happy to answer any questions you may have. Operator: Your first question comes from the line of Steve Wieczynski with Stifel. Steven Wieczynski: So Natalya or Rick, if we think about your guidance for the year, and Rick, you gave us a lot of good color in terms of what you're expecting from a yield perspective. But just maybe if you could walk us through what would get you more towards whether it's -- we think about the high end of that range or the low end of that range? Just trying to get a feel for what is embedded in there. Because if I think just about occupancy, you guys ended '25 right around 87%, 87.5%. And I think you guys were still kind of thinking that could get into the low 90s this year. It seems like getting to the midpoint of your guidance range, I mean, seems very, very realistic. And that would be even before assuming any kind of material price increases. So just trying to understand what would get you more towards the high end versus the low end. Natalya Leahy: Steve, good to hear from you. So we ended the year with 88% occupancy, and that's been a significant improvement. We are seeing great momentum. We are very confident to get to historical occupancy levels of 90%, and so as we've been talking about for a while now and I think that we are on track to do that. And yields, of course, will be mid-digits as we talked about in the past, it's very much dependent on the booking curve. We see strong momentum. And it's always dependent on absence of any geopolitical situation or unexpected events that can impact the demand. And Rick, anything else you want to add? Rick Goldberg: Yes. I think specifically to your question, Steve, around what would it take for us to hit the high end of our range. I think it really comes down to; one, no major geopolitical disruptions; and secondly, continuing to execute well against our strategic pillars of maximizing revenue growth and cost innovation. Steven Wieczynski: Okay, got you. And then second question, I guess, is we kind of -- you obviously kind of helped us a lot with the revenue side of the equation. But Rick, maybe if you could kind of walk us through how you're thinking about kind of cost for this year? Anything from a cadence standpoint in terms of where costs would hit through the quarters. Obviously, I think you said EBITDA growth will be higher in the second half of the year. But just maybe how you guys are -- what you're targeting from a cost per head perspective as we think about 2026. Rick Goldberg: Yes, I think there are a few major pieces moving around. The first is the employee retention tax credits that we are lapping year-over-year, the majority of which hit in Q2 of 2025. Obviously, we have the step-up in National Geographic royalties as well as the cost innovation initiatives. The other big thing for us always is dry docks and wet docks and where those fall in the year, and we're never trying to optimize necessarily just to hit certain quarters. What we're trying to do is thinking holistically about where is the best place and time for us to take those dry and wet docks in order to maximize revenue and EBITDA for the year. But those dry and wet docks costs will be weighted towards Q1 and Q4 in this year. Operator: Your next question comes from the line of Eric Wold with Texas Capital Securities. Eric Wold: Two questions. So I guess, first, kind of as you think about the guidance for 2026, you kind of gave great color on bookings or how much has been booked relative to '25 at this point. Can you give us a sense of how pricing is looking within kind of 2026 bookings? And similarly, as you kind of talked about '27, any kind of embedded price increases or how pricing is shaping up in '27 versus '26 as well? Natalya Leahy: Eric, great question. I mean we continue to see -- as we mentioned, we continue to see momentum both in '26 and '27 across both segments, land and expedition. If you look at the market in general, we very much maintain strong price integrity across all our products. Our demand all-time highs for core destinations like Galapagos, Antarctica, Alaska, we are very much expanding the booking curves. And if any message to the guests, we say book earlier, our '27 booking curve is ahead of '26 by literally months. So that allows us to drive price elasticity and maintain pricing momentum on both years. Eric Wold: Perfect. And then a follow-up question, I guess, second question. Any plans to expand the fleet with newbuilds at this point? I think as you get closer to pre-pandemic, post above 90% occupancy on a larger fleet than you had pre-pandemic and kind of get more visibility to that. Obviously, you're seeing strength in '27 or '26. When does it become the right time to start thinking about ordering a new ship? And what does the backlog look like if you were to place an order today for a ship that you would want? What is the time frame for delivery? Natalya Leahy: Yes. I mean the right time to grow capacity for us is now. That's a short answer. And by the way, we've been doing it. So in '25, as you know, we added 2 more ships in Galapagos, as we talked about. We also have been growing capacity through additional charters. For example, '27, Alaska capacity is increased by 12% by both optimizing our deployment, but also adding Greg Mortimer because we see strong demand. This year, as you know, we added European river charters. We expanded our charters in Asia. So we continue to do that now in addition to optimizing our deployment and reducing non-revenue days. We are looking at acquisitions of the ships or newbuilds actively. There is nothing to announce yet. But pipeline, if we were to go newbuild route is approximately 4 years. Operator: Question comes from the line of Mike Albanese with [ StoneX ]. Unknown Analyst: Just a couple of quick ones. First, regarding bookings, you provided nice color there. I'm just trying to get a sense of seasonal cadence. Is booking activity usually pretty stacked here in Q1? I guess I'm trying to get a sense on whether we can kind of expect that momentum to continue to build throughout the year? Or is it generally kind of tail off as the year goes? Natalya Leahy: Well, there is -- we did just complete the record wave, and this is a time where there are a lot of bookings done and that's just coming to completion. I think this -- we've had to extend it by a week or so. But generally, our business is like bookings throughout the year at a pretty consistent level, because we operate in destinations like Galapagos year-round. So we are completing the wave now, but people are still booking for the summer vacation and start really planning next winter and spring. There is not a significant booking seasonality in the business. There is, obviously, seasonality in revenue stream. As you know, and Q3, Q4 are generally very, very accretive because of Antarctica and Alaska season. But bookings are relatively consistent throughout the year. We do see an expanded booking curve, which is a great thing for us to see, and we've been intentionally driving it. So '27 bookings ahead of '26, '26 bookings ahead of '25, and that allows us to drive pricing elasticity and booking momentum. Unknown Analyst: And then secondly, I just wanted to touch on some of the momentum you're seeing in online bookings here. You, obviously, have a few initiatives, marketing, expansion of the National Geographic relationship. Could you just talk about kind of the key drivers to the 50% plus growth? And then second to that is, there's an initiative you have to basically grow international bookings and you just came back from the U.K. I mean, are we seeing a lift from that yet in these numbers? Or is that still kind of yet to come? Natalya Leahy: So there are 2 good questions. The web platform is, obviously, a very, very accretive platform for us, so we are very pleased with the progress there. And I think it's like Rick mentioned, it's driven by 2 major initiatives. One is we actually did a number of updates of our web platform. We completely changed our platform, but we also enhanced our search engine capabilities there, the bookings capabilities, the way the web platform flows and allows higher lead generation. And then, of course, our partnership with National Geographic, Disney is driving more leads to our website. So those are the 2 major drivers of increased web platform bookings. Question on international markets. We launched our brand in U.K. market last May. We are very committed to that market, and we are finally seeing a very real booking momentum. As I mentioned, in the first 6 weeks of this year, we already booked almost half of total 2025 annual revenue. So we will continue to be committed to that market, and we also plan to expand our efforts in Australia. All right. Bella, before you go to next question, I did want to clarify, I think, a question from Eric before on the newbuild. There was -- if we were to goal a newbuild pipeline, I mentioned it's a 4 years pipeline, approximately. But just a reminder in this industry, as you know, you start publishing destinations around 3 years ahead. And so you start selling cycle about 3, 2.5 years ahead of actually delivering the ship, which drives an increased deposit before you pay for the newbuild. So I think it's just an important clarification I thought to share. Bella, back to you. Operator: Your last question comes from the line of Eric Des Lauriers with Craig-Hallum. Eric Des Lauriers: Congrats on a very strong year. As you look to add capacity, you just provided some nice color on newbuilds. In terms of acquiring vessels or signing charter partnerships, acquiring new land-based experiences, can you kind of talk about the competitive environment around those right now? Are you seeing the number or quality of bidders either increase or decrease? Just any kind of commentary on the overall competitive landscape when it comes to acquiring new vessels and experiences. Rick Goldberg: I mean, I think that when it comes to acquiring new vessels and experiences, it's less about competition and just what's available in the marketplace. And so we're constantly looking for opportunities to acquire vessels that meet our standards for our guest experiences. But the reality is there aren't a lot of vessels that meet those criteria and certainly not available in the marketplace today. And then similarly, in terms of Land Experiences, I think that for many of these founder-led businesses, we are the preferred buyer given our commitment in terms of what we believe in responsible exploration as well as how we've worked so effectively with the founders who have come on board as part of the broader Lindblad family over the course of the last decade. However, it's really about sourcing opportunities that are unique to us more so than competing with other folks who are out there, who are trying to buy similar businesses. Operator: That concludes our Q&A session. I will now turn the call back over to Rick Goldberg, Chief Financial Officer, for closing remarks. Rick Goldberg: Just want to thank everyone for your continued support and interest in Lindblad Expeditions, and to our team on a really strong 2025, and we remain very excited about the year ahead. Thanks so much, everyone. Bye. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect. Everyone, have a great day.
Operator: Good day, and welcome to the Bubs Australia Limited Half Year '26 Results. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Joe Coote, CEO, to begin the conference. Joe, over to you. Joe Coote: Thank you very much, and good morning, everybody. We're here this morning to talk about our half 1 F'26 results. If we could tab, please. And if we could tab again, please. So just as we get started at Bubs, we acknowledge the traditional custodians of the lands on which we operate. We pay our respects to Elders, past and present. I'm Joe Coote, CEO at Bubs. I've been in my role now just 7 months. So very excited and proud to share with you our half 1 results. I'm joined here this morning by Naomi Verloop, our CFO. Tab, please. So this morning, we will take you through the headlines of our results. We'll update on our trading markets, then Naomi will take over and walk us through our financial results, and then we'll round out with a strategy update. Tab, please. Yes. So as I said, I'm very excited and proud of the team actually to report that we have exceeded our commitments in H1 of F'26. These results have been achieved through setting strategic clarity, focus on growth and then a lot of disciplined execution, particularly in relation to our stock rationing and our air freight. But overall, it's a great result. If I just headline through the main numbers, our revenue was $55.5 million, which was up 14% from prior year. There is a heavy weighting of the U.S. market, which quarter-over-quarter grew -- sorry, half-over-half grew 48%. Our gross profit exceeded our guidance at 48%. Underlying EBITDA pleasingly was $4.4 million positive, which on a comp basis cycles off a negative 0.7%. So we're very happy with that. And then those factors together draw us to today share an upgraded outlook for F'26. So Naomi will share that later. But we're feeling very positive about these results and through the balance of the year. A couple of other highlights just as we get started. We have now moved from strategy development into strategy deployment. And so it's very pleasing to share that we have now got a number of initiatives that are rolling forward, and I'll share some of the outcomes that we've delivered at the back end of this presentation. One of the core things we're focused on is building a high-performing culture. We've done quite a lot of work on this in the half. We've got a group of people now very motivated and committed. We have very clear accountabilities focused around executing in the day and also building a stronger business in the future through deploying strategic initiatives. Over the half, we've made 5 leadership appointments, one of which myself. We've got a new leader from outside the business, leading our commercial business in the U.S.A. We've set up a Global Chief Marketing Officer, also based up in the U.S. We've also secured the gentleman, Chris Lotsaris, who is running the U.S. to come back to Australia, and he is running Australia and rest of world after having delivered great outcomes in his time in the U.S. And finally, we've brought on a leader of our Corporate Services Group. So there's a lot going on at the leadership level, but also more broadly, we have done our inaugural team engagement survey, and we're focused on working with the teams to deliver our high-performance outcomes. Finally, U.S. market access. We continue to make strong progress with the FDA. Interesting to note that overnight, one of our competitors in the U.S. has secured permanent access. And so that's a precedent that we believe stands us in good stead to continue our positive engagement. Tab, please. And then if we tab again, I'll start to talk about the markets. Just as we're getting started on our markets, it's just important to note that we live in a dynamic global environment. I think it's unprecedented in a lot of ways, certainly in the 30 years that I've been in business. And as we look at it, there's really 3 things that we feel are dynamics that are impacting our business. Firstly, the demographic forces. So in the mass market globally in infant formula, there are some negative impacts from declining birth rates. I would call out China as one example where the birth rate was down 17% and then the infant formula dollar sales are down 5%. But pleasingly, our business in China is growing. So we have a strong business model and a strong brand. The other thing to note in terms of demographics is that our consumers, we're very clear who they are. They're a premium, natural consumer. So these cohorts of parents are looking for products similar to the products that we have that are a little differentiated from the mass market. They do tend to attract a higher margin. And so that's the subcategory of the broader category that Bubs participates in. From a regulatory and geopolitical, we are watching with increased interest rate environment, currency with our exposure to the U.S., we have seen a strengthening of the Aussie against the U.S. with the Aussie currently spot rate a little over $70. So we're watching that. Obviously, the tariff environment is interesting to say the least, there's a lot of volatility there. We did watch the recent high court decision in the U.S. and we are working with our advisers in the U.S. to optimize our position in the U.S. in relation to tariffs. Finally, competitors and consumers. There has been globally 2 quality issues in our industry. They're being managed and worked through. We are well aware of those issues, and we're very confident in our quality systems, and we continue to move forward on the basis of the strong quality reputation that we have as Bubs has been obviously from our Australian source. So to summarize, we feel well positioned to navigate the dynamic global environment. We're very happy our brand resonates strongly with our targeted consumers. We operate in diversified markets. So we have some ability to move between those markets. And finally, we have an attractive margin structure given we have the exposure to the premium natural subsegment. Tab, please. Going into the U.S. market, we've seen very strong volume and value growth in the half. We have worked very well with the large retailers. And so if you look at the overall category, we're fortunate to participate in that premium natural category, which is up 44% against the total category only up 3%. We're 8% of that premium natural subcategory. And so in terms of then the retailers that we look to work with, we've done some great work, and we're just cycling through at the moment the annual range review process, where at Target, we'll increase stores. We'll increase the number of products that we have in stores. Amazon gives us the natural coverage, and we're #1 in go on Amazon. Walmart, very pleasingly, we're stepping up very significantly in store count and also the number of products we have in their stores. And then additionally, very pleased to note that we have ranging at Sprouts, which is one of the top premium natural banners in the U.S. And then Sam's Club, which is part of the Walmart Group is the club element of that business, and we have secured ranging at Sam's Club. So if I go straight to the bottom right, you can see the chart there. At the start of February this year, we were a little over 5,500 stores. We're now going into a cycle of growth as these retailers do their annual resets. And so by the end of the year, we are forecasting to be over 8,500 stores with those additional placing. So we're going into a very exciting time where the business will work through the intake of those products, and we believe that that will be a positive for us as we move forward. During the half, we did cycle through some stock rationing. We were rationing the U.S. as authority. We did undertake an airfreight program. I'm very proud that the team executed that very well operationally. We did maintain service level. A lot of that was recognized by the retailers with these additional ranging outcomes that we've secured. With the new marketing focus based up in the U.S., we are very clear who our consumer is. We are moving more and more to some of the next-generation digital platforms like TikTok. We've got exposure to Reddit. AI is becoming a real reality in search. And so our marketing has been rerated to secure those exposures, and we feel really good going forward in relation to our prospects in the U.S. So moving through to China. It's encouraging performance in China. Our growth interestingly in the past period has been concentrated in the second and third tier cities where we are seeing a preference for some of the consumers to move to premium products like Bubs. We're very happy that we're running a very strong business in China, great team against some of the macro headwinds. But because we're in that premium subcategory of imported product because we have a great team, we're doing well. Interestingly, in the half, we did rebalance our stock. So we had a little bit of additional stock sitting in the trade. We've run that down. So our sell-out looks higher than our sell-in, and that sets us up really well for the second half. We're very pleased with the channel performance. The online to offline, the O2O channel is going great guns for us. We've secured an additional 77% of stores and our sell-through in those stores is up 50%. CBEC, which is the imported product, we've maintained our #1 position on Tmall. And we have worked through some of the stock rationing and the stock balancing challenges now. And then coming into the second half, we believe we're well set for sustained growth in China. The chart on the bottom right really shows the story. The 2 channels we play in the O2O and CBEC, both showing strong growth. Tab, please. Australia, we're very focused on investing to reestablish our growth trajectory. Fair to say that while we've maintained our #1 Goat position, we need to do better in Australia. We're working on that. One of the key things we've done, we entered the year with our advertising promotion set at about 8% of net sales in the second half, that's been upgraded to 12%. We've started that. We've seen some positive results. We did do a little bit of price activity, which has been well received by our consumers and retailers. We have started to activate through health care professionals. We have improved on-shelf availability as we work through the stock rationing, and we feel really well set to see a continuation of growth in the Australian market. I would note also that we did discontinue our food portfolio in the half. And so we're very, very focused on our core range of infant formula. And as we go forward, we believe we'll be cycling into stronger performance in our core home market of Australia. Tab, please. So our final segment is our rest of world segment. Again, we were impacted by some stock rationing. Additionally, we did have some regulatory challenges, particularly in the Vietnam market where the health authority has changed some of their requirements. So we've been very diligent to work that through with our distributor partner, Ms. Zhou. So we have resized our distributor relationship. That business has a great capability in health care professionals where we believe we do well in terms of reaching the parents that will be great customers for Bubs. During some of the challenges, we've done a great job to maintain supply. We are active on some of the very modern platforms up there on the right, there's actually a picture of myself on my trip up to Vietnam on TikTok. We do a number of in-store activations. So that other picture is an in-store activation in the modern trade, where we have a very strong following. Japan continues to be a strong market for Bubs. And then Malaysia is an emerging market where we've doubled distribution points in the last 12 months. So it's been resilient against some of the challenges. And again, we feel positive moving forward with our positions in the rest of world markets. Tab. And as we tab, I'll hand over to Naomi Verloop, our CFO, and she'll take us through the financial results. Naomi Verloop: Good morning, everyone, and really pleased to be here today. If we could just have across to the income statement, please. So looking at the P&L, the great takeaway here is our underlying EBITDA result, which came in at $4.4 million versus $0.7 million on the prior corresponding period. The EBITDA reported number came in at $3 million versus $0.6 million in the prior corresponding period. The revenue increase in the U.S.A. was the major driver for these results, increasing by 48%. Overall, revenues were up by 14% versus the prior corresponding period. Gross profit also held up surprisingly well despite the impacts of airfreight and tariffs, but we still managed to come in at 48% and the product mix in terms of more sales being sold through into the U.S.A. allowed us to achieve this result despite the additional tariffs and airfreight we incurred. Operating expenses came in approximately 3% down to $24.5 million versus $25.2 million, and this was primarily due to the completion of the FDA growth studies. So overall, ending the year at $4.4 million on an underlying basis, which was a great result for Bubs. We can move across now to the balance sheet. The key takeaway on the balance sheet is the inventory number. You can see that it has increased from $20.1 million to $28.1 million. We are still progressing through with our inventory rebuild, and that will carry on for the next half. We expect that number to be approximately $8 million to $10 million higher by the time we get to the end of this financial year. You can see trade and other receivables have also increased by $3.7 million. That is in line with the increase in revenues. Trade and other payables also up to $15.7 million from $10.3 million, and that is largely due to extra payments to suppliers for raw materials in particular, goat milk solids and fresh milk supply from Australian farms. You'll also see there that our right-of-use assets have increased up to $6.1 million. This is simply due to the renewal of the lease at our Deloraine dairy facility, which is our manufacturing and head office site in Dandenong South. We'll move across now to cash flow. The main takeaway here on the cash flow is obviously the net cash used in operating activities. So we had a net cash outflow of $5.7 million versus an outflow of $0.5 million at the half last year. This was largely expected and most of it relates to the inventory rebuild process, which we are still currently in the middle of. And as I mentioned earlier, we will continue to invest in inventory in the second half. One of the key takeaways subsequent to December of 2025 is obtaining formal approval from NAB to extend the limit on our working capital facility. So that has actually increased up from $10 million to $20 million and will be very helpful as we go through this inventory rebuild process. Moving across now to margin. We can see that margin has been maintained at 48%. It is down slightly from the 50%, but well above the guidance we were giving of the 40% to 45% range. As I said previously, we have incurred tariffs and air freight, which has been significant. Despite those facts, we've been able to deliver more of our revenues in the U.S.A. market, which are at a higher margin, and that's helped us to achieve a really, really positive result. As we cycle through to the next half, we actually anticipate to incur a higher level of airfreight and tariffs. And so we still expect margins to come in at the 40% to 45% range by the time we get to the end of the year. Moving across to net working capital. We can see net working capital has gone up. We are landing in at $33.4 million for the first half versus $23.2 million. This all relates to the inventory build and the increase in inventories mainly from $20 million to $28 million. You can see, however, that the average net working capital as a percentage of sales has dropped down to 23.9%. It was 25.8% at H2 FY '25 and then at H1, it was 30.7%. That measure really just shows how efficient we are in terms of delivering additional revenues against our working capital, and it just shows that we have the ability to generate more sales on an average basis versus our net working capital. Inventory came in at 28.1%. If you look at the chart just below, we were at 30.3% at the same point last year. So you can see we are quite low given the uplift in revenues. You can see inventory as a percentage of sales is down to 26%. We expect that to pare back up to around 30% by the time we get to the end of the year. Moving now to the FY '26 EBITDA guidance bridge on a full year basis. You can see we landed last year on an underlying number of $0.6 million. We're expecting to come in at $9.5 million on an underlying basis by the end of this year. And our EBITDA reported number is expected to come in at $4.5 million. So the main impacts there are the airfreight and penalty tariff, which we're assuming to come in at around $5.8 million. We also had a one-off payment from Alice & Willis in relation to the legal proceedings, and that was $0.8 million. We do not expect any further funds to be received in relation to this legal proceeding. I'll now just summarize the FY '26 outlook that we've provided. We do anticipate revenues to come in at $120 million to $125 million. It reflects 22% to 27% growth on the prior corresponding period. As I mentioned earlier, we're still targeting that 40% to 45% range on gross profit. That will be lower than what we have delivered for the first half. But as Joe alluded to at the beginning of the call, there's lots of moving pieces there. We have additional airfreight coming in, additional tariffs on non-AU product, and we are living in a very dynamic and changing world with Donald Trump and who knows where the tariffs will land. So those are some of the moving pieces that we're dealing with at the moment. In terms of reported EBITDA, we're going to land at between $4 million and $6 million, and the underlying is going to come in at between $9 million and $11 million. That concludes the financial review. I'll hand back now to Joe for a strategy update. Joe Coote: Thanks, Naomi. And if we could just tab through to the strategy summary page. If we tab again, this is a chart that we will be showing you very regularly as we move forward. As I said at the start of the call, we've moved from strategy development to strategy deployment. So we have active initiatives underway. We are standing up a transformation office as we speak. And so we're excited to share some of that with you at our strategy update later in March, which we will confirm shortly. We will have the new team members in from offshore as well as some of the new roles that we have here in Melbourne. And so we will drill into this strategy at that point in time. But fair to say we feel very comfortable. It's very crisp and clear. It's very focused, as I said, on execution and the delivery of performance improvement initiatives. And I'll say further discussion on that for our strategy update. So if we tab over, I did just want to highlight some of the initiatives that we have underway. Some of these are very substantial. Some will carry on for a number of years and some we have already concluded. So I'll just highlight a couple here. If I start on the left, we have done consumer research in China and the U.S. to confirm our consumer target cohort. And it's very clear who those consumers are, and it's very clear they align to the premium natural subcategory. Moving into the second point, we have upweighted our digital marketing activities to continue our presence on platforms like Meta and Google, but we're moving into some of the new platforms like TikTok and particularly Reddit is driving a lot of the AI search that we're seeing. So our consumers tend to be, we're calling them as seekers and explorers. They tend to be very savvy with the use of digital technology. And so we're really focused on that, and we're very happy with the initial results that we're seeing. Annie, our new Global CMO, will share more of that when she's down with us in March. If we move across to portfolio optimization, we've really had stunning results from the range reviews in the U.S. We're also excited to share that we've ranged in a very premium supermarket banner in China called Ole. We really have great coverage now across those 2 key markets, obviously, as well in our home market with Coles, Willis and Chemist Warehouse. So we are working with the supplier partners. We have great ranging. Now it's about the marketing to step it up and really get the sell-through targeting our consumers. We will share quite a bit on our product development road map in March. We have some exciting things to share there. But we're also very focused on who we are. So there will be some little adjacencies that we'll be looking at that can help us grow our business further faster. Moving across to supply chain, very clear dollar in the bank example where our supply chain team has done a great job. We've done some work in our warehouse where we've got additional capacity, and we're packing containers now. And we've got a run rate underway that will bank $400,000 per annum of cash savings. The next one down there in supply chain that's work in progress that I did want to mention is looking to the U.S. for sourcing of ingredients, the whey proteins that we use as well as the whole milk. Additionally, looking at the supply network, supplying the U.S. from Australia can be challenging. It's a long, thin supply chain. We have tariffs at the border. Geopolitically, it's a good thing as well to be participating within the economy in the U.S. So we're doing a classical buy, build and rent analysis. We're quite progressed through that. And as we grow and outgrow essentially our capacity here in Australia, we have aspiration to look at what a U.S. supply network might be for Bubs. If we move across to enablers, just to round out, we're very focused on culture and high-performing team. We have a great team assembled, very excited to work with such a great group of people. We're also bringing in partners. So we've got a great partner looking at our procurement area through an AI lens. They're a U.S.-based start-up firm called dSilo, they're doing great things for us in that space. Additionally, though, we're very focused on some of the core processes that run a business like Bubs, which is around operations excellence. So just being safe every day, delivering high quality, meeting our promises to our retailers and obviously driving our assets and being efficient in how we spend our cash. And finally, our integrated business planning is another area of focus, particularly the balancing of supply and demand. And as we're a high-growth business, we really need to be looking ahead to see what our growth will be and then convert that back into capacities in terms of shipping, in terms of procurement and in terms of manufacturing. And that's where we've also got a lot of focus, but I'll leave it there. I'm happy to take questions. I'm very excited to showcase the great team that we have when we're together in March. But for today, I'll leave it there and maybe hand back for some questions. Thank you. Operator: [Operator Instructions] And your first question comes from the line of Philip Pepe from Shaw and Partners. Philip Pepe: Well done on a good result. Just looking at your guidance, revenue in particular, you've got a slightly greater second half bias than usual. Is that because you're expecting Australia, and China and some of the other regions to start to grow in the second half to add revenue to what's already a strong U.S. growth? Naomi Verloop: Yes. So we are expecting revenues to normalize in the other regions as well in the second half. So we are expecting a better performance in China due to those selling sell-out rates through to the distributor normalizing. So we should see an uptick in China. In particular, U.S.A. as well will grow further due to that additional ranging of stores that Joe spoke about. So we are expecting a better half for the U.S.A. as well. Philip Pepe: And have we started to see that in February? Naomi Verloop: It depends on when the range reviews start. I'll hand over to Joe to answer that question. Joe Coote: Yes. Phil, we have seen things pick up in China and Australia just in the recent periods. The way the U.S. business works, which I know you understand is there's an annual range review cycle. So we have had confirmation of that range review outcome. And so that massive intake, particularly into Walmart and Target is currently underway. So the product we've been airfreighting up into the U.S. is sitting in the warehouse. It's staged and it's ready to go. The purchase orders are rolling in, and it's really a big pipeline into those stores. And then we wait and see how the consumer offtake goes and then we'll replenish back to those stores. But it's quite a big step-up. So it's exciting at one level, but it's also operationally quite a challenging task to execute, but it will drive a step-up in our sales, absolutely. Operator: Your next question comes from the line of Jonathan Snape from Bell Potter. Jonathan Snape: Just trying to ask a quick one. On the cost you've called out in the U.S. tariffs, airfreight like obviously, one component of that is probably going to be around a little longer than the other. Are you able to kind of split out which element is airfreight as opposed to tariffs? Naomi Verloop: Yes. So we've footnoted that in the P&L slide. So there's $1.8 million in airfreight, and there was about $0.4 million in penalty tariff. So that is tariff over and above the 10% that we incur on non-AU fresh milk supply. So when we purchase goat milk solids from overseas, they might come from the Netherlands or New Zealand or another part of the world, they are actually tariff at a higher rate and it is much higher than the 10%. Jonathan Snape: And how does that flow into your second half thinking? Is the mix kind of the same? Or does it start to move more towards tariffs given, I assume, you probably were selling through some stock that was kind of already there, [ you ] didn't have the tariffs... Naomi Verloop: Yes, we're actually expecting the impact to be larger in the second half, and we're expecting a larger revenue number to come through in the second half. We've got this ranging happening at Walmart that we've been speaking about. So we really have to get the pipe fill there done on that. So that means extra product, and we are going to need to still source from overseas to meet that demand. And some of that is also going to have to be airfreight as well. So we'll also incur additional airfreight, which will be at a higher level than this first half. Jonathan Snape: Yes. Okay. And can I just ask around China? I mean it seems like when I look at all your peers, even some of the bigger ones, there's a massive channel shift that's been going on from China label to English label over the last 6 months, if not last 12 months. And traditionally, Bubs has done pretty well in that environment, not just from CBEC and O2O, but also from Daigou. Are you seeing anything in the Daigou channel at all in terms of resumption of growth at the moment? Interested in your thoughts there. Joe Coote: Yes. We're not seeing a lot in Daigou. We -- as I said, yes, we see that shift to English label, and our team does a great job marketing on platforms. But our O2O growth, as we shared, is very pleasing as well. So we're in that general trade but with the CBEC product. So yes, if that continues, they're favorable to our current positioning, absolutely. So it should be something that we benefit from, I would agree. I can't see that we've seen a lot of it at this point. But we're bullish China more because of the capability of the team that they've [ indiscernible ] in our products. And so yes, that could be another headwind potentially for us. Jonathan Snape: Okay. And if you looked at, I guess, some of these product scarce, most of the, I guess, the recalls have happened from Europe. And I know it's kind of early days because it's been kind of rolling through December and January, more so than anything else. Have you seen any, I guess, benefits start to come maybe from some of that cross-border activity slowing off from Europe and shifting down into regions where you haven't had major product recalls like down here at all? Or is it too early direct to see anything like that? Joe Coote: Yes. Look, it's mixed. I mean the thing as an industry, yes, the families that are impacted by those recalls are where our thoughts go first. And then second, just for our industry, these quality issues are something that we would prefer not to see. You do highlight the recall from Europe. There is also a separate one in the U.S. So it is a dynamic in the U.S. as well. It's a little bit different in the U.S., but it's essentially a quality-related issue. So there is, I'd say, consternation amongst the parents who are formula feeding. So we're working very hard with our customer service and marketing teams to reassure people that the Bubs products remain safe. And we've got a huge focus on our quality. I would say that in pockets, we do see that our sales are responding to some of the gaps that we're seeing. I would also say that in the U.S., some of the ranging outcomes that we've achieved that are so stellar probably somewhat buoyed by the quality issues in some of the people that are participating currently. So -- but with that said, it's a mixed bag. And I would absolutely come back to my opening point, which is yes, we really feel for these parents who are navigating these difficult times in our industry, and we prefer not to see any quality issues anywhere. Operator: [Operator Instructions] Currently, there are no further questions on the phone. So I'd like to hand back. Apologies. You have a question from the line of Mark Topy from Select Equities. Mark Topy: I just want to ask on the production side of things, just how you placed and just give us a bit more insight into how you're ramping up for the inventory build-up. I guess we've got a sense of where you might be producing it, but I'm just wondering about your capability going forward to meet demand. Joe Coote: Yes, Mark, I mean, the way the supply chain works is the physical logistics, which is a fairly long thin supply chain from Australia to predominantly China, U.S. So that's one element. But in the sort of production side, we essentially have a 2-stage production process. We have our own facility in Melbourne in Dandenong, and that facility runs at about 40% to 60% of nameplate capacity. So we run that facility on a 2-shift basis, 6 days a week, and that facility has been operating very well over the past half. And the team that runs that facility do a great job. So we do have capacity there. We work with a network of partners in terms of then turning the milk into powder. So we have a network of supply partners across Victoria. And again, they're doing great work, and we have some capacity there. Where there are some challenges is in the goat milk solids. And so some of that comes off farm here in Victoria. And then we do supplement selectively from some offshore sources that Naomi mentioned, primarily the Netherlands and New Zealand. So you put all that together, the outlook is positive. It takes time, there is a long lead time in each of those steps to secure the goat solids, push it through the dryers and then into the blending and canning lines to get on to a container and across to the U.S. It's a long thin supply chain, as I said at the start. So -- but look, we're very confident that we will rebuild and we will have sufficient safety stock, particularly up in the U.S., and we'll be able to secure the sales that present in these additional range we have in the U.S. retail trade. Mark Topy: Great. Yes, obviously, you meet that demand. And then just secondly, on the kind of what's your read on the goat milk sort of perception in China? There seems to have sort of been a little bit of up and down in terms of the demand. And at one point, goat milk was very strong in terms of some of the other producers in that market. And how are you sort of converting the consumers over even in the U.S. to the goat milk product? Joe Coote: Yes. It ranges like total goat as a percentage of total is one number, and then it tends to be a higher percentage in the subcategory. The premium subcategory has higher participation in goat. In the U.S., it's almost solely in that premium natural subcategory. So the total addressable market, if we can collectively, as an industry, grow goat, that will be very beneficial to Bubs. In the U.S., at the moment, it's about 3% of total market, which is about 6% of the subcategory. So 1 percentage point there because we're about 1/3 of the market. China is a little bit different. China, the participation rate in goat, as you call out, has dropped back a little bit. It's a different sort of proposition in China. It's been more mainstreamed in China over a number of decades and beyond, I would suggest. So we watch that carefully in China. But certainly, with our exposure being a dominant goat player, a tick-up in goat participation in infant formula would be very beneficial. We also have an adult goat product CapriLac in China. So goat in adult is also something we're excited about. And then in Australia, goat, I think, runs at about 6% to 8% of category. So again, we're the #1 in goat. So we do watch those numbers on a total addressable market. And if we can collectively grow the goat participation, we -- naturally rising tide raises all boats. So yes, that's a really good metric to look at, and we look at it carefully. Mark Topy: Yes. And just lastly, just on the Aussie dollar, just touch on FX and any sort of implications there in terms of the sort of nudge up to the Aussie dollar where it is at the moment? Joe Coote: Yes. We don't certainly -- we're an infant formula company, so we don't try and play the currency market. But in terms of our risk management strategy, I'll just hand over to Naomi. Naomi Verloop: Yes. So that uptick that we saw in AUD versus USD only sort of came in around the end of January and up into early Feb. So we're sort of trading around that $0.7 level now. We actually hedge all of our transactional exposure, and we've taken hedges out already through to the end of this year. We'll be going through our budget process for FY '27, and we'll have to obviously rerate what that rate is looking like. So that will have a subsequent effect on the revenues that we report coming through from the U.S.A. But if we do our comparatives in the financials on a constant currency basis, we'll be able to see the true underlying performance. Mark Topy: Right. So if I interpreted that, so there is some crimping of margin then from the higher U.S. dollar-Aussie dollar. Is that the way I'm kind of hearing that? Naomi Verloop: Only on a reported basis, not within the result reported in the U.S.A., so only on consolidation because we are an AUD business. Yes, not transactional because that will be hedged through. But you'll be hedging through at higher rates. So it will have some impact. So there will be an impact. But if it moves higher than $0.7, you're protected against it. If it moves lower and you in at $0.7, then you'll have the opposite effect. Mark Topy: So that implies you're not repatriating cash from the U.S. Is that got some natural hedge over there or from a regulatory view... Naomi Verloop: We are repatriating cash, but there's 2 separate FX impacts. So there's a transactional FX and there is a reported FX, which are 2 different things. Operator: [Operator Instructions] Currently, there are no further questions on the phone lines, so I'd like to hand back. Joe Coote: Well, just to round out, thank you very much for your attendance this morning. And we look forward to having follow-up discussions and see you at the final strategy session in March and the end of the year. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.
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.
Operator: Thank you for standing by, and welcome to the Coles Group 1H '26 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Leah Weckert, Managing Director and Chief Executive Officer. Please go ahead. Leah Weckert: Good morning, and thank you for joining us for our half year results call this morning. Before I begin, I would like to acknowledge the traditional custodians of this land on which we meet today, the Wurundjeri people of the Kulin Nation. We acknowledge their strength and resilience and pay our respects to their elders, past and present. I'm joined in the room today by Charlie Elias, our CFO; Matt Swindells, our Chief Operations and Supply Chain Officer; Anna Croft, our Chief Commercial and Sustainability Officer; Michael Courtney, our Chief Customer Experience Officer; and Claire Lauber, our Chief Executive of Liquor. Moving now to Slide 3. I'm pleased that we've been able to deliver another very strong set of results in what is a competitive operating environment. We delivered strong supermarkets earnings growth with continued sales momentum. E-commerce was a key contributor again with sales growing by 27%. Our automation programs are delivering tangible benefits, and we delivered cost savings of $133 million through our Simplify and Save to Invest program. Of course, what matters most to us is our customers, which is why the improvement in our customer satisfaction scores across the business during the half was a key highlight for me. Finally, we completed our Liquorland banner simplification program. And while there are challenges in the overall liquor market, we are seeing positive growth across our convenience portfolio, which is really pleasing. Moving on to Slide 4 and the financial results. We reported group sales revenue of $23.6 billion, an increase of 2.5%. Excluding significant items, group EBIT increased by 10.2% and NPAT increased by 12.5%. In Supermarkets, adjusted for the competitive industrial action in the PCP and excluding tobacco, sales revenue increased by 6.1%. And Supermarkets EBIT increased by a very strong 14.6%, underpinned by top line growth and EBIT margin expansion of 55 basis points. Charlie will talk more to the financials in his presentation. Moving on to Slide 5. During the half, we maintained a consistent focus on executing against our strategic priorities, which once again underpinned our performance for the period. Let's get into this in some more detail, starting on Slide 6 with our first pillar, destination for food and drink. We know value remains front of mind for consumers and delivering on our value commitment to customers remains a priority for us. During the half, we strengthened our value proposition, expanding our range of everyday value products. We ran a winter and spring value campaign and our Shop Scan Win and European Glassware continuity programs each delivered strong engagement with our customers. Our exclusive to Coles portfolio continues to perform well with sales growth of 5.7%. We launched more than 500 new products, and the range was recognized with 17 Product of the Year awards. We know our own brand portfolio is a unique differentiator for Coles, and these new products and awards underscore the momentum we are building in quality and innovation across the portfolio. We also entered into some really exciting exclusive partnerships during the half. One of these was with Marks & Spencer, where we brought a number of their iconic favorites to Australian homes. This included their well-known Percy Pig and Colin the Caterpillar lollies, which turned out to be our most successful lolly launch ever. Our partnership with Grill'd also proved popular, particularly with the rising takeaway trend for those who want to recreate their restaurant or takeaway dinner in their own home. These collaborations broaden our appeal and help ensure we remain a destination for inspiration and everyday meals. We were also pleased with how we executed over the Christmas period, starting with our Christmas range, which showcased more than 340 own brand Christmas products and exclusive specialty drinks. We worked hard in the lead up to Christmas to ensure value was felt where customers needed it most. Our $1 seasonal produce lines in week before Christmas were a simple but powerful example of that commitment. Operationally, we delivered our highest monthly DIFOT results since December 2020, an important sign of the progress we are continuing to make in availability and overall execution. And this leads me to our customer satisfaction scores on Slide 7. As I said at the start, the improvements in customer satisfaction scores were a real highlight with strong improvement across our key metrics of quality, availability, store look and feel, and price. The big takeaway here is that customers are noticing the changes we are making. Improved availability, sharper value, and better execution in stores are translating directly into stronger satisfaction scores, and that gives us real confidence as we look ahead. There is always more to do, but we are very pleased with the progress we are making. Moving now on to Slide 8 and the next pillar of accelerated by digital. We reported another strong half in our e-commerce business with 27% revenue growth in supermarkets, penetration now over 13% and double-digit growth across all shopping missions, whether that be same-day, next-day, Click & Collect or our immediacy offering. We are focused on making sure we have a great offer across all online channels. We've made a lot of progress in e-commerce over the last few years, and customers are responding to this. We know customers have different shopping missions throughout the week, and the investments we have made allow us to provide them with exceptional service that matches their shopping mission. For example, our CFCs allow us to provide the biggest range, better availability and improved freshness for those customers who are looking to do their weekly shop. And our expanded partnership with Uber and our windowless Click & Collect Rapid offer provides us with a leading immediacy proposition. During the period, we made investments in our digital assets and are seeing particularly strong growth in our app metrics with monthly active visitors to the app growing by 32% and the app share of e-commerce revenue now at 54%. Our CFC volumes increased in the half with sales growth again outpacing total supermarkets e-commerce sales growth. Same-day deliveries commenced in Melbourne in the first quarter and Sydney in the second quarter. And we also had a major catchment extension to Geelong and the Surf Coast in Victoria. In terms of our immediacy offering, as I mentioned, we expanded our partnership with Uber Eats with now up to 17,000 products available to purchase through the Uber Eats app. And the windowless Click & Collect Rapid was also expanded to 255 stores nationally. Overall, our online NPS saw a meaningful uplift driven by improved availability, fulfillment and the overall digital customer experience. So, one of the most important points to make here is that we were able to make all of these investments, grow our business, expand catchments, and our immediacy offering while driving efficiencies through technology, scale, and a strong operational focus. We made further improvements to our picking processes in store, increased orders per van, and installed 2 key automation technology features in the CFC with on-grid robotic pick arms and auto frame loading. So, it's been a very pleasing half in terms of e-commerce. Moving now to Slide 9 and loyalty. Flybuys remains an important driver of customer engagement across Coles as well as a key element of our overall value proposition. During the half, Flybuys exceeded 10 million active members, growing by 6.2%. This highlights the continued relevance of personalized value for our customers. We were also pleased to see strong growth in our Coles Plus subscriptions with customers recognizing the additional benefits they receive by becoming part of Coles Plus family, including free delivery, free rapid Click & Collect, and double Flybuys points. Moving now to Slide 10 and our delivered consistently for the future pillar. Our SSI program remains a core part of our DNA. We know the importance of operational efficiency. Delivering consistent and sustainable cost savings through our SSI program enables us to help offset inflation and reinvest in the customer offer. And we see the benefits of that both in our top line as well as our bottom line. This half, we delivered cost savings of $133 million. This brings us to around $700 million since the beginning of FY '24, and we remain firmly on track to achieve more than $1 billion in benefits over the 4-year program. Consistent with previous years, there were many initiatives across different parts of the business that contributed. And again, a common theme with the use of AI and other technology automation to improve the effectiveness and efficiency of our processes. This leads me to Slide 11. We've been building and deploying AI for over a decade. What has changed recently is the pace of capability and the breadth of where we can apply it. For our customers, we are already scaling AI to drive more relevant offers and engagement through personalization across the shopping journey. AI is helping us deliver more personalized and relevant experiences with tailoring engines is improving relevance, conversion and overall customer satisfaction. In parallel, we're also now moving into the next wave, agentic commerce, conversational AI, and real-time personalization, capabilities that will transform how customers engage with us over time. We are proving the relevance, timing and effectiveness of offers and rewards for customers and helping them to find value whilst improving our promotional effectiveness. In our operations, AI is embedded across operational decision-making with a clear focus on outcomes to improve availability, reduce waste and lift productivity. We're using AI in forecasting, demand planning and ranging to improve accuracy and availability. And in stores and in our e-commerce business, AI is helping optimize rostering, improve workflows, pick efficiencies, and dynamic work. Across our supply chain, AI supports optimization in transport and improved workflows. We're also using AI in stores for computer vision for object recognition and loss technology. Now looking ahead, we're building an end-to-end optimization capability across the supply chain from automated DC pallet flows to transport to replenishment. So, decisions are all made as one system and not in silos. A digital twin also lets us simulate scenarios before we change operations. Then we can apply this to execute the best plan in the rural network. The result is improved availability, lower waste, lower cost to serve and faster response time to any disruptions. And we're also looking to optimize online fulfillment capacity across our stores, CFCs and DCs, helping us to decide where orders should flow, how much capacity to allocate and when to flex resources. And finally, for our team members, we're embedding AI tools that make work easier and more productive. Our knowledge assistant is helping teams quickly access policies and procedures, and we've rolled out AI productivity tools, including ChatGPT Enterprise and Microsoft Copilot, and we're partnering with OpenAI on team training. So, it's fair to say that AI is well and truly entrenched within our business, is delivering strong results and has been for some time. But the pace of change is accelerating, and we are really excited by the opportunities that are emerging, particularly in customer-facing agentic AI, and we will be talking about this more in the future as we start to scale. Moving to the next slide. Alongside our financial performance, we remain committed to the role we play in supporting our team members, suppliers, communities, and the environment. So before I hand over to Charlie, I would like to cover off some of our achievements in this area. I will start with our team members. Through our November team engagement poll survey, we maintained our highest ever team member engagement score, remaining in the top quartile. This is a strong reflection of the culture and leadership across the business. Almost 70,000 team members provided their feedback, and it was pleasing to see that delivering for our customers from one of our strongest areas with 90% of team members recognizing our commitment to meeting our customer needs. We also continue to support the well-being of our team members, including through initiatives such as R U OK? Day, where our stores and distribution centers came together to reinforce our care and courage values. We recently launched Round #14 of the Coles Nurture Fund, continuing our long-standing commitment to supporting innovation, sustainability and growth within the Australian supplier community. And we celebrated excellence across our supply base in the 2025 Supplier Partner Awards, recognizing achievements across each of our key trading categories. Our community partnerships remain a defining part of who we are. This half, we raised more than $1.6 million for November and more than $1.8 million for the second by Christmas appeal, helping to provide over 9 million meals for Australians experiencing food insecurity. And finally, we continue to make progress on our sustainability commitments. 87.7% of eligible packaging is now recyclable or reusable, and we maintained 100% renewable electricity usage across our operations, and we continue to divert more than 85% of solid waste from landfill. And with that, I'm now going to hand over to Charlie, who will take you through the financial results in some detail. Sharbel Elias: Great. Thank you, Leah, and good morning, everyone. I'm now on Slide 14, which details our group results. Excluding significant items, we reported group sales revenue of $23.6 billion, an increase of 2.5%. Group EBITDA of $2.2 billion, an increase of 7.8% and group EBIT of $1.2 billion, an increase of 10.2%. NPAT, excluding significant items, increased by 12.5%. Off the back of these results, the Board declared a fully franked interim dividend of $0.41 per share, an increase of 10.8% compared to the prior corresponding period. This is a consistent progression of shareholder returns over time. Moving on to the segment overview on Slide 15. Let's start with Supermarkets. Sales revenue increased by 3.6% with our value proposition continuing to resonate with customers. We adjust for competitive industrial action and excluding tobacco, sales revenue increased by 6.1% EBIT increased by 14.6%, reflecting the strong top line growth, coupled with EBIT margin expansion of 55 basis points to 5.8%, which was underpinned by a 65-basis point increase in gross profit margin. The strong gross profit result was achieved notwithstanding the significant investments we made in value during the period annualized benefits from our DC program, strategic sourcing, SSI initiatives and the growth of Coles 360. Lower tobacco sales also contributed 37 basis points to GP margin. In Liquor, sales revenue declined by 3.2%. The liquor market remains subdued and competitive intensity increased through the period, particularly at the big box end of the market. During the half, we completed our Simply Liquorland store conversion program and our convenience portfolio, representing around 90% of our store network delivered positive sales growth. We are seeing a shift in customer behaviors towards convenience-led purchases. And pleasingly, our stores are well positioned in this convenience space. There is some work to be done to optimize our Liquorland warehouses now that the conversion is complete. Overall Liquor EBIT was impacted by softer top line and $13 million in one-off costs relating to the Simply Liquorland conversions. In other, revenue relates solely to the product supply agreement we have with Viva Energy. As outlined in the results release, the PSA, which is due to expire in April, has been extended and is now due to expire at the end of November to allow Viva to complete the transition to New South Wales, WA and Queensland. The increase in other EBIT was predominantly due to the higher net property gains in the prior corresponding period. Turning to operating cash flow on Slide 16. Before discussing the numbers, I want to highlight a timing impact. The half year ended on the 4th of January. And similar to last year, this resulted in an additional payment run in the final week, creating an additional cash outflow of approximately $560 million. The timing effect impacted several metrics, including cash realization, working capital and net debt. These metrics will normalize in the second half. Operating flow, excluding interest and tax was $1.5 billion with a cash realization ratio of 69%. Adjusting for this additional payment run, the cash realization ratio was 94%. For the full year, we continue to expect cash realization of 100% with the first half timing impact reversing in the second half. The working capital movement primarily reflects increased inventory to support availability over the Christmas period and lower trade and other payables following the additional payment run. The movement in provisions and other largely reflects the flow provision, which is noncash but recognized in EBITDA. Now I'll now move to capital expenditure on Slide 17. Gross operating capital expenditure on an accrued basis was $476 million, a decrease of $66 million compared to the prior corresponding period. We had a higher weighting towards store renewals and new stores across supermarkets and liquor this half as well as a lower spend in relation to our Victorian ADC, and this was as a result of a milestone payment having been recorded in the prior corresponding period. Pleasingly, our Victorian ADC remains both on time and on budget. We also incurred lower capital expenditure in relation to our investments in loss technology. As you know, CapEx falls into 4 key areas: store renewals, growth initiatives, efficiency initiatives and maintenance. Within renewals, we completed 160 store renewals across our network, consisting of 35 supermarkets and 127 liquor stores. These included 122 Simply Liquorland conversions. Within growth, we opened 6 new supermarkets and 11 new liquor stores. We also contribute -- we continue to invest in our e-comm business. Efficiency initiatives included investments in the Victorian ADC, store front-end service transformation and Liquor ordering. Maintenance capital included our ongoing refrigeration electrical replacement programs and life cycle replacement of store and technology assets. We continue to optimize our property portfolio with net property capital expenditure increasing by $157 million, primarily due to an increase in property acquisitions and developments and lower proceeds from divestments. And to reiterate the guidance we provided at our FY '25 results, we continue to expect capital expenditure of approximately $1.2 billion for the full year as we continue to invest in store renewals, digital and technology and growth initiatives. Turning to funding and dividends on Slide 18. Our funding position remains strong. At the end of the half, our weighted average drawn debt maturity was 4.4 years with undrawn facilities of $1.9 billion. As I said earlier, the Coles Board declared a fully franked interim dividend of $0.41 per share, which is a 10.8% uplift versus first half '25 and shows a consistent progression of shareholder returns over time. We will also have a franking credit balance of approximately $600 million after the payment of our interim dividend. Finally, we retained a headroom within our rating agency credit metrics and a strong balance sheet to support growth initiatives with our current published credit ratings of BBB+ with S&P Global and Baa1 with Moody's. And with that, I'll hand it back to Leah to take us through the outlook and concluding comments. Leah Weckert: Thanks, Charlie. So, turning to the outlook on Slide 26. In the first 7 weeks of the third quarter, supermarket revenue increased by 3.7% or 5.3%, excluding tobacco. We're pleased with this strong sales result as we can see through the market share data that it represents above-market growth, continuing the sales momentum we have had for some time. It indicates that in Victoria, we have retained a portion of the customers that we gained as a result of our negative 2.5% continuing to deliver positive sales growth. As I said at the start, the focus for Liquor this period is on leveraging our unified brand, simplifying our processes and improving the performance of our Liquorland Warehouse stores. So overall, I'd say we have had a strong first half and a good start to the third quarter. And with that, I'll now hand back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from Ben Gilbert from Jarden. Ben Gilbert: Just a question on the trading update. But just on your comments around market growth, just interested if you could give us some color potentially ex Victoria and how within that trading update, you've seen some of the key categories in terms of sort of your health, beauty versus fresh versus sort of the food category? Leah Weckert: Yes. Thanks for the question, Ben. So, as I said, we're quite pleased with the first 7 weeks for 2 reasons really. One is that based on the market share data, we can see that it's above market growth, and that means we have retained a portion of those customers, which means our Victorian sales numbers actually aren't that far off where we are from a national basis. And then we have grown some share on top of that. The data point we received on Wednesday is entirely consistent with the market share data that we have, which is that our major competitor has also performed ahead of market, but that share is not coming from us, and we can see that it's coming from others. I think the second reason that we're pleased with that first 7 weeks is that it just really shows consistency. For those 7 weeks this year, we've got 5.3% ex tobacco. Last year, it was 4.5%. The year before that, it was 6.4%. And that represents really strong sales growth year in, year out. And we are really focused on continuing to drive the flywheel that we talk about, which is strengthen the top line, unlock operating leverage and then reinvest that back into the customer offer. So that's what we're intending to do. In terms of strength of categories, so food continues to be very strong for us. We're seeing good strength across the fresh areas, and you'll see on the customer satisfaction scores that quality is really stepping up. That is actually directly related to our fresh categories. And I would call out meat as one area where we are seeing outperformance in the market in that space. In the nonfood area, that's been a real focus for us. And we would say we're quite encouraged by the emerging trends that we're seeing in that area. We have reconfigured categories in the half to respond to some of the pricing dynamics that we are seeing in the broader market, which means that we have introduced a lot more lines on to EDLP. I mean we know that we're a convenient destination to pick up many of these nonfood products. You think your cleaning products, your paper products, your baby product, it actually makes sense to grab those when you come into the grocery shop. But we're taking very much a category-by-category approach. So, to maybe just give you a bit of color on that. We've invested, for example, into our cup wipes and our Ultra range in cleaning. So, beauty -- sorry, baby and cleaning, private label, and that has driven really strong volume growth for us in that space. We've also taken action on some of the proprietary lines in pet, for example, to be more competitive with some of the players in the market that have recently moved into that space. And on the back of that, we've seen double-digit growth on those lines. So really encouraging in terms of where we're headed there and more to come. Operator: Your next question comes from David Errington from Bank of America. David Errington: Yes, look, I'd like to pick up on that, particularly Slide 7. It's a fantastic looking slide. It's brilliant in terms of customer resonance, and you highlighted as one of your key highlights. But can you bring it to life a little bit, what does it actually mean? Like 330 basis points? Can you put it in context as how big a jump that is availability? I mean they look really impressive, but I don't know what to make of it. And what does shine for me a little bit is price, up only 180 basis points. I don't know if that's good or not, but your gross margin was very powerful, could you have gone a bit harder on price? Can you basically bring Slide 7 to life? Because that looks an incredibly powerful chart, great execution, great improvement in margin. Can you bring to life what drove that? And maybe given that you are higher margin than your competitor, how much firepower that you've got going forward to maintain that sales momentum that you've got? A bit in that question, but if you could have a go at it, that would be really appreciated. Leah Weckert: Thanks, David. We'll try and unpack it. I mean it was a highlight, I think, for all of us as a team because we do have a fundamental belief that if we're increasing customer satisfaction is one of the things that helps us to drive transaction and engagement in store. I think it is a real combination of the execution focus we've had, but also the benefits starting to flow through some of the transformational investments that we've made over a long period of time now. So, I think the benefits we're getting from the ADC, the CFCs, but also the step-up that we've made in terms of the renewal investment. Maybe I might ask Anna and Matt to give us a little bit of color. We'll maybe just work through the slides in order of what the headings are. But we start with quality. Do you want to cover that one? Anna Croft: Yes. David, it's Anna. When it comes to quality, obviously, it's important across the store, but very, very important in fresh, and we've been running a really big fresh transformation program. And that really has seen us take an end-to-end review of quality. So, taking every touch point on where we might aggregate that and how we would look to solve it. And actually, just to give you a bit of a sense of what we've been doing, we've been working through our supplier base to make sure that we have the right suppliers that are fit for the future. And we've gone into deeper end-to-end partnership with that. We've also coupled that with an upweight in our technical resource to really work with those suppliers to really unlock quality and cost. We've really then also focused particularly in meat around our manufacturing network to make sure it's actually closer to stores. So, I think WA to WA. Queensland, we've got a port facility there now, which means that we're faster and we get fresher product to stores and then therefore, give life to customers in store, and we know that's how they measure quality when they see life at home. The other bit we've done is we've invested quite significantly in store team training and also central team training to really focus on quality. coupled with the work that Matt and the team have been doing in supply chain around faster, fresher flows that mean we are flowing product from our supplier base to the stores in a very nuanced way that means we get better life. And on the back of that is probably to hand over to Matt to give a bit of flavor on that because reducing lead times has been a key priority. I might hand to you before we then talk about availability. Matthew Swindells: Sure. Thanks, Anna. David, look, it makes it easier when Anna and the team are super focused upon right supply, right range by store and the right pricing and promo plans. And that does then set us up to leverage the changes that we've made around our supply chain operations and our store operations. And the game we're playing here is speed. So, the faster we can move product, the fresher it will be and importantly, the less waste and markdown we also get. So, our faster fresh flows is essentially a shift away from bringing product in and racking and stacking to then wait to come and pick it later. We really are moving things through the supply chain as fast as possible and measuring in hours as opposed to days. And then similarly tying that in with the store execution where we've got the right display space and the right resourcing to really make sure that the product gets in front of the customer in the least possible time. I would also add, we've now got a couple of years under our belts of our replenishment forecasting system. This was the RELX implementation we did and the final part of our integrated replenishment plans, and so they get better too. So, it's a number of parts that drive the difference in quality. An answer to your question around this 330 basis points a shift, it is a really big shift. And if I think about the 390 basis points, we've then seen improvement in availability, that is at levels that previously we've not really seen. So, they are extremely good results. On availability itself, you probably think about this in 3 areas. So, the first, and I've talked about this again in the past, we're quite focused on foundations. So, this is where we've made the model changes, and we've got the commercial teams really focused upon supply collaboration, the supply chain team focused upon forecast and the logistics of moving product and the store teams super focused on it but it's the consistency with which the teams now work together that's driving the difference. And so we've got a really solid base that we can build on. Importantly, our supplier inbound fulfillment as I thought is at a 6-year high. And through the Christmas period where it traditionally falls away, we saw it maintain a level so we've got stability, not just consistency there. The second part then that enables us to really drive investments as making the difference. That's the ADCs that we have talked to in the CFCs. And we are putting more cars and more products through those ADCs to drive the benefit of not just efficiency but service. And we've also now rolled out our transport management system. which has enabled us to have better control and visibility of our fleet. And that means we are better at picking up from suppliers through Click & Collect, and we're better at delivering to stores as well. So those investments drive a difference. The final part, which I think is probably where we want to see the next level is really a shift from being reactive to being proactive. And this is where we're starting to use data and AI to look for gaps before they occur. So where can we see the problem before it becomes an issue in the store. And we're able to identify at a store SKU level potential out of stocks and target team members to go and manage the inventory closely so that we can then be proactive around availability and prevent any issues before they even occur. And I think that's then the next level, foundations first, technology driving the difference and then the AI and data really becoming proactive rather than reactive, that's setting us up for even further improving availability. So I might -- for the store look and feel, the third part. Leah Weckert: Yes, there's a number of key areas that go into the store look and feel metric. A couple of things I would say, driving this certainly is our renewal program. If I take you back to '22, we would have done 40 renewals. This year, we will complete 70. And actually, what we have done is maintain the blueprint now for some years to get to consistency. What that does is give customer consistency in every store they go into, but it's also enabled us to take the cost per renewal down to do more of those. So certainly a key focus. And we've really started to address what I would call some of the long-term underinvested stores as part of this program, and we're seeing really good progress and customer response there. The other bit that's in this metric is ease of shop, and we focused on the shelf edge through our range program and macro space. We've really stepped on both navigation of space and aisle. And the one big thing here, we've really thought about the integration of our omnichannel to actually remove the friction we see from customers in the store through that. So good progress there. And the big is we fixed up our checkout space through the service transformation program. So that has been a real meaningful step on from a customer satisfaction. So, I'd say there's lots of initiatives driving this. We are certainly focused on how do we continue to elevate this and how do we take it to the next level. So much more to do, but we're pretty pleased with where we are. And then if I come to the final one on price, funny enough actually it is always the hardest metric to move and move the slowest from a customer perspective. So, we are really pleased with 180 basis points. And that's come from all the work that we've talked about before around fewer, deeper, more targeted promotions, removing the noise and making it easier for customers to shop. We're seeing the increase in EDLP in the right categories really driving that price satisfaction -- and again, the work we have done not only on simplifying the range, but also tailoring the range to the store has made it easier for customers to find value and find the products they want shelf. So, a number of key things. Now there's an awful lot more to do in here, and we're really focused around that, but it's pleasing to see that the work we've done over the last 18 months really starting to come to fruition here. So, they would be the big drivers, David, across those. Operator: Your next question comes from Shaun Cousins from UBS. Shaun Cousins: Maybe just a question just on the first seven weeks, sorry, you dropped out Leah when you were talking in your outlook. Do you think you were hurt by the cycling, the Jan '25 period in that Woolworths is now indicating that they got -- that they were hurt in Jan '25. So did Coles benefit there and hence, you're cycling against a period there, which actually means that 37% could be a bit stronger and that you're getting some big industrial action tailwind. And my question is really more around liquor. Just in terms of like-for-like sales are down 2.5% to start the year. Sorry, yes, please, Leah. Sorry, your line is quite -- we're losing you a little bit. Sorry, the team for a second here or there. So, apologies for that. Leah Weckert: Shaun, can you hear me? Shaun Cousins: You're in and out. Leah Weckert: I'm going to go ahead and answer the question. Shaun, are you hearing us okay? Shaun Cousins: Yes, I can hear you now. Leah Weckert: Wonderful. Okay. So, I might reiterate the points I made when Ben asked the question. So, we are definitely still cycling over some disruption from the industrial action last year in the January period. We are pleased, though, with our first seven weeks of sales performance, and there's really two reasons driving that. So based on the market share data, what we have reported today is above-market growth. And that means that we have retained a portion of the customers that came to shop with us last year, and we have grown some share on top of that. What we received on Wednesday is entirely consistent with that market share growth -- with that market share data, I should say. So, our major competitor has also performed ahead of market, but that share is not coming from us, and we can see in the market share data where that is coming from. So, we feel that we have the right pitch in terms of customer at the moment because we are retaining customers, and we are stepping it up. The second thing we're really pleased about on the result is just the consistency, which is something we really prioritize. So, if you look back in prior years, those first 7 weeks, we've reported 5.3% ex-tobacco today. That was 4.5% last year, and it was 6.4% the year before. And so that represents really strong sales growth year in, year out that we are delivering. And we believe that is part of what we're managing to get to work through the strategy of the flywheel of strengthening the top line, unlocking it into the customer offer. Did you get all that. Shaun Cousins: We got most of that. And I think across the 2 answers, I think we've got it. My question is around liquor. Just in terms of your like-for-like to start the year is down 2.5%. Your earnings were down 37% in the first half. You've called out the aggression from Dan Murphy's. As Dan Murphy's remains aggressive on price and really tries to reestablish its sort of price leadership, which is quite existential for them. How does Coles Liquor actually perform, and does your big box just continue to sort of suffer? Just curious around the outlook for earnings. Should we be anticipating earnings to be down another 30% again? I'm just -- you've got a fixed cost base there and a competitor that's quite aggressive. Just curious around the outlook there, please. Leah Weckert: Well, we won't be giving any guidance on where the EBIT will go. But let me make a few comments. So, first of all, we're pleased that we've completed the 222 Liquorland conversions as part of the Simply Liquorland project. And along with that, we have reset range, and we have reset value mechanics in our stores. And ultimately, that entire program of work has really been about how do we attract customers into our offer. And what we're really encouraged by -- and I have to say it's early days. We only finished this process in the middle of December. But early days, we're very encouraged by the NPS uplift that we are seeing. It is a very significant and material uplift that we are seeing in customer satisfaction. And that tells us that those changes are really resonating, which is the first thing you have to achieve with your customers. Now there is no doubt that the backdrop to all of that is the market is very challenging. And we have a subdued market, which is a combination of a structural shift, which is generational around consumption of liquor, but you've also got the impacts in there of cost of living. And certainly, in Q2, we saw an elevation in the competitive intensity in the market. And that disproportionately impacted our large box, so the Liquorland warehouse stores, which is only about 10% of our network. And so, what we were really pleased about is even though those stores were impacted, the 90% of the network, which makes up the convenience formats of Liquorland and Liquorland sellers, that component of our network was in positive growth. And so, you team that up with strong customer scores and positive growth in the heart of our network. We think that, that is actually really positive in terms of setting ourselves up longer term to lean into what we are seeing is quite a few convenience trends coming through in liquor purchasing. Now that being said, we've got work to do on the warehouses, and that's going to be a big focus for us over the next 6 to 12 months. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just want to follow on in terms of the liquor commentary. So, one of the things you talked to there is lower consumption of liquor, a structural shift. I'm just wondering in supermarkets, oral GLP-1s seem to be coming down the pipe and maybe cheaper, which could drive increased uptake in your customer base. How are you thinking about the impacts on demand across the supermarket store, particularly in impulse categories, please? Leah Weckert: Yes. So, it's a great question and one we've been discussing quite a bit as a team. So, I mean, if I come up a level, we're actually seeing a huge trend from customers generally around healthful leaving. And we're seeing that play out in our offer that we have in stores today. So, things like the fact that coconut water is up over 30% on sales. The fact that we're getting the growth out of health powders and supplements. Even things like we've seen a shift even just in the last 6 months in the penetration of fresh produce that is hitting customers' baskets. And you've got items, snacking fresh produce items like baby cucumbers, snacking carrots, salary sticks. They're all in double-digit growth. And so, we are looking at that customer and seeing this behavioral change as there is a shift, again, a bit of a generational shift into healthful eating. We're excited by that. We think that's a really big opportunity and actually plays to many of the strengths that we have in the fresh area of the business, but also the way in which we're leaning into our convenience business. So, if you think about our ready meals, fresh ready meals that we have in the dairy section and frozen meals, our perform meals, in particular, are growing really, really strongly in that space, and they're dietitian designed meals that actually tailor the nutritional content to nutrient-rich and high protein. So, with that as a backdrop, we're already starting to make a shift with a lot of the product development that we're doing and also the ranging work that we do with suppliers to bring in more healthful options in every category. And we look at GLP-1, and we're observing closely what's happening overseas. And what we are seeing from those customers is actually what they are really looking for is solutions. They want to find nutrient-rich food in the supermarket and the supermarket that helps them to navigate that as easily as possible. One of the piece of feedback we hear is it's really hard to navigate supermarket shopping as a GLP-1 user. They have the real potential to be a winner here, and that's what we want to lean into. Operator: Your next question comes from Tom Kierath from Barrenjoey. Thomas Kierath: Just got a question on the gross margin. It's up 65 bps, and I understand you've made some restatements there. But I guess I'm just trying to square away the comment that you're investing in price. Could you maybe just step us through the moving parts on the gross margin? Because it's obviously a pretty big move there. And I guess, quite different to what Woolworths reported a couple of days ago. Sharbel Elias: Great. Thanks, Tom. Firstly, I just want to kind of lead off with the restatement was a prior period restatement. So, we didn't actually restate anything for this half. Look, we're really pleased with the progression in gross profit margin, as you'll note, 65 basis points. And if we look at the drivers, what are the drivers that are actually sort of leading to that sort of growth. Firstly, we're actually seeing the annualized benefits of the investments we're making in the ADCs and specifically this half, Kemps Creek. If you recall, Kemps Creek was in ramp-up last year in FY '25. So, what we're seeing at the moment is both the ADCs at business case in this FY '26 year. And we're definitely seeing benefits in the first half, and we'll continue to see that in the second half. Strategic sourcing and SSI benefits, again, are 2 really important drivers in terms of how we look at gross profit margin. And SSI, you would have seen that we delivered $113 million -- sorry, $133 million this half. And a good portion of that goes into GP. And in fact, I think we're really pleased with that particular program. Coles 360. Coles 360 was actually in double-digit growth for the half, and that is on the back of a number of halves now of double-digit growth. So, we're pleased with how that's sort of tracking. And then we've also called out previously the mix benefits from tobacco. As you know, tobacco sales are lower. That contributes in terms of a gross profit margin benefit, not gross margin dollars, but gross profit margin. So, we're actually really pleased with how they're sort of tracking. And the ADCs, obviously, the implementation costs. So, we successfully removed and unwound those implementation and dual running costs, and that created a benefit for the half. So, look, we're -- at this time, and as we did, we continue to sort of make these targeted investments in value, and therefore, we've been investing in value that's allowed us to do that, which is also driving that top line growth that you're seeing in our results. Thomas Kierath: Just can I just clarify the SSI benefit, like how much came through gross margin versus C0DB of the $133 million. Sharbel Elias: Yes. Well, look, typically, it's been -- yes, as you know, over a longer period of time, it's been 1/3, 2/3, 1/3 in GP and 2/3 in C0DB. This half was a little bit more weighted to CODB, for example. So it's a little bit more weighted to CODB and more like 1/4 in GP and 3/4 in C0DB. Operator: Your next question comes from Michael Simotas from Jefferies. Michael Simotas: Could I just follow on from Tom's question on gross margin? I think the message here is that gross margin would have declined if not for mix, Coles 360, SSI, the ADC benefit, et cetera. Can I just confirm that that is the case? And then you're investing in value for customers, which is great. Do you think you're getting enough support from the supplier base to continue to do that and justify what has been or reward what has been a period of very strong execution from Coles? Leah Weckert: Maybe I'll start that question, and Anna can talk to the supplier piece. But I mean, we haven't done the add up specifically on the gross margin. I mean I think one of the biggest drivers in the gross margin expansion is the tobacco impact, which is the 37 basis points. So that obviously is a very significant mix impact in there. And then you've got the initiatives that we've been doing that Charlie outlined like the ADC with Coles 360, strategic sourcing, et cetera. But we have made investments into value, and so that is definitely an offset in that line. And a big one during the half has been in the red meat space as we've seen costs increase in terms of cost of goods on that. And we know that's really important for customers. So we haven't passed all of that through into retail. But what I would say is it's a core job of ours as management to make sure that we're just managing that GP period to period. And we put in place a plan that works to have a look at what do we think the impact will be and therefore, what initiatives do we need to hit with the right degree of timing to be able to get those benefits coming through. So we're pleased with the overall result that we've been able to get there. Anna, did you want to talk about the relationship with suppliers? Anna Croft: Yes, happy to. What I would say, Michael, is that engaging with our supplier base more broadly to optimize the range and strengthen the customer offer is business as usual for us, and we're incredibly focused on that, and that won't change. I won't go into any specifics on the commercials because that wouldn't be appropriate. But what I would say is that we are incredibly focused on working collaboratively, taking a much longer-term view to drive a real meaningful step change in our offer and our commercials collectively. And it's about getting further ahead together, taking a real end-to-end view of our businesses in a way that accelerates our true differentiation, and that's really where we've been focused on working with our supplier bases on, and that has taken a fully collaborative cross-functional approach, not just a trading approach. We're taking it from a supply chain, from an in-store perspective, and we're really looking credible to grave as to how we think about that going forward. So yes, more work to do, but we're absolutely working with the supplier base on that. Sharbel Elias: And so Michael, what you're actually seeing is actually our 3D strategy actually in action. So that's flywheel effect, right, where we're making very deliberate targeted investments in programs in GP, cost discipline in our CODB, allowing us to reinvest that back into the customer offer, driving top line sales and getting that operational leverage and efficiency because all through that, what you actually saw was also an expansion in our EBIT margin bottom line. So it's really our 3D strategy in action. Operator: Your next question comes from Craig Woolford from MST Marquee. Craig Woolford: I'm interested in the comments about the market share performance. It looks -- it is a great result and interesting how it's played out for both Coles and Woolworths. I assume you're referring to supermarket market share. I'd be interested in how much work you're now doing on other definitions of the market, if we look at results from Chemist Warehouse or Bunnings or the strength in dining out more generally. Maybe the bigger question is how do supermarkets ensure they don't lose share from other retailers as well. Leah Weckert: Yes. Thanks, Craig. It did cut out in the middle, but I think we've probably got the gist of it. So yes, we were talking about supermarket share when we were making those comments around the outlook growth. But obviously, it's a much more competitive and broader competition market than it was 10 years ago. And so the likes of Chemist Warehouse, Bunnings and I think we could probably, based on the comments that you've just made, also talk about things like QSR in that mix. And for us, the approach that we've been taking is to really break that down category by category. And so even within the nonfood space, being very particular about how we think about the different categories in there. And I'll let Anna maybe talk to that one. But certainly, on the food front, we continue to expand our convenience options for customers. And we actually introduced a number of new products into both the meat range, but also into frozen and convenience dairy over the half, which are really leaning into that. And I mentioned the grilled burgers, they're a great example of where we can actually bring share back into the supermarkets channel by giving a product to customers that they feel like it's something that they might eat when they're out, but actually they can prepare it in their own homes. And we've seen fantastic growth in our convenience-based meals out of the freezer section, for example, that's an area that we've expanded significantly. So it is a focus area for us. Those categories that we're talking about there, they are in double-digit growth for us. So they're outperforming the rest of the supermarket. Do you want to talk a bit about nonfood and how we think about the different competitors there, Anna? Anna Croft: Yes, of course. And Craig, I think we've spoken about this quite a lot. It is a clear area of focus for us. What I'm pleased is we're starting to see some real green shoots coming through in both sales performance and market share. And when we look at that, we look at supermarkets market share. But more broadly, we look at kind of health and beauty and our pet business at a total market read because, as you said, our competition is far broader than the supermarket space. And I think what we're pleased about the progress has really been driven by a couple of things. I think sharpening our value and moving to a trusted pricing position through EDLP has made a marked difference. In the quarter, we moved 400 lines in that space, and we made 1,900 value-based in store really emphasize the value we have, and we're starting to see that come through. We've really focused on range where it matters. So in pet and baby and beauty that's really come through. We're using the CFCs very strategically to go deeper on range that really matters as well as a bulk strategy, which really means that we are competing with others outside of the supermarket arena in terms of both neutralizing the value, but making sure that we keep the volume within our business. I think in baby, we've talked about the importance of that. And Leah mentioned, we've been really doubling down on CUB, our own brand. And actually, we've invested in both value and quality, and we're seeing that now being the #1 both volume and value line in those categories. And then on pet, as we said, we've done a lot of work on both value and bulk and that is playing through. We ultimately know, as I said, we are the right convenience spot for customers to buy these categories. So we actually will take a category-by-category approach and make sure that we are being really tailored where we need to put innovation in, where we need to deal with value and where we need to deal with range. So certainly not a one-size-fit approach, and we're taking very much a total market view in these categories rather than the supermarket lens. Operator: Your next question comes from Caleb Wheatley from Macquarie Group. Caleb Wheatley: I wanted to follow up. I know there's been a bit of a discussion so far, but particularly around sort of the forward-looking thoughts on the capacity to reinvest. I mean, as you've spoken about, GP margins are up fairly materially, EBIT margins are up fairly materially. I know there's sort of one-offs and things dropping out that are helping that. But on a sort of go-forward basis, how are you thinking about now the sort of capacity to reinvest from an operational point of view? And I know prices has been a bit of a focus, but just sort of more broadly in the suite of options you have to reinvest from an operational point of view, whether it's kind of service or store ops or loyalty, how are you thinking about sort of your flexibility now? Do you have that margin expansion to reinvest and sort of where the more meaningful opportunities are from here, please? Leah Weckert: Yes. It's a great question. And I think the expansion that we have got in the margin does give us flexibility as we move forward. I think we've been fairly clear in all of our results presentation that we intend to maintain competitiveness. And so we do continue to monitor very closely price and not just from one competitor, but from a full suite of competitors depending on the category that we are talking about, and we will continue to do that. However, we have even just in the last 7 weeks, been what I would say is nuancing our operating model. And that's something that's just BAU for us, which is we look at performance, we look at where we see some opportunities, and we will put money in to help us to capture opportunities. A good example of that would be -- so we've actually seen some real strength in our Sunday trade. And as a result of that, we have made the move to invest more into store remuneration to help us to support that. And from a category perspective in the store, investing into the online space because we can see that there's latent capacity there that we can access. And we're not afraid to put some investment in to really capture that. And particularly through Flybuys, and we will flex on that to get the right outcome that we want. I'm told that you might have missed part of that because we're struggling with clarity today. So I'll just reiterate that one of the things that we've noticed coming into the first 7 weeks of the calendar year has been real strength on Sunday trade in our stores. And we have, as a result of that, made additional investments into store remuneration, so our team to help us to capture the upside of that and in particular, in the online space. Operator: Your next question comes from Bryan Raymond from JPMorgan. Bryan Raymond: Just mine is a bit of a follow-on actually around cost growth. On my numbers, excluding implementation costs, you had 6.6% cash CODB growth in the half. I know there's a lot of moving parts in there. But I just wanted to walk through because it was a bit of a surprise on the upside to me that cash cost growth. I acknowledge you had a pretty big online channel shift. That would be a higher cost channel. You just talked Sunday trading and there's obviously loading there, labor hours in store. But given you had $100 million of SSI benefits, which is the 3/4 of the $133 million in the period in CODB, I'm just surprised that cost growth is running that high. So, if you could help us understand sort of why that is and if that is the path that should continue or if there's some one-offs in there that we need to adjust for? Sharbel Elias: Bryan, thanks for the question. And look, as you know, when we look at CODB and look at cost generally, we look at it as a percentage of sales. And I actually think we are completely tight band over a number of years now in terms of -- as a percentage of sales, particularly if you exclude the sort of the D&A element of that. Cost discipline in our business is very much part of our DNA, right? And you've seen that through our SSI program. Leah mentioned earlier, to date over the last -- since FY'24, we've actually delivered over $700 million of that. That's going to continue. We're going to continue delivering on that, and we're going to continue delivering around that sort of $250 million a year in SSI benefits going forward. Look, we did successfully unwind and the implementation costs, as you did call out, and that was a clear positive. But we have been making very deliberate in strategic investments in our customer offer. So, including our CFCs, which are now fully embedded in our cost base. So, our CFCs are fully embedded in our cost base, they're delivering results and in line with expectations. So, you're seeing that result fall to the bottom line. We're actually making very deliberate investments in data and technology, which is all about improving that customer experience and online growth and omnichannel growth really across the board. So, with these investments, they are driving our top line. And one of the things that I do sort of look at as I look at the -- including GP and including our CODB. And what we're seeing is these investments are driving not only growth but margin growth in our business. Operator: Your next question comes from Richard Barwick from CLSA. Richard Barwick: I've got a question around the CFCs. You do mention that the CFC sales growth was ahead or outpacing your total online or e-commerce growth. Can you put some metrics around that just to give us a sense of how much better your New South Wales and Victoria would be doing online versus the rest of the country. And part of that answer just makes me wonder if you are outpacing online within Victoria, just why -- so it sounds like it wasn't quite enough to get your Victorian sales growth ahead of cycling the industrial action because I think you did call out that Victoria was a little softer than the national rate of growth. So, you sort of put those 2 pieces together for us. Michael Courtney: So Richard, it's Michael here. I did get the first part of the question, which was about CFC growth. And then I missed the second part of the question. So maybe I'll answer the first part first, and then maybe you can follow up and just clarify what the second part of the question was. So, we're not giving specific growth rates for the CFCs. But if I take a step back and talk about proposition types, where we've got Click & Collect, where we've got same-day delivery, where we've got next-day delivery and where we've got immediacy. I think the really pleasing part was that all of those offer types were in double-digit growth throughout the first half. And then next-day delivery, which obviously the CFCs form part of, is still by far and away our largest offer type. So, to be still getting really strong growth through that with the CFCs being a driving factor is really pleasing for us. The proposition continues to ramp up and continues to get really strong customer feedback. And I think that when you look across the positive feedback that we're getting from customers across range, availability and freshness, it's great to see that the customers are seeing the differentiation that is in that offer. So, we're getting really good growth. The operating metrics are in a really good spot in terms of Ocado partners globally where the top performing partner on key operational measures. As Charlie mentioned at the start, we're continuing to invest in that proposition when you look at things like on-grid robotic pick, there's other efficiency measures. So, we're getting really strong growth. It's becoming a really important part of our proposition. The NPS is growing, but an important part also in that as part of being an omnichannel retailer is that we've seen as those volumes have come out of stores and gone into the CFCs, the NPS in store has also improved, which speaks to the benefit of the CFCs, not just as a sales driver, but as a really key part of an omnichannel fulfillment network. Would you mind just clarifying the second part of your question? Richard Barwick: Yes. And the second part was just reconciling that commentary with the comment that Victoria was not growing as quickly as the rest of the country. And I realize that it was in part because of the industrial action but just trying to square those 2 pieces together. And just as a little adjunct to that, at what point are you completely clear of the -- any lingering sort of headwinds from last year's industrial action for Woolworths. So, when are you in sort of clear air there, so we're no longer having to make adjustments for that issue? Leah Weckert: Thanks, Richard. I think that is a million-dollar question. So as we shared, if we go back to when all this was unfolding last year, our big expectation was that there was going to be a cohort of customers that experienced the industrial action where they only came to us because it wasn't convenient to shop somewhere where there was really poor availability, and it's likely that all those customers have just returned back. Then there was a cohort of customers making an active decision between us and our major competitor where the stores are quite closely located. And then there were our online customers that came to us. And it's really the 2 second buckets that we have been working over the course of the last 12 months to put together a plan to say, how do we make sure that now that we've had those customers come and shop with us, that we can retain them. And what we're seeing in the first 7 weeks of data is that we have been successful in retaining a proportion of them, but we are definitely still going over the top of some of the disruption for last year. I think I'm hopeful that we're sort of past it. We aren't spending a lot of time trying to pull it out of the numbers, if I'm honest now. We're just cracking on with continuing to drive sales and do what we need to do. But my expectation would be that Q4, in particular, should be very clean. Richard Barwick: That's an important one because obviously, there's a lot of comparisons with your rate of growth versus Woolworths quarter-by-quarter, and it seems like it's made a difference, obviously, for the first 7 weeks. But if we -- so that's going to impact the third quarter. But if you -- I mean, effectively, your answer is all clear in the fourth quarter, that's what's important. Leah Weckert: That's my expectation. And we definitely -- obviously, we didn't actually receive all the sales that were disrupted as part of the industrial action last year. And I think you're seeing some very interesting reversions going on in the market share data because of that. Operator: Your next question comes from Peter Marks from Goldman Sachs. Peter Marks: My question is just on liquor again. Just wanted to touch on the gross margins. I guess, surprised to see them up in the half. I think you had a 21 basis point headwind from range optimization costs there as well. So I think underlying, they're probably up 40 basis points or so, if that's right. And I think you would have been lapping like a strong period last year as well. So I guess have you managed to drive that improvement in the liquor gross margins in the half? And then just wondering on your trading update, the sales down 2.5%. Are you able to give any indication of whether you're losing share there? Like what's your liquor market data showing in the first 7 weeks? Leah Weckert: Thanks, Peter. The line was a bit garbled. So let me play back what I think we're answering here. The second question you had was around what's our viewpoint on market share. And then the third part was around the expansion of the gross margin, which I might get Claire to answer. Maybe just market share issue though. The data that we have available these days for market share in the liquor market post the changes that were made to the ABS data that's available to us is quite poor these days. So it's actually difficult for us to have a view on that until we see our major competitor come out with their results. So at this stage, we probably couldn't give you a clear view on that one. On the gross margin, Claire, I might ask you maybe to cover that one-off and how we've achieved expansion. Claire Lauber: Thanks, Leah. Yes. So Q2 was obviously a heightened intense competition quarter. We were managing price and promotion intensely through the quarter with a focus to offer compelling offers for our customers. And despite the competitive intensity, we were really pleased that we thought we struck the right balance between driving sales and managing margin, with delivering the gross margin result of 17 basis points improvement. Operator: Your next question comes from Phil Kimber from E&P Capital. Phillip Kimber: My question was just about the online business. Williams has called out that there's been a step-up in competition from all the various players in there. Is that sort of what you're seeing? I mean, your growth rates are very strong. Are you seeing sort of reactions now from a competitive point of view that are maybe higher than they were in the last 3 to 6 months? Matthew Swindells: Yes. Thanks, Phil. So firstly, in terms of our own offer, when we look at whether it's customer acquisition or investment in the customer offer, we haven't increased the investment relative to the prior year. We've obviously had very strong sales growth. So, the level of dollars that we're investing with customers has gone up, but that's a good thing based on the sales growth. Our investment in the customer offer as a percentage of our sales hasn't gone up. So, I wouldn't say that we are investing more. In terms of competition, where I would say that there's been an increase in competition, is probably on the immediacy platforms because, depending on the platform, you've seen more competitors in the grocery space enter, which, a more competitors leads to more competition. But that's why we've taken a really proactive step of expanding our partnership with Uber. So that's something that will allow us to partner more closely with Uber, giving a better offer in terms of range, being able to partner more closely on things like loyalty, and something that's world-first for Uber in terms of the way that we're partnering. We think it's something that's going to allow us to have differentiation in this market as it relates to immediacy and ensure that we have a leading customer offer with strong economics. So, whilst there might be increased competition in certain parts of the market, I think we've taken some really proactive steps to ensure that we've got a winning offer. Operator: Your next question comes from Ben Gilbert from Jarden. Ben Gilbert: Just another one on liquor. It sounds like, obviously, you're probably doing pretty well, given that the pricing competition is more so across 10% of the portfolio. Just interested in how you're seeing the pricing deck across the residual 90 smaller format, where you think you're doing better? Because just anecdotally, your pricing probably seems much sharper than the market there. And I'm wondering if that's where the risk is if your competitors go after the smaller formats, which have probably been left alone a little bit at the moment. Leah Weckert: Yes, it's a great question, Ben. I mean, we're definitely seeing a good uptick in our customer satisfaction around value and price in the small format stores. And we have been very sharp on KPIs there. As we've said, we think that with the shift to convenience, building brand loyalty to Liquorland in that convenience format will be really key going forward. And the value proposition that we have in there is a really important part of that. Operator: Your next question comes from Adrian Lemme from Citi. Adrian Lemme: Just one quick one, please. Just on tobacco. I think we've seen a bit of a crackdown in recent months on illegal tobacco shops. Are you seeing any slight improvement yet coming through in your tobacco performance? It's obviously still a big drag on sales. Leah Weckert: Yes. Sales week-to-week are pretty consistent now for us, and they have been for the last 6 months. We have seen some slight improvements week-to-week when we've seen a couple of the crackdowns, particularly in Queensland and WA, but I'd probably describe it as quite marginal, and it doesn't tend to have longevity around it. So, it can go for a matter of days or a couple of weeks, and then we tend to see it revert back. So that's why, sort of overall, we're still in a sort of a similar position to what we reported at Q1. Operator: Your next question comes from Michael Simotas from Jefferies. Michael Simotas: Charlie, I just wanted to pick up on a comment that you made about the CFCs being embedded in the cost base. Just want to understand exactly what that means. Last year, you called out $40 million of effective start-up costs for the CFC model. How do we think about that going forward? And look, I'm not asking for specific numbers on that, but are there still some costs in the P&L that will come down over time? Or has that flipped to a positive contribution? And then just generally, what's the profitability of your online business look like right now, noting that your competitors disclose margins, and they effectively doubled year-on-year. Sharbel Elias: Yes. So, Michael, let me take that. Great question. So, a couple of things. Firstly, let me go to the CFC side of that equation. We are really pleased with the financial performance of the CFCs. They're absolutely in line with our expectations. And as we said, the CFCs are volume, we're seeing great volume growth, as Michael articulated a little earlier. And what we have seen now in financial performance is that the second half of '25 is better than the first half and certainly an improvement half-on-half and year-on-year in the CFCs. All the one-off implementation, any of those costs, they absolutely go away. So, there are no lingering costs from that perspective. We're really saying, when I mentioned that CFC is, that they're now in the cost base. It's actually part of our business going forward. They're fully embedded there. And I would just encourage, again, as I said earlier, there are elements that go into GP, there are elements that go into CODB, and those changes. From our e-commerce business, generally, again, really pleased with the growth, a positive contributor to earnings. And from that perspective, we're seeing the leverage actually drop to the line. So, you would have seen our e-commerce business has grown at 27% this half. Last half, it was a similar sort of very strong growth rate. And in that time, we've not only grown earnings, but we've absolutely grown our EBIT margin through that perspective. That's the lens which I would look at in terms of the profitability of our business. Operator: Your next question comes from Craig Woolford from MST Marquee. Craig Woolford: Just a follow-up on the inflation path. Without getting bogged down on the technicalities of how Woolworths and Coles measure it, it was surprising to see Coles measure accelerate in 2Q versus Q1, whereas Woolworths measure decelerated in 2Q versus Q1. So perhaps there are some elements in your basket you can talk to that may have added to inflation. And what's your perspective on that inflation outlook over the next 12 months or so? Leah Weckert: Yes. Thanks, Craig. I mean, we did see it accelerate 30 basis points, as you just highlighted quarter-on-quarter. I probably would say that over time, Coles has tracked quite closely to what we see in the CPI data, which gives us some confidence around how the reporting that we do actually aligns to that. The most significant areas of pressure for us from an inflationary perspective have been in the red meat space, so beef and livestock prices are coming in. We haven't passed all of that through to consumers, but it's definitely, some of it has moved through, particularly in the lamb space. We've also seen a bit of inflation in dairy for chilled desserts and milk. Some of that is related to capacity constraints in the market around yogurt. But equally, there have been others on the other side of the ledger. So, eggs have come off now that we're past the avian flu impacts. We've still got deflation in quite a few of the non-food categories where there continues to be very intense price investment across the market. Operator: Your next question comes from Thomas Kierath from Barrenjoey. Thomas Kierath: Just a quick one on depreciation and amortization. I think before you had said it would rise by $115 million this year, and it only went up by $46 million in the first half. How should we kind of think about that for the second half of the full year? Sharbel Elias: Yes. Well, look, thanks, Tom, for that sort of question. Look, we'd expect the second half to be around that sort of $50 million or so increase. So, we're probably expecting -- if you think about the full year, these things are not always a precise science in terms of -- because they do vary on when capital investments and things land. The depreciation is probably more like $100 million or thereabouts for the full year of '26. Operator: Your next question comes from Bryan Raymond from JPMorgan. Bryan Raymond: Might be one for Anna. There's obviously an ACCC case going at the moment. I don't expect you to comment on that specifically. But just wanting to sort of get your thoughts around value perception impacts that might come through from all the press coverage, but particularly how you're thinking about red versus yellow tickets longer-term, like this might be increasing a bit of distrust in some of those red tickets and whether you need to pivot a bit more to high-low. I'm just interested in how you're thinking about the composition of your promotional program going forward. Anna Croft: Thank you, Bryan. I won't comment on the case, but I think that would be appropriate. I think that we remain really focused on how we give our customers great value across the entire basket and making sure we've got the right mechanics in every category. And as we said, in some categories, we've had to move more on to EDLP. The program we've been running around actually doing fewer, bigger, bolder promotions, and that into activity with EDLP seems to be really working for customers, and we can see that through some of those areas. So I think, look, we're just really focused on actually using data and AI to work out how do we get the right promotions to meet the right customer cohorts and how do we do that longer term. And actually, what we are seeing is the work that's done in range is making it simpler for customers to find value. And obviously, our own brand growth in the quarter around really driving quality and value is another lever we have to really simplify that on an ongoing level. So, we're really focused. The outcomes will be the outcomes of where we are on the ACCC, and we'll work through that, whatever that may be. But again, it comes back to making sure that we're doing the right thing across the basket, not in any particular category, but lowering the cost of shopping and giving customers the right value in the right way in the right categories. I don't know whether you want to add anything, Leah? Leah Weckert: I think that's a good answer. Operator: There are no further questions at this time. I'll now hand back to Leah Weckert for closing remarks. Great. Leah Weckert: Thank you for joining us this morning. In summary, we say we're very pleased with the financial results and the strategic achievements that we've delivered over the last half, including strong supermarket sales and EBIT growth, and strength in online. The fact that our automation and operational efficiency programs are now delivering really tangible benefits, including improved customer satisfaction scores and the completion of the Liquorland banner simplification. So, we're seeking to be laser-focused going forward on what really matters to customers, both in the short-term and the long-term. And we know that if we do that, we will continue to move the dial in each period. We know that's what is going to drive our top line, translate to sustainable earnings, and create long-term value for our shareholders. So, thank you for your time this morning, and I look forward to speaking to you again at our third quarter results in April. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to today's Shift4 Payments, Inc. Q4 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the meeting over to Thomas McCrohan, EVP, Investor Relations. Please go ahead. Thomas McCrohan: Thank you, operator, and good morning, everyone, and welcome to Shift4's Fourth Quarter 2025 Earnings Conference Call. With me on the call today are Taylor Lauber, our CEO; and Christopher Cruz, our Chief Financial Officer. This call is being webcast on the Investor Relations section of our website, which can be found at investors.shift4.com. Today's call is also being simulcast on X Spaces, which can be accessed through our corporate X account @Shift4. Our quarterly shareholder letter, quarterly financial results and other materials related to our quarterly results have all been posted to our IR website. Our call and earnings materials today include forward-looking statements. These statements are not guarantees of future performance, and our actual results could differ materially as a result of certain risks, uncertainties and many important factors. Additional information concerning those factors can be found in our most recent reports on Forms 10-K and 10-Q, which can be found on the SEC's website and the Investor Relations section of our corporate website. For any non-GAAP financial information discussed on this call, the related GAAP measures and reconciliations are available in today's quarterly shareholder letter. With that, let me call -- turn the call over to Taylor. Taylor? David Lauber: Good morning. It's great to be speaking with you all. 2025 was yet another pivotal year for Shift4. We produced record results executed on transformative M&A, grew nicely and diversified the quality of our business. That's all while overcoming the occasional setback in more ways than one. We also fundamentally strengthened our global footprint, our technology capabilities, and organized our talent around our priorities that will continue to move the needle in 2026. As mentioned in my shareholder letter, the rapid expansion across multiple verticals has created confusion as to exactly why we win and who we compete with. This is understandable, but from our perspective, each vertical we serve is carefully selected based on the lessons we've learned over 28 years. Contrary to popular belief, we are in these verticals because we view the competitive landscape as narrow and as such, typically have fewer -- one or fewer good competitors in each vertical. To simplify things for everyone, I will succinctly say that we power the experience economy. We enable businesses to deliver the moments that matter and can be found anywhere you shop, dine, stay or play. These experiences demand high availability and often in-person engagement and come with high expectations from both the guests and the merchant. What as little as 5 years ago, might have been Shift4 powering a night out at your local -- at your favorite local restaurant has evolved into us earning the responsibility to power some of the largest global resorts operating 24/7, championship matches and so much more. In a world of constant innovation, especially digitally, the skill sets to power high-demand person experiences is increasingly valued. Now to touch on some highlights for the quarter and the full year. We closed on the acquisition of Global Blue back in July, marking our entry into the luxury retail vertical. As a quick reminder, Global Blue is a market share leader of tax-free shopping capabilities to merchants selling luxury goods with the #1 market share globally and a 4x relative market share to their nearest competitor. Global Blue's business remained resilient despite the weakening U.S. dollar and rising tensions between China and Japan. While a weaker U.S. dollar translates into higher prices for those traveling to Europe, having the business over-indexed to wealthy consumers remain the key benefit in this K-shaped economy. The integration of Global Blue remains on track, including the timing of revenue synergies to begin being realized this year as expected. As you can see from our materials, we continue to add many new merchants and can increasingly be seen anywhere you shop, dine, stay or play with many of these wins a direct result of us successfully cross-selling payments. We powered payments at the big game at Levi's Stadium in early February. So congrats to all you Seahawks Fans. And we are constantly renewing key merchants and recently signed a 5-year renewal with Choice Hotels. Some other key milestones. In Europe, we continue to add many thousands of new SkyTab POS merchants across the U.K., Ireland and Germany, ending the year with over 80,000 merchants outside of the Americas, which is before cross-selling any Global Blue merchants. Canada is also a focus as we've only recently had full stack capabilities in the region, but inherited many world-class customer relationships from both the Eigen and Givex acquisitions. We entered the Australia and New Zealand markets and now have a substantive sales force via the acquisition of Smartpay. This progress translated into solid financial performance, including nearly $2 billion of total gross revenue less network fees, representing 46% year-over-year growth. And that's excluding -- when you exclude the contribution of Global Blue and Smartpay, we delivered roughly 23% year-over-year growth in gross revenue less network fees during 2025. $970 million of adjusted EBITDA, representing 49% adjusted EBITDA margins and $500 million of adjusted free cash flow. We are proud of both of our margins in light of ongoing investments we're making in both products and expansion. We introduced an all-in-one payments, DCC and tax-free shopping terminal last year that we began piloting in several European countries. We also invested heavily in making our restaurants, sports and entertainment and other products suitable for the global stage. I want to stress that our story is not a complicated one. We are experts in handling software, hardware and payments and demanding verticals and in the most competitive market in the world, the United States. We've grown from an SMB restaurant-oriented technology business to powering commerce across the experience economy, and our most meaningful growth has been as a public company for all to see. We are now taking those lessons learned and our industry-leading products out into the world. One only needs to study our evolution in the U.S. to understand what we will be doing and less mature and often less competitive markets. Unlike our history in the U.S., we are aided by excellent beachheads provided to us by acquisition and already have a presence in over 75 countries around the world. As we look to 2026, the macro environment remains dynamic, but we view the diversity of our end markets, our disciplined approach to customer acquisition and healthy operating margins as affording us a degree of resiliency and optionality relative to many of our peers. In terms of priorities, I'm focused on the following: We only just begun delivering our all-in-one payment terminals throughout Europe. As mentioned previously, the Global Blue tax-free shopping product is unrivaled. And when combined with eligibility detection at the point of payment, adds meaningful utility to retailers of all sizes. We believe we can add many thousands of merchants as a result of this capability and are targeting 15 countries for launch in 2026. Our go-to-market motion across these countries will allow us not just to win retail merchants but also deliver our restaurant, hotel and stadium products and replicate the vertical success we've had in the U.S. While on the topic of the U.S., we still have plenty of market share to win across our key verticals and enabling DCC across our merchant base will be particularly valuable in anticipation of the World Cup this year and the Summer Olympics in 2028. We continue to leverage our restaurant merchant estate to inform our road map for SkyTab, which has been growing nicely in both customer counts and volume per merchant. To better leverage the larger ship for brand and our presence in the broader experience economy, we will be rebranding SkyTab to Shift4 Dine later in the year. Asia and the Middle East are also increasingly becoming important strategic markets for us, and in particular, Japan and the Kingdom of Saudi Arabia. These are large markets that align perfectly with our core competencies and it only offer one of our products today. And lastly, our AI road map is extensive on both the operational and product fronts. We've partnered with xAI for broad-based adoption of Grok in virtually every area of our business. We've deployed AI assistance within our key products to help resolve inquiries more quickly and with less human intervention. These tools have recently been expanded to providing operational insights to our merchants as well. We are building predictive models that analyze merchant signals to prevent churn before it happens while leveraging the vast trove of data we collect from customer interactions to identify and resolve customer pain points more rapidly than ever before. On the productivity front, we've seen a doubling in our Grok production as a result of broader adoption of AI tools within our technology teams. And many of you know that Palantir has been powering our mission control platform for several years at this point. So none of this should be a big surprise. Before I turn the call over to Chris, I want to summarize the simplification transaction announced earlier this year. We've successfully collapsed all B and C shares previously held by our founder into Class A common. As a result, Shift4 is no longer a controlled company under the NYSE rules. Going forward, Jared will own approximately 27% of our outstanding Class A shares with voting rights that are par passu to all other shareholders. Additionally, Jared has agreed to transfer all future benefits of its tax receivable agreement to the company, permanently eliminating an estimated $440 million of future TRA payments. We believe these improvements to our governance and capital structure significantly broaden our appeal to the investment community. In summary, 2026 marks a new chapter defined by a simplified corporate structure, improved disclosure and clear strategic focus. As we expand our footprint globally, we are laser-focused on execution, ensuring we deliver our immediate financial goals without sacrificing the balance that comes between growth and margins. And with that, I'll turn the call over to Chris. Christopher Cruz: Thanks, Taylor. 2025 was another record year for Shift4 across all financial metrics underpinned by strong execution, integration, capital allocation and continuing to achieve scale diversification, both geographically and across multiple verticals in the experience economy. We delivered record results with full year gross revenue of $4.18 billion, above the high end of the range we provided last quarter, volume of $209 billion, again, near the high end of last quarter's guided range. Blended spreads came in at 61 basis points, exceeding our guidance of above 60 basis points. Gross revenue less network fees or GRLNF of $1.98 billion, representing 46% growth year-over-year. Adjusted EBITDA of $970 million, representing 43% growth year-over-year at a 49% margin and adjusted free cash flow of $500 million, which exceeded our guided adjusted free cash flow conversion range by 150 basis points. Now let's move on to our quarterly performance and then shift to 2026 guidance and close with our capital allocation framework. For fourth quarter results, gross revenue increased 34% year-over-year to $1.189 billion. Volumes grew 23% year-over-year to $59 billion towards the higher end of guidance range. Q4 volume mix was influenced by a few enterprise go-lives with strong seasonal volumes. Blended spreads came in at 57 basis points, influenced by the aforementioned few enterprise go-lives with strong seasonal volumes such as the Alterra, Ikon Pass. This enterprise volume outperformance has an inverse mix shift impact on our blended spreads. That said, our full year 2025 blended spreads delivered in line with our previously communicated guidance of greater than 60 basis points, and we anticipate blended spreads to continue above 60 basis points for the full year in 2026 as well. GRLNF grew 51% to $610 million, which was towards the lower end of our guidance range as the aforementioned outperformance in enterprise did not offset the continuation of Q3's same-store sales trends, particularly amongst SMBs in the Americas region, which were further impacted by late Q4 weather events. Going forward, we will disaggregate our revenue into three categories: one, payments base revenue reported on a gross basis. So it's noteworthy to back out [ network ] to arrive at the relative contribution to GRLNF; two, tax-free shopping revenue; and three, subscription and other revenue. We have consciously chosen to report these three disaggregated revenue categories in order to let investors focus on our North Star growth in payments in -- growth in payments-based revenue and clearly break out the tax-free shopping revenue for transparency as investors acclimate to the performance of this line of business. Adjusted EBITDA grew 48% to $304 million, delivering a 50% margin. Non-GAAP EPS came in at $1.60. Our adjusted free cash flow in the quarter was a record $171 million, representing year-over-year growth of 28% and free cash flow conversion from adjusted EBITDA of 56%. On a non-GAAP per share basis, this results in $1.76 of adjusted free cash flow per share. As of year-end, our net leverage pro forma for the full year effect of Global Blue was 3.4x and includes the effects of our November activity of repaying the 2025 convertible notes, issuing incremental euro-denominated senior notes under our existing 2033 indenture and repricing our term loan generating 50 basis points of run rate savings. Our leverage guidance remains unchanged with a view that the business should not exceed [ $3 to $3.25 ] net leverage on a sustained basis. Now, for full year 2026, we are introducing the following guidance ranges. Volume of $240 billion to $260 billion, representing 15% to 24% year-over-year growth. We are anticipating stable spreads in 2026, remaining above 60 basis points for the full year. GRLNF range of $2.5 billion to $2.6 billion, representing 26% to 31% year-over-year growth. And to help you model our trajectory to 2026, we are introducing a growth algorithm bridge, providing further transparency on the disaggregated GRLNF growth categories. As mentioned, we're reporting disaggregated revenue across three categories: payments-based revenue, tax-free shopping, and subscription and other. Within our payments-based revenue less network fees, we think it noteworthy to appreciate the difference between our two geographic regions. Of one the Americas and two, the worldwide region, excluding Americas. For the Americas market, this is our most mature region where all of our market-leading experience economy commerce solutions are present. And is a market wherein 2026, there will be minimal impact from prior year M&A annualization. In this region, we expect payments-based revenue less network fees to deliver mid-teens percentage growth. We view this growth rate as being more than 3x the baseline growth of the comparable market. The worldwide, excluding Americas REIT market, is our faster-growing market where multiple high-growth themes exist. Such as: one, bringing our market-leading solutions, proven in the competitive Americas market into the region; two, disrupting a largely unintegrated bank-distributed card present market with our proven bundled value proposition that we pioneered decades ago; and three, the region is benefiting from our excess capital allocation through the acquisition of Global Blue and Smartpay, which provide both their attractive business attributes, but also serve as the infrastructure accelerant from which we will deploy our market-leading solutions into the region. In this region, we are expecting high 20 percentage growth. On tax-free shopping, we expect mid-single-digit pro forma growth. We are cautious going into 2026 with a few headwinds that include a weakening outlook on the U.S. dollar relative to the euro, albeit with diverging views across major banks as well as cross-border travel tension in Asia. Additionally, it's noteworthy that the business delivered low double-digit growth last year on the high end of its medium-term outlook range disclosed when Global Blue was an independent public company. And thus is growing over a strong comparable period. On subscription and other, we expect low single-digit growth with quarterly fluctuation as we anticipate less impact from applying our carrots and sticks against acquisitions than in prior years, while continuing to prioritize growth in our core payments based revenue. When you sum these parts, it builds to our guidance range of $2.5 billion to $2.6 billion in GRLNF. We are guiding an adjusted EBITDA range of $1.165 billion to $1.215 billion, representing 20% to 25% year-over-year growth and representing margins of approximately 47%. We are introducing a non-GAAP EPS guidance range of $5.50 to $5.70. Our EPS range assumes an effective tax rate of 26%. We are guiding adjusted free cash flow of $490 million to $510 million. We anticipate free cash flow conversion to moderate in 2026, and average approximately 42% as a result of three factors: one, the annualization of interest expense; two, lower interest income due to relative cash balances; and three, Global Blue related impacts, such as integration investments and the impact of Global Blue seasonality are our year-over-year results, given the timing of the close in the second half of '25. If you isolate the incremental flow-through of adjusted free cash flow, the implied conversion is expected to be 59%. And overall, this guidance includes the close of Bambora because we expect it to take place in the next couple of days. And now for Q1 quarterly guidance. For the upcoming first quarter of 2026, we are introducing guidance as follows: GRLNF of $548 million, adjusted EBITDA of $233 million and adjusted free cash flow of $70 million. Additionally, gross revenue for the quarter is expected to be $1.05 billion. Our shareholder letter materials provide a detailed bridge on these various components to our guidance to help you model these specific impacts. Consistent with our commentary in Q3 earnings, as we looked at our capital allocation options in Q4, we found the most attractive risk-adjusted return was repurchasing our own stock. Between Q4 and year-to-date Q1, we have repurchased 7.7 million shares and now have a remaining $500 million against the $1 billion share repurchase authorization recently announced. In light of the current market environment and the continued opportunity it presents for share repurchases, we think it more appropriate to base the previously stated goal of $1 billion of exit rate Q4 2027 adjusted free cash flow to being viewed on a per share basis through the lens of a long-term owner of the business. Last, on capital allocation. As mentioned, we repurchased a total of 7.7 million shares, of which 4.3 million shares were repurchased during the fourth quarter and the remaining 3.4 million shares were repurchased during Q1 of this year. We have $500 million remaining under our existing authorization. As a reminder, we allocate capital on a comparative assessment basis of our four priorities: customer acquisition, product investment, acquisitions and share repurchases. We've utilized buybacks recently due to the clear relative value. And while our valuation remains attractive, we are mindful of the associated relative value balance and net leverage ratios. Our focus in 2026 will be to continue employing our balanced approach to capital allocation using this relative framework. That said, this quarter, we want to provide investors with insight into our capital efficiency. In our view, the textbook financial formula for value creation is driving sustainable positive spread of return on invested capital or ROIC greater than weighted average cost of capital, or WACC. A couple of key takeaways from this. One, we have a historical track record of value creation. Throughout 2023 and 2024, our ROIC averaged approximately 13%, consistently exceeding the midpoint of our WACC range by 300 to 400 basis points. This demonstrates that our historical acquisition strategy has been accretive not just to top line but to shareholder value. All of this while deepening our durable competitive advantages, scaling and diversifying the business as a whole. Second takeaway. We have been able to maintain this value creation spread across the investment cycle. Even in historical periods of invested capital expansions in our history, we have maintained a positive ROIC over WACC spread, and expect this to continue. Our track record shows that we have been here before and experienced the integration phase of an investment with ROIC experiencing short-term dilution followed by very high incremental returns. Now before turning the call back to Taylor, I want to sincerely thank our fellow shareholders, the broader management team and especially the finance organization for supporting a seamless transition. I'm energized by the momentum we've built and look forward to the year ahead. And with that, let me now turn the call back to Taylor. David Lauber: Thanks, Chris. And with that, operator, we're ready for questions. Operator: [Operator Instructions] Our first question will come from Darrin Peller with Wolfe Research. Darrin Peller: Let me just first start with a question on guidance, and then I'm going to shift to a question on free cash, if that's okay, as a follow-up. But just on guidance. When we look at the outlook you're giving now, and I understand, Chris, you probably tried to build an element of safety and conservatism given the macro uncertainty. So maybe just touch on how you built it up? What the organic assumptions were embedded in it for overall organic revenue growth rates? And how we should think about the potential cross-sell integration in there for the year ahead of us? Christopher Cruz: Yes. Thanks for that, Darrin. So to kind of unpack the pieces, I think one of the things that we definitely wanted to provide some visibility into is the GRLNF growth algorithm. To give a sense for how some of the parts in our three disaggregated revenue categories are expected to behave in the year -- in the 2026 guide. And so to look at that piece within the bridge in the materials is probably a place I'll reference and cite everyone toward. And within that, you can see that you've got the payments-based revenue piece, split out between kind of the new disaggregation of giving visibility into our two geographic regions of Americas versus the worldwide ex Americas. Then we give our tax-free shopping, which is obviously a new disaggregated revenue disclosure that we'll be providing and give that in -- on a pro forma basis, is expecting that to be on the mid-single digit and then, of course, sub and other. But maybe the incremental piece that you're asking within what's inside of these guidance points might be a bit more related to some of the macro that you're asking about. Did I hear that within your question? Darrin Peller: Well, I'm trying to understand really, if you think you've built in a layer of effectively conservatism around macro or even your own bottoms-up assumptions, just given the results last year have been a little challenging versus your prior guide. And so, I'm curious to hear where you build that in? And then again, I understand your subsegments, but as a company-wide, I think we're coming to about a low to mid-teens organic revenue growth rate. I'm curious if that's about right? Christopher Cruz: Yes. So let me -- so when I think about what is inside of the guide, obviously, you're right to point out that last year had a little bit of a volatile macro backdrop and maybe more specifically within the world of same-store sales in the Americas, so inside of the payments-based revenue piece. And then within sales in store, which is kind of the equivalent of the volume metric in the tax-free shopping, both had exhibited volatility. But the one that probably you're hinting at is the volatility that was the result of the Triple S, mainly in the Americas, amongst SMBs, for example, within restaurants, lodging and retail. Within that, I think what we're looking at in the start of the year is really a tale of kind of like two halves. In the first half of the year, we're anticipating that there's a continuation of the kind of exit rate trends that we were seeing within the Triple S. And that seems to be holding up, because even though we had what looks like a little bit of a continuation of softer trends in January, February was looking strong, but you have to offset some of that with weather events. But I think in total, you end up with a place that says, that's the first half of the year, assume similar trends to what you were seeing coming out of the end of the year. And then in the back half, an assumption that there will be an anniversary over some softer comps, and you see some positive rebound. Overall, though, I think the outlook for the year is a fairly neutral view, which is admittedly a couple of points lower, like low single-digit points lower than what might have existed in years past as we were laying out kind of Triple S impact within an overall outlook for the year. Then I'll take the other opportunity to just say that one of the other variables that we're sort of trying to get our heads around is the concept, is the FX variable and how that impacts the tax-free shopping business. I think we alluded to it a couple of times that the outlook on a weakening USD relative to euro, although has maybe a benefit on financial translation, it has a more negative benefit on demand. And so -- within tax-free shopping. So if there is a continued sort of weakening within USD relative to expectations against the euro, which right now, there's a pretty divergent view even amongst the major banks as to what that weakening looks like. To the extent that, that is a headwind relative to expectations and you could have -- you could have some pressures there, but we're anticipating what sort of in the consensus. Darrin Peller: Okay. Just a quick follow-up on free cash. If I understand it right, the interest expense, interest income changes given the combination of buybacks and cash available for interest income and the integration costs are causing free cash to be roughly flat. Was there -- if you could help quantify those variables? And then anything on chip costs or memory costs potentially impacting the free cash guidance this year? I just want to make sure we're still on track for the exit rate of '27 to be the $1 billion range you guys have indicated? Christopher Cruz: Yes. Thanks, Darrin. So let me unpack three parts. So first, the quantification around each of the components in the building blocks of the free cash flow variance. What we tried to do was provide people in the materials with a bridge page that gives a view on the kind of the year-over-year outlook and guidance around free cash flow. And what you see on that bridge page is -- or in material is the effect of each of kind of the components, the largest of which you pointed out well, right, the annualization of the capital structure, the annualization of the interest expense, that's the largest component there. And then the second largest component is just a reduction in year-over-year interest income as our cash balances on a year-over-year basis are -- because of the variance in the cash balance. As a reminder, like, for example, in Q2 ended our cash balance was sort of artificially high at $3 billion as we are preparing for the close of the Global Blue transaction. So those are your two biggest components within the bridge, and then we highlight integration and investment expenses, et cetera, and other parts related to Global Blue. But the one thing I would highlight within the bridge is that the incremental flow-through of free cash flow is probably the place that absent those interest expense and integration investment type expenses, absent those things, the incremental flow-through on adjusted free cash flow is still running at a high -- like a 59% kind of 60% free cash flow conversion rate. And so I point people to the bridge to just understand the sizing of that. And then the second part of your question in the free cash flow was related to -- sorry, can you just repeat? Darrin Peller: It was just whether chips, higher memory costs are impacting... Christopher Cruz: Yes, thanks for that. So from our perspective, even though we are seeing sort of the back end of inflation and maybe trade-related activity start to kind of abate within some of these cost components, and there are still other factors separate and away from that, that might be impacting hardware costs. Just namely within the supply chain of how payment devices are manufactured and the landscape, the competitive landscape of that within like payment terminals and devices. But for the most part, within our free cash flow, and within our P&L, we're not anticipating like a material change such that anything was noteworthy to call out as it relates to those types of costs. A component that might be different than what you might hear from others, it's just that within how we manage inventory policy, how we flow that all through within our P&L versus our cash flow, those variances and differences to others that exist, might be some of the explanation as to why we're not seeing it in the same way others are. Operator: Our next question comes from Dan Dolev with Mizuho. Dan Dolev: Great job here. Really appreciate it. Chris, I know you were asked before about the assumptions for 2026. But can you maybe just elaborate a little deeper on the exact macro assumptions and how you kind of frame the low end and the high end of the guide when it comes to your macro assumptions, I think that would be really helpful. And great job. Christopher Cruz: Yes, sure. Thanks for that, Dan. So look, I'd say if I was to break out -- if I were to categorize the macro into three parts, there's probably one thinking about the impact of Triple S within really more specifically our Americas and largely impacting SMBs. So think of that as kind of restaurant, lodging, retail. Then there's two, I would say, it's the FX component that impacts the tax-free shopping disaggregated revenue line. And then the third is sort of also impacting tax-free, but it would be kind of just a geopolitical or we'll say, like tensions that we're seeing in some of the markets. So I'll just go back into each of the three and unpack. So on the Triple S, what we were anticipating and what we already talked about was this idea that we have an assumption of a fairly neutral year on Triple S, which relative to years past, might be kind of low single-digit points below, what might have been the trends that we were seeing within the macro. And so that's definitely a point of difference. And that variable certainly is one of the variables that impacts kind of the low to high within the range. I would say, second, embedded within that, even though it's less about the macro effects of Triple S, we have seen some volatility in the weather both in Q4 and most recently within Feb. But those all kind of play into the same Triple S variable. Within FX, I already alluded to it, but it is worth a reminder because I think it is clarifying for some that even though -- about, we'll call it, 1/4 of our revenue to size it are non-U.S. dollar denominated. And therefore, there's a view that a weakening USD has a financial translation benefit. It actually has a greater headwind because of its impact on the tax-free shopping demand. So to the extent there is a weaker USD relative to the euro as for example, on that cross, we are going to have a lighter demand or a negative on the demand side of tax-free shopping between those markets. And so that's something that we're monitoring and we're watching, in particular, because, as I already said, if you go and look at bank forecast, there's a pretty divergent view as to the extent of the USD-euro cross right now. And then the last thing I would just point out, and again, sort of touching more on the Asia segment within -- or the Asian market within tax-free shopping, we are seeing the effect of kind of tourism tension. As for example, passenger seats are down at like almost 30% between China and Japan, and that will have an effect. And so that's just another of the macro variables we're watching. Maybe the last thing I would just say, though, is that a variable that seems to be having less of an effect on the volatility of the P&L is probably the inflationary variable. That does seem like one that is a little more benign, and that's what we're anticipating. Operator: Our next question will come from Timothy Chiodo with UBS. Timothy Chiodo: I want to see if we could dig in a little bit to the fiscal 2026 guide around the spread staying relatively stable and that 60 bps or potentially slightly higher range. I'm assuming that some of that is related to dynamic currency conversion, which I gather has been going well. And I want to see if you could talk a little bit about that assumption in terms of supporting the spread and maybe any of the contributions from either Smartpay or we already have with the Global Blue acquiring business and those spreads. Maybe there's some mix shift factors as well, but really just any of the underlying drivers of the spread staying stable, at least on an overall fiscal year basis? And then a quick follow-up. David Lauber: Yes, sure, Tim. I'll hit the first part of that and then Chris can layer on. Q4 was slightly anomalous in terms of how it spreads represented itself. So if you recall even back to our last call, we were relatively cautious on the same-store sales volatility we were seeing, particularly in SMB and particularly in restaurants. Those are our highest spread categories from a merchant perspective. Offsetting that was some really nice volume from the enterprise activation. So volume performing okay with spread a little lower than expected. That's somewhat anomalous. And especially as you hear how kind Chris is forecasting the business, it's kind of a muted view on the same-store sales, progress in all those categories throughout the rest of the year. That's one thing that Q4 is slightly anomalous. At the year ahead, I think forecasting a more normalized trend even on kind of these lower same-store sales comps that we're seeing. So that's one thing. Separately, you've heard us talk about this as well, but the real early success we're seeing in Global Blue and really just our international expansion more broadly is in that SMB space where you do expect to earn towards the higher end of your spread averages. So it's not to say we're forecasting a decline in enterprise or anything like that. The reality is, though, when you enter these new markets, the quickest merchants to adopt your solution are at the lower end and that the medium and large merchants come in over the course of the year to 2 years ahead. We tried to illustrate this in our materials. We have 80,000 merchants outside the U.S. The vast majority of those are SMBs, which generate a higher spread. So I think the spread mix is going to be somewhat predictable largely because we're forecasting kind of the average quality of our merchants to be pretty predictable through the... Christopher Cruz: Yes, I can just add on to. Probably the best way to think about starting from Q4 and looking at that 57 basis points blended spread figure, if you normalize out quite literally three enterprise merchants, you actually end up in the greater than 60 blended spread territory. And the activity there have -- are largely seasonal in nature, but one was actually the benefit of a somewhat unexpected large volume allocation away from a competitor. And so when you have those kind of timing -- those kind of seasonal jumps coupled with the sort of an unexpected positive, you end up with that Q4 spread dynamic, which was a couple of basis points below the 60. When you forecast the business though across all of the different fronts and you factor in the mix shift dynamics slightly towards SMB from a growth standpoint that Taylor alluded to, you get to the place that allows us to guide to the blended spreads remaining stable at north of 60. Timothy Chiodo: Excellent. So it sounds like DCC might not be too large of a component there, but a quick follow-up on DCC. Last quarter you gave a really helpful disclosure in terms of the contribution to net payments revenue from DCC. Is it fair to assume that in Q4 there was directionally in that same ballpark, I believe last quarter, it was around $11.5 million. Christopher Cruz: I was just going to -- sorry, one thing I was going to say though, Tim, was that, when we talk about the blended spreads across the product, I don't want there to be a takeaway that it doesn't include a positive benefit from -- like FX-based -- FX-based spread revenues such as DCC or other types of products like DCC that are also FX-based. There definitely is a benefit that comes through. And so you're right to point it out as a positive. It's definitely been one of the nice components of having acquired a business like Global Blue, where we now have that capability and competency in-house and are able to kind of bring that into the value proposition and the bundle facing merchants. So I just want to clarify that as a starting point. David Lauber: Maybe just to illustrate how we're rolling out DCC and it's embedded in our offering internationally. So the blended spread of those merchants would include the benefit of a DCC product, but they're coming in as a net new merchant. So it's not really changing the spread of an existing customer meaningfully outside of the U.S. In the U.S., and this is really no change to the expectations we've set as far back as announcing the transaction. We really want DCC live as product kind of broadly based in the U.S. prior to the World Cup, that's where we see significant benefit. So in the back half is where you could see spreads on existing customers increasing as a result of the benefit of DCC, but I want to be really specific, it's a new product forecasting the relative adoption kind of tricky. It's not widely used in the United States, although you can obviously be pretty optimistic about it when you think about a big international event like the World Cup, and we're focused on making sure, it's live in our hotels and stadiums. Timothy Chiodo: Yes, that's what I was getting at, partially in terms of the U.S. cross sell. So it sounds like a good opportunity. Operator: Our next question will come from Will Nance of Goldman Sachs. William Nance: I wanted to circle back on the free cash flow and come back to the bridge that you guys provided. So I think we get most of the moving pieces around interest expense and cash balances. Could you speak to the $30 million of integration and investment spending? How long do you expect that spend to persist? And if we think about the flow-through of free cash flow kind of excluding some of these items, being at 60%, like is it possible we could be north of 60% into 2027 as the integration spend winds down? David Lauber: Yes. I'll break down, not necessarily in whole dollar terms, but a significant portion of that $30 million is what I would consider in-year integration expense one time. There is a portion where we anticipate building sales teams. And as you know, like when we build sales teams in different geographies around the world, they don't pay for themselves in the first year, they take kind of 1 to 2 years to pay for themselves. So I don't think a significant portion of that line would be recurring, but all of the line would be paying for itself to the extent we hit our sales objectives. This is something we challenge ourselves on pretty constantly. Will, you know probably better than most that our preference is to deploy capital and buy small payments organizations that have a proven track record of selling in one geography or another, and we've executed against that pretty successfully in places like Germany. At the U.K., we anticipate launching in 15 countries with our all-in-one payment product, and it's just impractical to assume that you can find that many interesting M&A opportunities across those countries. So the forecast skews a little bit more towards an organic build than we probably prefer, it takes a little longer, and it costs you to your point, this capital upfront. But in the absence of kind of finding a great sales team locally that we can partner with or we can buy, this is like -- we're not going to ignore the opportunity simply because it requires some fixed cost. Christopher Cruz: Yes. And Will, maybe just to add, in terms of where you might see some of that line show up within the financials is actually in the form of probably the CAC and the EUL lines within cash flow statement or you'll probably end up seeing some of that. And the reason for that is that we probably expect that when we're newer in a market we'd like to be more aggressive around some of the incentification as you kind of "prime the pump" in entering the market with a differentiated totally new offering and you want to get the potential partners very excited to work with us and embrace the value proposition. So that's just a little bit of extra color on that. William Nance: Helpful. Okay. So it sounds like a good portion of that should kind of run off into 2027. And then just a follow-up. You're talking about the kind of organic versus inorganic trade-off. How are you guys feeling about just capacity to do further M&A, particularly given the lower level of free cash flow this year? You thinking about $0.5 billion of free cash flow against $4.5 billion of debt. Just what is sort of leverage capacity today? And is the thought to take a pause on M&A this year as you digest the several large deals from last year? David Lauber: Yes. Thanks for the question. I'll address kind of the strategic bench, and then Chris can reiterate his comments on leverage ratios and everything else. We have a team dedicated to looking at opportunities. So to say pause or any, it's not really how it works. We get introduced the opportunities, and we evaluate them and we challenge ourselves as to whether those opportunities make sense. And then there is a relative balance of capital. Of course, we think about leverage ratios and how stretched we are, we think about buybacks on a relative basis with those opportunities in front of us. So we evaluate all those things constantly. And Chris can talk about where he is the hammer to say stop. I will say though, in a year like this, we are very focused on smaller, very strategically aligned M&A. So less likely to do something kind of far afield from what we do. But if we can buy a small payment sales team in a particular country, we will do that. Why? Because you're traditionally paying a relatively low multiple, even inside of multiples we trade at today. You're acquiring a team that's got a proven track record of adding customers. You're emboldening that team with your own product and inevitably, they're bringing some batch of customers with them that are quick and easy cross-sell. So we want to reserve the right to do that. I think if we did it, you find that the capital trade-offs are well worth it because it's an upfront and a lot of the timing associated with building is slower. Just by way of example, we did this in the U.K. and within a couple of months, we're adding 1,000 merchants a month. Now that sounds impressive. But if you look at the quality of the organization we acquired, that was a very small organization, call it, 50 people. Their sales prowess was proven. We were able to invest in that confidently. So we'll continue to look. I don't know that these would never be things that hit the radar of kind of an earnings call, but I'd love to buy a small successful team in Spain or Italy or France as opposed to building from scratch. Christopher Cruz: Yes. The only thing I would probably add to that is that, well, I really like the line of questioning because it connects to concept that I think people have been able that -- have been constantly asking us about, which is how we allocate capital in order to drive or accelerate kind of the strategic initiatives. Your first line of question asking about the integration expenses and us talking about in many respects, growth CapEx, that's going to be inside of our free cash flow bridge. To then follow that up with the ask about how we might be allocating capital in order to maybe acquire distribution assets that further accelerate this international expansion and the launch of brand-new products that are completely differentiated, I mean they're exactly in the line of how we think. The capital that we have to allocate at all points do we view it as a scarce resource regardless of whether we have ample leverage capacity, ample liquidity, ample excess cash flow generation. At all points in time, it all still has a cost, and a relative ability to generate a return. So I don't think that there is much of a change philosophically regardless of where we are because we value the capital so highly. And -- but I do like line of thinking because it really does underscore this core point that we can allocate the capital dollars at initiatives like growth CapEx or we can allocate the dollars at initiatives that acquire us and accelerate into capabilities like distribution in an emerging market. Operator: Our next question will come from Dominic Ball with Rothschild & Co Redburn. Dominic Ball: Super clear on the guidance. So looking slightly beyond the quarter and the guidance, many investors are trying to understand what integration success with Global Blue looks like from here. It's harder to see, obviously, from the outside. So -- and Global Blue is such a critical part of the equity story of Shift4. So can you tell us a little bit more about internally what it looks like, any key metrics and when you think you'll start to approach Global Blue retail merchants for that cross-sell opportunity as well? David Lauber: Yes. Thank you for the great question. I'll start by saying it's already happening. So we have line merchants in multiple countries. We're betting in more. We've got, as I said, the ambition of having kind of being live, so to speak, in 15 countries. Those are companies that Global Blue is already in today, but we don't have a payments offering. To give you a sense of how we view success internally, it's the ability to add several thousand merchants upon towards the back half of this year. Now these are smaller merchants admittedly. And I think the root of your question is important one because traditionally the investors look at volume as the key metric. We don't view that as the key metric internally on the cross-sell. If you look across Global Blue's customer base, it ranges from the LVMHs of the world at the highest end representing -- them and others representing like 80% of the volume. And then there's a really long tail of SMBs, the hypothetical [ Scarlet ] Boutique in Bellagio, Italy, representing 70,000 customers. Those customers are getting this highly differentiated product in our all-in-one terminal that delivers eligibility detection as if you were in the highest quality you may saw in Paris. And so this is the product that's being released most quickly. This is the product that we're investing in local sales teams. And I think it's no surprise, just go to our job postings, and you'll see job postings basically everywhere throughout Europe, looking for sales reps around this product. And quite frankly, it's where Global Blue is a stand-alone business was least equipped. They didn't have a sales force focused on this small -- this really long tail of SMB. So we're building out that sales force. Internally, we've got this kind of mantra that one -- it's our dedicated Shift4 professionals that go into a local country sit in a local Global Blue office and help them build out this capability. And once they have 100 or so merchants under their belt, they pass it off to the regional manager. So we're already seeing the early signs of that success in a handful of countries today, but we want to be doing it in 15 countries. And so we have this internal kind of merchant count focus. And we don't have a volume priority. We just say we know what great payments businesses throughout Europe can produce on a merchant-by-merchant basis, we see a lot of that data internally, and we know that several thousand merchants a month is very reasonable outcome, and that's before you have a lead list like your 70,000 Global Blue customers. So we're very pleased with the internal progress of that. And then separate and distinct from that is visibility, and I mentioned it earlier, so I won't belabor it, to cross-sell DCC into our U.S. base of customers. But in Europe specifically, it is an SMB-oriented sale. It's an all-in-one terminal that is displacing a bank terminal, but with a lot more feature and functionality and to drive higher TFS adoption. As you'd expect, when you walk into a merchant with this product, it adds a heck of a lot of value they adopt it quickly. And we expect, by the way, equal proportion of kind of net new wins and cross-selling existing global good customers as a result of that. Dominic Ball: Yes, that's great to hear. And just one more, if that's okay. I mean the future growth of Shift4, as you mentioned, seems very much more international, but a good minority of your existing sort of stock, shall we say, are still in the U.S. and SMBs. A lot of your direct peers in the restaurant space are stepping up when it comes to the direct sales force. It seems like you're now, as you mentioned, rebranded SkyTab as well. Would you follow your peers in terms of a larger direct sales force or more rely on the more traditional Shift4 route when it comes to gateway M&A-driven growth, et cetera? David Lauber: It's a great question. We have been scaling our sales force, our direct sales force, but in a pretty deliberate and measured way. We have kind of a higher bar for capital allocation around the SMB space, especially in our more mature markets than our peers. So like the idea of chasing them is not a good example. It's actually our Head of Marketing was challenging me around the SkyTab brand and what we could do to elevate it. And I was very candid with him to say, if we look at what our peers spend on sales and marketing, we're not going to come close to that. But the Shift4 brand is a much larger, much more powerful, much more visible one. And so why should we have two different products when we could leverage the Shift4 brand and our presence in the many tens of thousands of restaurants that we're already in. So it's a relatively simplistic move to simplify the product names to lead the part, but I think it will have some meaningful value. And it's just a sign that we have a very, very disciplined approach to customer acquisition cost. We spend far less than our peers, and this still help us. It's a good step to gain incremental progress. We are adding direct sales people to the tune that you mentioned, but with the capital discipline that I think really differentiates us, like we will not chase the capital curve around customer acquisition costs that we see some of our peers doing. And yes, will still grow nicely. Operator: Our next question will come from Dan Perlin with RBC Capital Markets. Daniel Perlin: I wanted to just touch on maybe the backlog for a second. I think you're implying like $32 billion embedded in the guide, that's down a bit from the $35 billion last quarter. And so the question really is just have we reached a point now where like the burn rate is greater than maybe the net new signings? I know last quarter you installed $6 billion and you signed $6 billion. So just trying to kind of work through that framework a little bit? David Lauber: Yes. It's still kind of a relatively new disclosure for us as we think about the backlog. And it's a relatively new form of measurement for us. I would say it shouldn't be that much of a surprise for a slight step down when you consider the other comments made by Chris that we experienced more enterprise volume in the quarter than we necessarily expected. And there are chunky enterprises, whether it be Alterra, Ikon Pass is a multibillion-dollar opportunity and a handful of others. So we didn't view this as a change in kind of our relative progress. Keep in mind, most of our SMB opportunity never hits that backlog. But we did see a little bit of, I would call it, enterprise volume that was faster than we anticipated in Q4. Daniel Perlin: Yes, that totally puts. Kind of staying on that same vein, if you think about the end-to-end volume guide, it's a pretty reasonable band that you guys put out for 15% to 24%. It sounds like this year it's totally more towards SMB versus maybe some of the enterprise that we've seen in the past. And so the question is really just how does that impact the visibility that you might have in terms of forecasting that line item? Or does that not really matter? Christopher Cruz: Just to clarify that one, Dan, when you say you're referring to the Americas versus the worldwide when you talk about when you set those two numbers? Daniel Perlin: I was really talking about -- I was really talking about total end-to-end volume, kind of total volume that you guys are kind of calling out $240 billion to $260 billion. And then it sounded like in the way you guys were describing maybe that book of business as you're thinking about it, it sounds like tilting a little more towards SMB this year as opposed to more enterprise maybe in the years past. Is there more visibility that you have or less visibility because it's SMB and so it's trickier. I guess the point is if you have a large implementation for enterprise clients, usually you have those in queue exactly the time lines. SMB can be a little more spotty. So I'm just wondering if that increases or makes it harder to forecast that line. David Lauber: Well, indulge me why we kind of travel around the world because there are nuances to this. In the Americas, our SMB forecasts are pretty reliable. I mean, again, this is a 28-year-old business. Our SMB presence has never dwindled. The change that you saw in the business over the last few years is that enterprise was entering the mix for the first time. And the relative contribution of enterprise has matured. So again, talking about just kind of the Americas for a second, it's a relatively mature business. Our SMB progress is quite easy to predict. And in the enterprise, to your point, longer lead time, better visibility. And the mix of SMB to enterprise is more mature there. Now when you go outside of the U.S., the SKU is heavily skewed towards SMB. And this isn't because we're strategically limited in any way. This is the reality that SMBs make decisions quickly, same day. The higher you go up in the spectrum, the longer they take to make decisions. So if you follow our shareholder letters over the course of the past couple of years, we only just began internationally a couple of years ago, a lot of SMB-oriented wins sort of the green shoots of larger hotel groups and things like that. Those are just starting to play through in this year, but again, still heavily SMBs skewed. There's one area of guesswork, it is how many SMB merchants can we add internationally over the course of the year. We are anticipating an acceleration there. But to give you a sense for how we predict it, we have a pretty wide swath of data. We act as a payment service provider for large PSPs. So we know what SMB production can look like in good, bad and in different scenarios throughout Europe. And we believe several thousand merchants a month is a very achievable result on top of kind of the 1,000 plus that we've been executing on relatively recently. So I would say yes, you're believing that we can execute against that cross-sell plan and that build out of that sales force. But the numbers that we have are quite grounded and I think a reasonable reality. Operator: Thank you. This concludes our Q&A session and also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Thank you.
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 morning, ladies and gentlemen, and welcome to the Chemtrade Logistics Income Fund Q4 2025 question-and-answer session. This call is being recorded on Thursday, February 26, 2026. And I would now like to turn the conference over to Mr. Rohit Bhardwaj. Please go ahead. Rohit Bhardwaj: Thank you, operator, and thank you for joining the Q&A session for Chemtrade's fourth quarter and full year 2025 results. I would like to remind everyone that today's call will contain certain forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results may differ materially from those expressed or implied. Additional information regarding these risks, uncertainties and assumptions as well as information on certain non-IFRS and other financial measures referred to today, can be found in our disclosure documents filed with the securities regulators and available on sedarplus.com. One of the non-IFRS measures we will refer to today is adjusted EBITDA, which is EBITDA modified to exclude noncash items such as unrealized foreign exchange gains and losses. While our slide deck and disclosure documents refer to adjusted EBITDA, we may refer to it as EBITDA during the call. With that, we would now like to open the line up for your questions. Thank you. Operator? Operator: [Operator Instructions] And your first question comes from the line of Nikolai Goroupitch from CIBC Capital Markets. Nikolai Goroupitch: Given the margin pressures in high sulphur costs in the SWC segment, are you expecting some relief going forward as contracts renew? And do you think segment EBITDA margins can match 2025 levels of 23% this year? Rohit Bhardwaj: Yes. So I'll give you some context for margin. So as you know, in 2025, we had cost escalations, particularly sulphur went up significantly. So what happened in that situation is we try and pass through the incremental cost to our customers, but it's hard to mark those costs up. So basically, we're trying to protect our EBITDA and passing costs, especially when they're so significant. So what the effect of that is it actually reduces the margin percentage because your revenue goes up and costs are dragged along with it. So that's -- generally in our business in SWC in particular, when costs are lower, the margin percentage tends to be higher and vice versa. So in 2026, we'll have to see how sulphur other costs progress. But that's kind of -- the general rule is when costs spike up, the margin percentage tends to come down, but we're protecting our EBITDA. Scott Rook: So -- and Rohit, just to add to that, I'll remind the listeners that in our water business, as we sell product to city municipalities across North America, we sell under -- we sell our product at fixed annual costs, and that's the way -- that's just the way this business operates and has operated for a long time. So we sell our products at fixed annual prices that are determined by bids. And so as when raw materials go up, we'll take the hit in the short-term on that, but it works vice versa as raw materials fall. We have contracts that roll in and out every month. So whenever sulphur has a significant increase, like what we've experienced over the last 6 months, it takes us a little time to work on that. So we'll -- our water business has margin pressure for a few months as we work through those price increases, but we make it up over time. On the counter to that, our merchant acid business does a better job and can react with more rapid price increases whenever sulphur goes up. Nikolai Goroupitch: Okay. That makes sense. And with you guys breaking out the water chemicals into a separate segment going forward, help with some of our modeling? Are you able to provide some more detail on new segments revenue or EBITDA contribution or margins? And secondly, to confirm, 100% of the new segment is coming out of the SWC segment and nothing from EC, is that correct? Rohit Bhardwaj: Yes. So yes, it's all coming from SWC. And at this stage, we are not ready to give you that breakout. But starting Q1, when we release Q1 in May, we will give you all the lines that you typically now see in our reporting [ segment ]. Operator: And your next question comes from the line of Joel Jackson from BMO Capital Markets. Joel Jackson: I just wanted to play out the order of magnitude of what the year might look like. So is it like the last couple of years where sequentially Q1 EBITDA higher, sequentially Q2 EBITDA higher, sequentially Q3 EBITDA even higher than that, highest year, then a drop down seasonally in Q4? Is that order of magnitude the way to look at it? Rohit Bhardwaj: So Q2 and Q3 tend to be our highest quarters. One thing to keep in mind this year is it's -- the North went through a turnaround here, which is in Q2. So Q2 will have the negative impact of those costs. And in terms of sequentially, Q1 and Q4 tend to be the weakest ones. And the other thing to keep in mind is a little bit depends on how caustic is evolving as well. So there's a seasonality impact is really Q3, Q4 being strong and the rest are specific factors that come into play in any given quarter around commodity pricing. Scott Rook: And Joel, to add to that, part of that is going to depend on what happens with sulphur. So that could play into it. And then obviously, as we're looking at caustic soda -- caustic soda, as we're in the first quarter, caustic soda is weaker than what we put in our assumptions. And so we are planning on the second half of the year being stronger for caustic than in the first half. Joel Jackson: Okay. That's helpful. And then on corporate costs, what should they look like in '26 versus '25? Rohit Bhardwaj: So in 2020 -- so firstly, the way we look at corporate costs are we look at in 2 buckets. One is kind of our -- what we call program expenses and the other is long-term incentive that fluctuates based on how the units are doing. 2025, as you know, unit appreciated considerably. So that resulted in higher LTIP costs. So once you normalize for all that, we expect 2026 corporate costs on the program line to be similar to 2025. And it's -- we've given you kind of our outlook for LTIP, but that really does change. And so you can -- we've given you that detailed assumption on LTIP between $22 million and $28 million, and we came in at around a little bit higher -- on the higher end of the range in 2025. So based on that, you can kind of model it out. Operator: And your next question comes from the line of Zachary Evershed from National Bank Financial. Zachary Evershed: I was hoping you could give us some more detail on the timing and scope of the heavy maintenance plan for the SWC segment this year? Rohit Bhardwaj: Look... Scott Rook: Yes. I can -- I'll do that. So we have -- on the SWC side, our Regen acid plants are tied in -- are tied into gasoline producers. And so we have -- we tend to take longer outages that are tied in with our customers. So we have one of our customers that does a significant turnaround every 5 years, but we have more heavy turnaround than what we've had the past couple of years. And so that's going -- it's not anything unusual compared to what we've done over the past 10 years, but our turnarounds can be a little bit lumpy. So our turnarounds in '26 are going to be a little heavier than what we saw over the last 2 years, but that's pretty much tied to the schedule for our significant customers. Zachary Evershed: Got you. And on the Tulsa facility upgrades, what drove the decision for those investments? And also if we tie in Cairo, how much of the future volume is currently spoken for? Scott Rook: Okay. So what came out of that is, so as we have -- as we work with our significant customers, the fabs and as we have brought up our Cairo facility, our fabs -- the fabs are also looking for redundancy in supply and trying to get as close to the quality at our Cairo facility as possible. So what drove it was requests from our major customers, the fabs, for redundancy of supply in between plants. So we've been operating the Tulsa facility for many, many years. And we took some of the learnings from Cairo and have made investments in Tulsa. And those investments, we're very pleased with the quality of what we've been able to achieve in Tulsa. So the Tulsa material is -- it's sampled. It's going through the approval process at the fabs, but that's really -- what drove it was request from the fabs for redundant supply, and we took some of the key learnings. Tulsa will not -- still Cairo will be our highest quality plant for sure, but we've made investments for Tulsa that we believe will meet advanced node quality. So we're pretty happy with the quality improvements there. And we're -- again, we're working closely with fabs and Alpha on approvals. Zachary Evershed: And then just circling back on that, how are those approval processes going for Cairo? Rohit Bhardwaj: So far, so good. We have a lot of samples out. So we have a lot of samples out. I'll say the feedback we're getting is quite positive. Probably I won't share more other than the fact that we see -- we do see volume ramping up -- sales volume ramping up in the second half of the year. So that's kind of on plan. We're excited about that, and we'll have more details to come, but lots of samples out and starting sales in the second half. Operator: [Operator Instructions] And your next question comes from the line of Gary Ho from Desjardins Capital Markets. Gary Ho: Sorry, I jumped on late if this was asked, but just on the caustic soda pricing environment, it feels like the spot pricing is a bit lower than the $450 you assumed in your guidance. I know there's some commentary in the prepared remarks. Can you maybe elaborate on your confidence level there will be a recovery in pricing in the back half of the year? Scott Rook: Gary, this is Scott. Rohit will add some color there, too. Yes, look, we're -- caustic soda is lower. It's lower than our assumptions, what we put in the assumptions. And the reason for that is tied to -- basically to some oversupply, particularly in China. It's tied to right now weaker production of aluminum -- alumina in Asia and also tied in with the overall weakness in pulp and paper. So -- but I think the -- what we're -- I hate to say what we're hoping for. I think that partly the reduced prices that we're seeing right now were based on some shipments right before Chinese New Year. And so I'm hopeful that after Chinese New Year, they'll come back and prices will rebound a bit. But I think it may take through second quarter to see a rebound, but we're planning on prices to return closer to our planned level in the second half of the year. Rohit Bhardwaj: Yes. And we speak with the industry analysts, obviously, very frequently. And so the fundamentals that drive chlorine demand, which is mainly construction activity and caustic which is battery and alumina, the fundamentals have not changed. And so it's very difficult always in Q1 to get direction with the Chinese New Year holiday, which is pretty prolonged. But when we've talked to them, they believe -- they have a pretty strong belief that the trend that's there will resume and continue with cost stabilizing up over the next few years. Gary Ho: Okay. Great. And then second question, I listened in on the rezoning call from the Northland facility process earlier this week. I know it's early days, but assuming that gets approved, how does the growth CapEx look like there? At first glance, looking at some of the slides, it seems like it's a decent undertaking. Correct me if I'm wrong. There's additional chlorine railcar, loading, building. There's a removal of all existing liquid chlorine equipment amongst others. So how should we think about the magnitude of that? And I just want to make sure that the $35 million to $55 million of growth CapEx does not include any spend related to the Northland rezoning efforts? Scott Rook: So Gary, you are correct that the $35 million to $50 million of our growth CapEx does not assume any money associated with North Vancouver. So our plant is a -- we spend out of our typical $120 million to $130 million of sustenance capital, a fair amount of that goes to the North Vancouver plant. And over a 5, 6, 7-year period, I don't think there will be a noticeable difference in our sustenance capital budget tied to the safety upgrades. We will be -- as you call out, assuming that we -- that the rezoning is successful, we will be building a new chlorine loading facility. We'll be getting rid of liquid chlorine. But I think those projects tend -- will come close to being included in our standard sustenance CapEx budget for that site over a period of several years. So yes, again, I don't think it's going to be -- we're not expecting or planning on a noticeable increase in our sustenance CapEx budget tied to that. Gary Ho: Okay. Great. And maybe if I can sneak one more in. Rohit, just these releases were based on unaudited financials. I don't think that was the case last few years. Just wondering if you can provide a few comments on the reporting side of things? Rohit Bhardwaj: Sure, sure. So when you have an audit versus a quarterly review, there's less leeway for auditors in completing their testing and their files. There's a lot more rigor to it. And every year, it's always a rush to get it all completed. And I think this year, the one additional factor which delayed it a little bit is the timing of the closing of Polytec. There's a lot more work that needs to be done when you do an acquisition in terms of -- yes, it's all -- it's nothing earth shattering, but there's just a lot of things you've got to do, including valuing their assets. And we only closed this deal towards the end of November, which didn't give much time and put a lot of pressure on the order that's already typically got pressure to it. But it's fairly innocuous. There's no -- the numbers -- we feel good about the numbers. This is why we released them, and we are hoping that the order will be included in short order, in which case then we file the whole -- all the full disclosure documents. But there's really no issues here. It's pretty [Audio Gap] innocuous. Operator: And your next question comes from the line of Zachary Evershed from National Bank Financial. Zachary Evershed: When you guys refer to merchant and Regen acid pricing returning to historical ranges this year, is there a specific year or period that we should use as the baseline for comparison there? Rohit Bhardwaj: So I think what -- so merchant, what happened was, as you mentioned, there were some disruptions with some of our competitors. And so we had some spot business that we picked up and got the higher pricing. And Regen was not as -- didn't have as much effect on it. But -- so I think Regen will be not much different than 2025. And merchant will be a bit lower. And again, it's hard to really point to a specific year because sulphur is such a big variable in pricing for merchant acid. But what you can assume is that the merchant acid will be off in '26 a little bit compared to '25. But again, we're talking at the margins here. We're not talking about anything too significant. Scott Rook: Yes. And what I'll say is that the -- I think it's important to continue to emphasize that our Regen business performance has been steadily improving, but -- not by leaps and bounds, but steadily improving year-over-year for several years. So -- and we expect that to continue. So very, very pleased with the performance there, tied in with our reliability, our production, tied in with the outlook for alkylate production in North America. So strong business, slight growth, but our business performance has been steadily improving step-by-step over the past many years. Merchant does tend to bounce around. And it's kind of hard to look at any -- certainly, last year was a very, very strong year for merchant. But as Rohit just said, that's tied to some of our competitors having outages. And with our reliability, we stepped in and supplied. But I think you probably go back and look at '23 and '24 at -- I think those were more normal years for merchant. Rohit Bhardwaj: And it's good to remind you that about half of our volume in merchant acid is byproduct acid that we get from smelters. And the way we've structured those contracts is that the smelter or our supplier gets the lion's share of price less freight movements. So that business tends to be relatively stable. It's just the spot opportunities that came up that were unusual. So generally, the actual pricing is -- we are not as affected by pricing. We do take volume risk, but price tends to generally be passed through to our supplier. Zachary Evershed: Got you. And just one last one on the water chemical contracts in terms of sequencing through the year as you reprice with expiries, any particular quarters that we will see a larger volume or bigger clumps of renewals? Rohit Bhardwaj: Well, not so much renewals, but there is seasonality there. So we do tend to get heavier in the summer months. So that's just normal seasonality, but not so much on the timing of contracts. Operator: [Operator Instructions] And there are no further questions at this time. I will now hand the call back to Mr. Scott Rook for any closing remarks. Scott Rook: Well, thank you, operator. So I'd like to thank everyone for joining the call today. 2025 was a record year for Chemtrade. As I said in the remarks, I'd like to thank all of our employees for their hard work and great results in 2025. Thanks for attending the call today, and have a great day. Thank you.
Operator: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Fox Factory Holding Corp.'s Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I'd now like to turn the conference over to Toby Merchant, Chief Legal Officer at Fox Factory Holding Corp. Thank you, sir. You may begin. Toby D. Merchant,: Thank you. Good afternoon, and welcome to Fox Factory's fourth quarter 2025 earnings conference call. I'm joined today by Mike Dennison, Chief Executive Officer; and Dennis Schemm, Chief Financial Officer. First, Mike will provide business updates, and then Dennis will review the quarterly results and outlook. Mike will then provide some closing remarks before we open up the call for your questions. By now, everyone should have access to the earnings release, which went out earlier this afternoon. If you have not had a chance to review the release, it's available on the Investor Relations portion of our website at investor.ridefox.com. Please note that throughout this call, we will refer to Fox Factory as FOX or the company. Before we begin, I would like to remind everyone that the prepared remarks contain forward-looking statements within the meaning of federal securities laws, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks, uncertainties, many of which are outside of the company's control and can cause future results, performance or achievements to differ materially from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors and risks that could cause or contribute to such differences are detailed in the company's quarterly reports on Form 10-Q and in the company's latest annual report on Form 10-K, each filed with the Securities and Exchange Commission. Investors should not place undue reliance on the company's forward-looking statements and except as required by law, the company undertakes no obligation to update any forward-looking statement or other statements herein, whether as a result of new information, future events or otherwise. In addition, where appropriate in today's prepared remarks and within our earnings release, we will refer to certain non-GAAP financial measures to evaluate our business, including adjusted gross profit, adjusted gross margin, adjusted operating expenses, adjusted net income, adjusted earnings per diluted share, adjusted EBITDA and adjusted EBITDA margin. As we believe these are useful metrics that allow investors to better understand and evaluate the company's core operating performance and trends. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are included in today's earnings release, which has also been posted on our website. And with that, it is my pleasure to turn the call over to our CEO, Mike Dennison. Michael Dennison: Thanks, Toby, and thanks to everyone for joining our fourth quarter call today. I want to use our time today to do something beyond a traditional quarter recap. While we'll cover our fourth quarter results, the more important conversation is about where this business is headed and the specific actions we are taking to improve profitability. We have a comprehensive plan. We're executing against it, and we want to make sure you leave with a clear understanding of the building blocks and how they translate into meaningful improved margins. To this end, we've shifted our guidance approach to lead with adjusted EBITDA to better align with the goals we will outline today and importantly, so you can more easily measure our results. Full year sales were $1.47 billion, which was an increase of 5.3% and fourth quarter sales were $361.1 million, which was an increase of 2.3%. While we demonstrated the relevance of our brands and products across our end markets, our margin performance was not where it needs to be. Revenue growth alone is not the objective. Profitable growth is. And the actions we're laying out today are designed to close that gap with urgency. Ultimately, we are a growth company, and our product pipeline is focused on sustainable long-term growth. However, in the near term and specifically 2026, we must rebuild profitability to establish the appropriate foundation for future growth. We began our initial cost reduction program at the beginning of 2025 with a goal of setting the company on a path to restore our historical adjusted EBITDA margins to the mid- to high teens and accelerate our path to balance sheet improvement. I'm pleased that we successfully delivered our Phase 1 $25 million profit optimization plan on target and on time. This was a comprehensive effort focused on footprint optimization and continuous improvement across all 3 of our operating segments. We consolidated facilities in our AAG and SSG businesses and completed warehouse consolidation work that has positioned us with a more efficient distribution footprint going forward. We improved our supply chains and utilized our machine shops more effectively. While the unforeseen tariffs masked the underlying savings we've achieved, these proactive actions proved to be a valuable tool to help us accelerate countermeasures and tighten our operations. We recognize that there are significant savings to capture and that our work must continue. And we are accelerating our efforts to position the business to achieve best-in-class EBITDA margins when cyclical forces abate and our end markets return to growth, which brings me to Phase 2 of our profit optimization strategy. Where Phase 1 was about consolidation and efficiency, Phase 2 represents a fundamental shift in how we are thinking about the business. Focusing on our core high-margin businesses and products to have elevated FOX and its portfolio of brands to be the leaders in their respective industries. We will continue to operate with a continuous improvement mindset. And as part of our Phase 2 efforts, our leadership team has identified specific cost improvement actions to materially improve profitability while strengthening our core and enabling long-term growth. We have identified critical opportunities across the business, some larger than others and some more complex than others, but all of them lead us to a simpler, more focused and more durable business profile. Dennis will walk you through the financial details around this in his remarks, but I want to take a moment to provide a clear view of the targeted areas of work in 2026. First, business line rationalization. We're exiting businesses within segments that are not accretive from a margin perspective today. The footprint work in Phase 1 gave us better visibility into true profitability by product line and by business. Now we're acting on that visibility. For example, by the end of the quarter, we expect to have divested our Phoenix, Arizona operations, which were dilutive in our AAG segment margins. The exit of Shock Therapy, Upfit UTV and Geiser is expected to reduce working capital and SG&A, improve margins in both percent and dollar terms and simplify our model. The changes are reflected in our 2026 guidance and are the first examples of our rationalization plans. We are not done. We are aggressively evaluating all noncore businesses and all product lines across the entire FOX portfolio and we'll pursue appropriate action where the return profile does not meet our expectations. We will look at strategic alternatives for any business that doesn't deliver 3 key elements: aligned with our core brands, synergistic to our vertical offering and has a durable ability to achieve sustainably accretive profit to the enterprise. Second, supply chain and material cost productivity. We are continuing to evaluate our operations to determine where we have the opportunity for further productivity either through better utilization, reduction of footprint, make or buy optimization efforts and supply chain improvements. Additionally, we are working aggressively to reduce material costs through redesign or actions with suppliers. This work is critical to achieving our margin expectations. However, some of these efforts will necessitate some short-term expense to deliver. And third, a significant reduction in operating expenses. We have opportunities to reduce spending across sales, marketing and G&A functions. We will address marketing and R&D spend that is not aligned with growth and our profitability expectations. These are difficult decisions. We don't take them lightly, but they are necessary to rightsize our cost structure for the business we are running today. In aggregate, our actions are targeting approximately $50 million of incremental realized savings in fiscal 2026. These actions will drive meaningful bottom line improvement in our 2026 results and more importantly, return us to the appropriate foundation to build revenue growth in 2027. In conjunction with our Phase 2 profit optimization initiative and towards our ongoing prioritization of balance sheet improvement, we are also reducing our CapEx spending. We have been in an elevated CapEx cycle where we are spending 3% plus of revenue. In 2026, we're targeting a step down to approximately 2% of revenue. With several years of investment having been made in product capacity and innovation, we have the assets in place to achieve our near- to intermediate-term goals. This shift isn't compromising our ability to grow, but rather is better characterized as a militancy around ROIC metrics and focus, which is driving improved free cash flow generation to help accelerate debt paydown and strengthen our balance sheet. Beyond these management-driven actions, we announced earlier this month that our Board of Directors will be establishing a Transformation Committee focused on operational excellence and margin improvement. The committee will begin its work in the coming month and is expected to advise on the existing Phase 2 actions we have already established as well as unlock additional opportunities that would be incremental to the $50 million target for 2026. Taken together, this is a comprehensive effort with management and Board aligned that will move with urgency. We're not simply managing through a cycle. We're fundamentally repositioning this company to deliver greater operating leverage as we deliver growth over the next several years. Before I get into our segment performance, I want to address an organizational change. As we initiate our Phase 2 cost actions and support the Board's Transformation Committee, Dennis will be dedicating his full attention to these efforts alongside his responsibilities as CFO. To that end, I assumed responsibility for AAG earlier this month to drive critical actions. This is a short-term need to execute the critical actions within AAG, such as the expected divestiture of Phoenix operations I mentioned earlier and overhaul our PVD business as well as meaningful actions within the rest of the portfolio. We will revisit the leadership of this segment later this year once this work has been completed. I want to take a moment to thank Dennis for the work he has done leading AAG. Dennis laid the groundwork for the decisions and actions that are necessary going forward, and I appreciate his time and focus over the last year. While there is much work still to be done in AAG, I believe it will be more efficient and productive short term for me to drive the product line decisions and optimize the operations to support our near-term goals. It's the right time for Dennis to redeploy the same intensity he showed with AAG toward the next phase of our broader cost transformation that will benefit the entire enterprise. Now with that, let me turn to review our segment performance for the fourth quarter. The PVG segment delivered as expected in Q4, overcoming extraneous challenges with net sales of $116.7 million, with our automotive OE business remaining reasonably stable and predictable throughout the quarter. We benefited from our position on premium vehicle SKUs, which continued to outperform the broader automotive market even in challenging conditions. Importantly, PVG delivered margin improvement in fiscal 2025, demonstrating the benefit of our Phase 1 cost actions flowing through to the segment level. This is the type of execution we expect to see across all segments as our Phase 2 actions take hold. The aluminum supplier disruption at our OEM customers impacted our volumes as expected in Q4, creating some timing challenges for both our OEM partners and our business. We estimate the disruption impacted our Q4 revenue by approximately $8 million as compared to historical norms. However, I want to emphasize that this is a temporary issue that will be resolved. Despite this headwind, the underlying business momentum remains strong as our customers expand the product platforms that we support. Our Power Sports business continues to stabilize and improve. We're seeing encouraging signs from our expansion into the motorized 2-wheel space, where growth from new customers is helping offset sluggishness as well as increased content with some of our leading OEM partners, which provides confidence in our ability to drive long-term growth in this space. This diversification strategy is allowing us to navigate through the varying stages of industry and macro cycles across our end markets. On the product development front, our Live Valve aftermarket launch at SEMA in November was exceptional. Previously, enthusiasts could only access our best technology through new vehicle purchases. Now we're expanding access to our dealer and installer network. This is the most advanced technology available in the off-road aftermarket and early indications suggest strong demand from our enthusiasts. In addition, our product development work with OEMs has landed us new platforms with Ducati in motorcycle, Airstream across several premium RV models as well as early revenue from 2 large well-known EV brands in both autonomous mobility and performance off-road. These programs are designed to deliver early revenue now while full production will provide real growth in '27 and beyond. Turning to AAG. As I mentioned, we are taking portfolio actions across the business, and AAG is an area where these actions will have a particularly visible impact in the near term as we divest our operations that were dilutive to the segment's margin profile. These exits will be immediately accretive to AAG's profitability after close. We will continue to evaluate all businesses within the segment against our go-forward return expectations. With that preface, AAG delivered net sales of $126.2 million, up 12.5% year-over-year and 7.1% sequentially, driven by strong demand across our CWH, Sport Truck and RideTech businesses. Importantly, AAG margins would have been meaningfully stronger when excluding the dilutive operations I just described. As I previously mentioned, additional work in PVD and other areas will enable us to fully capture margins in that business necessary to drive a sustainable margin profile necessary across AAG. On the OE side, the programs we've been cultivating will underpin AAG's long-term profitable growth. The performance truck program we launched in Q3 with a major OE partner has been an immediate success. Our initial units are sold out, and we have a strong backlog building into 2026. We did encounter temporary supply chain complexities associated with this pivot to a more OEM aligned strategy, which has been identified and is getting the attention it needs for improvement. During the quarter, these supply chain issues delayed shipments of approximately 300 units to late Q1 and Q2 of 2026. These aren't just one-off builds. They represent a deepening relationship with OEMs who see us as an innovation partner, not just an upfitter. And in Q1, we secured a second similar program with Ford, which was announced at the NADA show earlier this month and is activated for their dealer relationships across the country. These investments further validate our strategy of creating differentiated high-performance vehicles that command premium pricing and provide more predictable and sustainable revenue and profit streams over time. SSG performed largely as expected in what continues to be a challenging environment across both bike and Marzocchi, with Q4 net sales of $118.2 million, down 5% year-over-year. The bike industry as a whole continues to slowly stabilize amid what remains a complex environment. Tariffs are adding pressure to OEMs and driving inventory levels below historical norms. And we're seeing the rise of disruptive market entrants create new competitive dynamics that have forced some legacy bike brands to reconsider their offerings, consolidate or cease operations. Against this challenging backdrop, our bike business ended fiscal 2025 slightly above 2024 in an industry experiencing turbulence and challenges across many of our OEM customers. We believe our stability is a meaningful proof point for the strength of our brand and our competitive positioning. And consistent with our broader messaging today, we're not chasing revenue. We have the financial strength to lead with our brands and a discipline to protect our margin structure while the industry works through its cycle. Our strategy focuses on 3 critical objectives. First, product expansion to leverage the changing mix toward e-bikes and new categories; second, customer expansion to build long-term growth partnerships with the new companies aggressively redefining the sport; and third, continued cost optimization to maintain best-in-class margins even in a flat revenue environment. Turning to Marzocchi. As expected, Q4 was stronger than Q3. The sequential improvement reflects the shift in our distribution channels toward retail that we discussed last quarter as retailers took inventory of our new products ahead of the holiday shopping period. Nevertheless, this was a departure from the plan we had forecasted at the beginning of the year, and we recognize that profitability remains below historical rates in our recent expectations. This margin compression reflects our long-term strategic growth investments in new categories like softball, in-house engineering capabilities, go-to-market improvements and the impact of tariffs. While we maintain our conviction that Marzocchi is the best business in baseball with the best team in baseball, our strategic review of this business will unlock alternative options for consideration as we drive the focus on our core business mentioned previously. Before I turn the call over to Dennis, I would like to recap 2026. In the near term, we are focusing our efforts on meaningful margin improvement. As part of our Phase 2 optimization efforts, we're evaluating all businesses within our portfolio to ensure they meet our profitability standards and strategic objectives. In summary, we're not counting on market recovery or tariff relief. Given these macro realities of elevated interest rates, soft labor markets and channel partners' tightening inventory levels, we remain focused on what we can control in 2026. And with that, I'll turn the call over to Dennis. Dennis Schemm: Thanks, Mike. I'll begin by discussing our fourth quarter financial results, followed by our balance sheet, cash flow and capital allocation strategy before concluding with a review of our outlook for fiscal 2026. Total consolidated net sales in the fourth quarter of fiscal 2025 were $361.1 million, an increase of 2.3% versus the same quarter last year. Gross margin was 28.3% for the fourth quarter of fiscal 2025 compared to 28.9% in the fourth quarter last year, with the decrease primarily driven by shifts in our product line mix and impact of tariffs. Total operating expense for the quarter included a noncash goodwill impairment charge of $295.2 million related to our share price. Adjusted operating expenses, which excludes the impact of the goodwill impairment charge, restructuring and other discrete expenses as well as the amortization of purchased intangibles were $82.6 million or 22.9% of net sales in the fourth quarter of 2025 compared to $76.4 million or 21.7% in the prior year quarter, with the increase primarily attributed to the reinstatement of incentive compensation payouts for the current year compared to no bonus payouts for the prior year period. The company's tax benefit was $33 million in the fourth quarter of fiscal 2025 compared to a tax benefit of $4.1 million in the same period last year with the difference being driven by the impairment of nondeductible goodwill recognized this year. Adjusted net income normalizing for the goodwill impairment was $8.3 million or $0.20 per diluted share compared to $12.8 million or $0.31 per diluted share in the fourth quarter last year. Adjusted EBITDA in the fourth quarter of fiscal 2025 was $35 million compared to $40.4 million in the prior year period. Adjusted EBITDA margin was 9.7% in the fourth quarter of 2025 versus 11.5% in the prior year period. Moving to the balance sheet and cash flows. We continue to execute on working capital management with improved inventory positions supporting our cash flow generation. We also made progress on balance sheet deleveraging, which remains a key priority, which will also be impacted by our progress with the Phase 2 actions that we laid out today. We paid down $13 million of debt during the fourth quarter for a total reduction of $33 million for the year, bringing fiscal year-end debt to $673.5 million. Looking ahead, the combination of our Phase 2 cost actions, CapEx discipline at approximately 2% of revenues and working capital improvements, they are designed to accelerate free cash flow generation and drive meaningful balance sheet deleveraging in fiscal 2026. Now moving on to our outlook. We are introducing full year 2026 guidance that reflects a decline in our top line expectation, which is largely a combination of the business divestitures, product line rationalization and a slightly down market while driving meaningful margin expansion through a comprehensive set of actions that span every part of our cost structure. There are a number of moving parts, so I want to walk you through how they come together because we think it's important that you appreciate both the building blocks and how they roll up into our outlook. We entered fiscal 2026 with momentum from the achievement of our Phase 1 cost program, which delivered $25 million in realized savings in fiscal 2025. We expect approximately $10 million of those actions to carry over as incremental year-on-year benefit in fiscal 2026 as we annualize a full year of footprint and network consolidation savings. Building on that foundation, the Phase 2 elements Mike introduced related to business line rationalization, supply chain and material productivity and a reduction in operating expenses will target our SG&A structure and the complexion of our business portfolio. These actions are expected to deliver approximately $40 million of incremental savings this year in 2026. In total, Phase 1 plus Phase 2 is expected to generate approximately $50 million in cost reductions this year, supporting the approximate 200 basis points of adjusted EBITDA margin improvement that's implied in our guidance. In the near term, we expect margin pressure to remain visible as we work through our supply chain improvement efforts within the AAG segment. We will also continue to feel the impact from the dilutive Phoenix operations through its divestiture toward the end of the first quarter as well as the ongoing effects of tariffs that won't anniversary until later in the second quarter and represent an approximately $15 million of headwind in the first half of the year. Looking toward the balance of the year, we expect a material improvement in EBITDA margin and dollars. To summarize clearly, we are taking comprehensive actions that will provide measurable benefits in 2026. This translates into a material positive step change of approximately 200 basis points improvement in adjusted EBITDA margin from our 2025 rate of 11.5%. The collective focus around these initiatives is strong. This is something we are driving at every level of the organization from the Board and executive team through every operating segment. And as Mike mentioned, the Board's Transformation Committee will begin its work in the coming months, partnering with external advisers to identify further opportunities. Any additional savings that come from that process will be incremental to the approximately $50 million of incremental cost saves from our Phase 1 and Phase 2 profit optimization efforts. Bringing this all together, for the first quarter of fiscal 2026, we expect net sales in the range of $343 million to $369 million and adjusted EBITDA of $27 million to $34 million. To reiterate my earlier comments, we expect the first quarter to be more challenged due to multiple headwinds that aren't fully offset by last year's Phase 1 carryover benefits, including the full year-on-year tariff impact before we anniversary the Liberation Day implementation and difficult comparisons in SSG Bike given the strength of the first half of 2025. As we move into the second quarter and especially the second half of the year, we expect to improve meaningfully. Tariff comparisons normalize, aluminum supply is expected to be fully normalized and the benefits of our Phase 2 actions should materialize. With that context, we expect full year 2026 net sales in the range of $1.328 billion to $1.416 billion, which at the midpoint represents a year-over-year decline of approximately 6.5% and is largely a combination of the divestitures, product line rationalization and a slightly down market that we mentioned. We are guiding to adjusted EBITDA in the range of $174 million to $203 million, which represents a margin of 13.7% at the midpoint or approximately 200 basis points of improvement relative to full year 2025. Capital expenditures are expected to be approximately 2% of revenues, and our tax rate is expected to be 15% to 18%. That wraps up my commentary. Mike, back to you for closing remarks. Michael Dennison: In closing, I want to leave you with 3 key messages. First, we're not waiting for markets to improve. The actions we are taking now around Phase 2 objectives as well as capital discipline and working capital improvements are within our control, and our team is executing them with precision and urgency. Second, our fiscal 2026 targets are achievable through self-help. Our outlook calls for material margin expansion on flattish organic revenues. That's our commitment. When markets do recover, we'll be positioned to deliver even stronger results. Third, our business is built to deliver long-term growth, and we will ensure that growth comes with the right margin and leverage by taking aggressive action to optimize the system end to end. Our performance-defining products continue to resonate with customers. Our operational foundation is stronger following a significant cycle of investment, and our Board and management team are fully aligned on creating value for our shareholders. I'm confident in our ability to demonstrate progress this year toward our goals. I want to thank our employees for their incredible focus and resilience during this time. The decisions we're making today, while difficult, are necessary to position FOX for sustainable profitable growth. With that, operator, please open the call for questions. Operator: [Operator Instructions] We'll move first to Peter McGoldrick with Stifel. Peter McGoldrick: I appreciate all the detail today. I'd like to dive in on the moving parts on guidance. So I was thinking -- I wanted to ask if -- as we think about the underlying growth profile of your ongoing business, can you talk about the revenue and profitability related to those that are expected to be sold at the end of the quarter and what that means for the organic business? Dennis Schemm: Well, what we've been doing is taking a look at the overall complexion of the business, looking at those businesses that are dilutive to our overall profile that we've been expecting. So at the end of the day, after we take out Geiser, Upfit UTV and Shock Therapy, which should happen later on this quarter, that's going to result in a couple hundred basis points of improvement there. And then we're going to continue just to look at other businesses along the way. Marzocchi has not been included in any of this as well. Michael Dennison: And to be clear, Peter, when we talk about 200 basis points of improvement relative to the Phoenix, Arizona operations, that's for AAG specifically. Dennis Schemm: It's a great point. Peter McGoldrick: Okay. I appreciate that. And then as we think about the size and the shape of the go-forward business, can you talk about how much of your current portfolio is -- makes up the sort of the core synergistic and accretive criteria that you pointed to that would be a part of your core business and not related to any potential divestitures or changes in the portfolio? Dennis Schemm: Yes. I think overall, when I think about core and Mike thinks about core, we're thinking SSG Bike is core to our operations. When you look at AAG, core to those operations there are going to be PVD and then your Sport Truck, RideTech, Custom Wheel House and then on PVG, obviously, that is core to who we are as well. Again, though, we're going to be taking a look at everything as we move forward, making sure that it is lining up with the 3 aspects that Mike talked about during his prepared remarks, and that is alignment with our brands and then it's going to be the synergistic nature of that. We've talked about 1 plus 1 equals 3. That needs to continue as well. And then it's got to have the durability of profit generation over the long haul. Operator: We'll move next to Anna Glaessgen with B. Riley Securities. Anna Glaessgen: I'd like -- I'm curious on the thought process behind divesting the Phoenix business, which is focused mostly on Power Sports. I'm curious the extent to which this is a margin play. I don't know the degree to which that was more dilutive than maybe other businesses within the line, maybe a function of the outlook for Power Sports, at least near to medium term. Just any help there as we contemplate maybe what else could be contemplated within the broader portfolio, as you noted, assessing other noncore assets? Michael Dennison: Yes, Anna, it's a good question. When we think about that business and the lens that Dennis just described, which I talked about in the earlier remarks, we have to use a lens of these are good businesses. However, at their current size and scale, to get them to be at the scale we need them to be, to be a productive and durable value component of our enterprise, there is heavy investment, and there has been heavy investment and heavy working capital utilization to support that growth curve. And as we look at the next several years, while they're great businesses, they are hard to own in our portfolio because of the draw on capital, the draw on SG&A and the dilution in the margin for that time frame. So we actually will continue to partner with these companies in product development and innovation in a lot of ways. This is not about us just exiting them in a way that we will never work with them again. That's not the point. The point is in our current portfolio, they just don't fit and the dilution effect over the next 2 years is significant enough that we need to do something different. So this is a well thought out process that we've started in Q4 and, as we've mentioned, executing in Q1. Anna Glaessgen: And then on the guidance, you referenced 3 separate points that are being contemplated in sales, the business divestment, some product rationalization and then thirdly, a down market. Would it be possible to frame up roughly your expectations across the end markets in 2026? Dennis Schemm: In general here, when we talk about the top line, I mean, essentially, what we're getting at is we are going to scale down the business through thoughtful divestitures and product line rationalization. That will be the bulk of that decrease of about 6.5% at the midpoint. In addition, as we look at SG&A and those expenses, we would be -- we need to consider that if we're going to reduce some of those expenses, they're going to have some impact on the top line. So that's another aspect of it. And then in general, we're just hedging against a macro environment that's a little weaker. And so while we always expect our products to outperform, we're trying to put a hedge on the overall market there as well. And so I'd leave you in summary with its divestitures, product line rationalization result in the bulk of the decrease, then it would be the impact of the cost-outs on the SG&A line that deliver that 6.5% decrease. Operator: We'll move next to Scott Stember with ROTH Capital. Scott Stember: Can you talk about tariffs? What was the net impact to the business? I don't know if you mentioned it or not in '25? And what is baked into guidance at this point, assuming no material changes with all the happenings as of late? Dennis Schemm: Yes. So that's a great question. Thanks for that. And so essentially, what we experienced in 2025 was $50 million of gross tariff impact. We were able to offset $25 million of that through cost-out initiatives, et cetera, with supply chain, passing on cost to suppliers and customers, et cetera. And then going forward into 2026, we're estimating an additional $30 million of gross tariff impact, and we expect to mitigate about 50% of that. So leaving a net tariff impact in the first half of 2026 of $15 million. Michael Dennison: And we have not [indiscernible] or input from the most recent noise you mentioned. We -- I think it's too early to try to input some sort of benefit from those -- from the statements and from the Supreme Court. Scott Stember: Got it. And then last question on the balance sheet and cash flow. What was the net leverage ratio at the end of the quarter -- at the end of the year? And what are you targeting as far as free cash flow and the leverage ratio by the end of '26? Dennis Schemm: Yes. So another great question. Balance sheet is obviously a key priority for us moving into 2026 as it was in 2025 as well. We finished comfortably in Q4. We are at 3.74 versus a covenant ratio of 4.5. So we are well within the range there. And as we move forward, cash flow is really going to be primarily a function of the EBITDA contribution that we'll be driving in 2026, along with extreme focus on working capital reductions as well and a reduction in our CapEx. So those are going to be some of the big drivers as we move forward into 2026. Operator: We'll take our next question from Craig Kennison with Baird. Craig Kennison: A lot of information to process. I wanted to follow up on Scott's question with respect to tariffs. Do you plan to pursue a refund of your tariff payments? Michael Dennison: We will do everything possible to get a refund for sure. Now how that works and how that plays out and when that actually arrives, we are not going to put in the guide because that is a crystal ball we cannot see through. Craig Kennison: And then as we look at the businesses that you plan to divest, the way you're speaking about them suggests you have a buyer in place. Can you confirm that's true? And then how would you plan to use the proceeds from any sale? Michael Dennison: That's true and debt reduction. Dennis Schemm: 100% debt reduction. Michael Dennison: It's pretty simple, pretty straightforward. Operator: And this does conclude the Q&A portion of today's program. I would now like to turn the call back to Mike Dennison for any closing remarks. Michael Dennison: Thanks for your time today, everybody, and we will talk to you soon. Have a good evening. Operator: This does conclude the Fox Factory Holding Corporation's fourth quarter 2025 earnings call. You may now disconnect your line and have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Starz Q4 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Nilay from Investor Relations. Nilay Shah: Good afternoon. Thank you for joining us for Starz Entertainment's Fiscal 2025 Fourth Quarter Earnings Call. We'll begin with opening remarks from our President and CEO, Jeffrey Hirsch; followed by remarks from our CFO, Scott MacDonald. Also joining us on the call today is Alison Hoffman, President of Starz Networks. After our opening remarks, we'll open the call for questions. The matters discussed on the call include forward-looking statements, including those regarding expected future performance. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors. This includes the risk factors set forth in our most recently filed 10-Q for Starz Entertainment Corp. Starz undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The matters discussed today will also include non-GAAP measures. The reconciliation for these and additional required information is available in the 8-K we filed this afternoon, which is available on the Starz Investor Relations website at investors.starz.com. I'll now turn the call over to Jeff. Jeffrey Hirsch: Thank you Nilay, and thank you, everyone, for joining us today. It's only been 9 months since our separation, and I'm pleased to report that Starz delivered another strong quarter, both financially and operationally. Before I get into the highlights of the quarter, I want to give everyone an update on how we are executing in our core operations and how we are positioned for 2026 and beyond. 2025 was a very successful year, one in which we exceeded all of our financial guidance. It's a feat we're especially proud of amidst the pressures you see happening across the industry. We ended the year at an all-time high of 12.7 million OTT subscribers, growing year-over-year by 7.6%. We grew OTT subscribers in 3 out of 4 quarters, including adding 370,000 in the fourth quarter alone. This resulted in 170,000 total subscriber growth in quarter 4. We grew total revenue on a sequential basis in both quarter 3 and quarter 4. We exceeded our $200 million outlook for 2025 by 2%, delivering $204 million and grew adjusted OIBDA year-over-year. And we exceeded our leverage target ending the year lower than anticipated at 2.9x versus a 3.1x guide. The successful 2025 was aided by an exceptionally strong December quarter. Our substantial subscriber growth in the quarter was fueled by the stellar reception to our programming slate. We premiered the highly anticipated Spartacus, revival to critical acclaim, and Power Book IV: Force Season 3 delivered impressive in-season viewership growth of 57%. The momentum from quarter 4 has continued into 2026, resulting in a strong start to the year. The success of our originals proved that our Bedrock strategy is working. We deliver edgy, premium content for women and underrepresented audiences that broad-based streamers don't address. Content remains core to everything we do. And as we look at the rest of 2026, it's clear we have one of our most compelling lineups of originals. The slate includes the highly anticipated conclusion of Outlander and Power Book III: Raising Kanan, the premiere of Starz owned Fightland, the return of Blood of My Blood and the long-awaited return of one of our biggest hits, P-Valley, from Pulitzer Prize-winning, showrunner, Katori Hall. These 2026 originals, our Pay-One movies from Lionsgate, including films like The Housemaid and the Michael Biopic and our robust development pipeline make it clear that Starz has never been better positioned to keep our audience engaged, entertained and growing. Before I get into our key financial targets for 2026, I want to recap our operational milestones in 2025. We restructured our Canadian business into a licensing revenue stream, prioritizing our focus on the U.S. market. We greenlit and completed production on our first wholly owned series Fightland, advancing our strategy of rebuilding our content library through ownership. And this morning, we announced that Sky will come on board as our co-commission partner for Fightland, further improving the already superior unit economics we get from owning the series. We've also made significant strides in the aging our content slate this year while still expanding our network-defining franchises, Outlander and the Power Universe. More specifically, we successfully launched Outlander prequel Blood of My Blood and have greenlit a new Power Universe series. Power Origins, which has a supersized 18-episode order, is currently in production and will give fans an action-packed origin story of fan favorite characters, Ghost and Tommy as ambitious young entrepreneurs. These shifts are critical in achieving our long-term targets of increasing margins to 20%, converting 70% of adjusted OIBDA to unlevered free cash flow and delevering to 2.5x as quickly as possible. The changes fortify our long-term path and set us up to continue the growth we delivered in 2025 through 2026. Our outlook for 2026 is strong. We expect OTT revenue to grow. We expect to deliver low single-digit percentage adjusted OIBDA growth versus 2025. We anticipate generating between $80 million to $120 million of positive unlevered free cash flow, converting the business to positive equity free cash flow. And we expect to end the year at approximately 2.7x leverage, an improvement from our current 2.9x leverage and well on our way to reaching our stated goal of 2.5x leverage. As we stated, we've spent several quarters unwinding some of the legacy constraints of operating within a studio. We believe this has set up the business to drive strong cash flow generation going forward, with 2026 functioning as an inflection point. With the long-term growth of the business as our North Star, we are deemphasizing the need to manage the business around quarterly subscriber levels. As a result, we will not be disclosing subscribers starting with the March 2026 quarter. We remain laser-focused on OTT revenue growth, profitability, converting adjusted OIBDA to free cash flow and delevering. We believe this decision is in the best interest of our shareholders as it puts us on a path to achieving the targets we outlined. Before I hand the call over to Scott, I want to reiterate that we continue to believe that there is an opportunity to scale our 2 core demos and grow our business as a result of the increased consolidation across the media landscape. Given our track record of profitably converting our business from linear to digital and our industry-leading tech stack, we believe we are uniquely positioned to capitalize on potential M&A opportunities. We are poised to increase our scale as assets that are strategically valuable to Starz become available. Now let me hand it over to Scott to take you through the financials. Scott MacDonald: Thank you, Jeff, and good afternoon, everyone. I'll briefly discuss the fourth quarter's financial results, provide an update on our balance sheet and discuss our outlook for 2026. It was a strong fourth quarter and calendar year for Starz, as Jeff outlined. We were able to reach the key milestones we outlined on our previous calls for both the quarter and the year, and we positioned the post-separation business to drive a significant increase in free cash flow generation from 2025 to 2026 while further bringing down our leverage. Let me start the breakdown of the quarter with an update on our subscribers. Please note that our financials for the fourth quarter reflect the transition of our Canadian operations to a content licensing relationship. And hence, I will focus my discussion on subscriber trends on Starz's U.S. business. Starz added 370,000 domestic OTT subscribers in the quarter, reaching an all-time high of 12.7 million customers. Additionally, total U.S. subscribers grew 170,000 in the period to 17.6 million as growth in OTT was partially offset by a decline in linear customers. The increase in subscribers in the seasonally strong fourth quarter was driven by demand for our scripted originals, including Force and Spartacus. Moving on to revenue. Total revenue in the quarter was $323 million, up 60 basis points on a sequential basis. Sequential revenue growth was driven by an increase in distribution revenue, primarily from revenue recognized in the quarter related to the transition of our Canadian operations to a content licensing relationship and is reflected in the linear and other revenue line item on our income statement. This growth in distribution revenue was partially offset by a decline in linear and OTT revenue, which stemmed from ongoing traditional linear declines and heavy holiday seasonal promotions, including lower-churn multi-month plans. Adjusted OIBDA for the quarter was $56 million, up over 100% sequentially due to lower programming amortization, lower advertising marketing and higher revenue. We ended the calendar year with $204 million of adjusted OIBDA, exceeding our $200 million outlook. Looking at the balance sheet, we ended the quarter with net debt of $589 million, roughly flat with Q3 levels. Total gross debt was flat at $625 million and includes $325 million of our 5.5% senior unsecured notes as well as $300 million of our Term Loan A. Cash was $36 million, and our $150 million revolver remained undrawn at the end of the period. Leverage at the end of 2025 was 2.9x, better than our previous guidance of exiting the year at 3.1x. Looking forward, as Jeff noted in his prepared remarks, 2026 is going to be a year with significant focus on driving increased free cash flow. More specifically, in 2026, we expect unlevered free cash flow to range between $80 million to $120 million, and we expect to generate positive equity free cash flow for the year. This represents approximately an $80 million to $120 million improvement year-over-year in both measures. The improvement in cash flow stems from lower cash content spend in 2026 versus 2025, which drives a closer alignment of cash content spend with the programming amortization expense reflected on our income statement. Finally, as we complete the transition in the first few months of 2026 from being part of a studio business and bringing our content payment timing in better alignment with industry norms, with improved free cash flow and another year of at least $200 million of adjusted OIBDA, we expect our leverage to continue to decline year-over-year and exit the year at approximately 2.7x. Now I'd like to turn the call back over to Nilay for Q&A. Nilay Shah: Operator, could we open up the call for Q&A? Operator: Yes. Thank you. [Operator Instructions] Our first question comes from Brent Penter with Raymond James & Associates. Brent Penter: And first and foremost, I appreciate the 50 Cent hold music there. So good to see the $200 million target exceeded in '25 and then expected to grow in '26. Can you just walk us through some of the moving pieces? You talked about OTT revenue up. How should we think about total revenue? And then with that 20% margin target out there exiting 2028, what kind of progress in '26 does the guidance contemplate? Jeffrey Hirsch: Look forward to seeing you on Monday. I'll take the second question in terms of the margin. So we're well on our way to executing against getting to that 20% margin coming out of calendar '28. You'll see a slight improvement in '26, but the lion's share of the improvement really comes in '27 and '28 when you start to see the Starz originals really become a lion's share of our programming slate. And there's a lot of de-aging of the content there, ownership of the content we announced, offsetting some of the costs by bringing Sky in on Fightland as a co-commission partner. So when you take all of the de-aging of the content, Starz owned content, creating that incremental revenue stream by selling it internationally, you really start to see us move significantly toward that 20% margin in '27 and '28. Scott, do you want to take that? Scott MacDonald: I would just say, on OTT revenue, we feel really good about growth next year. When you look at our slate, it's probably one of the best we've ever had. It's very consistently placed throughout the year. So we feel really good about that as well as our focus on our pricing strategy. Brent Penter: Okay. Got it. And then thanks for the commentary on industry consolidation. It sounds like you all are ready to capitalize if there's an opportunity. So I guess, what kind of assets would you be interested in? And then how should we think about the constraints in terms of your ability to buy something? Is there a leverage level you want to go above or an equity valuation that you would want to be at before doing any kind of deal? Or just can you help frame those constraints? Jeffrey Hirsch: Yes, great question. I'm not going to comment on our conversations to date. But what I will say, and we've said this repeatedly, we have 2 very valuable core demos that make us really complementary and important in the ecosystem. And there's a lot of, I would say, linear networks out there that have great brands that kind of complement our 2 core demos, but are really marooned on the linear side of the business without any kind of tech capability or desire from their larger corporate parent to try to transition them and reconnect them with their consumers that have moved to the digital side. And so those are kind of the characteristics that we look at to make sure that we're continuing to lean into what we do on an SVOD side, much more on an ad-supported side. And again, we continue to drive leverage down. Scott and I continue to focus on getting leverage down to that 2.5x. And so that's where we would like to operate. So any kind of deal that we do, we'd have to stick within that kind of leverage constraint to keep it around. We don't really want to operate in a business that's 4x, 5x, 6x levered. And so we'll be very cautious about what kind of deal we do when it comes to leverage. Brent Penter: Okay. Got it. And then putting M&A aside, given that free cash flow is starting to inflect, how do you rank order your other capital allocation priorities? Obviously, delevering has been the top goal so far. And -- but as you start to get closer to that 2.5x goal, what are your other capital allocation goals? And at what point, given where the valuation is, do you start to consider shareholder returns? Scott MacDonald: I think we look at this as it's going to be a good problem to have as we move forward. We -- as I noted, we expect free cash flow to improve or come in the range on unlevered basis, $80 million to $120 million. That's a significant improvement over the year. We'll start to have cash that we'll start to build, which will give us an opportunity to delever, further invest in the business. And at that point, we would be in a position to make the decision to start returning some of that cash to shareholders. Operator: Our next question comes from Thomas Yeh with Morgan Stanley. Thomas Yeh: On the OTT subscriber momentum into this year, I think you mentioned 1Q is pacing pretty healthy. Can you just talk about the retention patterns that you're seeing for the subscribers that might have come in for Spartacus or it came back for Power Book IV Season 3? Is the slate structured to run that retention through? Or is there something more to do there still? Jeffrey Hirsch: I think there's really 2 components to that. One is the slate is really set up to have a great connected year throughout the year. We have some of our biggest shows throughout the year, Kanan, P-Valley, Fightland, that's a real long good run across the year against one of our demos. We've got Outlander finale, Blood of My Blood coming in. We have a couple of acquisitions to fill the gaps there. So we have a great, complete slate, again, surrounded by great movies from the Lionsgate Pay-One and Universal Pay-Two, that plus, we really deployed -- what we've seen in our data, we really deployed longer-term offers, so annual offers, which we see really has -- when people roll from that 12-month offer to retail, the take rate up to retail is significantly higher. And so you see a lot more spike in ARPU at the end of those offers, and they're also great for long-term churn. And so the combination of a great slate and longer-term offers really lead us to push churn down over the next 12 to 18 months. Thomas Yeh: Okay. That's helpful. Anything on the distribution partnership side that is kicking in as well? Or any update on progress there in terms of the bundled partnerships that you've taken on? Alison Hoffman: Thomas, this is Alison. I would say we continue to be at the forefront of bundling. This is really a focus for us. We've set up the business to be a complementary or an add-on partner to a broad-based streamer, to targeted streamers. And so that's a real focus for us. I think that we're excited to expand our bundling relationships, and we're excited to see expansion in our distribution relationships. And we think that even with the disruption in the industry that those will come. And just to comment on particularly the bundling piece, our data is showing that it is very good for business. The bundles that we have in place are expanding our TAM. They're driving net new additions to the business. They're revenue accretive and then also ultimately are driving better retention for the business. So bundling and distribution are a big focus for us, and we're excited about the year to come. Thomas Yeh: Okay. Great. And then last one for me. You've talked about a time line to get to 60% plus slate ownership. If we just think about the opportunities there, is it fair to assume that we should think about the international sales as concurrent with that ramp and then ancillaries maybe start to build thereafter? Jeffrey Hirsch: I think that's spot on. I mean we've got -- we've announced 4 originals that we have in some stage of production. All 4, we've just brought in Plan B, a production agency to help produce that show, and we're super excited about that. Kingmaker, Masquerade, the rooms have just finished, and we're just getting the materials into a place. We're out looking for production partners there as well to see where we're going to shoot those shows and at what cost. And again, as you saw with the Sky announcement this morning, we have somewhat of a first-look deal with Sky, where they continue to look at our slate and be excited about it, and I expect that partnership to build and grow. Also, Fightland was Lionsgate, who's our international sales partner today, took Fightland out to Content London last night to very, very great reviews. So outside of the Sky markets, Lionsgate will sell that for us. So I expect that only -- the unit economics of Fightland to only continue to get better. Operator: Our next question comes from David Joyce with Seaport Research Partners. David Joyce: A couple of things. Last year, you had a few volatile quarters of cash flows in and out and margins up and down, tied to some of the final content arrangements with Lionsgate. How should we think about the cadence this year of both OIBDA and free cash flow? And on the free cash flow side, is it going to be moving around based on spending for originals? That's the first question. Scott MacDonald: Okay. Thanks, David. That's a good question. When you think about our P&L, it has been very up and down. A lot of that was driven by the transition from being part of a bigger studio, same thing with the related cash. We worked over the last few months to bring that better -- into better alignment. We worked with our teams as to better sync up when we're spending the dollars on the production and getting that more in alignment when they are much more in line with industry standards. When you're part of a bigger organization, the cash management is just totally different. It's not necessarily based on just what Starz's needs are. So we feel like we're getting that into a really good place now as we move into '26. There's a little bit of work to do here in the first part of the year. But we feel like we're on a really good glide path to improve our spend. And we see content spend coming in under about $650 million next year. From a P&L cadence, you'll see very consistent over the year, especially in the first 3 quarters. The fourth quarter in '26 will be a more positive quarter, but the first 3 will be very consistent. It won't be as choppy as you've seen in the past. David Joyce: Okay. And on my other question, I see you've got $41 million in production loans now. How many projects is that for? Is that just Fightland? Or is that a couple of others? And how many originals do you think will be in production by the time you're exiting 2026? Scott MacDonald: That is just for Fightland, that particular production loan. We look -- it's very cost-effective cost of capital. So we like to use those -- the line -- help us line up our cash flows with those shows. As we greenlight the new shows coming up here, we would expect to have production loans for those shows. It will take a time to -- as those will build up over time. But at some point, the show will be completed and you'll repay the loan. So it should end up being a fairly consistent balance after we get through the end of this year. Operator: Our next question comes from Vikram Kesavabhotla with Baird. Vikram Kesavabhotla: I wanted to follow up on the co-commission deal with Sky. Can you talk more about why they were the right partner? And from a higher level, when you look at the content slate that you have planned, how would you characterize the demand environment for your programming internationally? Jeffrey Hirsch: Vikram, it's Jeff. Thanks for the question. Look, we think that we've seen in the past when we were in the international business before that the U.K. market is an incredible market for all of our shows. And over time, that has actually expanded into France as well. And so we think there's a real big appetite for our content in some of the biggest international markets. We've had a great relationship with Sky. We've licensed Amadeus from them. We've licensed Sweetpea from them. And so we have an ongoing relationship with them. I think they're very interested in what we have in production, and I think there's others that will be as well. And so I think the slate that we've designed, we've obviously designed it with international revenue in mind. And I expect that to continue to grow as we get more ownership back onto the network and own our own library. Vikram Kesavabhotla: Okay. That's helpful. And then you referenced the pricing strategy a few times in your previous answers. Can you just elaborate more on your philosophy there? I mean do you think there's one way for you to raise price on your subscriptions over time? And how do you plan to manage the cadence of that going forward? Jeffrey Hirsch: Yes. So as we said and we'll continue to say, we're a complementary service. We've always wanted to be underpriced, way underpriced of the broad-based streamers out there. And so as they continue to raise rate, it gives us room to raise rate. You've seen the broad-based streamers raise anywhere from $1 to $3 over the last couple of years. So it's created a lot of room for us to have some pricing power against the broad-based streamers. And we'll continue to look at that right time, right place, right slate to determine whether that's right for our consumers. So we'll watch the industry, watch the broad-based streamers and we'll make decisions based on where we think that's right to drop that in. Operator: Our next question comes from David Karnovsky with JPMorgan. Douglas Samuel Wardlaw: Doug Wardlaw on for David. I just wanted to get an idea of how you guys think about relying on spin-offs or reliable shows like Power and Outlander versus new originals. Obviously, each piece of content kind of plays a large part on what sub growth looks like in the quarter. So I guess, long term, how you weigh starting a new show versus a spin-off of sure thing? Alison Hoffman: Thanks for the question. I mean franchising here at Starz is a real kind of power of ours. I think we -- as you know, we've successfully franchised Power into 3 successful spin-offs and currently in production. And these are really reliable drivers of engagement, drivers of acquisition for the business. Same with Outlander, we're so proud that Outlander has been on the air since 2014 and still drives a huge engaged fan base, and we successfully launched Blood of My Blood last season. But what they also provide is a real platform or lead-in for new shows. And so what you'll see is you'll see us using these reliable franchises to launch new IP and establish new IPs with audiences so that we can bring thread audiences from one show to the next as we're marketing and expanding our TAM with new audiences. So I think it's a real -- thank you for the question. I think it's a real part of our programming strategy, and it's something that we think a lot about in terms of how we make investments and how we schedule. Operator: And the last question will come from Matthew Harrigan with Benchmark. Matthew Harrigan: I should probably apologize for belaboring you with this one. But what's your reaction to Seedance? It caused a lot of volatility in the markets. Are there benefits -- I guess, speaking more broadly, do you see more benefits from you on the AI side as far as development? And I guess, secondly, how is the development process differing from when you were under the Lionsgate's weighing? I mean, what parameters are you emphasizing or maybe a little bit different in terms of moving faster or adapting to your demographic even more precisely? Jeffrey Hirsch: It's Jeff. Thanks for the question. I think on the first one, look, AI is a -- it's going to be a very powerful tool to enhance the business. I think there's 3 or 4 areas that we're using it today. Obviously, with content and reducing costs that we used it with Spartacus, for some of the large scenes in Spartacus, I think, very successfully. On the boring side, I think you can do a lot of internal training with AI that you would have to do -- waste hours of employees. Again, for us, with a large-scale D2C business that has over 10 years of acquisition data, retention data, pricing data, that, coupled with all of the content we have and how to schedule that content to best align around lifetime value and customer churn and marrying all those key KPIs together with hundreds of millions of data sets, I think the AI tools can really help us be efficient and continue to drive profitability for our business. I do believe it will be an additional tool for the industry. And I don't -- again, this is a lot -- still more art than it is science, and I think the creative process will continue to be that way. And we're excited to use it as a tool, but I think the business is really grown on the success of the uniqueness of our originals, and I think that's hard to replicate. And so we're excited about that. From a second question, it's -- look, Lionsgate is a tremendous producer of television. We've had a great 9-year run with Kevin and team. And I think that will continue based on the Power Universe that we're still locked on the hip on. And so I don't expect that relationship to change. I think as we go out and start to rebuild our own library again and it gives us the ability to control front-end costs, a little better direct line to the producing partner that way. It also allows us to really get that incremental revenue stream from international that we weren't getting as part of being owned by a studio. And so those are probably the 2 biggest components that we have, a little more control with our team and a little more revenue on the other side. So -- but again, we're still pretty much locked at the hip with Lionsgate on a lot of our big shows. As I said, they're our sales agent for internationally. They're over in London today. I think Packer continues to do a great job maximizing revenue for us there. So I expect that relationship to continue for a long time, and we're excited about that. Matthew Harrigan: It would be interesting to see what your stock does now. Operator: Thank you. I would now like to turn the call back over to Nilay for any closing remarks. Nilay Shah: Thank you, operator, and thank you, everyone. Please refer to the News and Events tab under the Investor Relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thanks, everyone. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Elastic Third Quarter Fiscal 2026 Earnings Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Eric Prengel, Global Vice President of Finance. Please go ahead. Eric Prengel: Thank you. Good afternoon, and thank you for joining us on today's conference call to discuss Elastic's Third Quarter Fiscal 2026 Financial Results. On the call, we have Ash Kulkarni, Chief Executive Officer; and Navam Welihinda, Chief Financial Officer. Following their prepared remarks, we will take questions. Our press release was issued today after the close of market and is posted on our website. Slides, which are supplemental to the call, can also be found on the Elastic Investor Relations website at ir.elastic.co. Our discussion will include forward-looking statements, which may include predictions, estimates, our expectations regarding demand for our products and solutions and our future revenue and other information. These forward-looking statements are based on factors currently known to us, speak only as to the date of this call and are subject to risks and uncertainties that could cause actual results to differ materially. We disclaim any obligation to update or revise these forward-looking statements unless required by law. Please refer to the risks and uncertainties included in the press release that we issued earlier today, included in the slides posted on the Investor Relations website and those more fully described in our filings with the Securities and Exchange Commission. We will also discuss certain non-GAAP financial measures. Disclosures regarding non-GAAP measures, including reconciliations with the most comparable GAAP measures, can be found in the press release and slides. Unless specifically noted otherwise, all results and comparisons are on a fiscal year-over-year basis. The webcast replay of this call will be available on our company website under the Investor Relations link. Our fourth quarter fiscal 2026 quiet period begins at the close of business on Thursday, April 16, 2026. We will be participating in the Morgan Stanley Technology, Media and Telecom Conference on March 2. With that, I'll turn it over to Ash. Ashutosh Kulkarni: Thank you, Eric, and good afternoon, everyone. Thank you for joining today's call. Elastic delivered yet another outstanding quarter, beating the high end of guidance across all key metrics and showcasing the power of the Elastic platform and our business model. Sustained platform demand, strong sales execution and our relentless focus on customers drove Q3 momentum. As LLMs rapidly evolve their capabilities around inference and reasoning, it is becoming increasingly clear that context is the most important ingredient in making these models useful within an enterprise. With that backdrop, in Q3, we continue to see enterprises choose Elastic to power context for their most critical AI needs. Translating the success to our performance, we achieved 18% total revenue growth and an 18.6% non-GAAP operating margin. Sales-led subscription revenue accelerated to 21% alongside our growing cohort of $100,000 ACV customers, which now exceeds 1,660. Q3 marked our sixth consecutive quarter of strong field execution, driving solid customer commitments and supporting healthy CRPO growth. That execution is also translating into a strong pipeline as we head into Q4. The lifeblood of organizations is the proprietary data that they create, manage and analyze every day to drive business decisions and operations. This data is massive, often many petabytes in scale and simply cannot be moved for cost and security reasons outside of the organization's control. For businesses to use agentic AI, the LLM needs to come to the data. This is where Elastic comes in with our ability to help organizations store and manage all of their data in very cost-effective ways and by providing accurate real-time context to AI by searching through all of this organizational data in real time. Furthermore, Elastic is capable of doing this consistently across cloud and self-managed environments. This hybrid flexibility allows sensitive data and workloads to remain in their preferred environments, eliminating the need for costly replatforming. This unique flexibility is why we continue to displace legacy vendors and niche cloud-native players alike. And the results are clear. The number of commitments for over $1 million in annual commitment value signed this quarter grew over 30% compared to the same period last year, driven by new logos and customer expansion. Consolidation and AI are powerful tailwinds. As organizations manage exploding data volumes, they are turning to Elastic to drive both innovation and efficiency to their search, observability and security needs. For example, we signed a 7-figure new logo deal with a Fortune 100 insurance institution for Elastic Security. Seeking to modernize their security operations, the company initiated a competitive process to replace a legacy SIEM solution that was plagued by slow query speeds, inefficient data retention and rigid SOC workflows. By leveraging features like Logsdb and searchable snapshots, they're consolidating data into a single cyber data lake with integrated AI-powered SIEM workflows, all powered by Elastic and its capabilities, including AI assistant, attack discovery and AI-driven orchestration. This transition enables their analysts to achieve markedly faster cybersecurity detection and remediation outcomes while meeting strict regulatory requirements. In another large deal from the quarter, a global leader in data resiliency software chose Elastic Observability to power the monitoring layer for its new cloud offering. As they migrate their vast user base to the cloud, they are leveraging our full Observability suite, including AI assistant with Logsdb to transform from reactive troubleshooting to intelligent semantic aware analysis. By integrating open telemetry and our vector search capabilities, the customer is now able to proactively detect anomalies and remediate issues using natural language queries, significantly reducing mean time to resolution. They chose Elastic over incumbents due to our deep integration flexibility, superior handling of unstructured data and the ability to provide a single source of truth across the organization. Crucially, as companies navigate their cloud migrations, they require a platform that doesn't force them to choose between their existing data centers and the cloud. Our asymmetric advantage in supporting modern cloud and hybrid environments drove a significant win with a global financial group. During the quarter, we closed a 7-figure expansion deal for Elasticsearch, which serves as the core of their online banking application for tens of millions of users. They needed a central data repository capable of supporting both cloud and self-managed architectures, allowing them to run mission-critical workloads in their preferred environment without compromising performance. Elastic succeeded with their existing MongoDB implementation failed to provide the scalable retrieval and precision necessary to move beyond simple search into production-grade context engineering. Moving forward, they are integrating semantic search and advanced AI features to further personalize the user experience through faster, more accurate retrieval. Central to these enterprise engagements is the rise of agentic AI. Customers are moving from passive Q&A to active agents that drive workflows. Precise action requires precise data. The conversation has shifted from which model to use to how to feed it the most accurate context. Enterprises realize that to unlock the value of AI, they must bridge the gap between their LLMs and their proprietary unstructured and structured data. Elastic makes this AI work. We are the engine that allows enterprises to build production-grade AI systems that are actually worthy of their business. While others offer simple vector databases, we know that vectors alone are not enough. We deliver the full retrieval toolkit from hybrid search to advanced reranking, ensuring that agents have the relevant context they need to take precise actions. This ability to bridge enterprise data to the LLM with our platform is directly translating into expanded AI adoption. In Q3, new customer commitments with AI continued to grow. And we now have over 2,700 customers on Elastic Cloud using us as a vector database with additional customers using us for broader AI capabilities, including agent builder and attack discovery, bringing our total count of AI customers to over 3,000. We now have over 470 customers with an ACV of $100,000 or greater using us for AI. This includes more than 410 using us as a vector database. Cumulatively, AI use cases have now penetrated over 1/4 of our $100,000 ACV customer cohort. We are seeing sustained demand from the largest companies in the world alongside interest from the new wave of AI native companies. During the quarter, we closed multiple new logo and expansion deals with AI-first innovators, validating that our platform is the standard for both established enterprises and disruptors. A leading AI recruiting platform used by large enterprises and start-ups alike chose Elastic's vector database to power their core customer-facing software because our search performance at scale was better than competitors. An AI-enabled driver and fleet safety company expanded their use of Elastic Search in Q3 as they scale into new global regions. Elastic provides the real-time retrieval necessary to power their platform, ensuring they can manage increasing data volumes without sacrificing performance. And a leading AI-native cybersecurity company focused on AI automated penetration testing has integrated our SIEM solution into their product. Elastic centralizes all of their logs without complication, allowing them to effortlessly scale through their massive growth trajectory. At the heart of these wins is the performance of our Search AI platform. We aren't just adding features, we are aggressively optimizing our engine, focusing our development efforts on delivering market-leading relevance, speed and efficiency. In the last 18 months, we have driven 2 orders of magnitude less RAM required for vector search through innovations like better binary quantization or BBQ, Disk BBQ and our Acorn filtering algorithm, among other things. This investment makes Elasticsearch vector search up to 8x faster than OpenSearch. Our superior performance led to one 7-figure deal with a global heavy equipment manufacturer. The customer continues to migrate mission-critical workloads over to Elastic Cloud from OpenSearch to improve scalability and performance. They are relying on our platform to power their high-speed search for telemetry data collected via the StarLink network. By leveraging Logsdb, they have achieved a significant reduction in cloud costs while managing 7 years of historical customer data. Our focus on performance extends to our partnership with NVIDIA as well, where together, we help enterprises deploy AI applications faster without draining IT infrastructure. We recently announced the technical preview of our Elasticsearch GPU plug-in for a GPU-accelerated vector database, which allows for 12x faster indexing. Additionally, the Dell AI data platform, now with NVIDIA and Elastic delivers a tightly integrated AI stack that streamlines the ability to build, deploy and scale AI. By making Elasticsearch a core component of the Dell and NVIDIA AI factories, we are meeting the critical demand for building AI on customer-controlled infrastructure. As we deepen these technical advantages, we strengthen our technical moat while removing friction from scaling AI. This quarter, we reached several product milestones designed to simplify the path from data to action for our customers. We are providing an end-to-end framework for building the next generation of intelligent applications. First, we officially launched the general availability of Agent Builder. Agent Builder allows developers to build secure context-driven AI agents in minutes. Unlike consumer apps that surf the web, our focus is on internal business applications using company data. We piloted agent builder with a Global 100 financial group to investigate and troubleshoot its production infrastructure, demonstrating an order of magnitude improvement in performance for complex issues and democratizing the specialized expertise necessary for rapid troubleshooting. An international entertainment and media company created a chat interface for customer interactions. They found the Agent Builder results to be significantly more reliable and accurate than the other LLM-centric approaches they had tried. Building an agent is only half the battle. The other half is ensuring that agent has the most relevant information at its fingertips. This quarter, we expanded our Elastic inference service to include Jina AI's multilingual reranking models. Jina AI delivers a best-in-class model for search accuracy with Jina V3 currently the #1 reranker in its model size category on the MTEB English retrieval benchmark, a gold standard for search and rag relevance. Jina AI's V5 Nano and V5 small models continue to outpace peers as well, scoring high in retrieval, reranking and other tasks. By making these models available natively, we are allowing our customers to tune their AI applications for maximum precision and recall. Rerank is the critical next step in a context engineering pipeline that ensures the most relevant data is presented to the LLM. Jina's state-of-the-art models delivered superior performance across over 80 languages. While AI provides the reasoning, enterprises still require the reliability of rule-based automation for critical business tasks. This is why we introduced Elastic Workflows in technical preview. Workflows adds automation capability directly into our platform, allowing agents to orchestrate actions across internal and external systems like Slack or ServiceNow. It moves Elastic from being a search box to a complete system of action. Finally, we are delivering on our promise of hybrid flexibility with Cloud Connect for self-managed customers. We recognize that many of our largest customers, particularly in financial services and government, maintain data on-premises for regulatory or sovereignty reasons. However, procuring and managing GPU hardware for AI is a massive hurdle for these teams. Cloud Connect allows customers to keep their data local while securely bursting to Elastic Cloud to leverage NVIDIA GPUs for high-performance inference. This ability to bridge modern AI capabilities with rigorous enterprise requirements is exactly why we are winning large-scale displacements against legacy providers. As organizations prioritize both innovation and operational efficiency, they're moving away from fragmented legacy tools in favor of Elastic's unified search AI platform. The results of this quarter, accelerating growth, large deal momentum and major competitive displacements confirm that our strategy is resonating and that we are winning the race to become the essential infrastructure for the next generation of AI-powered businesses. I want to thank our customers for their partnership, our shareholders for their trust and most importantly, our employees for their tireless spirit of innovation. With that, I will turn the call over to Navam to review our financial results in more detail. Navam Welihinda: Thank you, Ash. Good afternoon, everyone. We delivered yet another outstanding quarter. We outperformed the high end of revenue and profitability guidance ranges, driven by another quarter of consistent execution, strong consumption and strong customer commitments across search, security and observability. The momentum in our performance throughout this fiscal year is a testament to our team's ability to deliver rapid innovation and sales execution consistently quarter-over-quarter. The ongoing market demand we see is translating to total revenue growth, sales-led subscription revenue growth and healthy increases in pipeline generation to support our future growth. These factors together underscore our increasingly strategic value as a critical data platform in the age of AI. Our total revenue in the third quarter was $450 million, representing growth of approximately 18% as reported and 16% on a constant currency basis. Sales-led subscription revenue in the third quarter was $376 million, growing 21% as reported and 19% on a constant currency basis. We saw commitment contribution from both our self-managed and cloud offerings, and aggregate consumption trends in the third quarter remained strong. Our current remaining performance obligations, or CRPO, which is a portion of RPO that we expect to recognize as revenue within the next 12 months, crossed the $1 billion mark for the first time in Q3. CRPO accelerated to approximately $1.06 billion, growing 19% as reported and 15% on a constant currency basis. In our consumption business, we structure customer contracts based on their annual usage. So our CRPO gives us a very clear view into the revenue we will recognize in the next 12 months, giving us visibility and confidence in our business. As Ash mentioned, we saw deal momentum continue in Q3. This quarter's strength was balanced across all geographies, and we continue to see customers make multiyear commitments this quarter, which serves as a clear indicator of how our customers view the Elastic platform as a critical foundational element in their long-term data architectures. The positive momentum was reflected in our RPO, which saw strong growth of 22% in the quarter as reported and 18% on a constant currency basis. Our deal momentum is also evident in the growth of the count of customers with over $100,000 in annual contract value. We ended the third quarter with over 1,660 customers with ACV of more than $100,000, growing 14%. Quarter-over-quarter, we added approximately 60 net new $100,000 ACV customers. We saw strong field execution and healthy growth across our solutions, where search continues to see ongoing momentum from AI. This demand is benefiting both cloud and self-managed where both form factors are relevant for AI use cases. We continue to see customers taking a self-managed license and deploying Elastic into their own modern cloud and hybrid environments. The demand reflects customers' preference for Elastic, which uniquely provides the necessary control and cost efficiency for AI initiatives. AI also continues to be a powerful catalyst for customer expansion. 28% of our greater than $100,000 cohort now utilizes Elastic for AI, which includes incremental AI capabilities like Attack Discovery and Agent Builder. Today, we are still in the early stages of expansion, and we see considerable opportunity for ongoing upside for both new and existing customers to accelerate their AI adoption in the years ahead, particularly as they scale into and within our $100,000 ACV cohort. Now turning to third quarter margins and profitability. I will discuss all measures on a non-GAAP basis. Our commitment to balancing growth with disciplined spending translated into robust operating leverage and strong bottom line results. We continue to focus on costs and efficiency in our business. We recorded subscription gross margins of 82% and total gross margins of 78%, delivering an operating margin of 18.6%. The outperformance on Q3 operating margin was the result of our strong revenue performance, the sustained leverage in our model as well as some Q3 expenses moving into Q4. Due to this outperformance, we now expect to see our full year margins to come in slightly ahead than previously anticipated with updated FY '26 operating margin guidance now at 16.3%. Regarding cash flow, adjusted free cash flow was approximately $54 million in Q3, representing a margin of approximately 12%. Our cash flows are expected to fluctuate on a quarterly basis based on the timing of bookings and collections related to the enterprise booking seasonality. So we continue to manage cash flow on a full year basis. For fiscal 2026, we do not see any change in our full year outlook, where we continue to expect to sustain the level of adjusted free cash flow margins that we achieved in fiscal 2025. We have made significant progress on the $500 million share repurchase program that we announced in October. During the third quarter, we returned approximately $186 million to shareholders, representing purchases of approximately 2.4 million shares. Cumulatively, we have repurchased 3.8 million shares. I mentioned at our Financial Analyst Day in October that we expect to use more than 50% of the $500 million authorized amount in fiscal 2026, and we have already exceeded this goal. As of the end of Q3, we have completed 60% of our repurchase program, and we are continuing our repurchase program here in Q4. Let's move to our outlook for the fourth quarter and the remainder of fiscal 2026. For the fourth quarter of fiscal 2026, we expect total revenue in the range of $445 million to $447 million, representing 15% growth at the midpoint or 13% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $371 million to $373 million, representing 18% growth at the midpoint or 15% in constant currency growth at the midpoint. We expect non-GAAP operating margins to be approximately 14.5%. We expect non-GAAP diluted earnings per share in the range of $0.55 to $0.57 using between 105.5 million and 106.5 million diluted weighted average ordinary shares outstanding. Based on our fourth quarter guidance, we are raising our full year total revenue and sales-led subscription revenue targets as well. We expect total revenue in the range of $1.734 billion to $1.736 billion, representing approximately 17% growth at the midpoint or 15% constant currency growth at the midpoint. We expect sales-led subscription revenue in the range of $1.434 billion to $1.436 billion, representing 20% growth at the midpoint or 18% in constant currency growth at the midpoint. We expect non-GAAP operating margin for full fiscal 2026 to be approximately 16.3%. We expect non-GAAP diluted earnings per share in the range of $2.50 to $2.54, using between 107 million and 108 million diluted weighted average ordinary shares outstanding. A few other financial modeling points to keep in mind. The diluted weighted average shares outstanding reflect only share buybacks completed as of January 31, 2026. As you consider comparing sequential quarters, keep in mind that Q4 has 3 fewer days than we had in each of the first 3 quarters of the year, which creates a sequential headwind to revenue, which we have accounted for in our guidance. Also, as is typical with prior Q4 periods, we expect to see seasonally higher expenses related to the timing of employee benefit costs. These expenses were already part of the guidance that we had initially laid out for the year. As in past years, we finalized our plans for the upcoming fiscal year during the fourth quarter, and we will provide our initial FY '27 guide during our earnings call in May. In summary, Q3 was another very strong quarter at Elastic. Consistent sales execution throughout FY '26 continues to drive our sales-led subscription revenue growth expectations higher for the year, validating the durability of this business motion. As I said last quarter, while quarterly revenue can naturally vary in a consumption model, our strong customer commitments drive strong annual growth. Fueled by a highly differentiated platform and the expanding value we deliver to our customers, we remain on track to achieve our medium-term targets for both sales-led subscription revenue growth and adjusted free cash flow. Looking forward, we are confident in our ability to continue to drive profitable growth. We are the critical technology that accelerates data discovery, secures infrastructure and maximizes application performance. With that, I'll open it up for Q&A. Operator: [Operator Instructions] Our first question today is from Sanjit Singh with Morgan Stanley. Sanjit Singh: Congrats on the stability that we're seeing across the business. Navam, I wanted to go back to some of the themes on the Investor Day a couple of months ago. There was a data point that you provided around the AI native customers or the AI customers being a relatively small amount of the customers in fiscal year '24, but driving an outsized degree of expansion, that sort of year 1 to year 2 expansion. And so the gist of this question is that as we get to like 25% penetration of your $100,000 customer cohort, is there an opportunity here for growth to not just be stable, but actually to accelerate on a more sustained basis as we hit those critical tipping points, if you will? Navam Welihinda: Yes. Thanks for the question, Sanjit. And the trends that we laid out during the financial Analyst Day for the generative AI cohort, they remain the same. So we continue to perform well, and we're seeing stronger growth on those generative AI cohorts today as it was when we disclosed it to you during Financial Analyst Day. So we're seeing these tailwinds right now, and we're seeing more of our customers reach the $100,000 mark. Now remember that each of these customers in the $100,000 mark are also early in their journey. So there's this other dimension of additional penetration and maturation in their own AI journey, which will drive faster growth as well. So we're seeing the tailwinds right now. We've seen tailwinds that average to 5%, but there's obviously more that -- there are some customers that have higher growth than that. And to answer your question, yes, absolutely, there is a possibility. The art of the possible is there for us to actually accelerate beyond that 5% that we laid out during Financial Analyst Day, and the trends remain positive. Ashutosh Kulkarni: And Sanjit, just to add to that, that is exactly why we are so focused on the penetration of AI within our customer base. And as these customers, right now, every quarter, you're seeing us increase the penetration. The penetration initially starts with them using us in some small way. And as that usage grows, as you rightly pointed out, that's going to add to the consumption, it's going to add to the overall revenue, and that's going to show in the continued strength and acceleration of the business. Sanjit Singh: Understood. And Ash, maybe a question for you. You made the point in your script about vector search and vector databases are not enough in terms of building a resilient and powerful AI application. And I think a lot of people would agree with that statement. So when we brand the company as a context engine, what are the core pieces that are mandatory to secure status as the leading provider of context for AI applications? Ashutosh Kulkarni: That's a great question. I think the most important thing to keep in mind is context is going to change from task to task. And so the data platform, the context engineering platform that you provide needs to be able to do a whole bunch of things all together in a very consistent way. The first is the ability to bring in any and all kinds of data. And as you know, we have some unique capabilities in our ability to bring in not just structured information, but also unstructured really, really messy information. The second is to then take that data and convert it into vectors for vector search, which is a very powerful technique, especially in the AI world for semantic search, but then also to be able to mix it with hybrid search techniques. That includes textual search and then being able to rerank against multiple techniques to get the most accurate context. So the Jina AI embedding models, the Jina AI reranker models, those are a key part of the overall platform infrastructure. On top of it, then you need something that will allow you to assemble agents using all of these capabilities, and that's what Agent Builder was all about. As you know, it's a relatively new feature from us and a relatively new capability, but we are seeing great traction and adoption within our customer base. Then on top of it, you need workflows because agents are not just about chat anymore. They're not just about conversations. They're about taking precise actions. And that's where the workflow functionality that we released becomes really important. And lastly, the ability to monitor all of this, and that's where our LLM Observability functionality becomes key. So we believe that it's all of these capabilities, Sanjit, that taken together make the platform a very compelling platform for context engineering. And on top of that, we've also added our Elastic inference service. So you don't need to bring your own LLM. We can help you proxy to any LLM of choice that you might want to use. We integrate with pretty much all of them. Operator: The next question is Rob Owens with Piper Sandler. Robbie Owens: I apologize upfront for the flurry of questions in one here, but I will keep it to one question, but maybe 3 parts. Really want to focus on the outperformance in other subscription. And I understand you're going to meet customers where they want to buy. So I guess upfront, was some of that strength potentially pushouts that you saw in the prior quarter? Then if I look at your sales-led subscription forecast for Q4 and the fact it's down quarter-over-quarter, which you haven't seen historically, it's usually a little bit up. Is that really a function of the strength you saw here in the January quarter or something else to be read into that? And lastly, when we think about monetization of self-managed versus cloud customers and your ability to expand them over the coming years, can you maybe articulate the difference between the 2, if there's much there. So again, I apologize for the 3 questions, but hopefully, they're brief answers. Ashutosh Kulkarni: Yes, Rob, let me start. This is Ash. Let me start and then pass it on to Navam. In terms of our strength in self-managed, this is not just about pushouts or anything of that sort. We are continuing to see a lot of strength in our self-managed business. At the end of the day, what we are seeing now, especially with AI is a lot of customers are applying AI on data that they consider to be extremely critical, extremely sensitive. This is not just with government customers. This is also in other regulated industries. And for that reason, they're choosing or they're preferring to keep the data where it's within their control, within their environment. And that doesn't always mean in their own data centers. It might also mean within their own cloud VPCs and we give them the flexibility to be able to do that. So these are modern workloads that continue to grow as their usage of AI grows, and we are going to continue to benefit from it, which is why we believe it is really important to not just look at cloud, but to look at the whole picture and take into account the strong growth that we are seeing even on self-managed. And I'll let Navam address the other questions. Navam Welihinda: Yes, Rob, I'll address your quarterly sequential question. So overall, I'll start with how the business is doing. We're continuing to execute very well on the sales-led motion. This is another quarter of good execution from the sales side. And we saw that play out in our CRPO and RPO numbers accelerating as well. If you're looking at commitments, we're seeing a good commitment volume, and there's no deceleration on that. And on top of that, the pipeline is very healthy and growing each quarter. So overall, from a business perspective, very happy with where the quarter turned out and very positive about the future quarters as well. So that leads us to the guide. So when you think about the guide, we always guide with an appropriate amount of prudence on what we can achieve and outperform every quarter. So when you look about -- look at historical numbers versus actuals and guidance, you're comparing an actual number against a guidance number and the guidance number has risk incorporated into that forward-looking projections. So I'll first point to that. And the second point I'd make is that the fourth quarter has 3 less days, which translates to a 3% headwind or a $14 million -- or $14 million to $15 million headwind for us on a revenue basis because there's just less days of revenue to recognize. And all of that is incorporated in the guide. And if you look at last year's Q4 guidance or Q4 guidance in the past, there have been occasions where we've guided lower than the current quarter. So just keep that in mind. We continue to keep well on track with achieving our midterm targets, and we feel very positive about the strength of the business itself. Operator: The next question is from Matt Hedberg with RBC. Matthew Hedberg: Ash, I wanted to ask you about AI. And obviously, we've all seen pressure of the software market. And I appreciate your comments at the start of the call, it was really helpful to kind of get your perspective on AI. And it seems like there's a lot of great momentum from a customer perspective. I guess my question is, when we're looking at these frontier models, do you see them as future competition or more of a partnership opportunity? Ashutosh Kulkarni: Really, we don't -- in our opinion, AI doesn't displace us. It really depends on us because if you think about these frontier models, they're amazing reasoning engines. Like the way I think about them is they are going to be the operating systems of tomorrow. But just as operating systems today also require data systems to feed appropriate data and context to these operating systems to actually build applications with, you're going to need the same thing going forward. And our role in this whole ecosystem is to make sure that we can very quickly in real time across all of the petabytes of data that every organization holds, give the right context to these LLMs so they can do their job. And that's the reason why I believe that in the world of tomorrow, you're going to have agents talking to each other. You're going to have agents that you build with Elastic agent builders that are talking to Claude Cowork that are talking to things that you build with OpenAI Frontier. And we already support the MCP protocols, the A2A protocols that allow for that kind of communication. So this is a world where we feel that the fact that we have this tremendous position, the capabilities with our vector database, the capabilities with our entire context engineering platform to become a critical part of the infrastructure going forward. And we're already partnering with hyperscalers, and we already integrate with all of these frontier class models today. Matthew Hedberg: It's a great perspective. And then maybe just one quick follow-up about Elastic internally using AI. How are you seeing some of the tangible benefits? And how might that impact headcount in the future? Ashutosh Kulkarni: Yes. Look, we are all in on AI, not just in terms of what we are doing externally in terms of providing the platform that we are building, but also in terms of how we are using AI internally. Just to give you some context on this, a couple of years ago, we built out our first agent, our first support agent within the company. And that's been in production for a long time now. It's what our customers first hit when they have support questions and the amount of queries it's able to answer and the number of support tickets it's able to deflect has not only improved the overall performance, the overall experience for our customers when they come to us for support, but it has also significantly reduced the demand on headcount from our side. So in the last 2 years, even as our business has been growing, and as you can imagine, typically support workloads grow with the business, we have been able to manage that workload growth without adding any headcount to that support team. In other parts of the business, whether it's in HR, whether it's in finance, in legal, we are heavily using AI tools. Some of these are built on our stack. Some of them might be external products that we are leveraging. And even in engineering, we are finding tremendous value in using multiple different code generation tools that we use within the company. So overall, we believe that this is going to definitely help us not just accelerate the pace of innovation, which we're already seeing now, but also improve the productivity and improve the overall efficiency of the business. And that's what's exciting about this. We are able to help our customers with this, but we're also able to benefit from it ourselves. Operator: The next question is from Brian Essex with JPMorgan. Brian Essex: I appreciate your response to Matt's question with regard to your vector database capabilities and context engineering platform. I guess as you look at the changing landscape and you look at different approaches, different ways to think about things, are there anything -- how do we think about the platform and its ability to adhere to some of those approaches. Like, for example, the Page Index approach to RAG. You -- if they solve the cost and latency issues involved with that approach, are you well positioned to benefit from something like that and pivot with your approach? Ashutosh Kulkarni: Yes. Look, RAG, retrieval augmented generation itself has progressed a lot since the last several years when it was first introduced as a concept. But fundamentally, this comes down to finding the most appropriate context that is relevant for the LLM to do its job. Sometimes that requires you to understand specific data relationships that might exist. Sometimes it requires you to just search through all of your data. Sometimes it requires you to understand specific things, things like preferences and so on that you might have captured in other data systems. And it's an amalgamation of all of this. And as RAG continues to evolve, as these techniques become more and more sophisticated, we are actually on the leading front of capturing more than one single technique into our platform. We were one of the first to adopt hybrid search, and we were the first to talk about it. And since then, we have continued with that kind of momentum. So absolutely, I feel very, very confident that we're going to be on the bleeding edge. This is, at the end of the day, what Elastic was born to do. We've always been in the business of relevance. Without relevance, you don't get good search. Without relevance, you don't get good accurate AI. Brian Essex: Great. That's super helpful. Maybe just one quick follow-up. Any traction from the recent CISA win that you had. Are any Fed agencies leveraging that for SIEM referenceability? And are you seeing better activity on the back of that win? Ashutosh Kulkarni: Yes. Thank you. It's been a great success for us already. I think we mentioned it in our press release as well. That SIEM as a service with CISA continues to grow, and we saw additional agencies coming on board even in Q3. So I would expect that CISA win to be just the beginning of multiple agencies coming on to that service over the next several quarters. And fundamentally, CISA is considered to be the primary agency responsible for cybersecurity in the civilian government in the United States. And that just -- that kind of endorsement is something that goes a long way. So it's a very exciting win. Like I said, we are going to benefit from it for many quarters and many years to come. Operator: The next question is from Brent Thill with Jefferies. Brent Thill: Ash, just on the CRPO, 15% constant currency, 15% last quarter. I guess, I mean, good mid-teen growth, but I think everyone is asking why aren't we seeing a faster inflection? I know you have a true north to 20%. It seems like the numbers support that you can accelerate to 20%. But just curious kind of how you bridge to 20% and perhaps why maybe you're not seeing a little bit stronger AI tailwind in the near term? Navam Welihinda: Yes. Thanks for the question, Brent. So I'll start. CRPOs crossed over $1 billion. We're at 19% growth right now. RPO is at 22% growth. That's the best we've seen in 2 years, and we're very happy with the progress that we're making. And if you just look at the absolute dollar additions that we added in the quarter, it's progressing very, very well. So that's all pointing to the core things that are driving that CRPO growth, which is strong customer commitments, which now we've been talking about for a couple of quarters now, and it's been yet another quarter of good -- very good sales execution leading to strong customer commitments. So the AI tailwinds we talked about during Financial Analyst Day, we're seeing them right now, and they are continuing to grow as we see more and more of the $100,000 have -- or adopt AI workloads from us. So we're -- we think that there's a good strong trajectory from this point ahead as we see more AI penetration among our $100,000 customer base. Ashutosh Kulkarni: The other thing that I will say to this, Brent, is that if you look at the full year guide for sales-led subscription revenue, you can see that the strength in our business continues. And look, for us, the midterm guide that we laid out is not the place where we end up. That's the place that we believe we can go beyond that. If you remember, we talked about 20-plus. And really, that's the way we see it. So as more and more customers adopt our AI functionality, given the fact that those cohorts tend to grow and expand faster, we feel very, very good about how we are tracking to that midterm, and we feel very good about the fact that as that traction continues, we feel good about even exceeding what we've talked about in the past. Operator: The next question is from Howard Ma with Guggenheim. Howard Ma: I wanted to ask about cloud. And I guess this one is for Navam, I want to throw out a caveat first, which is that I appreciate your deployment agnosticism and fewer days in Q4. When I look at cloud revenue in Q4 versus Q3 in FY '22 and earlier, there was more of a sequential step-up than in FY '23 through FY '25, which were obviously impacted by -- you had industry-wide cloud optimizations. Also Elastic had company-specific go-to-market issues. But now that the go-to-market execution has improved significantly and given the visibility that you now have into how large customers ramp consumption relative to the commits, and that includes some of the $10 million-plus TCV contracts that you signed last quarter. The question is, is there any reason why the sequential cloud growth in Q4 would not be more in line with the earlier years? Navam Welihinda: So I'll start off with what I always start off on, which is sales-led subscription revenue growth is the right metric for you to focus on in measuring us as a barometer as the success of the company and the barometer of success of the company. And I talked about this during our prepared remarks as well. There's multiple examples, including this quarter of AI workloads being sold as self-managed and deployed either in the customer's cloud or in their hybrid environments. So sales-led subscription grew a healthy 21% this year. If you look at just cloud and the number there, again, is what is the sales-led cloud number, that grew 27% year-over-year this quarter. So we're seeing very good traction on the metric that we matter -- the metric that matters to us, which is sales-led subscription revenue. And also on the annual cloud number this quarter was very good as well at 27%. The forward quarters, number one, you have 3 less days, so that's 3 less days to focus on. The forward quarter is a risk-adjusted number. So you can't really compare an actual to a guidance number. But the point I'd like to make is that we're seeing very strong commitments and very strong performance on sales-led. Operator: Next question is from Ryan MacWilliams with Wells Fargo. DeShaun Fontenot: This is DeShaun on for Ryan MacWilliams. I wanted to ask, it really seems that based on some of the work we've been doing that the number of agents and AI services and production have really increased over the past couple of months. And I wanted to hear from you what you're seeing within your customers? Like are you seeing the types of AI use cases broaden out compared to what you were seeing maybe 2 quarters ago and how that's impacting usage and spend amongst those customers? Ashutosh Kulkarni: Yes, we are seeing the usage broaden out in the sense that we are seeing more and more variety of use cases that involve AI. 8 quarters ago, the bulk of what we were seeing was only around vector databases, vector search, hybrid search, semantic search. It was mostly around the chat-style interface kind of work. Now we are seeing agentic workflows being put together not just around what you would typically think of as search-related workflows, but also around security workflows, around observability workflows. And that was the reason why we gave the stat around our total count of customers using us for various AI use cases beyond just vector database. And that includes things like Agent Builder. That includes things like Attack Discovery. And in these kinds of scenarios, people are trying to automate their SOC workflows, their cybersecurity workflows for detection, for remediation. They're trying to do the same for SRE workflows around Observability. So the variety of use cases is growing. And as that grows, we see an opportunity, not just in our core search business, but also in the work that we're doing in security and observability. Operator: The next question is from Miller Jump with Truth Securities. William Miller Jump: Congrats on the sales-led momentum. Ash, you mentioned a MongoDB competitive win in the prepared remarks. We hadn't heard as much about this head-to-head between the 2 of you until fairly recently. So are you seeing MongoDB increasingly in bake-offs as customers look to build AI apps? Or is that more of a one-off? Ashutosh Kulkarni: No, this was a situation where the customer had started to use that technology for a basic search application. They had some issues scaling it. And as they were trying to build a more scalable solution, especially for hybrid search, they realized that they needed something that could perform, and that was the customer win that I talked about. At the end of the day, where we tend to typically play is in the area of unstructured data. We don't tend to see them as much. But from time to time, you do see these kinds of situations. William Miller Jump: And if I could just ask a quick follow-up for Navam. As large deals are becoming more of a contributor in your go-to-market strategy moving up market, can you just remind us how you're handling those large deals in your guidance process and any considerations around seasonality there? Navam Welihinda: Yes. Seasonality-wise, I think it just follows the normal typical enterprise seasonality pattern where they end up being more tail-end weighted in Q3 and Q4. But we talked about large deals in the last quarter. They happen every quarter. It's just the volume of bookings are bigger towards the tail end of the year. In terms of how we handle it, I think that this is a natural byproduct of just being successful with our customers, particularly the larger customers within the G2K. So we welcome it. When we look at our guidance and what we expect the full year to be, we naturally take a haircut on specific deals that could move from one quarter to another. So that's how we incorporate it into our guidance, a risk-adjusted number on not actually counting on everything going our way. Operator: The next question is from Koji Ikeda with Bank of America. Unknown Analyst: This is [ George McGuen ] on for Koji. I appreciate you guys taking our questions today. I wanted to ask just in the conversations that you guys have with customers and their strategy around adopting AI, how would you say that the tone and the conversations differ versus a year ago? And what kind of inning are they in today versus maybe a year ago in their adoption journey with Elastic? Ashutosh Kulkarni: The general tone is definitely one of greater enthusiasm for AI. I think there's been enough proof points now for AI helping in all kinds of use cases, whether it be around code development, whether it be around customer support, in legal e-discovery, like lots and lots of use cases across all functions. And so we are seeing the conversations be less evangelism and more about helping them put together these kinds of sophisticated agentic applications. So there's definitely been maturity. In terms of the total number of these agents that people have within their organization, that number is still in the early days. Like if you think about the total number of business processes and workflows that can be automated by AI, I think you have to be realistic that we are still in the early days because AI just is a pretty powerful and transformative capability. And what you can do with these LLMs in terms of reasoning can be applied to many, many different functions and different work processes. So we believe that the opportunity is still very significant and still ahead of us. Operator: The next question is from Mike Cikos with Needham. Matthew Calitri: This is Matt Calitri on for Mike Cikos over at Needham. With all the advancements you're making to search with things like the Jina reranking models, are you able to charge customers more? Or is the improved speed and accuracy more of an acquisition vehicle? Ashutosh Kulkarni: So we do charge in terms of consumption, right? So we have a consumption model, as you know. So pretty much everything that you do on our platform, it's metered and effectively based on compute, based on storage and so on. And for anything that's LLM or model related, it's based on tokens, all of our pricing is sort of public on our pricing pages. But yes, with these newer models, we are monetizing everything. And as the usage continues to grow, as customers do more and more on our platform, that is what drives revenue for us. Matthew Calitri: Got it. Very helpful. And then maybe just taking a different slice of the guidance question here. So you beat on the 3Q guide in constant currency and then you raised the constant currency guide for sales-led subscription revenue, but you left constant currency unchanged for the full year guide. And I can appreciate the 3 fewer days and the risk adjusted, but that would have been baked into the prior guide. Can you just help walk through the mechanics there of why that wouldn't have increased? Navam Welihinda: Yes. I mean it's quite simple. The number that we care about is sales-led subscription revenue. We handily beat that number this quarter, and we raised more than we beat. That's a reaction of what we think is happening with the business and the sort of the positive momentum that we're seeing on the sales line. So overall, what we -- we're not thinking about it too much more than we feel good about the forward momentum of sales-led subscription revenue, and we beat the number, and we're raising more than we beat. Operator: The next question is from Eric Heath with KeyBanc Capital Markets. Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ash Kulkarni for any closing remarks. Ashutosh Kulkarni: Thank you all for joining us today. We here at Elastic are very proud of our business results and excited about the opportunity ahead. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Kurt Mueffelmann: All right. Great. Well, good morning, everybody. Welcome to archTIS's first half of fiscal '26 update for the period ending December 2025. I'm Kurt Mueffelmann, and I'm joined by our CEO and Managing Director, Daniel Lai. We generally don't have these types of updates on the first half results, however, given the level of excitement around kind of the defense sales pipeline and technology motion, we thought it would be a good opportunity to kind of address the market and really create more excitement about where we see the market opportunity and the business going today. So during today's session, we'll update you on the half year performance, provide an in-depth financial review, update the U.S. DoD opportunity, somewhat of a resurgence that we're seeing in the Australian defense and a big military alliance win. We'll also discuss the go-forward strategy around market focus and growth, surrounding a really exciting topic around AI and the effects in the markets, product and sales opportunities. Why don't I kick it over to Dan for a quick minute or 2 overview on the first half of the year and just kind of overall thoughts? Chun Leung Lai: Yes. Thanks very much, Kurt, and welcome, everybody, to our half year update. Look, it's been a very productive first half of the year. And I think that, obviously, with the acquisition of Spirion has been very active, but I think the most pleasing aspect of all of this is that we've completed that integration. We've identified synergies in terms of savings, and we're seeing the pipeline grow. But most importantly, we're seeing active deals come out of this process and the execution. So the activity in the marketplace has certainly increased as well, which is giving us a lot of confidence. And of course, our execution in that defense and intelligence marketplace is very, very promising for the rest of this year. Kurt Mueffelmann: Great. So why don't we go through -- so the first half of fiscal '26 we really saw scalable changes, obviously, with archTIS with the inclusion of Spirion and its successful completion, as Dan said. ARR reached $16.3 million, while the prior comparative period for revenue grew 120%, to $6.1 million. We've really seen strong gross margins where it's increased 124%, to $4.6 million, which shows the operating leverage we've continued to talk about quarter after quarter, really driving that scalable higher-margin software. Operation expenses was $7.6 million, excluding acquisition-related items. This included, and we'll look at this in the appendix, an additional $2.9 million of nonrecurring transactional expenses from the acquisition. Again, we really detailed that and broke that out below the line from the acquisition costs and where we see the business going. And additionally, as we mentioned at the end of our quarterly 4C, we've created integration synergies that are expected to be close to $4.5 million in cost savings during 2026. So I think we've done a really good job at not only managing where the business goes from an integration standpoint, but also really managing that cost and looking for those synergies across the business. And as we announced yesterday, we also strengthened our balance sheet with another $8 million through a CBA facility, providing nondilutive capital to execute our growth strategy. So these results position us really for that accelerated ARR expansion, improved margins, and continued scalable growth. So Dan, any comments on the actual quarter from a financial standpoint? Chun Leung Lai: No, no. I think that we -- had a strong performance there. And obviously, now it's about accelerating the growth moving forward. Kurt Mueffelmann: Yes. I think -- I'd urge shareholders to really look at that appendix around the $7.6 million of acquisition-related items. I think there's some really strong work that was done there by our CFO, Andrew Burns, and the integration teams and really how we're driving that forward. So we feel like we're really in good shape from a cash as well as from an operating expense standpoint heading into the second half of the year. But at the end of the day, we know expenses don't drive business. I think I've been caught on making a statement or 2 about sales previously. So Dan, why don't we update everybody on a little bit about the sales opportunities that are out there, and really, the exciting one, I think, that we have on the right side of the slide here that's just closed earlier this week? Chun Leung Lai: Yes. Obviously, we've just made the announcement 24 hours ago. But a global military alliance or what we've described in the announcement as the U.S.-European military alliance. I guess, there's not too many of those, so I think we can work it out pretty quickly. But NC Protect, to be able to do the policy enforce data-centric security, and it is with that organization and obviously has a lot of member states, and we see a potential growth opportunity inside that. But it is a strong win. It has followed a life cycle of a proof of concept, engagement, competitive process, of course, which we have announced that we are the winners of. So I think that is -- one of the foundation building blocks of this year moving forward is this conversation about how we become the preferred provider of data-centric security for military alliances across the globe. And we're seeing how important that is with the activity that's going on around us constantly and the amount of money that's being increased in terms of the spending. What I'm happy about seeing now is the urgency from some of these clients to get these things completed. And that's certainly something that's been out of our control. We've been saying to shareholders for a period of time now it's coming, it's coming, believe us. And we're starting to see that action on the defense side now globally. So that's really, really important win. And of course, a massive, massive client to be successful with. So that's good. Obviously, everybody else wants to know about what's going on with this U.S. DoD deal. What's exciting for us is, again, I keep saying this, we are in constant contact with them, and we are confident about this deal coming to completion. Timing, yes, still working through that. Sometimes they get distracted with things like activities in Iran and discussions that are going on there. But that also gives you an indication of where this is really being deployed and being tested. It's at the cutting edge here, and get this right and it's going to definitely explode in terms of growth across that department if it's successful. So we're very excited by that. We know the tranche is still out there for the 125,000 users. We are making progress. It has been deployed, and we're just waiting for feedback on how those activities are going. But I think in the short-term, we will see something happen there. And finally, the Australian government in terms of their Department of Defense, I'm really pleased to say that we've completed a TDI, trusted data integration, which is really the foundation of what we discussed at the last 4C webinar of becoming a platform. This was off the back of that Direktiv acquisition in February. And of course, we've done a trial there. It is the foundation of the NEC deal in Japan as well. So we're seeing real traction with this, and we're really kind of excited about where this is heading and the interest from departments, military organizations on this product as well. Kojensi has also come very active. We've got signed up recently a couple of different resellers, one in the U.K. and one here in Australia that want to attack that defense industrial base and make it an offering to the market. So the activity there is strong. Spirion data protector, that's another defense industrial base, but it's for shipbuilding activities. You can guess there's a couple of major programs being highly invested in Australia currently, one in Adelaide and one in Perth, and they're looking at deployment of this and how do they secure their data across that. So we're very excited about the current opportunities in the pipeline. Again, all of these nuggets promote us as the #1 option for data-centric security across defense and defense industrial base. And I'm very happy that we're seeing that execution across that strategy. Kurt Mueffelmann: Yes. I think one of the highlights I'm personally seeing being on a lot of the calls across the enterprise as well as with the defense coalitions is really the interest in the model that we brought to bear on the kind of Spirion and NC Protect integration where we're going from identifying to labeling to enforcing to governing. That methodology is really catching on. So you see it with the shipbuilding infrastructure. I'm up in D.C. next week talking to Microsoft about that and how our Microsoft message with SDP, which is Spirion data protector. And Purview is a better together story. And we're going to be talking to about half a dozen different devs that are out there currently. That latest global military alliance win, that next step could be Spirion opportunity that we're looking at, because again, everybody needs to identify the data before they can do anything with it. You can't do anything with it unless you know what it is. So we're really seeing that traction out there. So I'm really pleased to see that. And I know, just from a pipeline standpoint, that we continue to have constant demos, consistent pipeline building on it. And I think there's even one or 2 different webinars that may be online if our investors would like to check that out. So really exciting stuff there with Spirion that's going on. So I think one of the things that's really -- we're seeing hard, and we want to spend a little bit of time on this within the markets. We're doing some work with a number of investment bankers in the U.S. And so -- you see what we're doing with the U.S. DoD. You see what we're doing with Spirion. You see the level of investment that we're making in the U.S. itself. So we're getting some really good professional feedbacks from people that have feet on the ground here and have really looked through where the business has gone. And you saw the market take a crash a couple of weeks ago, and it was really around this, hey, can AI replace the whole SaaS ERP, security, what have you. And so it's going that structural reset where software companies based on AI readiness and system-level importance rather than this traditional SaaS growth. And we're seeing the model shifting a little bit to what can AI do across the business? and so when you look at autonomous agents and how they work. So we look at this chart, and I thought this is a really big chart. And it's pretty complicated. So if you're into the quants like I am and into where valuations are about the industry and competitors, really look at this because I think what we're seeing, and my personal belief is you're seeing a decoupling of where traditional SaaS companies go and where AI agents and where AI as a valuation within a business come into play. And that's something -- Dan and I were on a call. Boy, it must have been 2 days ago at my 2:00 a.m. in the morning. It's one of those 2:00 a.m. you can't sleep type things. And we're talking about AI and the strategy that we're bringing to bear. And so we want to talk about this as it relates to the market, but I think it's also more important how we present AI across the business. So Dan, from a strategic standpoint, let's talk about the kind of the 3 stages that we see as a business and then how we bring that into play from a revenue and scalability standpoint? Chun Leung Lai: Yes. Look, AI means different things to different people, and there's a lot of, I guess, hype around it and what it's going to do and people are still feeling their way through it. But in the areas that we target from a market perspective, where it's classified information or sensitive information, there's a real concern about how AI is introduced into those highly regulated industries. So -- but overall, there's also the promise of productivity gains for the archTIS themselves and how -- and also product enhancement. So we've taken a 3-activity approach. These things will run in parallel. So first, of course, is how do we make our teams more productive and deliver product faster to the market? How do we accelerate? What we're doing in every aspect of the business from marketing to finance to product development, to testing, all of those things? That's the first activity. And we have got a strategy of how to implement that. And obviously, we are trialing our own different use cases for AI. Activity 2 is product innovations. How do we embed AI into our product offerings? And a good example of that is, when we have to write policy rules which match against compliance frameworks, can we automate that process, have a lot of those things out of the boxes and have that translated into plain English? Can we test those things before they get deployed and inform the user and make it much more friendly from that perspective? And the activity 3 is, what can our products do to make organizations feel more secure about adopting AI and how it gets implemented across their enterprises? And I think that's really the big, big opportunity. We previously discussed that we're going from best-of-breed to a platform offering. And one of the things that we really saw early on with the Direktiv acquisition and the launching of trusted data integration is its ability to manage AI and where it gets published and what information and services it transacts on. And that ability was -- we identified very early as part of the foundation of building out the platform so that we've got an offering to help highly classified areas or sensitive IP or manufacturing or help understand how they control and adopt AI into their organizations securely and having it governed. Do you want to add anything to that, Kurt? Kurt Mueffelmann: Talking on staff, I think it's -- the fun part is, I think the first one is we're getting people coming into the business, all employees and contractors coming in and saying, how can we help, how can we deploy AI and make us more efficient, more productive, whether it's support being more proactive to customer needs, whether it's sales going through pipeline and looking at each opportunity and really going in and digging, whether it's IT or operations, everybody across the business is looking at that, and we're promoting that very heavily across the business. It's really creating a culture of participation and a culture of real drive to really look at how do you peel the onion back to see how can we create and maybe lower things such as operating costs, how can we become more effective, how can we do more with less, which is something we always see in microcap companies. And that will obviously drip through -- all the way through how we're doing that development. As Dan said, the AI market readiness is where we are today. And we're seeing kind of a number of kind of Open AI issues that not a lot of people are dealing with. And so Dan, we've talked about this. We've talked to, I would say, half a dozen different customers and prospects about their challenges. So why don't we talk a little bit about the challenges that those customers are seeing? Chun Leung Lai: Yes. Look, it's very, very true that it's very easy to talk about the benefits. It's very difficult to implement it and get those benefits, measurable outcomes for the business. So one -- the first one is, obviously, when you have an AI which can make calls for services and to data resources, how do I know I'm getting the right data exposures and I'm not creating data leaks? That's very important to the customer base that we deal with. So uncontrolled data exposure is a big issue, and it's something that they fear a lot. Compliance. How do they make sure that they're adhering to the compliance requirements? Again, defense industrial base, which we deal with, they're regulated a lot by information, trade and arms regulation controls. How do they know that, that information is still being adhered to in terms of the compliance requirements, which have massive penalties for them to do? Data boundaries. They just don't exist anymore. We've talked about this before, about customers operating in hybrid environments. They're using SaaS platforms. They've got information in the cloud. They're using cloud services. They've got legacy systems, this sort of thing as well. And how do I know what the AI and the MCP can actually call in terms of services and data? We've looked at all of these issues. We have to look at this also for ourselves, which is also helping us look at how we design our responses as well. And most importantly, I think when you integrate AI across the organization and start to add agentic agents, it's the nonhuman identities which become so problematic because they expand exponentially. So how do I also identify what services I'm calling? Where this information is going? So it's becoming quite a problem. And obviously, there's a very sweet spot. Therefore, if I can resolve that issue, there's a massive marketplace for products such as TDI. Kurt Mueffelmann: Yes. I mean you look at that, right? We were on with an investor the other day, and they're like, "Oh, you're making a shift from data-centric security over to AI." And I said, "Well, they're really coupled together" because I think as organizations scale towards AI, the requirement is really shifting from that visibility to real-time policy enforcement. So we're going from data-centric or data security policy orchestration and leveraging that into AI. We're ensuring the right data is used by the right user, the right model, the right agent, and we're doing that by design. So I think it's a nice segue into, again, as we talk about valuations within business and we talk about that kind of the chart about decoupling where AI can go and coupling back -- that back into the archTIS message around data-centric or data security policy orchestration and how we leverage across AI. So if we start to look -- sorry, I double hit there by mistake. As we start to look about that, Dan, where do you see that? Because we talked that last time a little bit around the control plane where archTIS enables organizations to scale safely by delivering that single policy? Chun Leung Lai: Well, again, it all comes down to context, and that's the biggest issue that people are trying to solve today. And it comes down to, as I mentioned before, that hybrid environment and having transparency about being able to govern all of those components together. AI cannot work in isolation to the rest of the organization, to the people that have to interface with it, to the other machines that have to interface to it. Having a single place that you can control and govern that information and put your rules in about how that information will be retrieved and in what context it will be released and how it will be released, how it can be used, becomes very much an incentive for all organizations to know that they've got a single point where they can control that. And again, we've talked about this. We're not here to compete against everybody. We're here to enable that to happen through security and governance of those services and of that data. And really, that becomes something where we have an opportunity to do that. And one of the early use cases, I might just add, for when we looked at Direktiv was -- and I think I've mentioned this use case before, was Viasat, which have all the U.S. deployments for satellite contracts. Now a young fellow there at Viasat puts some coding to be checked by ChatGPT and caused a data spill. So how do I use -- get the benefits of that AI and -- but also not publish -- know where that information gets published? I want to control where that information gets published. And in that particular case, Direktiv was used to intercept that and transfer that information to a secure place that it wasn't publicly available or be able to be reused by other users on that ChatGPT tool. And that's really where we're heading. As this gets adopted and Agentic AI really comes into it, we're going to see this -- the environments become more and more complex, which means they need a central place, which can interface into all of those aspects and be controlled through a single policy. That is what the purpose of the control plan is. Kurt Mueffelmann: Yes. I mean we're providing that execution level control, ensuring that every interaction, output, everything that is going through is critically related to the governance guidelines of an organization. So we're not actually being the AI, but we're being that layer above. So we don't have to tie into specific engines. We're actually being that layer across all models and providers, really providing that security across that multimodal AI adoption, which we're really looking to play. So we really become that additional layer from a governance or that control plane that we drive. And that starts to lead us into kind of where we see the strategic differences and next steps where we think we can be that competitive differentiation around preventive control versus post-event, that data level enforcement, not just at the app layer that Dan talked about, become that neutral aspect or become Switzerland of where we can go from that neutrality standpoint. And Dan, talk a little bit about where we see the market opportunity through the growth vectors themselves? Chun Leung Lai: Yes. Look, really, this is part of that land and expand. Customers already have made heavy investments in things like DLP management, data loss prevention, in this case, identities, Microsoft. And it's about connecting those things together so that they get full transparency in a single point of control. Large-scale defense programs out there, they're also trying to integrate and do interoperability. We've seen declarations from -- recently from the Japanese Ministry of Defense about deploying air service missiles on islands and these sort of things, but they can't work in isolation. They have to work with their allies and share that information. NATO is an excellent example of that, what they're trying to achieve and the U.S. DoD through the Five Eyes and AUKUS are 2 other examples of how do they do that. And then, of course, the supply chain for nuclear submarines, et cetera, they're all perfect examples of how we're doing this. But all of them are trying to adopt AI in all of these different areas to, again, increase productivity, do more with less, get more accurate results. And the thing that's stopping them is how do we do that securely. And that's where we see the opportunities really in this space. It's about integration and solving the integration and interoperability problem and playing that layer. And I think that, that's a niche where out of the 4,500 vendors, we are certainly in the lead on, we're certainly getting acknowledged, and we're certainly getting referenceability, and I think that that's what's really exciting. It doesn't change what we have to do today in the short-term. We have to win with the products we've got and win big awards and grow them from expanding to solve that strategic problem with them as we develop the platform out. And that brings us to our 3 horizons of growth, and you can talk through that, Kurt. Kurt Mueffelmann: Yes. [indiscernible] The AI doesn't change the model, right? We still have the strategy that we're going forward with. It just adds another layer of what we believe we can differentiate and bring them to market. And so when we talk about the 3 horizons over the 6 to 18-month time line that we look at, where we have to deliver today. We have to deliver consistent earnings through stronger ARR, controlled operating expenses and what have you, right? And so we've talked already about the left-hand side of [ EU ], where are we updating across the U.S. DoD. We talked about the recent win for 2,500 users, which is just a small component of a major U.S.-European military alliance. That reassurance of -- kind of resurgence, I should say, of Australian DoD that we're seeing with a number of real pipeline opportunities, and we know pipeline opportunities in Australia are generally seasonality, which is Q3, Q4, which is now until June. That's where they've always fallen historically. Again, we're going up to see Microsoft on Monday. And Spirion we're seeing some really strong cross-sell opportunities, not only in defense, but we're actually seeing it the other way where the Spirion enterprises are actually coming to us and saying, "All right, now that we've identified our data for Spirion, how do we push NC Protect and how do we enforce that data?" And so really trying to defend and extend that base across where we are today and drive that. And that carries us into -- Dan, take us through horizons 2 and 3? Chun Leung Lai: Horizon 2 and 3 are really about having that TDI function, all of those other services such as Spirion. When do I go out and do the discovery now? What do I do with it? I'll automate NC Protect coming in and protecting that. I'll take that and I need to set up an instant in Teams where only certain people can access that and I need to validate who's accessing that. It starts to become very automated, very machine-driven. And I might need some AI technology in there that's going to be doing certain services or repositioning captured data and regenerating that into a different view, context. Who can see that? Why can they see that? Where can they see that? And suddenly, you're starting to see that full picture. Finally, when we get all of that integrated completely, and we are building in other people's services such as BigID, Varonis, Microsoft, AWSs, when we can start to link all of those things together, you've got a platform which we're calling DSPO, and that can completely disrupt the market because what we then do is have all of those other providers' customer list is our potential customers. And that's where you get that real hyper growth based off the credibility that you've done in Horizon 1, the expansion of that strategic opportunity through the platform development in Horizon 2 and complete disruption in Horizon 3, where you start to own a particular niche market, which is being supported by all of the big guns out there. So that's really the nuts and bolts of that strategy. And I think you're starting to see now why we've done what we've done in terms of those acquisitions, why we see that data-centric security life cycle is being so important, and how that fits in and that IA isn't a threat. It's a genuine opportunity. Kurt Mueffelmann: Great. Why don't we -- and as we look at a couple of questions, I know that -- a couple of questions already in here are around kind of, with the market consolidating, are you likely to generate takeover offers? And what are your thoughts around that in the business itself? Chun Leung Lai: Great question. We're a publicly listed company. Obviously, if there's takeover offers, we have to consider them all and what's in the best interest of shareholders. Look, there is a huge amount of consolidation activity going on. We're not blind to that. We watch it very carefully. We obviously have plans, and we obviously have models that we look at where we think we're going to maximize shareholder value, but also what we think our potential is in the marketplace. But we need the offers. We will look at that forward to getting those offers, but I think that will be off the back more announcements of success and demonstrating a few more validation points in our strategy that we're executing. And if we do that, I have no doubts that we will be an attractive target to other large providers out there. Is that what's best for the company? We'll make those calls when we actually get those offers, but any offers, we may have to take seriously. Kurt Mueffelmann: Yes. Listen, the market is consolidating out there very aggressively, right? We have to do what's right for the shareholders. But as we've shown through the acquisition of Direktiv as well as Spirion, we're not afraid to go and punch above our weight and go make further acquisitions if it fits what we need to do and it fits in the best interest of the shareholders going forward. Listen, Direktiv has brought us TDI, which we think is going to be really driving where the AI next stage goes. And Spirion is bringing us some fabulous ARR, which is scalability. It's bringing us that U.S. presence. Now that we're tearing the cost through it a little bit and blowing out the operating expenses, it's going to start to drive cash that will drive us into more investment in other areas within the business, whether it's additional product, whether it's additional marketing or what have you. So I think we're pushing the right buttons, and we're not afraid to make those acquisition decisions on both sides of the fence. Dan, so the next question -- I love this one because it's -- we talk about this all the time. With the DoD opportunity -- I'll boil it down -- is the delay technical, budget or bureaucratic? Chun Leung Lai: Technical, budget or bureaucratic. It's a great question. Kurt Mueffelmann: How's D, all of the above? Chun Leung Lai: All of the above. Look, let me put some some of these aside. It's not budget. I think we've confirmed that the budget is there and it's -- that they've already budgeted for this, which is a definite sign of intent, isn't it? It is bureaucratic. It's not so much technical, but we do keep coming across some technical things. And again, that's because the different -- there are different environments where this is being tested. When we talk about co-command is that co-command is very different to the central agency, which we're putting in and there's tweaks and those sorts of things. But I don't think there's any major technical obstacles. In fact, I think we've resolved most of those things through that piece of work that we did in terms of software configuration development and interoperability. It's really now just going through the hoops, getting through the process, and that's what's exciting to us. Kurt Mueffelmann: Great. There's a couple of questions on the CBA credit facility and a little bit of, I guess, confusion around where that relates to the Regal that we announced at the end of last quarter as well and what the relationship between that is? Chun Leung Lai: Obviously, with some of these delays, we want to make sure that we can continue to execute the strategy that we -- and with the momentum and accelerate that momentum. So we need to make sure that the business is well financed. We looked at the share price. We looked at -- we have other options to go-to-market to raise capital. We thought it was in the best interest of shareholders not to do that, that we should look at some debt facilities to get out of those bumps and little hurdles and delays. So we looked at debt facilities instead of going out to the market to raise capital, which was the objective of all of this. We looked at Regal. We already had established fund with CBA. We've got both available to us at this point in time. Now that we've actually completed and signed the CBA, we'll relook at the Regal facility as to whether or not we still need it. But at this point in time, we still have a terms of agreement signed. And if there's any changes to that, we'll make those announcements when they happen. Kurt Mueffelmann: Great. Yes. Why don't we grab one more? How does Varonis on-premise transition impact your bottom line? And how are we dealing with that as we move forward? Chun Leung Lai: Do you want to take that one? Kurt Mueffelmann: Yes, I think so. So we always look at Varonis, right? Varonis, we look at as -- we look at a couple of companies as the North Star companies, want to emulate, fabulous growth, fabulous story. They've done a nice job in the data security posture management. And they are looking to go towards an all-cloud offering. And so that leaves them with the on-premise of a major significant share point market, file shares, on-prem, kind of [indiscernible]. And so we've taken a proactive stance. We've gone and done some competitive positioning against them from a webinar standpoint, going out there, playing the -- these -- the keyword search and really trying to drive SEO and pushing that. So we're seeing some opportunities where people come to us and say, "Hey, we feel abandoned." That's fine. If that's their strategy to go 100% cloud, listen, great companies are going in that direction, and I applaud them for that. But we really look at being the ability to grab all types of data in a hybrid environment, whether it's on-prem, whether it's in Azure, whether it's on AWS, Google or what have you. So we want to really keep that flexibility around those technology formats and bases that we have. So I think we're positioning ourselves well. The NC Protect, the Spirion do really well in those on-prem, off-prem environments and in the cloud. So we feel we can handle all those opportunities that are out there today. So we feel really... Chun Leung Lai: I think it just validates our strategy. As these big companies move to consolidate their cost base and target on their markets with cloud-only solutions, it proves the point that the customers still exist in a hybrid world. And that opens up opportunities for us to do that value-add and extension from Varonis to working with their on-prem problems because they can't get off them quickly. They've got legacy systems. But it proves the point of the strategy that we're taking is a very viable strategy. Kurt Mueffelmann: Yes. Dan, why don't we hit one last question, and then I'll pick you up with some closing comments. Spirion, how is that delivering new opportunities for the business? And where do you see that going in the near and mid-term future? Chun Leung Lai: Yes. Look, Spirion is -- no, we acquired Spirion as a strategic acquisition to reposition the business into the U.S. Let me be frank about that. We see the opportunities with the U.S. DoD. We see that is creating not only accelerated revenue and increase in ARR, but also a reference point to also move into the commercial markets, to extend our relationships with Microsoft into other military alliances partners, et cetera, et cetera. So we need to have a base there which can execute that and is in the U.S. to support that. That's really where the desire for taking on a data-centric security company in the U.S. came from. The software that, that [indiscernible] is an added bonus. We've talked about the discover, classify, enforced life cycle and [ governed ] life cycle of data-centric security. They give us that ability to do that discovery. So that's a beautiful segue. And a good example of that is, one of those opportunities we put up there about the shipbuilding yards is that they've got 44 terabytes of data that they don't know how they should protect it. Spirion is a perfect play to take into that organization and do that data discovery. So it fits in terms of the model of the customer problem that we're solving. The other thing that's really good about Spirion is they can do on-prem as well as in the cloud, and that's something we've just discussed in that Varonis example. So I think they're going to add a lot to us. And of course, the final statement there is they've got 150 customers that are already investing in data-centric security, which we can cross and upsell to. And we are providing incentives to those customers to do that as quickly as possible. And we are discovering opportunities that -- not opportunities that are going to turnover in 6 weeks. So there's a bit of work there to get that machine humming. But I think we can do that, and I think we can successfully do that. We've done the cultural integration. We've done the systems integration. Now we need to get into that sales and really start to drive that pipeline growth. So I'm excited by the opportunity. It's an important acquisition, and I think it will pay its dividends, but it's just a matter of time to make sure that we get it right. Kurt Mueffelmann: Yes. I would just add, I was up in Tampa earlier today meeting with Kevin Coppins and the team from Spirion. And you're starting to really see how it fits in. You're starting to see the adoption by the reps and bringing it into their sales pitch in the way that they can bring a fully integrated solution to market. It's just not a, hey, let's sell NC Protect or hey, let's sell Spirion. It's becoming this more integrated platform, which we talked about before. And you hear it on the sales calls. You hear it on the sales recordings that we listen to, for that. You hear it in the pipeline reports and what we're doing with forecast every week and where it goes. So I think you'll see more and more of that. And we're not going to be able to announce every deal, obviously, from the space we're in, but we're seeing good traction as we build the business through that. And I think it's a really good add of what we're doing. So Dan, with that, why don't we spend 2 or 3 minutes just wrapping up and summarizing up again the quarter? Chun Leung Lai: Yes. Look, to me, I think it's been a exciting half year. I think we're reasonably happy with the results. You can always do better, you can always do worse. But I think we are in a solid position to push the business growth forward over the next 6 months. And I think -- and I often say this, but I'm expecting a good 6 months ahead of us in terms of the business and the execution. There are a number of deals just hanging out there ready to drop. And I think that, that's going to really change the perspective of the company to our investment base. I think there's a lot of people out there waiting and watching. And I think when -- if we can execute a couple of strong deals, which -- more validation points in our strategic direction and our strategic plan, I think people will start to truly believe, and I think that we'll see that reflected in activity in the marketplace supporting the company. Kurt Mueffelmann: Excellent. Great. Well, thank you very much. And I'd like to thank everybody for your time. Enjoy the weekend. If there are further questions as you move forward through the financials and through the half year results, please feel free to hit us up at investor@archtis.com, and we'll do our best to answer as many questions as possibly as we can within the parameters set by the ASX. So enjoy the weekend, and thank you very much for your time. Take care. Chun Leung Lai: Thank you, everyone.
Julia Fernandez: Hello, everyone, and welcome to the VTEX Earnings Conference Call for the quarter ended December 31, 2025. I'm Julia Vater Fernandez, VP of Investor Relations for VTEX. Our senior executives presenting today are Geraldo Thomaz Jr., Founder and Co-CEO; and Ricardo Camatta Sodre, Chief Financial Officer. Additionally, Mariano Gomide de Faria, Founder and Co-CEO; and Andre Spolidoro, Chief Strategy Officer, will be available during today's Q&A session. I would like to remind you that management may make forward-looking statements relating to such matters as continued growth prospects for the company, industry trends and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the current available information, you are cautioned not to place undue reliance on these forward-looking statements. Certain risks and uncertainties are described under Risk Factors and Forward-Looking Statements sections of VTEX's Form 20-F for the year ended December 31, 2025, and other VTEX filings within the U.S. Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our fourth quarter 2025 earnings press release available on our Investor Relations website. With that, I hand the call over to Geraldo. Geraldo, the floor is yours. Geraldo do Carmo Thomaz: Thank you, Julia, and good afternoon, everyone. Thank you for joining us today. Today's call is primarily about giving shareholder transparency into how we're positioning VTEX to strengthen growth over time. Let me start by acknowledging that our recent growth has been below our long-term ambition. We believe that this is largely cyclical, not structural, driven primarily by 3 external factors: a more challenging macro environment in Brazil and Argentina; and a more promotional marketplace environment in Brazil; and longer decision cycles as enterprises reassess its priorities in a rapidly evolving AI landscape. More broadly, we recognize the market debate around AI and what it means for software. Although the combination of rapid AI innovation with limited tangible commerce applications so far may elongate sales cycle, the consistent view from our conversations with enterprise CIOs is that AI will change how software is built and operated, but it won't eliminate the need for deeply integrated enterprise-grade platforms that run mission-critical processes. And while AI lowers the cost of writing code, it raises the bar for security, complex integrations and reliability, precisely the attributes enterprises rely on VTEX to provide and consistent with broadly stable dollar churn we delivered in 2025. As value shifts from seat-based to outcome-based, VTEX is certainly aligned with this shift. We are not just building AI features. We're building the mission-critical backbone for connected commerce that global brands can rely on to deploy AI safely and effectively. We could dive deeper into each of 3 external factors mentioned. But as we cannot control the environment, let's focus on what we can control, our execution and product road map. Starting on that, we see a clear opportunity to improve growth with a plan anchored in 4 levers: global expansion, B2B, retail media, and AI. While we execute this growth plan, our enterprise focus remains front and center. In 2025, customers generating over $250,000 in ARR reached 158 with revenue from this cohort up 13% year-over-year. And to illustrate the relevance of our plan, in Q4, our 4 growth levers represented roughly 15% of subscription revenue, delivering approximately 20% FX-neutral growth and contributing to nearly half of subscription revenue growth. The addressable market for these levers is materially larger than our core Latin American opportunity, and we believe we are well-positioned competitively. So our focus now is disciplined execution. With that, let me bring our 4 growth levers to life. First, global expansion. We're winning and scaling in markets where complexity is highest. In 2025, global markets delivered 22% subscription revenue growth. For instance, in Europe, our partnership with Manchester City reached its first milestone with the stadium tour store, offering personalized fan experiences and a single high-performance flow. Second, B2B. We're modernizing large enterprises by delivering complex capability that are AI-ready and composable by design, such as contract pricing, curated catalogs, punch out and omnichannel fulfillment. Mondelez launched B2B in Brazil on VTEX, extending a multi-region footprint. While we're still early in the mix, B2B demand in the U.S. and Europe signals a durable shift, one we are now driving to digitalize across Latin America as well. Third, retail media. 2025 was a turning point. We moved from pilots to a core growth engine with clear margin-accretive outcomes. With VTEX ads, customers run on-site, off-site and in-store campaigns and measure them end-to-end through closed-loop attribution anchored in first-party data. The retail media market evolution plays directly to our integrated model. Enterprise retailers monetize traffic they already own, brands gain performance media tied to transactions and both parties see results in a single source of truth. For example, Essity achieved a 39% increase in average conversion rate on average enrollers of above 17x and consistent month-over-month acceleration in sales driven by retail media performance, demonstrating the power of data-driven campaigns to elevate brand performance in digital retail environments. Finally, AI. Our work here spans 2 dimensions. First, our product. We're redesigning VTEX with an AI-first approach. For example, leading Brazilian retailers like Americanas and C&A are using Weni by VTEX to automate high-volume support journeys with deep enterprise integrations such as orders, invoice and CRM, reducing manual ticketing, speeding resolution and improving customer satisfaction. Beyond Weni by VTEX, we see AI reshaping how commerce is built, operated and optimized. We're embedding intelligence across the platform while simultaneously rethinking how we build commerce and run the company. Our multi-tenant architecture and role as a mission-critical commerce data aggregator give us advantages that point solutions, and legacy platforms can't easily replicate. Second, our own operations. AI is already showing up results. Automation and support has expanded gross margins by approximately 3 percentage points. And in December, we implemented a reorganization in sales and marketing that impacted almost 100 headcounts. This move simplified management layers and centralized our global team for greater agility and efficiency. As we embrace an AI-first operating model, we are aligning our organizations to operate with increased speed, consistency and technical depth. In summary, we chose structural transformation over incremental steps. Despite a challenging environment, disciplined execution and already identified productivity gains support continued improvement in profitability and enable increased R&D investments that drive our AI transformation and deepen our value with top-tier customers. We're evolving VTEX from a platform that powers commerce to a multiproduct company, AI-first platform that increasingly automates and orchestrated. We will keep executing behind this plan, expanding with existing customers as they scale on VTEX and adding more enterprises to the mix. So, these 4 growth levers translate into sustained compounding growth. With that and moving to the fourth quarter of 2025, we added new enterprise customers, including Atacado Vila Nova, Lofty Style, Luz da Lua and TCL in Brazil, Mercacentro in Colombia, Pharmacy's and Cruz Azul in Ecuador, Llantas Avante and T-fal in Mexico. We also saw expansion activity within our existing customer base, such as EssilorLuxottica, launched 2 new brands in Brazil, eOtica and E-Lens, adding to its existing portfolio of stores. Impresistem launched their B2B website in Colombia, adding to its B2C operation running on VTEX. Mondelez launched a B2B operation in Brazil, expanding its VTEX footprint ranging from Latin America to Europe. OBI, who expanded to Italy, adding to its operation in Germany and Austria. And Whirlpool launched KitchenAid in Canada, building on its successful store launch in the U.S., while continuing our global relationship in over 20 countries. Even in a softer macro environment, customers continue to choose VTEX to support strategic initiatives involving new channels, new geographies and more complex operating models. Now before I hand over the call to Ricardo, I would like to express my sincere gratitude to our 1,139 VTEX employees whose dedication and adaptability were critical. I also would like to thank you, customers, partners and investors for their trust and support. Ricardo, over to you. Ricardo Sodre: Thank you, Geraldo, and hello, everyone. I will now walk you through our financial performance for the fourth quarter and the full year of 2025. Before going into the details, I'd like to frame the year in context. As mentioned by Geraldo, while the external environment pressured our customers' GMV growth and lengthened enterprise decision cycles, 2025 demonstrated the resilience of our business model and the strengthen of our unit economics. As evidenced, we continue to drive efficiency gains and deliver record profitability even in a slower growth environment. In the fourth quarter of 2025, our GMV reached $6.3 billion, representing a year-over-year growth of 17.2% in U.S. dollars and 10.0% in FX-neutral. For the full year, GMV reached $20.5 billion, up 12.1% in U.S. dollars and 12.9% in FX-neutral. Subscription revenue reached $66.7 million in the fourth quarter, representing a growth of 12.2% year-over-year in U.S. dollars and 5.4% in FX-neutral. For the full year, subscription revenue reached $234.9 million, growing 7.9% in U.S. dollars and 9.5% in FX-neutral. Turning to revenue retention. In 2025, subscription revenue from existing stores reached $194 million, and our net revenue retention was 99.5% in FX-neutral. Annual dollar churn remained broadly stable year-over-year. However, given that roughly 60% of our revenue come from a take rate on our customers' GMV, the decline in net revenue retention compared to 2024 was primarily driven by lower same-store sales growth of 6.8% in FX-neutral in 2025. This lower same-store sales growth reflected continued softness in Argentina and more muted consumer spending in Brazil, which weakened over the course of the year. A key highlight for the year was the continued improvement in the profitability of our existing stores. Existing stores gross margin increased from 80% in 2024 to 82% in 2025, while operating margin reached 44%, representing a 1 percentage point increase year-over-year. This marks the second consecutive year in which this P&L exceeded the Rule of 40, reinforcing our confidence in sustaining a Rule of 40 performance as the business scales. Moving on to subscription revenue addition. In 2025, new stores added $25 million to our base, representing approximately 13% of our 2024 VTEX platform revenue. As discussed in prior quarters, elongated sales cycles throughout the year impacted revenue added from new stores and will carry over some impact in 2026. On the new stores P&L, our focus remains on maintaining a healthy return on the capital allocated to sales and marketing. On that front, LTV over CAC reached approximately 4x in 2025. The year-over-year decline in this metric was primarily driven by longer sales cycles and timing rather than changes in win rates or the underlying attractiveness of the cohort. In fact, our continued enterprise focus drove our number of customers generating over $250,000 in ARR to reach 158 customers in 2025. While this represents only 1.9% increase in customer count, it resulted in 14.5% FX-neutral revenue increase from this cohort. Looking forward, as mentioned by Geraldo, we adjusted our sales and marketing investments, and we are reallocating capital towards R&D investments to enhance key product offerings such as B2B, retail media and AI-powered aftersales support. From a geographic perspective, Brazil subscription revenue grew 12.2% in FX-neutral, supported by the go-live and ramp-up of new stores despite softer same-store sales. Latin America, excluding Brazil, grew 2.1% in FX-neutral. And excluding Argentina, the region grew just slightly below Brazil's pace. Subscription revenue from global markets, formerly reported as Rest of the World grew 19.2% in FX-neutral, demonstrating continued compounding even as the base expands. Additionally, global markets represented 11.1% of our total revenue. Its contribution margin, defined as gross profit minus directly allocated sales and marketing expenses, improved significantly and approached breakeven. Moving down the P&L. We maintained strong cost and expense discipline while continuing to prioritize investments aimed at supporting revenue reacceleration. All figures I will now reference are non-GAAP unless otherwise stated. You can find all GAAP to non-GAAP reconciliations on our Investor Relations website. Subscription gross profit reached $54.6 million in the fourth quarter, resulting in 81.8% subscription gross margin, up from 78.8% in the same period of the prior year. Total gross margin increased to 79.6% compared to 75.0% in the fourth quarter of 2024, driven largely by AI-powered customer support automation and to a smaller extent, a higher mix of subscription revenue. Operating expenses totaled $38 million in the fourth quarter, resulting in income from operations of $16.2 million and an operating margin of 23.8%, up from 19.9% in the same period of last year. During the quarter, we executed a reorganization in the sales and marketing to simplify layers, centralized global teams to better leverage AI as well as align investments with the expected demand. These actions resulted in approximately $2 million severance expense above normalized level. Excluding that one-off impact, operating margin would have been just under 27%. Free cash flow reached $11.1 million in the quarter, representing a 16.3% margin. Adjusted for one-off severance payments above normalized levels, free cash flow margin would have been just over 19%. Considering this level of cash generation and our current cash position as a percentage of our market cap, we are announcing a new $50 million 12-month share repurchase program for Class A shares. Looking ahead into 2026, as Geraldo highlighted at the beginning of the call, we remain focused on our 4 growth levers, global expansion, B2B, retail media and AI. We are executing with discipline. The productivity we have unlocked across cost of revenue, sales and marketing and G&A are expanding profitability while funding higher R&D to accelerate our AI transformation and deepen our value with top-tier customers. While macro headwinds persist, we remain encouraged by the quality of new customer additions, our competitive position among global enterprise customers and the compelling market opportunity across our 4 key long-term growth initiatives. With that, and recognizing that Q1 seasonality is our lowest GMV quarter and faces the toughest year-over-year comparison for Q1 2026, we expect subscription revenue to grow at mid-single-digit percentage rate on an FX-neutral year-over-year basis. Gross profit to grow at a high single-digit percentage rate on an FX-neutral year-over-year basis. Non-GAAP income from operations to be in the mid-teens' percentage margin and free cash flow to be in the high teens percentage margin. For the full year 2026, we are targeting subscription revenue to grow at mid- to high single-digit percentage rate on an FX-neutral year-over-year basis, gross profit to grow at a high single-digit to low teens percentage rate on an FX-neutral year-over-year basis. Non-GAAP income from operations to be in the low 20s percentage margin and free cash flow to be in the low 20s percentage margin. Assuming FX rates remain broadly consistent with January 2026 averages, the FX-neutral growth guidance outlined above would translate into higher reported USD subscription revenue growth, adding approximately 8.4 percentage points in the first quarter and 4.5 percentage points in the full year 2026. Before we open to Q&A, I would like to reiterate, we are executing with discipline, investing behind our 4 growth levers to drive durable growth and shareholder value and expanding profitability while maintaining a strong balance sheet. With that, let's open it up for questions now. Thank you. Operator: [Operator Instructions] Our first question comes from the line of [indiscernible] with JPMorgan. Unknown Analyst: I would like to explore a little bit the point of the sales cycle. So what I would like to understand is mainly if you see a turning point on this elongated sales cycle, I mean, from your conversations with CTOs and the industry players, what is the feedback that you are having regarding this point? And is there any market intelligence that you could share with us to help us understand when this could normalize? And what do you think is necessary to happen in the market to change the scenario? Is there something that you see as a turning point? And the second point that I would like to explore is the gross margin gains in the fourth quarter. Is it all coming from AI? Is there other elements that are helping you to bring this margin level up? Ricardo Sodre: Mariano will take the first question, and I can take the second one. Mariano? Mariano Gomide de Faria: Yes, I can take. So, make no mistake, what we were seeing is not a deterioration in competitiveness, but a clear elongation of sales cycle. 2024 was a record year for bookings. In 2025, we signed fewer new contracts. That's a fact. And RFP processes are taking longer to close. So, enterprise customers are simply taking more time to make platform decisions due to macro scenarios and uncertainty of AI future. The primary driver is what we call the AI wait-and-see effect. There is an enormous amount of discussions around how AI will reshape software. When companies are making a 5 to 10 years infrastructure decision with high switching costs, they want clarity. So, decisions are being delayed, sales cycles are being elongated. Importantly to mention is that our win rates remain stable. Our churns remain in the mid-single digits and is stable. And this is, in my opinion, a market-wide excitation, not a VTEX-specific issue. In response, we streamlined our sales and marketing organization to operate more efficient, leveraging all the new AI paradigm and capabilities. The productivity gains are being redirected into R&D, accelerating our AI road map and positioning VTEX an AI-first native platform for commerce enterprise companies. So yes, momentum is slower, and cycles are longer, but fundamentals remain strong. Sodre? Ricardo Sodre: Thanks, Mariano. On the second question on gross margin. As we mentioned in the prepared remarks, we gained roughly 3 percentage points in subscription gross margin this quarter, from 78.8% to 81.8%. And this is basically all AI-driven. So, just to recap over the past 3 years, we gained a lot of subscription gross margin. Over the first 2 years in this 3-year period was mostly driven by hosting optimizations and gains. Over the last 1 year, so during 2025, it was driven on the support function of our existing customers. And by automating the support using AI tools, we have managed to gain 3 percentage points in margin, and this is sustainable going forward as well. Operator: And our next question comes from the line of Lucca Brendim with Bank of America. Lucca Brendim: I have 2 on my side here. The first one, if you could comment a little bit on what you think are the main risks and also the main opportunities of AI that you see for the company, both in the short term, but also in the long term? And how do you think both sides will pan out in the long run? And also, second, if you could comment a little bit on capital allocation. You guys announced the new buyback program, which is very robust. So, how can we think about what VTEX plans to do with the cash generation that will be coming in the next years? Geraldo do Carmo Thomaz: So, thank you very much, Lucca, for the question. I am Geraldo, I'll answer that. So, first of all, like AI is not a feature that we create. It's a structural shift comparable to the move to the cloud that we did a decade ago and make us viable as a company. Our role in this transition is very clear to be the mission-critical orchestration layer of AI-driven commerce. AI is lowering the cost of writing code. Everybody is talking about it, but it's raising the bar for security integration and reliability. Global enterprise, they don't buy lines of code. They buy future-driven domain knowledge packaged around security and reliability. They need a backbone that propels them for the future with resilience and security. As commerce fragments across AI agents, bots, and new interfaces, the front end becomes increasingly commoditized. But every transaction still needs a centralized system of records to validate inventory, manage price, and trigger fulfillment. That orchestration layer, the single source of true is where VTEX operates. We have a cloud-native multi-tenant architecture that give us access to billions of real-world commerce data points across a lot of verticals. That deterministic data is a strategic asset for training proprietary models, something similar that are on legacy platform that they cannot replicate. In our own operations, Sodre and Mariano talked about this already, we're seeing a lot of tangible impact. So, I would say, Lucca, that the risk is that for us and for any other software company is that we don't embrace and adopt the revolution, the technological revolution. But if we do a software company that goes to this technological shift, they will be stronger, not weaker. And we are working very hard to get there with the strength that we already got from a lot of years from now, which is the credibility, the security, the customer base, the proprietary data, I think there's a lot of room for us to use and leverage the AI revolution. Ricardo Sodre: And on the capital allocation, Lucca, so our capital allocation is guided by a simple principle. We prioritize long-term value creation while maintaining the flexibility to navigate a dynamic macro environment. So, we are operating from a position of significant financial strength. As our year-end 2025, we held roughly $200 million in cash. So, this robust position, combined with our consistent free cash flow generation allow us to announce a new $50 million 12-month share repurchase program that you just mentioned. So, we view buybacks as a disciplined tool to optimize our capital structure and importantly, to mitigate dilution from our share-based compensation program. While organic growth remains our primary focus, and we talked a lot in the prepared remarks about how we plan to reaccelerate the organic growth, and we are investing more in R&D to boost our AI transformation and strengthen our main key growth pillars. We are also strategically active in the M&A market. More recently, our approach has been about acquiring capabilities that accelerates our product road map to enhance the platform differentiation. So, you've seen this recently with the Weni acquisition, which strengthened our Agentic CX product and Newtail, which accelerated our retail media capabilities. So, our capital allocation remains anchored in discipline ROI and long-term view for the shareholders. Operator: And your next question comes from the line of Rafael Oliveira with UBS. Rafael Oliveira: I got 2 questions here on my side. So first, I want to start here by asking what are the main drivers that could drive revenue growth back to double digits in the next few years? If you could disclose any regional breakdown on the current macro backdrop would be very helpful. And the second question would be, how is the B2B pipeline evolving, both in terms of size and quality? And again, any color on the global expansion of B2B will be very helpful. Geraldo do Carmo Thomaz: Good. I'll get that. So to address the path forward, like we know, as I said in the first remarks, we're not satisfied and we think that we have a lot of more bandwidth to deal with more complex problems to reaccelerate the comp to initiate other -- to start other initiatives that will make the company accelerate and go back to the growth we were used to. So, first of all, we need to distinguish between what is cyclical and what is structural. While our Q4 of 2025 subscription revenue growth of 5.4% FX-neutral reflect a cyclical slowdown, mostly driven by macro softness in Brazil and Argentina and also an unusually promotional marketplace environment our structural foundations have never been stronger in my opinion. We have deliberately evolved VTEX into a multiproduct company, AI-driven commerce platform, and we are now seeing double-digit growth momentum across 4 levers that will power our next phase. And I'll try to give some picture on these 4 levers. So, first of all is the global expansion. Our markets in the U.S. and Europe delivered 22% subscription revenue growth in 2025. These operations are now approaching breakeven contribution margins and are becoming largely self-funded. Second is B2B commerce. This is a natural extension of our platform that effectively doubles our addressable market in our opinion, roughly half of our new deals in the U.S. and EMEA are now B2B related as enterprise migrate from outdated 20 years old legacy system to a modern architecture. The third one is retail media. We moved from a pilot to a core engine this year by enabling retailers to monetize their digital traffic, capturing ad revenue that represents 3% to 8% of GMV for marketplaces. We're creating a high-margin accretive revenue streams for our customers and for VTEX. The fourth one is the AI-first approach. AI is already delivering measurable outcomes such as the 3 percentage point expansion on the gross margin that we talked about, but we'll also reinvest these productivity gains back into R&D to lead the transition to our AI workspace and vision products that can be transformational to our customers. For the full year of 2026, as comps ease throughout the year, we anticipate a trajectory of gradual acceleration with the expectation that we will exit the year at a faster pace than we entered. While we recognize there are external factors that we do not control such as the interest rate cycles, the consumption cadence, the broader market volatility, we believe we have the right tools to help our customers reaccelerate their same-store sales and reinvigorate our own sales funnel. So, we're staying the course, executing with discipline and positioning the tax as the backbone for the next era of connected commerce. All of that while delivering record profitability, as you noticed. Mariano Gomide de Faria: Okay. About the B2B, can you -- if I'm not answering correctly, but can you please repeat the B2B question, if I misunderstand. But just an overall perspective on B2B. VTEX is a company that has 3 products and multiple solutions. The products are commerce platform, Retail Media platform and Agentic CX platform. And we do support with those 3 products, multiple solutions, omnichannel B2C, B2B commerce, advertising, retail media for advertisers, retail media for publishers. About B2B, we are seeing that B2B is getting traction. Something that we call an acceleration phase, each in deploys and pipeline generation. Our commerce platform product delivers multiple solutions, specialist in B2B, showing great momentum. So, in fact, something that we can share is roughly half of our deals in the U.S. and EMEA are now B2B related. So that effectively doubles our addressable market within the enterprise tier. If I don't -- if I didn't answer what you wanted about B2B, please let me know. Rafael Oliveira: No, it was super clear. I was just asking about how the B2B pipeline is evolving, but thanks for the color. If I may do just a follow-up here on the AI team. How are you guys seeing the development of these new AI tools from the large tech or LLM providers? Are you guys seeing some competitive pressure? And if you guys could comment about agentic e-commerce and how this should be maybe beneficial for the B2C platforms? Geraldo do Carmo Thomaz: I think every one of us are very impressed with the velocity of this evolution and eventually are getting to conclusions that are maybe faster than we should have. I don't -- I see that this AI company, they are very powerful. They are doing a lot of nice work, a lot of aggregated value, but they're also enabling companies like us to deliver even better software, just like the cloud revolution, they are enabling us to build much better software. And if we embrace that technology, if we embrace the APIs that they provide to us, I believe that companies like us can provide to the retailers and brands, and manufacturers a better solution than they could do it alone. Why? Because these are high-risk workflows. These are problems that are difficult to articulate. These are problems that require more than building software. This requires credibility, as I said, security, compliance, and trust. And I believe we're better positioned as a domain application to provide the solution to our customers than the generic ones. This was always true. We always believed that in every revolution, when open-source code arrived, we believed that when everybody thought open-source code would dominate the world, and we are here selling software, selling subscriptions. When the cloud revolution came, everybody thought that people would internalize their software because now it's so easy to deploy a server and software industry, and VTEX is much bigger because of the cloud revolution, not despite that. And now I believe that the AI revolution will give us even more strength to deliver even more value to our customers. Mariano Gomide de Faria: And just adding up on Geraldo's comments here. If the question on LLMs were about the kind of monopoly on traffic control that can generate the way we see the world of traffic, we used to be controlled by Meta, Google, and a few marketplaces. And now with new entrants like Chinese brands becomes a huge traffic controller, OpenAI, with the LLM like cracking the code of becoming a huge aggregator. Actually, we are seeing more fragmentation in the traffic industry. So, when the traffic layers fragment, the backbone for a multichannel operation increases value. WhatsApp in LatAm, for example, is a huge traffic originator. So, the world is evolving in creating more channels and not more consolidation of channels. We see it as a foundation for strengthening the positioning of anyone in the backbone for the commerce market as we are. Geraldo do Carmo Thomaz: We talk about that in our founder's letter on this annual earnings report. I think it's worth it to take a look at our perspective on how this revolution affects us and the market in general. Operator: And our final question comes from the line of Maddie Schrage with KeyBanc Capital Markets. Madison Schrage: Obviously, you guys called out some macro headwinds, but also we're emphasizing global expansion as a key growth lever. So, how are you thinking about the pace and prioritization of geographic investments? And then, in particular, as you guys move faster internationally, what do you think is the biggest factor in terms of gaining traction? Was it brand awareness, maybe partnerships, or product localization? Is there something we should call out? Mariano Gomide de Faria: Perfect. I can give some color, and Geraldo can give as well. We cannot avoid to understand that a company that will leverage the most of the AI revolution is the company that can group competencies under org charts. So recently, precisely in December, we changed a lot of our regional approaches by having the same competencies of people below different managers in many regions in the world, countries, and regions. We understood that we need to bring them more in specialization, like a functional-oriented org chart. So we announced a big reorg on the growth structure, where now a majority of the sales and marketing organizations are oriented by functions. And with that, we can leverage most of the AI agentic revolution. The agents are unified by knowledge. What we are seeing, VTEX has reached the level of a brand by being recognized on Gartner for 2 consecutive years as the customer choice in the Gartner voice. The brand of VTEX was able to produce clients in all the regions. And now with the globally oriented by function org chart, we can deliver through our ecosystem services and solutions among any kind of regional definition. We believe the company that will crack the code on really using AI in favor of operational gains will be the one with a global readiness by joining human plus agentic labor. And so, the regional approach lost importance for us. This doesn't mean that the regional localization, is less. It's quite the opposite. We reduced our solution architect layer of FTEs, increasing the trust we do have in our ecosystem. That's a sign of the maturity of our ecosystem in the world. We are delivering global projects in Abu Dhabi, in Asia, in EMEA, in Africa, in North America, in LatAm. And now we are doing this through the ecosystem. That is a transition coming from the last 5 years. So, we are not seeing any more the go-to-market of VTEX heavily or kind of exclusively based on regions. Now we are defining our scope to the world that is 3 products commerce platform, a Retail Media platform, and Agentic CX platform with multiple solutions. The 2 the biggest solutions are B2B commerce and omnichannel B2C. Madison Schrage: Super helpful. And if I could just ask 1 follow-up. In your conversations with CIOs and digital leaders, how often are you guys talking about discoverability in the age of agentic commerce and conversion? Mariano Gomide de Faria: The AI, agentic, is a kind of top-notch topic in any RFP today, right? What VTEX is really focused is to deliver the value aggregation of the disruption in technology. Talking about the technology itself doesn't aggregate outcomes to our customers. But with the Agentic CX platform of VTEX, we have already deployed clients that have saved 80% in the customer service costs. This is AI for us. AI is a median to deliver the outcome that our clients need. And our clients all over the world, they trust us to future-proof them in terms of AI. So, the AI bet of VTEX is pretty big. It's all across all our products and solutions. But the one that I would say, that is delivering the most results, it is our solution of agentic customer service based on our product of Agentic CX platform. Operator: There are no further questions at this time. I will now turn the call back over to Geraldo Thomaz for closing remarks. Geraldo? Geraldo do Carmo Thomaz: Before we conclude, I want to step back once more and reflect on where VTEX stands today. 2025 tested the market, our customers, and our industry, but it also reaffirmed the strength of our foundation. We navigated a challenging environment to deliver record profitability while deepening our relevance with enterprise customers. Crucially, we did this while increasing our investment in R&D to accelerate our AI transformation. As we look ahead, our focus is on execution. As discussed, we remain focused on our 4 growth levers, global expansion, B2B, retail media, and AI. We believe VTEX is structurally aligned with where enterprise commerce is going, and that alignment positioned us to improve growth over time as these initiatives scale. Finally, I want to thank our employees, customers, partners, and investors for their continued trust. VTEX has been built over decades by navigating moments of transition, just like [Technical Difficulty]. Our history shows that our willingness to adapt early and invest with discipline creates durable value over time. We entered the next chapter with clarity, resiliency, and confidence in our ability to deliver long-term growth and profitability. Thank you for joining us today, and we look forward to updating you in our progress in the quarters ahead. Operator: That concludes today's call. You may now disconnect.
Operator: Good day, and welcome to the Bubs Australia Limited Half Year '26 Results. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Joe Coote, CEO, to begin the conference. Joe, over to you. Joe Coote: Thank you very much, and good morning, everybody. We're here this morning to talk about our half 1 F'26 results. If we could tab, please. And if we could tab again, please. So just as we get started at Bubs, we acknowledge the traditional custodians of the lands on which we operate. We pay our respects to Elders, past and present. I'm Joe Coote, CEO at Bubs. I've been in my role now just 7 months. So very excited and proud to share with you our half 1 results. I'm joined here this morning by Naomi Verloop, our CFO. Tab, please. So this morning, we will take you through the headlines of our results. We'll update on our trading markets, then Naomi will take over and walk us through our financial results, and then we'll round out with a strategy update. Tab, please. Yes. So as I said, I'm very excited and proud of the team actually to report that we have exceeded our commitments in H1 of F'26. These results have been achieved through setting strategic clarity, focus on growth and then a lot of disciplined execution, particularly in relation to our stock rationing and our air freight. But overall, it's a great result. If I just headline through the main numbers, our revenue was $55.5 million, which was up 14% from prior year. There is a heavy weighting of the U.S. market, which quarter-over-quarter grew -- sorry, half-over-half grew 48%. Our gross profit exceeded our guidance at 48%. Underlying EBITDA pleasingly was $4.4 million positive, which on a comp basis cycles off a negative 0.7%. So we're very happy with that. And then those factors together draw us to today share an upgraded outlook for F'26. So Naomi will share that later. But we're feeling very positive about these results and through the balance of the year. A couple of other highlights just as we get started. We have now moved from strategy development into strategy deployment. And so it's very pleasing to share that we have now got a number of initiatives that are rolling forward, and I'll share some of the outcomes that we've delivered at the back end of this presentation. One of the core things we're focused on is building a high-performing culture. We've done quite a lot of work on this in the half. We've got a group of people now very motivated and committed. We have very clear accountabilities focused around executing in the day and also building a stronger business in the future through deploying strategic initiatives. Over the half, we've made 5 leadership appointments, one of which myself. We've got a new leader from outside the business, leading our commercial business in the U.S.A. We've set up a Global Chief Marketing Officer, also based up in the U.S. We've also secured the gentleman, Chris Lotsaris, who is running the U.S. to come back to Australia, and he is running Australia and rest of world after having delivered great outcomes in his time in the U.S. And finally, we've brought on a leader of our Corporate Services Group. So there's a lot going on at the leadership level, but also more broadly, we have done our inaugural team engagement survey, and we're focused on working with the teams to deliver our high-performance outcomes. Finally, U.S. market access. We continue to make strong progress with the FDA. Interesting to note that overnight, one of our competitors in the U.S. has secured permanent access. And so that's a precedent that we believe stands us in good stead to continue our positive engagement. Tab, please. And then if we tab again, I'll start to talk about the markets. Just as we're getting started on our markets, it's just important to note that we live in a dynamic global environment. I think it's unprecedented in a lot of ways, certainly in the 30 years that I've been in business. And as we look at it, there's really 3 things that we feel are dynamics that are impacting our business. Firstly, the demographic forces. So in the mass market globally in infant formula, there are some negative impacts from declining birth rates. I would call out China as one example where the birth rate was down 17% and then the infant formula dollar sales are down 5%. But pleasingly, our business in China is growing. So we have a strong business model and a strong brand. The other thing to note in terms of demographics is that our consumers, we're very clear who they are. They're a premium, natural consumer. So these cohorts of parents are looking for products similar to the products that we have that are a little differentiated from the mass market. They do tend to attract a higher margin. And so that's the subcategory of the broader category that Bubs participates in. From a regulatory and geopolitical, we are watching with increased interest rate environment, currency with our exposure to the U.S., we have seen a strengthening of the Aussie against the U.S. with the Aussie currently spot rate a little over $70. So we're watching that. Obviously, the tariff environment is interesting to say the least, there's a lot of volatility there. We did watch the recent high court decision in the U.S. and we are working with our advisers in the U.S. to optimize our position in the U.S. in relation to tariffs. Finally, competitors and consumers. There has been globally 2 quality issues in our industry. They're being managed and worked through. We are well aware of those issues, and we're very confident in our quality systems, and we continue to move forward on the basis of the strong quality reputation that we have as Bubs has been obviously from our Australian source. So to summarize, we feel well positioned to navigate the dynamic global environment. We're very happy our brand resonates strongly with our targeted consumers. We operate in diversified markets. So we have some ability to move between those markets. And finally, we have an attractive margin structure given we have the exposure to the premium natural subsegment. Tab, please. Going into the U.S. market, we've seen very strong volume and value growth in the half. We have worked very well with the large retailers. And so if you look at the overall category, we're fortunate to participate in that premium natural category, which is up 44% against the total category only up 3%. We're 8% of that premium natural subcategory. And so in terms of then the retailers that we look to work with, we've done some great work, and we're just cycling through at the moment the annual range review process, where at Target, we'll increase stores. We'll increase the number of products that we have in stores. Amazon gives us the natural coverage, and we're #1 in go on Amazon. Walmart, very pleasingly, we're stepping up very significantly in store count and also the number of products we have in their stores. And then additionally, very pleased to note that we have ranging at Sprouts, which is one of the top premium natural banners in the U.S. And then Sam's Club, which is part of the Walmart Group is the club element of that business, and we have secured ranging at Sam's Club. So if I go straight to the bottom right, you can see the chart there. At the start of February this year, we were a little over 5,500 stores. We're now going into a cycle of growth as these retailers do their annual resets. And so by the end of the year, we are forecasting to be over 8,500 stores with those additional placing. So we're going into a very exciting time where the business will work through the intake of those products, and we believe that that will be a positive for us as we move forward. During the half, we did cycle through some stock rationing. We were rationing the U.S. as authority. We did undertake an airfreight program. I'm very proud that the team executed that very well operationally. We did maintain service level. A lot of that was recognized by the retailers with these additional ranging outcomes that we've secured. With the new marketing focus based up in the U.S., we are very clear who our consumer is. We are moving more and more to some of the next-generation digital platforms like TikTok. We've got exposure to Reddit. AI is becoming a real reality in search. And so our marketing has been rerated to secure those exposures, and we feel really good going forward in relation to our prospects in the U.S. So moving through to China. It's encouraging performance in China. Our growth interestingly in the past period has been concentrated in the second and third tier cities where we are seeing a preference for some of the consumers to move to premium products like Bubs. We're very happy that we're running a very strong business in China, great team against some of the macro headwinds. But because we're in that premium subcategory of imported product because we have a great team, we're doing well. Interestingly, in the half, we did rebalance our stock. So we had a little bit of additional stock sitting in the trade. We've run that down. So our sell-out looks higher than our sell-in, and that sets us up really well for the second half. We're very pleased with the channel performance. The online to offline, the O2O channel is going great guns for us. We've secured an additional 77% of stores and our sell-through in those stores is up 50%. CBEC, which is the imported product, we've maintained our #1 position on Tmall. And we have worked through some of the stock rationing and the stock balancing challenges now. And then coming into the second half, we believe we're well set for sustained growth in China. The chart on the bottom right really shows the story. The 2 channels we play in the O2O and CBEC, both showing strong growth. Tab, please. Australia, we're very focused on investing to reestablish our growth trajectory. Fair to say that while we've maintained our #1 Goat position, we need to do better in Australia. We're working on that. One of the key things we've done, we entered the year with our advertising promotion set at about 8% of net sales in the second half, that's been upgraded to 12%. We've started that. We've seen some positive results. We did do a little bit of price activity, which has been well received by our consumers and retailers. We have started to activate through health care professionals. We have improved on-shelf availability as we work through the stock rationing, and we feel really well set to see a continuation of growth in the Australian market. I would note also that we did discontinue our food portfolio in the half. And so we're very, very focused on our core range of infant formula. And as we go forward, we believe we'll be cycling into stronger performance in our core home market of Australia. Tab, please. So our final segment is our rest of world segment. Again, we were impacted by some stock rationing. Additionally, we did have some regulatory challenges, particularly in the Vietnam market where the health authority has changed some of their requirements. So we've been very diligent to work that through with our distributor partner, Ms. Zhou. So we have resized our distributor relationship. That business has a great capability in health care professionals where we believe we do well in terms of reaching the parents that will be great customers for Bubs. During some of the challenges, we've done a great job to maintain supply. We are active on some of the very modern platforms up there on the right, there's actually a picture of myself on my trip up to Vietnam on TikTok. We do a number of in-store activations. So that other picture is an in-store activation in the modern trade, where we have a very strong following. Japan continues to be a strong market for Bubs. And then Malaysia is an emerging market where we've doubled distribution points in the last 12 months. So it's been resilient against some of the challenges. And again, we feel positive moving forward with our positions in the rest of world markets. Tab. And as we tab, I'll hand over to Naomi Verloop, our CFO, and she'll take us through the financial results. Naomi Verloop: Good morning, everyone, and really pleased to be here today. If we could just have across to the income statement, please. So looking at the P&L, the great takeaway here is our underlying EBITDA result, which came in at $4.4 million versus $0.7 million on the prior corresponding period. The EBITDA reported number came in at $3 million versus $0.6 million in the prior corresponding period. The revenue increase in the U.S.A. was the major driver for these results, increasing by 48%. Overall, revenues were up by 14% versus the prior corresponding period. Gross profit also held up surprisingly well despite the impacts of airfreight and tariffs, but we still managed to come in at 48% and the product mix in terms of more sales being sold through into the U.S.A. allowed us to achieve this result despite the additional tariffs and airfreight we incurred. Operating expenses came in approximately 3% down to $24.5 million versus $25.2 million, and this was primarily due to the completion of the FDA growth studies. So overall, ending the year at $4.4 million on an underlying basis, which was a great result for Bubs. We can move across now to the balance sheet. The key takeaway on the balance sheet is the inventory number. You can see that it has increased from $20.1 million to $28.1 million. We are still progressing through with our inventory rebuild, and that will carry on for the next half. We expect that number to be approximately $8 million to $10 million higher by the time we get to the end of this financial year. You can see trade and other receivables have also increased by $3.7 million. That is in line with the increase in revenues. Trade and other payables also up to $15.7 million from $10.3 million, and that is largely due to extra payments to suppliers for raw materials in particular, goat milk solids and fresh milk supply from Australian farms. You'll also see there that our right-of-use assets have increased up to $6.1 million. This is simply due to the renewal of the lease at our Deloraine dairy facility, which is our manufacturing and head office site in Dandenong South. We'll move across now to cash flow. The main takeaway here on the cash flow is obviously the net cash used in operating activities. So we had a net cash outflow of $5.7 million versus an outflow of $0.5 million at the half last year. This was largely expected and most of it relates to the inventory rebuild process, which we are still currently in the middle of. And as I mentioned earlier, we will continue to invest in inventory in the second half. One of the key takeaways subsequent to December of 2025 is obtaining formal approval from NAB to extend the limit on our working capital facility. So that has actually increased up from $10 million to $20 million and will be very helpful as we go through this inventory rebuild process. Moving across now to margin. We can see that margin has been maintained at 48%. It is down slightly from the 50%, but well above the guidance we were giving of the 40% to 45% range. As I said previously, we have incurred tariffs and air freight, which has been significant. Despite those facts, we've been able to deliver more of our revenues in the U.S.A. market, which are at a higher margin, and that's helped us to achieve a really, really positive result. As we cycle through to the next half, we actually anticipate to incur a higher level of airfreight and tariffs. And so we still expect margins to come in at the 40% to 45% range by the time we get to the end of the year. Moving across to net working capital. We can see net working capital has gone up. We are landing in at $33.4 million for the first half versus $23.2 million. This all relates to the inventory build and the increase in inventories mainly from $20 million to $28 million. You can see, however, that the average net working capital as a percentage of sales has dropped down to 23.9%. It was 25.8% at H2 FY '25 and then at H1, it was 30.7%. That measure really just shows how efficient we are in terms of delivering additional revenues against our working capital, and it just shows that we have the ability to generate more sales on an average basis versus our net working capital. Inventory came in at 28.1%. If you look at the chart just below, we were at 30.3% at the same point last year. So you can see we are quite low given the uplift in revenues. You can see inventory as a percentage of sales is down to 26%. We expect that to pare back up to around 30% by the time we get to the end of the year. Moving now to the FY '26 EBITDA guidance bridge on a full year basis. You can see we landed last year on an underlying number of $0.6 million. We're expecting to come in at $9.5 million on an underlying basis by the end of this year. And our EBITDA reported number is expected to come in at $4.5 million. So the main impacts there are the airfreight and penalty tariff, which we're assuming to come in at around $5.8 million. We also had a one-off payment from Alice & Willis in relation to the legal proceedings, and that was $0.8 million. We do not expect any further funds to be received in relation to this legal proceeding. I'll now just summarize the FY '26 outlook that we've provided. We do anticipate revenues to come in at $120 million to $125 million. It reflects 22% to 27% growth on the prior corresponding period. As I mentioned earlier, we're still targeting that 40% to 45% range on gross profit. That will be lower than what we have delivered for the first half. But as Joe alluded to at the beginning of the call, there's lots of moving pieces there. We have additional airfreight coming in, additional tariffs on non-AU product, and we are living in a very dynamic and changing world with Donald Trump and who knows where the tariffs will land. So those are some of the moving pieces that we're dealing with at the moment. In terms of reported EBITDA, we're going to land at between $4 million and $6 million, and the underlying is going to come in at between $9 million and $11 million. That concludes the financial review. I'll hand back now to Joe for a strategy update. Joe Coote: Thanks, Naomi. And if we could just tab through to the strategy summary page. If we tab again, this is a chart that we will be showing you very regularly as we move forward. As I said at the start of the call, we've moved from strategy development to strategy deployment. So we have active initiatives underway. We are standing up a transformation office as we speak. And so we're excited to share some of that with you at our strategy update later in March, which we will confirm shortly. We will have the new team members in from offshore as well as some of the new roles that we have here in Melbourne. And so we will drill into this strategy at that point in time. But fair to say we feel very comfortable. It's very crisp and clear. It's very focused, as I said, on execution and the delivery of performance improvement initiatives. And I'll say further discussion on that for our strategy update. So if we tab over, I did just want to highlight some of the initiatives that we have underway. Some of these are very substantial. Some will carry on for a number of years and some we have already concluded. So I'll just highlight a couple here. If I start on the left, we have done consumer research in China and the U.S. to confirm our consumer target cohort. And it's very clear who those consumers are, and it's very clear they align to the premium natural subcategory. Moving into the second point, we have upweighted our digital marketing activities to continue our presence on platforms like Meta and Google, but we're moving into some of the new platforms like TikTok and particularly Reddit is driving a lot of the AI search that we're seeing. So our consumers tend to be, we're calling them as seekers and explorers. They tend to be very savvy with the use of digital technology. And so we're really focused on that, and we're very happy with the initial results that we're seeing. Annie, our new Global CMO, will share more of that when she's down with us in March. If we move across to portfolio optimization, we've really had stunning results from the range reviews in the U.S. We're also excited to share that we've ranged in a very premium supermarket banner in China called Ole. We really have great coverage now across those 2 key markets, obviously, as well in our home market with Coles, Willis and Chemist Warehouse. So we are working with the supplier partners. We have great ranging. Now it's about the marketing to step it up and really get the sell-through targeting our consumers. We will share quite a bit on our product development road map in March. We have some exciting things to share there. But we're also very focused on who we are. So there will be some little adjacencies that we'll be looking at that can help us grow our business further faster. Moving across to supply chain, very clear dollar in the bank example where our supply chain team has done a great job. We've done some work in our warehouse where we've got additional capacity, and we're packing containers now. And we've got a run rate underway that will bank $400,000 per annum of cash savings. The next one down there in supply chain that's work in progress that I did want to mention is looking to the U.S. for sourcing of ingredients, the whey proteins that we use as well as the whole milk. Additionally, looking at the supply network, supplying the U.S. from Australia can be challenging. It's a long, thin supply chain. We have tariffs at the border. Geopolitically, it's a good thing as well to be participating within the economy in the U.S. So we're doing a classical buy, build and rent analysis. We're quite progressed through that. And as we grow and outgrow essentially our capacity here in Australia, we have aspiration to look at what a U.S. supply network might be for Bubs. If we move across to enablers, just to round out, we're very focused on culture and high-performing team. We have a great team assembled, very excited to work with such a great group of people. We're also bringing in partners. So we've got a great partner looking at our procurement area through an AI lens. They're a U.S.-based start-up firm called dSilo, they're doing great things for us in that space. Additionally, though, we're very focused on some of the core processes that run a business like Bubs, which is around operations excellence. So just being safe every day, delivering high quality, meeting our promises to our retailers and obviously driving our assets and being efficient in how we spend our cash. And finally, our integrated business planning is another area of focus, particularly the balancing of supply and demand. And as we're a high-growth business, we really need to be looking ahead to see what our growth will be and then convert that back into capacities in terms of shipping, in terms of procurement and in terms of manufacturing. And that's where we've also got a lot of focus, but I'll leave it there. I'm happy to take questions. I'm very excited to showcase the great team that we have when we're together in March. But for today, I'll leave it there and maybe hand back for some questions. Thank you. Operator: [Operator Instructions] And your first question comes from the line of Philip Pepe from Shaw and Partners. Philip Pepe: Well done on a good result. Just looking at your guidance, revenue in particular, you've got a slightly greater second half bias than usual. Is that because you're expecting Australia, and China and some of the other regions to start to grow in the second half to add revenue to what's already a strong U.S. growth? Naomi Verloop: Yes. So we are expecting revenues to normalize in the other regions as well in the second half. So we are expecting a better performance in China due to those selling sell-out rates through to the distributor normalizing. So we should see an uptick in China. In particular, U.S.A. as well will grow further due to that additional ranging of stores that Joe spoke about. So we are expecting a better half for the U.S.A. as well. Philip Pepe: And have we started to see that in February? Naomi Verloop: It depends on when the range reviews start. I'll hand over to Joe to answer that question. Joe Coote: Yes. Phil, we have seen things pick up in China and Australia just in the recent periods. The way the U.S. business works, which I know you understand is there's an annual range review cycle. So we have had confirmation of that range review outcome. And so that massive intake, particularly into Walmart and Target is currently underway. So the product we've been airfreighting up into the U.S. is sitting in the warehouse. It's staged and it's ready to go. The purchase orders are rolling in, and it's really a big pipeline into those stores. And then we wait and see how the consumer offtake goes and then we'll replenish back to those stores. But it's quite a big step-up. So it's exciting at one level, but it's also operationally quite a challenging task to execute, but it will drive a step-up in our sales, absolutely. Operator: Your next question comes from the line of Jonathan Snape from Bell Potter. Jonathan Snape: Just trying to ask a quick one. On the cost you've called out in the U.S. tariffs, airfreight like obviously, one component of that is probably going to be around a little longer than the other. Are you able to kind of split out which element is airfreight as opposed to tariffs? Naomi Verloop: Yes. So we've footnoted that in the P&L slide. So there's $1.8 million in airfreight, and there was about $0.4 million in penalty tariff. So that is tariff over and above the 10% that we incur on non-AU fresh milk supply. So when we purchase goat milk solids from overseas, they might come from the Netherlands or New Zealand or another part of the world, they are actually tariff at a higher rate and it is much higher than the 10%. Jonathan Snape: And how does that flow into your second half thinking? Is the mix kind of the same? Or does it start to move more towards tariffs given, I assume, you probably were selling through some stock that was kind of already there, [ you ] didn't have the tariffs... Naomi Verloop: Yes, we're actually expecting the impact to be larger in the second half, and we're expecting a larger revenue number to come through in the second half. We've got this ranging happening at Walmart that we've been speaking about. So we really have to get the pipe fill there done on that. So that means extra product, and we are going to need to still source from overseas to meet that demand. And some of that is also going to have to be airfreight as well. So we'll also incur additional airfreight, which will be at a higher level than this first half. Jonathan Snape: Yes. Okay. And can I just ask around China? I mean it seems like when I look at all your peers, even some of the bigger ones, there's a massive channel shift that's been going on from China label to English label over the last 6 months, if not last 12 months. And traditionally, Bubs has done pretty well in that environment, not just from CBEC and O2O, but also from Daigou. Are you seeing anything in the Daigou channel at all in terms of resumption of growth at the moment? Interested in your thoughts there. Joe Coote: Yes. We're not seeing a lot in Daigou. We -- as I said, yes, we see that shift to English label, and our team does a great job marketing on platforms. But our O2O growth, as we shared, is very pleasing as well. So we're in that general trade but with the CBEC product. So yes, if that continues, they're favorable to our current positioning, absolutely. So it should be something that we benefit from, I would agree. I can't see that we've seen a lot of it at this point. But we're bullish China more because of the capability of the team that they've [ indiscernible ] in our products. And so yes, that could be another headwind potentially for us. Jonathan Snape: Okay. And if you looked at, I guess, some of these product scarce, most of the, I guess, the recalls have happened from Europe. And I know it's kind of early days because it's been kind of rolling through December and January, more so than anything else. Have you seen any, I guess, benefits start to come maybe from some of that cross-border activity slowing off from Europe and shifting down into regions where you haven't had major product recalls like down here at all? Or is it too early direct to see anything like that? Joe Coote: Yes. Look, it's mixed. I mean the thing as an industry, yes, the families that are impacted by those recalls are where our thoughts go first. And then second, just for our industry, these quality issues are something that we would prefer not to see. You do highlight the recall from Europe. There is also a separate one in the U.S. So it is a dynamic in the U.S. as well. It's a little bit different in the U.S., but it's essentially a quality-related issue. So there is, I'd say, consternation amongst the parents who are formula feeding. So we're working very hard with our customer service and marketing teams to reassure people that the Bubs products remain safe. And we've got a huge focus on our quality. I would say that in pockets, we do see that our sales are responding to some of the gaps that we're seeing. I would also say that in the U.S., some of the ranging outcomes that we've achieved that are so stellar probably somewhat buoyed by the quality issues in some of the people that are participating currently. So -- but with that said, it's a mixed bag. And I would absolutely come back to my opening point, which is yes, we really feel for these parents who are navigating these difficult times in our industry, and we prefer not to see any quality issues anywhere. Operator: [Operator Instructions] Currently, there are no further questions on the phone. So I'd like to hand back. Apologies. You have a question from the line of Mark Topy from Select Equities. Mark Topy: I just want to ask on the production side of things, just how you placed and just give us a bit more insight into how you're ramping up for the inventory build-up. I guess we've got a sense of where you might be producing it, but I'm just wondering about your capability going forward to meet demand. Joe Coote: Yes, Mark, I mean, the way the supply chain works is the physical logistics, which is a fairly long thin supply chain from Australia to predominantly China, U.S. So that's one element. But in the sort of production side, we essentially have a 2-stage production process. We have our own facility in Melbourne in Dandenong, and that facility runs at about 40% to 60% of nameplate capacity. So we run that facility on a 2-shift basis, 6 days a week, and that facility has been operating very well over the past half. And the team that runs that facility do a great job. So we do have capacity there. We work with a network of partners in terms of then turning the milk into powder. So we have a network of supply partners across Victoria. And again, they're doing great work, and we have some capacity there. Where there are some challenges is in the goat milk solids. And so some of that comes off farm here in Victoria. And then we do supplement selectively from some offshore sources that Naomi mentioned, primarily the Netherlands and New Zealand. So you put all that together, the outlook is positive. It takes time, there is a long lead time in each of those steps to secure the goat solids, push it through the dryers and then into the blending and canning lines to get on to a container and across to the U.S. It's a long thin supply chain, as I said at the start. So -- but look, we're very confident that we will rebuild and we will have sufficient safety stock, particularly up in the U.S., and we'll be able to secure the sales that present in these additional range we have in the U.S. retail trade. Mark Topy: Great. Yes, obviously, you meet that demand. And then just secondly, on the kind of what's your read on the goat milk sort of perception in China? There seems to have sort of been a little bit of up and down in terms of the demand. And at one point, goat milk was very strong in terms of some of the other producers in that market. And how are you sort of converting the consumers over even in the U.S. to the goat milk product? Joe Coote: Yes. It ranges like total goat as a percentage of total is one number, and then it tends to be a higher percentage in the subcategory. The premium subcategory has higher participation in goat. In the U.S., it's almost solely in that premium natural subcategory. So the total addressable market, if we can collectively, as an industry, grow goat, that will be very beneficial to Bubs. In the U.S., at the moment, it's about 3% of total market, which is about 6% of the subcategory. So 1 percentage point there because we're about 1/3 of the market. China is a little bit different. China, the participation rate in goat, as you call out, has dropped back a little bit. It's a different sort of proposition in China. It's been more mainstreamed in China over a number of decades and beyond, I would suggest. So we watch that carefully in China. But certainly, with our exposure being a dominant goat player, a tick-up in goat participation in infant formula would be very beneficial. We also have an adult goat product CapriLac in China. So goat in adult is also something we're excited about. And then in Australia, goat, I think, runs at about 6% to 8% of category. So again, we're the #1 in goat. So we do watch those numbers on a total addressable market. And if we can collectively grow the goat participation, we -- naturally rising tide raises all boats. So yes, that's a really good metric to look at, and we look at it carefully. Mark Topy: Yes. And just lastly, just on the Aussie dollar, just touch on FX and any sort of implications there in terms of the sort of nudge up to the Aussie dollar where it is at the moment? Joe Coote: Yes. We don't certainly -- we're an infant formula company, so we don't try and play the currency market. But in terms of our risk management strategy, I'll just hand over to Naomi. Naomi Verloop: Yes. So that uptick that we saw in AUD versus USD only sort of came in around the end of January and up into early Feb. So we're sort of trading around that $0.7 level now. We actually hedge all of our transactional exposure, and we've taken hedges out already through to the end of this year. We'll be going through our budget process for FY '27, and we'll have to obviously rerate what that rate is looking like. So that will have a subsequent effect on the revenues that we report coming through from the U.S.A. But if we do our comparatives in the financials on a constant currency basis, we'll be able to see the true underlying performance. Mark Topy: Right. So if I interpreted that, so there is some crimping of margin then from the higher U.S. dollar-Aussie dollar. Is that the way I'm kind of hearing that? Naomi Verloop: Only on a reported basis, not within the result reported in the U.S.A., so only on consolidation because we are an AUD business. Yes, not transactional because that will be hedged through. But you'll be hedging through at higher rates. So it will have some impact. So there will be an impact. But if it moves higher than $0.7, you're protected against it. If it moves lower and you in at $0.7, then you'll have the opposite effect. Mark Topy: So that implies you're not repatriating cash from the U.S. Is that got some natural hedge over there or from a regulatory view... Naomi Verloop: We are repatriating cash, but there's 2 separate FX impacts. So there's a transactional FX and there is a reported FX, which are 2 different things. Operator: [Operator Instructions] Currently, there are no further questions on the phone lines, so I'd like to hand back. Joe Coote: Well, just to round out, thank you very much for your attendance this morning. And we look forward to having follow-up discussions and see you at the final strategy session in March and the end of the year. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now all 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.
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.