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Operator: Good morning, and welcome to the NewLake Capital Partners Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to Jack Perkins, Investor Relations. Jack Perkins: Thank you, operator, and good morning, everyone. Joining me today are Gordon DuGan, Chairman; Anthony Coniglio, President and Chief Executive Officer; and Lisa Meyer, Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be considered forward-looking under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to various risks and uncertainties. We will also reference non-GAAP measures, including FFO and AFFO. Reconciliations to the most direct comparable GAAP measures are included in our earnings release. With that, I'll turn the call over to our Chairman, Gordon DuGan. Gordon DuGan: Thank you, Jack, and good morning, everyone. We are very pleased with our fourth quarter and full year 2025 performance delivered against a backdrop that remains challenging for the cannabis industry with continued capital scarcity and inconsistent operator execution. For the year, we generated $51 million of revenue, $44 million of AFFO and returned $1.72 per share in dividends from our $2.09 per share of AFFO, highlighting the cash flow generation of our business. Since our IPO in 2021, we have paid $6.86 per share in dividends. Our team remains focused on disciplined risk management, re-tenanting where necessary and sourcing high-quality opportunities. Our measured pace of origination reflects intentional discipline as we navigate the current environment and position the company for future growth once reforms materialize. On the policy front, the most notable development of the quarter was obviously President Trump's executive order directing the Attorney General to accelerate the process of rescheduling cannabis from Schedule I to Schedule III. This represents an important and constructive federal signal, but one that now requires decisive follow-through from the Department of Justice. Rescheduling is critical to eliminating the burdensome 280E tax regime and supporting additional reform that could restore access to capital, both foundational to the long-term health of this industry. Like many, we are awaiting DOJ action. Until that occurs, we will continue to operate cautiously based on today's regulatory environment and maintain our disciplined risk-aware approach. As we look into 2026, NewLake is entering the year with a strong balance sheet. We have more cash than debt. We have no expensive preferred stock and basically the lowest leverage ratio of any REIT that I'm aware of. We expect continued cannabis industry headwinds until reforms are ultimately completed. And against that backdrop, we will remain disciplined, waiting for the opportunities that will come as the industry progresses. Thank you for joining us, and I'll now turn the call over to Anthony. Anthony Coniglio: Thank you, Gordon, and good morning, everyone Fourth quarter results were in line with our expectations, delivering $0.51 per share of AFFO and an 85% AFFO payout ratio. Our full year results exceeded those of 2024, which is especially notable in a market where competitors reported year-over-year declines in both revenue and AFFO. Throughout 2025, our team remained focused on mitigating risks across the portfolio, addressing vacancies and sourcing high-quality investment opportunities. That's work that's continued into 2026. During the year, we closed 2 smaller transactions with our existing tenant Cresco Labs, and we partnered with tenants, Curaleaf and C3 to optimize property performance and further reduce long-term risk in the portfolio. During our last call, we provided details about the C3 amendment. But as a reminder, that higher-than-expected construction costs reduced the attractiveness of the Hartford project, and we worked collaboratively with our tenant to structure a transaction, providing a better risk/reward for our shareholders. Overall, our portfolio remains in solid position. Our top 3 tenants, Curaleaf, Trulieve and Cresco, which together represent more than 50% of our annualized base rent, each reported strong 2025 results, including positive operating cash flow. Curaleaf generated $1.3 billion in net revenue, delivered a 50% adjusted gross margin and produced $90 million of free cash flow. Trulieve continued to demonstrate industry-leading profitability with 60% gross margins and $230 million of free cash flow. Cresco reported sequential improvements in gross margins to 52%, extended their debt maturities to 2030 and generated over $70 million in operating cash flow during the year. Having said that, the broader cannabis landscape remains challenging without federal reform, and we continue to proactively manage risk while seeking opportunities to strengthen the portfolio. We're also closely monitoring developments at The Cannabist, which remains in forbearance with its creditors following a debt default. In the first quarter of 2026, The Cannabist completed the sale of its San Diego operations where we lease a dispensary. The new operator, Wellgreens, has taken over the location, and we are pleased to welcome them to our tenant roster. In connection with the transition, we completed a lease amendment under which Wellgreens assumed full operational control of the property, and we secured a 5-year lease extension. This amendment underscores the property's strategic value within the cannabis ecosystem, enhances long-term cash visibility and reflects our disciplined, proactive approach to asset management in the portfolio. The transition also reduces our exposure to The Cannabist from 9% to 8% of annualized base rent. Turning to policy. While federal momentum is encouraging, we remain appropriately cautious until a final rule rescheduling cannabis is published. Eliminating 280E through a move to Schedule III would meaningfully improve long-term cash flow fundamentals for our tenants and in our view, pave the way for additional reforms such as the SAFER Banking Act and broader state-level expansion. In addition, shortly after our last earnings call, the President signed a continuing resolution that closed the long-standing hemp loophole from the 2018 Farm Bill. This loophole enabled a nationwide market for intoxicating hemp-derived THC products outside state-regulated systems. We believe this unregulated channel siphoned revenue from the state licensed operators. If fully implemented as scheduled on November 12 of this year, the ban on hemp-derived THC could help stabilize pricing and support operator revenue growth in the second half of 2026 and into 2027. The combination of these reforms, rescheduling and the elimination of hemp-derived THC, once implemented, has the potential to meaningfully improve industry fundamentals and by extension, our tenant quality. Importantly, we're not taking these reforms for granted nor are we adjusting underwriting or capital allocation based on anticipated policy outcomes. With respect to our vacant properties, we continue to advance re-tenanting efforts. Interest remains healthy, and we will update investors as developments become tangible. Our focus remains on thoughtful, risk-adjusted decisions designed to protect long-term shareholder value. With that, I'll turn it over to Lisa. Lisa Meyer: Thank you, Anthony. For the full year of 2025, our portfolio generated total revenue of $51.1 million, representing a modest 1.9% increase from $50.1 million for the full year of 2024. The key factors contributing to this revenue growth include rental income from the 2025 acquisition of 2 Ohio dispensaries, a full year of rent generated from a property that we acquired in 2024 for $4 million, a full year of rent generated from funded improvement allowances during 2024 of $15.1 million and annual rent escalators that consistently boost our revenue. The increase in revenue was partially offset by the impact of vacancies at 2 properties previously leased to Ayr and 1 property previously leased to Revolutionary Clinics. As a result of this modest revenue growth, we experienced a corresponding increase in our net income and AFFO. Net income attributable to common stockholders for the full year of 2025 totaled $26.3 million compared to $26.1 million for the full year of 2024. AFFO for the full year of 2025 totaled $43.8 million or $2.09 per share, reflecting a 0.3% year-over-year increase. Moving on to the fourth quarter of 2025. Total revenue was $12.3 million, reflecting a modest decrease of approximately 1.4% year-over-year. This decrease was primarily driven by vacancies previously mentioned. During the fourth quarter of 2025, we applied the remaining Ayr security deposit of approximately $408,000 to partially offset unpaid rent amounts. The lower rental income and additional property carrying costs drove corresponding declines in our results for the quarter. Net income attributable to common stock for the 3 months ended December 31, 2025, totaled $6 million or $0.29 per share. AFFO for the fourth quarter was $10.6 million or $0.51 per share, representing a 3% decline compared to the same period in 2024. On December 15, 2025, the company declared a fourth quarter cash dividend of $0.43 per share, which was paid on January 15, 2026. This dividend represents an AFFO payout ratio of 85%. For the full year of 2025, our aggregate dividend totaled $1.72 per share, reflecting an AFFO payout ratio of 82%. Most recently, our Board of Directors declared the first quarter 2026 cash dividend of $0.43 per share. The dividend is payable on April 15, 2026, to shareholders of record as of March 31, 2026. As of December 31, 2025, our balance sheet remains strong with $433 million in gross real estate assets and only $7.6 million in outstanding debt. Our leverage remains exceptionally low at 1.6% debt to total gross assets and a debt service coverage ratio of approximately 78x. Furthermore, we have no debt maturities until May of 2027. Our liquidity is solid with $106.3 million available, including $23.9 million in cash and $82.4 million in untapped capacity under the revolving credit facility. With that, I will turn the call over to the operator. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Just following up on the comment on the Ayr security deposit that was applied to rental in the fourth quarter. Just very basic math question, trying to model 1Q. All else equal, what would be the impact on the Ayr side? Because you still applied some deposits and escrow, I think, to rental income in 4Q. If you can explain that, please, quantify that. Lisa Meyer: Yes. So the $408,000 represents a little over 1.5 months of rent. So I guess it's approximately... Anthony Coniglio: Yes, that's it. Just the $408,000. Lisa Meyer: Yes. Pablo Zuanic: Right. Okay. So that's -- I mean that's all else equal, and I know that a lot of things can change, but at least based on what we know right now, that would be the major change when we try to model 1Q, right? Or would there be any expense items that have cadence or that are different from 4Q? Again, just it's a basic modeling question to start. Lisa Meyer: Yes. No, it would just be the $408,000. We already have the property carrying costs on balance sheet -- I mean on the income statement. So those will just continue to roll forward. Pablo Zuanic: Okay. And then, Anthony, in the recent IIPR call, they sounded quite, I guess, positive or bullish on their ability to re-tenant facilities. I don't know if you share those comments. From my point of view, it's taking a while to retenant the facility in Massachusetts from Rev Clinics. And I'm not sure where we are with retenanting the 2 Ayr properties in Pennsylvania and Nevada. But if you can -- it's a 2-part question. Do you echo the positive sentiment from IIPR? And then maybe just more color in terms of when and how you can retenant to cannabis operators or to people outside the industry. Anthony Coniglio: Yes. Thank you for the question, Pablo. We've been at this now over 7 years. We talk to a lot of operators. We're very cautious about this industry. Given some of the stuff we talked about in the prepared remarks, the fact that this industry lacks access to regular way capital, the onerous 280E taxation on the industry and how that limits capital flows to the companies. And so while we have seen a modest pickup in interest in the vacant properties, we're just going to continue to be very cautious. I would say specifically about Massachusetts, there are some structural changes to the state regulatory approach such as increasing the cap on dispensaries that any one operator could own that is part of driving some renewed interest in the sector. And so while we're having some activity around our properties, we won't be announcing LOIs. We're only going to announce actual lease activity. And so while I'm cautiously optimistic, we're certainly not going to strike the tone here at NewLake that we think everything is great, and we're going to be able to backfill these properties with no problem. That's not our position. Gordon DuGan: And I would just add to that, Anthony, that I agree with everything you said. And we are seeing a modest pickup in activity and operator interest in expansion, and we do have activity on all 3 sites. But it's tough getting a lease across the line on any of these. So we're -- as Anthony said, I think we're very appropriately cautious about announcing anything ahead of getting something done. Pablo Zuanic: That's good color. I appreciate it. Look, and then just moving on to Cannabist and Acreage. And again, I know there's only so much you can share about these companies. I realize you have access to data that is not public, so you cannot comment on that. But in the case of Cannabist, you talked about the California property, so great. That's been with the new operator. But can you comment on the other Cannabist operations, I mean, cultivation dispensary in Illinois, cultivation dispensary in Massachusetts. Are they operational? And I guess as an analyst, I should know that, but I'm not -- are they operational? What color can you share, if not from the operator or a bit more at the state level? And the same question regarding Acreage cultivation in Massachusetts and Pennsylvania. Whatever color you can share, Anthony. I mean from my point of view, those are 2... Anthony Coniglio: From what we know all those properties are operational. Is it possible they closed down yesterday? It is. I'm only limited on what we know. We don't run the properties. But it's our belief that they're all currently operational. Obviously, Illinois is a better state to operate in for those familiar with the industry than it would be safe for Massachusetts. And we take some comfort that Acreage is owned by a very large Canadian company, albeit having a ring-fenced structure, but that transaction closed only a little over a year ago, and I think Canopy sees meaningful opportunity long term in owning and maximizing the value from a U.S.-based MSO like Acreage. And so I think you could look at the first quarter dividend announcement and also connected with that if we had something material to tell you, we take transparency with our investors very importantly. And so we would have announced something. But as we stand here, all of our tenants are in compliance with their leases. Nobody is in a default position when we sit here today. Gordon DuGan: Maybe just a little extra color on that. I would -- you picked on exactly the 2 right tenants to focus on. And I'd be more worried about Cannabist and Acreage, and we'll just have to see how they both play out. But Acreage has been prompt in paying rent. And Cannabist, I think, similarly up to now, but they have defaulted on their -- they're in forbearance on their senior debt. So we're watching that very closely. Pablo Zuanic: Yes. All right. That's great color again. Just moving on, in terms of the Connecticut property that's held for sale in your balance sheet, C3, I think if I read correctly, in the 10-K, if that property is sold above your book value, that goes to C3. If it's sold below book value, C3 is responsible for that. Can you clarify that and correct -- I mean, correct me if I'm wrong in my interpretation. Anthony Coniglio: You're correct, but I'd provide an amplification around if it's sold above market value, there is a corridor of value where C3 participates so they can recover some of their very significant investment into the property. But beyond that corridor, premiums on the property come to NewLake. And you are also correct, and I would reiterate that the extent that there's even a $0.01 below our basis, we are reimbursed 100%. Pablo Zuanic: Right. But what happens if the property is not sold for a year or 2? I mean the agreement remains in place, I suppose, right? Anthony Coniglio: Yes. We continue -- they continue to be a tenant and they continue to pay rent while they're seeking -- while we're seeking a sale of the property. Pablo Zuanic: Okay. Sorry, I didn't realize that. So that property, although it's held for sale at the moment, it is paying rental and it's current. Yes. Anthony Coniglio: Correct. Yes. Pablo Zuanic: Just moving on, and apologies if there's somewhere else on the Q&A line here. In the case of IIPR, in their conference call, they disclosed that they've been served by the SEC. There's a bit -- I don't know what that exact legal term is, subpoena or investigation. When I hear things like that, I wonder if there's any read across for the rest of the industry, for other sale-leaseback operators. I mean, obviously, if you have been served, you would probably issue a press release on that. But in my opinion, when there's this type of investigations, they are not just company specific, but we can be looking at the industry and practices in the industry. So there could be some minimal risk read across for NewLake. But again, please correct me if I'm wrong. Anthony Coniglio: I don't believe so at all. Let me be clear. We are not under investigation. We have not received any SEC inquiries. We do not have any subpoenas from the SEC. And we take transparency and investor communication extremely seriously. As you could tell from the way we've been doing this for 5 years, we try to be very upfront about issues in the portfolio, about the condition of our tenants. I don't know, Pablo, that there really is a read-through from this. If you look at the disclosure, and that's really all that any of us have to go on right now. If you look at the disclosure, it looks like it was an outgrowth of their class action lawsuits that were pertaining to the transparency of the disclosures that the company had made. We don't have any class action lawsuits. We've never been accused of not being transparent in our communications with investors. So I would not think that there is a read-through to other sale-leaseback providers. Pablo Zuanic: Okay. And the very last question, and I know you touched on the policy front, and we know that it's uncertain, although we are all positive at the federal level and state level. But can you give more color in terms of your conversations with operators? Are people trying to get ahead of Virginia or Pennsylvania and that could lead to discussions that are more positive and constructive right now in terms of future opportunities for NewLake. And by the same token, like you said, with rescheduling, the credit quality of your operators, tenants improves, more business. But is all this news flow translating into more active conversations with operators out there or not really yet? Am I putting too much of a positive spin on this right now? Anthony Coniglio: It is, but to a small extent. I would say that similar to what we saw in Florida, before the ballot initiative, there were some operators that were building up -- build out in anticipation. A large majority were awaiting the actual results. I'd say in Pennsylvania, it's a similar thing. We've heard of a couple who are thinking about and looking forward to some expansion, others and many of them are not. And so it's a mixed bag. I would say that the level of activity for us has increased -- in terms of looking at new deals has increased in the first quarter from the fourth quarter. But I don't want to give you the impression that it's up tenfold that it's a massive pipeline. It certainly isn't that, which quite frankly is a good thing because it tells me that this industry is remaining disciplined about its CapEx obligations because even though we fund for real estate on any of these projects, there's a meaningful amount of equity investment that an operator needs to put into a cultivation facility or a dispensary in terms of equipment, people training and other various expenses to get these facilities up and running. And so I think people are being generally judicious about not leaning too hard into the what can happen. They're doing their research, having the conversations, but I think being appropriately cautious. Gordon DuGan: Yes. I would say it is -- I think it is fair to have a more positive outlook on that. We're seeing more operator interest in places like Massachusetts. Virginia, hopefully, is close to some positive momentum. Pennsylvania, you mentioned. So yes, it feels like for the first time in a while, the operators are modestly better and more optimistic. It's really been -- the industry has been tough. And it does feel like some green shoots are appearing. Pablo Zuanic: And again, I would say congratulations to the team for having maintained the discipline throughout in a very tough environment. Operator: Our next question is from Craig Kucera with Lucid Capital. Gordon DuGan: Sorry, Craig, you had to wait so long. Those are good questions though. That was useful. Craig Kucera: Yes, they were. Yes, absolutely. So I've got a few follow-up questions on Cannabist. So I guess you were able to get the California asset retenanted without any real downtime, obviously. Were the lease terms -- I know you mentioned it was a 5-year lease, but as far as the rent, was that more or less in line with what Cannabist was paying? Anthony Coniglio: One clarification. It's not a 5-year lease. It's a 5-year lease extension. Craig Kucera: Extension. Okay. Anthony Coniglio: That was an extension. So we added duration to that lease generating from an NPV perspective, as you know, we created value by getting that lease extension. And Cannabist... Gordon DuGan: Anthony, what was the old lease term? Anthony Coniglio: We had about 6 years remaining. Gordon DuGan: Okay. Yes. So we pushed it out to 11, obviously, or roughly. Anthony Coniglio: Yes, and rental... Gordon DuGan: yes, Go ahead. Sorry, Anthony. Anthony Coniglio: No, no, go ahead, Gordon. Rent was not adjusted. Craig Kucera: Okay. That's helpful. And of the remaining 4 assets that Cannabist has leased, can you give us a split of how much is coming from Massachusetts versus Illinois? Anthony Coniglio: It's about half and half. In Illinois, we have a dispensary and a cultivation, and we have the same in Massachusetts. Craig Kucera: Right. Okay. And do those leases kind of have your standard, call it, 6-month rent deposit affiliated with them? Anthony Coniglio: The deposits vary on those leases. It's not 6 months. It varies. Sometimes you have a little bit more on cultivation, a little bit less on dispensary. But if those go into default and we have an announcement, we'll talk about the security deposits associated with those. Craig Kucera: Okay. That's helpful. And just one more on Cannabist. I guess, can you give us a sense of the rent coverage of those assets? Are those kind of in line with your -- I think you typically have maybe 3.5% on the cultivation, 9% on the dispensary. Are they in that kind of ballpark range? Anthony Coniglio: We don't disclose specific property level asset-by-asset coverages. The way I'd answer your question is by focusing on the state's operating environment. And I think what you would find is that Illinois, given the size of that market, given the more limited license nature of that market has a better operating profile overall for cannabis operators in the state versus, say, a Massachusetts. We've spoken many times over the last couple of years about the difficulties in Massachusetts, primarily driven by the lack of ability to become vertical with the cap at 3 on dispensaries, but also the proliferation of cultivation licenses that occurred over the last 4 years. And in fact, the state has taken notice and recently at a February regulatory commission hearing, the CCC was requesting input on a potential moratorium for new cultivation licenses. And so that's part of what's driving some of this increase in interest in Massachusetts because with the moratorium, it could make the state dynamics better and provide a better floor support for wholesale revenue there and couple that with the increase in the cap on dispensary ownership where the legislature approved a bill that would let you go to 6, the House has approved one that lets you go to 4, and they're in reconciliation right now. Those are some of the tailwinds that people are feeling a little bit better about Massachusetts today. But coming back to your question, Illinois is an easier market to operate in than Massachusetts. Craig Kucera: Right, right. That's helpful. Changing gears, last quarter, you mentioned that you might look at expanding outside of the cannabis sector. Does the sort of improving legislative environment momentum maybe put that on pause? Or are you still evaluating maybe expansion outside of cannabis? Anthony Coniglio: We continue to evaluate all opportunities to deliver growth for shareholders. And so yes, during the quarter, we were evaluating noncannabis opportunities. And when we think there's an opportunity for good risk/reward, we'll present it to our investment committee and ultimately, the Board for approval. Gordon DuGan: Yes. If I might just add to that, I think there is some subtle positive momentum that would raise the bar on noncannabis opportunities given some positive momentum. And almost without exception, we still find the highest cap rates in the net lease sector in the cannabis sector. So it's a tough bar. Most of the alternatives that we've looked at, some of them are, we think, attractive, but they're lower return alternatives. And that's always been sort of the premise of the cannabis sale-leaseback industry, very high returns, higher risk. And I think we've navigated that very well. But it's still -- the bar -- the positive momentum from the regulatory standpoint has probably raised the bars in a subtle way for doing something outside of it. Craig Kucera: That makes sense. Just one more for me. You mentioned the strength of the public companies that represent, I think, about 50% of your portfolio. And obviously, we can look at that and there's a lot of visibility into their operations. But can you talk about your private tenants? Are you seeing any degradation in 4-wall coverage or any concerns there? Anthony Coniglio: No. And you point out we can't discuss their specific profitability, but they are performing as expected. And that's not a -- they are performing well. We have some private operators that have profit and cash flow profiles that people in the industry would love to have that financial performance. But we are -- everybody is performing in line with our expectations. Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Anthony Coniglio for any closing comments. Anthony Coniglio: Great. Thank you all for joining us today. We appreciate your continued support, and we look forward to updating you in the months ahead. Have a nice weekend.
Operator: Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Methanex Corporation Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference call over to the Vice President of Investor Relations at Methanex, Mr. Robert Winslow. Please go ahead, Mr. Winslow. Robert Winslow: Good morning, everyone. My name is Robert Winslow, and I recently joined Methanex as Vice President, Investor Relations. Welcome to Methanex' Fourth Quarter 2025 Results Conference Call. Our 2025 fourth quarter news release and 2025 annual report were posted yesterday, and can be accessed through our website at methanex.com. I would like to remind the listeners that our comments today may contain forward-looking information, which by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from actual results. We may also refer to non-GAAP financial measures and ratios that do not have any standardized meaning prescribed by GAAP, and are, therefore, unlikely to be comparable to similar measures presented by other companies. Any references made on today's call reflect our 63.1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, our 50% interest in the Natgasoline facility and our 60% interest in Waterfront Shipping. To review the cautionary language regarding forward-looking statements, and to find definitions and reconciliations of the non-GAAP measures, please refer to our most recent news release, MD&A, annual report and investor presentation, all of which are posted on our website under the Investor Relations tab. I will now turn the call over to Methanex' President and CEO, Mr. Rich Sumner for his comments, followed by a question-and-answer period. Rich Sumner: Thank you, Robert, and good morning, everyone. We appreciate you joining us today to discuss our fourth quarter 2025 results. I'd like to start the call by thanking all our global team members for their continued commitment to responsible care and safety, which remains at the core of our company's culture. Over 2024 and 2025, we've had the best 2-year safety performance in our company's history, even as we navigated significant changes to our asset portfolio and supply chain. As a demonstration of these results, we've had 0 Tier 1 process safety incidents over the past 2 years and recorded only 0.09 and 0.12 recordable injuries per 200,000 hours worked in 2024 and 2025, respectively, compared with the chemical industry average of 0.59 in 2024. These outstanding achievements are a testament to our employees and contractors continued focus on strong planning, hazard awareness and reliable behaviors. Turning now to a financial and operational review of the company. Our fourth quarter average realized price of $331 per tonne, and produced sales of approximately 2.4 million tonnes generated adjusted EBITDA of $186 million and an adjusted net loss of $11 million. Adjusted EBITDA was lower compared to the third quarter of 2025, as higher sales of produced methanol were offset by a lower average realized price, and the impact of immediate fixed cost recognition related to plant outages in the fourth quarter. Turning now to industry fundamentals. We're closely monitoring the current events in the Middle East region and its impact on global markets and our business. Looking back on the fourth quarter, we estimate that global demand increased in China by about 4%, while demand outside of China was relatively flat. The increased demand in China in the fourth quarter compared to the third quarter was driven by increased demand for methanol into energy applications and higher operating rates by methanol to olefin producers, the latter also being supported by high operating rates and import supply availability from Iran. Steady imports from Iran, particularly through October and November, also led to higher coastal inventories in China, which pushed pricing towards the $250 per metric ton range. Towards the end of the fourth quarter, we believe seasonal gas constraints significantly reduced Iranian output leading to MTO producers reduced operating rates in response to decreasing supply. Through the first quarter of 2026, up until current market escalations, our average realized pricing has been quite stable with some small increases on slightly tighter supply conditions. After considering first quarter posted prices and factoring in higher discounts -- customer discounts through recontracting for 2026, our first quarter average realized price is estimated to be between $330 and $340 per tonne. The current escalation in the Middle East brings significant uncertainty to reliability of methanol supply to the market from this region. We continue to see significantly reduced methanol supply from Iran, and we believe it is also impacting operations and trade flows from other producers. This has led to an increase in spot methanol pricing in Asia Pacific and Europe with Chinese methanol prices now trading above $300 per metric ton and European spot prices now trading close to $400 per tonne. Now turning to our operations, where our methanol production was higher in the fourth quarter compared to the third quarter. Starting with our newly acquired assets in Texas. We produced 216,000 tonnes at Beaumont and 186,000 tonnes from our equity share of Natgasoline. During the fourth quarter, Beaumont experienced a short unplanned outage and Natgasoline took a plant 10-day outage to reduce a -- to replace the catalyst that's important to environmental compliance. We've been actively working with both of these manufacturing sites on integration plans, completing detailed reviews of systems and technical findings and are pleased with the progress to date. In Geismar production was slightly higher in the fourth quarter as all 3 plants operated reasonably well, although we did experience some minor unplanned outages. In Chile, after completing a plant turnaround in September, we operated both plants at full rates for most of the fourth quarter, utilizing gas supply from Chile and Argentina. During December, a third-party pipeline failure caused a temporary restriction on gas supply to our facilities, and this resulted in approximately 75,000 tonnes of lost production. The gas supplier developed a resolution to this issue in early '26, and we're now operating both plants at full rates, which we expect to sustain through April. In Egypt, we had higher production in the fourth quarter as the third quarter was partially impacted by seasonal gas availability constraints. There's been stabilization of gas balances in the region, but some continued limitations on supply to industrial plants are expected going forward, particularly in the summer. The plant is currently operating at full rates, and we're closely monitoring the regional situation for any potential impact on gas supply to the plant. In New Zealand, we produced 171,000 tonnes as increased gas supply was available in the nonwinter season. Notwithstanding the short-term dynamics, structural gas supply availability in New Zealand continues to be challenging, and we're working with our gas suppliers, and the government to optimize our operations in the country. Our expected equity production for 2026 is approximately 9 million tonnes of methanol. Actual production may vary by quarter based on timing of turnarounds, gas availability, unplanned outages and unanticipated events. Now turning to our current financial position and outlook. During the fourth quarter, solid cash flows from operations allowed us to repay $75 million of the Term Loan A facility and end the year in a strong cash position with $425 million on the balance sheet. Since the start of '26, we've repaid a further $50 million, and the balance of the Term Loan A facility is currently at $300 million. Our priorities for 2026 are to safely and reliably operate our business and continue to deliver on our integration plan. We remain focused on maintaining a strong balance sheet and ensuring financial flexibility and our near-term capital allocation priority is to direct all free cash flow to the repayment of the Term Loan A facility. Based on a forecasted first quarter average realized price between $330 and $340 per tonne and similar produced sales, we expect slightly higher adjusted EBITDA in the first quarter of 2026 compared to the fourth quarter. We'd now be happy to answer your questions. Operator: [Operator Instructions] Your first question comes from the line of Joel Jackson with BMO Capital Markets. Joel Jackson: Welcome aboard, Rob. Nice to hear from you again. Rich team, can you talk about costs? So if we look at Q4, and we think of costs, not gas costs but other costs logistics, other things going on, can you talk about what does that look like into the first half of this year in Q1? It seems like costs have really elevated. What's going on? Are there any artifacts, some of the things going on with the OCI taking over the OCI assets? Rich Sumner: Thanks, Joel. Yes. I mean a couple of points I'd make on cost is we did see that the unabsorbed costs come through. That's really about how the assets ran through December. We saw some outages there that just results in immediate recognition of those costs to the P&L. As we think into where we were, our fixed costs we would expect those to come down. Our ocean freight was probably a longer supply chain in the third and fourth quarter. As we said, we do have probably a higher percentage of sales coming through in the last few quarters as we -- higher than we expect as we move into the new year with our contracted position. And then we have not yet -- we're not all the way through the OCI transaction. So right now, we are spending costs as we move through to create the synergies post deal, and that will happen through 2026 and when we get into 2027. So we're not all the way there, obviously. And what we do need to do is to continue the integration plans. And as we move through, we'd expect beginning in 2027, that our fixed cost structure also adjusts down to the new base of the business. Joel Jackson: Okay. And then my second question is, obviously, you all know what's going on in the world. And there's a lot of methanol sitting in Iran and Saudi and around the Middle East. You obviously set your contract prices, your posted prices for March just on the onset of this. It's early, but what do you think is going to happen here in the market? Like if this continues, can you talk about what will we see in the short term, the medium term as you see your business potentially changing from what's going on? Rich Sumner: Yes, for sure. I think for us, I mean, I think the -- our first -- and first priority here is our supply to customers. And I think this is where our reliability of supply and our global supply chain really shows -- demonstrates its value. And where we are today is that's our first commitment. Pricing has obviously increased in all regions with the anticipation of tightness coming out because the amount of tons on the internationally traded market here is quite meaningful that's currently impacted. So our first commitment is to our customers. And as of right now, we'll see some benefits because of the tightness on pricing through March, but the real reset will come through into the second quarter. I think the big -- we're talking about around 15 million to 20 million tonnes of the globally internationally traded methanol market here. So it's a significant impact. which will ultimately impact all global markets, and we've seen pricing come up around the world, and we're watching things really closely here obviously, with our customers trying to make sure we keep them whole while also looking at the risks on the global market and potentially some demand destruction that could come out of the market as well. So watching things very closely, and we're really talking to all our suppliers about -- or all of our customers about how we can keep them supplied through this. Operator: Your next question comes from the line of Ben Isaacson with Scotiabank. Ben Isaacson: I have a question and a follow-up. Rich, can you remind us how opportunistic are you able to be when we have price spikes? I know most of your volume is contracted. So can you just talk about how you can take advantage of short-term price spikes? And is there some kind of lag in that recognition? Rich Sumner: Thanks, Ben. Yes, I mean, we're a term contract supplier. So our first priority is our commitment to our customers, and we reset price monthly. And so right now, we're selling based on our March contract price. And we would expect under current conditions that we would be resetting into April to be reflective of the market. So our first priority right today is the security of supply to our customers globally. Of course, there are certain mechanisms in our contracts, which may adjust up slightly, and that's built into our forecast. So you could see that there could be a little bit of a push up in our kind of guidance on where pricing is for the first quarter. But generally, it will reset into April. And our first commitment is really about, how do we make sure we keep the industry operating for our customers and really to help them take care of their business. Ben Isaacson: Great. And my follow-up is in the Middle East. I know things are moving very quickly. Are you aware factually of any damage to methanol assets or export or port infrastructure in Iran? And are you seeing a slowdown in gas flow from Israel to Egypt? Rich Sumner: Thanks, Ben. No, we're not aware of any damage to any methanol facilities. We're monitoring the situation really, really closely. As far as it relates to the gas supply from Israel and to Egypt, our understanding is that gas is not flowing that they've all but shut down the gas imports from Israel today. What we're working really closely with our gas suppliers in Egypt. Our plant continues to operate. It is the low season in terms of demand on the gas grid in Egypt. And -- the Egyptian government has been getting in excess supply or more supply through LNG imports. So, so far, we've got sustainable operations there, but we're watching things and monitoring them really closely. Operator: Your next question comes from the line of Hamir Patel with CIBC Capital Markets. Hamir Patel: Rich, in your price guidance for Q1, you referenced new customer discounts for 2026. So how should we think about, how much maybe on an annual basis, those have shifted? And will that largely be apparent in Q1? Or will it adjust over the year? Rich Sumner: I think the Q1 will be sort of -- is sort of the reset, Hamir. It's what we'll wind up seeing is that when we think about where our realized pricing is for Q1, if you go sort of region by region, China is going to be up because we saw that supply through Q4 built in China. So China is going to realize more in Q1. The European contract settlement actually results in slightly lower pricing for Q1 compared to Q4. And then when we look at where North America, Latin America and Asia Pacific are, they're kind of relatively flat on a realized basis. So that should be a resetting the discount for 2020 -- or Q1 should be consistent through or a good guide for the rest of the year. And then on an average realized basis, we're expecting to be up a little bit. And this is all pre the current developments, right? So I think prior to the current situation, we were going to be slightly up mainly because of China and factoring in all those other considerations. Hamir Patel: Okay. Great. And Rich, with respect to the 2026, the $9 million production guide, can you give us some color on some of the regional puts and takes embedded in that? I imagine the Egypt piece is probably maybe the most fluid. Rich Sumner: Yes, I think it's -- we've got a -- you can think of it in terms of these numbers about 6 million or a little over 6 million tonnes in North America, about 1.3 million to 1.4 million tonnes for Chile, which is consistent with where we were last year, around 0.5 million to 0.6 million tonnes for Egypt, which is obviously less than around an 80% operating rate. And then Trinidad would be one plant would be really the Titan plant around 800,000 tonnes. So I think -- and then New Zealand our guide for New Zealand is less than 0.5 million tonnes, and that's because of the situation we're faced with in New Zealand on gas supply. So those are rough numbers to help you with kind of breaking that out by plant. . Operator: Your next question comes from the line of Steve Hansen with Raymond James. Steven Hansen: I just want to go back to the discount issue or perhaps even just the weighted average global price just as we think about the shifting dynamics there. It did strike me that the realized price came in lower, but not just because of the discount but because of that global-weighted spread or global-weighted average, I should say. Has there been a material shift in the sales mix here in the last 2 quarters relative to prior? It does seem that the formulas we used in the past are becoming outdated. Rich Sumner: No, I think, what we do is we give guidance in terms of percentages in terms of regional allocations there, Steve. So I think you can use those as a good guide. And I think the proportion of China was higher as we move through Q4 for sure. And that's partly because when we acquired the assets, we did inherit a fairly large uncontracted position from the OCI business. We've contracted into Q1 now. And I think the what you'd see is that if you work the percentages, and the pricing you get close to our ARP. But I think, we can help you with that offline, if it's, for some reason, it's not adding up. Steven Hansen: Okay. No, that's very helpful. And just on the operational rhythm or cadence at the new facility in Geismar. It sounds like things are running well now. But just to give us a sense for again that cadence? Is it running sort of to plan, and you think you suggested even full rates? But I mean, is there anything else in sort of the tempo that we should expect to change over the balance of the year, whether it be turnarounds or other major hiccups? Rich Sumner: Yes. No, we're pleased with the operations in Geismar. We've gotten through our the ATR challenges that we had, and we feel really good about the way the asset is running. So in a lot of ways, it's about just continuing to ensure safe, reliable operations in Geismar, and the team is doing a fantastic job there. So we're -- we've put those issues behind us. And right now, we've got a really good, stable production coming out of Geismar. Operator: Your next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: I remember that you were less hedged on gas at Beaumont and Natgasoline. Is your hedging now consistent with your other North American plants, and when there was that gas spike at the end of January? Was that something that you felt or you were hedged against it? Rich Sumner: Yes. Thanks, Jeff. We -- so our hedging today, what we're guiding towards is around 50% hedged for our North American assets, and that's across the whole portfolio. We did see gas pricing, as we always see, come up through the winter period, and then we did hit the gas spike. We'll talk more about our operations when we get to our first quarter results, but we would expect and normally expect gas prices to come up, and then we have different ways to manage that. So we would have had some open exposure, but we would have been managing disclose more about that in our first quarter. We do expect the gas pricing, and that's part of the guide. Really, when we look at slightly higher earnings, part of the reason that it's slightly higher and not higher is because there is a bit higher gas cost coming through in the first quarter compared to the fourth quarter, which we'll give more information on when we go to disclose that in the coming weeks here. . Jeffrey Zekauskas: Okay. And in Trinidad, do you expect your operating rates to rise relative to the fourth quarter or fall in the first quarter? Rich Sumner: Well, we've got in Trinidad. We're running the one plant, the one -- the smaller Titan plant based on a gas contract for the plant. So we're expecting that operations should be very consistent. And yes, we'll operate that plant. Our main focus is going to be on gas contract renewals for the Titan facility. That contract comes up at the end of -- in September time frame, and we would expect to have good operations from that plant up until that time frame. We are looking at the contract renewal already. Most producers are already in discussions for their gas recontracting, their feedstock recontracting in Trinidad, and we're making sure we're in discussions as ours comes up later in the year. But I would anticipate that we're running that plant at similar rates to last year until that time. Operator: Your next question comes from the line of Josh Spector with UBS. Christopher Perrella: It's Chris Perrella on for Josh. As you had lower production out of the OCI -- the acquired assets sequentially. Can you just give us an update on the integration there and sort of what the cost puts and takes over the course of 2026 or what you guys are budgeting in there for the spend to get the synergies? Rich Sumner: Yes. No, the first thing I'd say about the assets is we're really pleased with the way the operations are going there. We -- when we modeled this, on the acquisition, we used operating rates of around 85% to 90%, and we've definitely achieved over and above that since we've owned the assets. We're really impressed with the teams that we're working with, and we're really working collaboratively together to bring our global expertise and work with the expertise at both sites to create value from the asset. So really happy with that. We did have some downtime in Natgasoline, and that was really partly an environmental compliance getting ahead of environmental compliance there and taking a proactive outage. And then we did have some minor downtime at the Beaumont plant as well. So really happy with the way the assets are running and as well as the other parts of the integration. What we did have is, we had, we said about $30 million in synergies that we were targeting to realize by the end of 2026. We've realized some of those, but you also have to take on higher costs when you're integrating systems, and you're integrating teams and other things during that phase. So we're in the middle of that right now, and we'd expect to try to complete that as we move through 2026, and then have realized the $30 million in synergies as we move into '27. Christopher Perrella: I appreciate that. Is there a step-up in the spend there in the year? Or is that cost now kind of baked in on a go-forward basis, at least through the end of the year? And then could you just -- has the gas supply situation in Trinidad absent the contract improved since the events in Venezuela? Rich Sumner: Yes. So to the first question about the spend there increased. I would say no. When we did the modeling around the deal, we would have set a certain assumption around operating rates, and we would have set an assumption around CapEx spend on average per year. The two things I'd say to that is the plants have been operating above our assumptions on the deal. And the second thing is both of the assets have come off of turnarounds in 2024 and 2025. So really, the CapEx spend relative to where we had deal assumptions, which would have been an average are much lower in the early phase of the asset acquisition, which is good for us because we're in a deleveraging period. On your second question, which is in regards to Venezuela, yes. So there's announcements about fields being developed there and for import into Trinidad. So that is a longer-term positive. When we look at the Dragon field that's recently been announced, the things I would say is, one, the size of these fields relative to the demand/supply gap, more than just the Dragon field needs to be developed. So there are other fields also being developed, but that's going to take time. It's going to take a lot of progress. And then ultimately, we're also going to need to ensure that the commercial agreements and pricing that is for that gas, allows that to make sense long term for methanol. So there's a lot to be done there, and our focus is really on the short term right now is how we're operating our plants in Trinidad with a contract renewal that's ahead of us before any of this gas could come on. Operator: Your next question comes from the line of Nelson Ng with RBC Capital Markets. Nelson Ng: Quick question on the supply/demand dynamics. Rich, you talked about potential demand destruction. Can you -- like I think you talked about in the past how MTO facilities are, like their economics are somewhat challenged. But do you expect a large reduction in MTO demand? And also from your customer perspective, do you have a sense of how price sensitive they are? Rich Sumner: Yes. So thanks, Nelson. Yes, just there's a lot of dynamics going on, obviously, right now. So we've seen, just in terms of MTO and MTO affordability, to your point, the price in methanol is rising, but so is the price downstream for the -- in the olefins market, and that's because, it's not -- methanol is constrained, but so is naphtha, so is all the oil derivatives that come out of the Middle East, which means naphtha pricing has gone up, which means olefins pricing has gone up, which means that makes methanol more affordable. So there's a lot of dynamics at play right now. That's what's you're actually uplifting China price, but their pricing in the downstream has gone up too. So the affordability dynamics are changing as well. So there's a lot in play. I think what's going to happen here is depending on the restriction on supply, it's going to be, okay, how does that supply get directed into which markets, and then what does that do to price? So we're watching things really, really closely. But right now, every -- all energy and energy derivatives are lifting up because the demand supply gap continues to grow every day that there's disruption in that region and not a lot of product flowing out. So we're going to monitor this really closely. Our commitments to work with our customers and on security of supply, and certainly, we see the forecast would be there's going to be pressure until some relief comes into the market. Nelson Ng: Okay. Got it. And then in terms of your production in New Zealand, it's staying relatively low in 2026. I presume that facility is marginally profitable. So I just want to get your sense on like what are some of the factors or some of the key factors you look at in terms of making a decision to potentially like mothball that last plant? Rich Sumner: Yes. So I mean, really, it's coming down to gas production and gas development and production out of the field. These are very mature fields, and there's not outside of the existing fields, there's not a lot of new exploration going on. So our concern would be that we have seen the forecast continue to decline. . And in that industry, you have to see capital going in, and you have to see development consistently happening for that to be -- for your operations to be sustained. So we're watching things really, really closely. Today, that we've got a profitable operation, but we are operating even when there's peak gas available, we're still operating at less than one plant at less than full rates, which is not ideal. So we're watching things really closely. And we're working with gas suppliers as well as the government to sustained operations, but it is a tough outlook right now. Operator: Your next question comes from the line of Matthew Blair with TPH. Matthew Blair: Great. Could you talk about whether you're truly realizing the benefits of the OCI acquisition that closed in mid-2025. And just looking at the total company EBITDA in Q3 and Q4, it's roughly flat to Q2, even though like global spot methanol prices are also about flat, and I think the OCI acquisition should have provided at least $250 million in EBITDA. So is this just a function of, I remember Q3, you had some accounting headwinds, Q4, it sounds like some unplanned outages, but are you getting the benefits of that OCI deal rolling through? Rich Sumner: Yes. So I think, maybe the way to answer this is just look at that -- if we look at kind of the numbers that we had on the deal at a $350 methanol price, we said it was slightly over $1 billion in EBITDA. So that would be $250. Methanol prices today are not at $350 per tonne, that's $20 lower across an asset base that's 9 million tonnes. So that's -- the big thing is price. We're also pre-synergies on the deal, so we haven't realized the synergies. And I did describe there are some other things on cost structure that are slightly above what our assumptions would have been on the deal. So as we see that some of those cost issues are transitionary. And I think we can get back to those numbers, but we certainly need the market to be a little tighter and methanol prices to be at the $350 level to hit the numbers that we disclosed. And in today's environment, we would be looking and thinking we're probably at least in the short term, going above $350. Matthew Blair: Okay. Sounds good. And then what percent of your North American methanol production is exported? And should we think about applying spot U.S. prices to those export volumes? Or is that really still on like a contract basis? Rich Sumner: We run our -- I think the way to think of it is we run our global supply chain, our assets through our global supply chain. So we give our regional sales percentages, and then you can see where our assets are located. So our -- we run things so that our product isn't assigned to any particular region. It's a flexible supply chain where we -- our main priority is to keep our customers full with in the most cost-effective manner to do that. So I think it's a little bit more, you have to put it together on where the product is going and how much we're selling. And right now, we've got -- we would give you the global sales allocation, and you can see where our assets are located. And so we will have some cross-basin flows from the Atlantic over into Asia Pacific, but mostly the product stays within the Atlantic Basin. Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: I guess, first of all, just can you help parse what the current situation means for the market in terms of the near term? Like how much of the near-term disruption is shipping being rerouted, and to what extent, or how long do you think it will take for you to start seeing customers shutting capacity in response to a tighter market? Can you help sort of parse the near-term supply chain adjustment versus how you're thinking about the demand adjustment? Rich Sumner: Yes. So thanks, Laurence. I think when we look at what supply is impacted today, you have between Iran that Iran puts into the market around 9 million to 10 million tonnes a year. And then when you combine Saudi Arabia, Oman, Qatar, Bahrain in other countries that are going to be impacted. It's probably another 9 million to 10 million tonnes of a 100 million-tonne market, but really a globally internationally traded market about 55 million tonnes. So this is a pretty big impact. Of course, Iranian supply goes only into China. So that's a direct impact to the China market. And then the other product services, mainly the Asia Pacific region as well as some into Europe. So those trade flows today have stopped. How long this lasts, how quickly you can -- you work, you're going to first work off inventories, you're going to try and buy product to ensure security of supply. How long this lasts will impact. How long and how long people have on inventory will ultimately determine how long people can operate here. So our first commitment here is to our contract customers, and the security of supply that we provide through our contracts, and that's our #1 commitment, and we'll continue to monitor this as it evolves because it's certainly hitting methanol, and it's hitting a lot of other downstream oil and energy products as this develops. Laurence Alexander: And secondly, on your shipping fleets, given that you can reroute tankers more quickly than sort of somebody who's using the -- has a ship but that might be contracted to ship in other products rather than being committed to methanol. Should you be seeing a benefit in Q2 or Q3 from that? And can you help size it? Rich Sumner: Yes. I mean, I think the main thing for us is that this is where our time charters certainly give us that security within our supply chain. And so we have very little spot exposure in our fleet. We've seen shipping rates double on a lot of the lanes that we do. And so it's more of a what does it do to our competitors versus what does it do to us to the extent that pricing has to go up to help our competitors cover costs to meet security of supply well, then that's going to be baked into the pricing that we can benefit from. So it's not an immediate like instant hit to our cost structure because we -- ours are fixed in. But we do think that, that partially is compensated through increasing price that's required to get other products into market. So again, that's another factor that we'll be watching. And certainly, this shows that demonstrates the value of our Waterfront Shipping company and having dedicated ships to our business. . Operator: The last question comes from the line of Steve Hansen with Raymond James. Steven Hansen: Just in the event that this conflict does last longer than planned or longer than some people might expect, how do you think about the incremental or excess cash flow coming in the door? Is it just going to accelerate the paydown of Term Loan A? How you've been at a fairly rapid pace thus far, anyways. But is that how we should think about that excess cash flow that comes in the door? Rich Sumner: Yes. Our first commitment is to our balance sheet right now. We have, like I said in the opening remarks, we've got $300 million left on the Term Loan A, and that's our first priority for cash. Of course, we're going to monitor things really closely here. Volatility is important. You can have fly-ups, and then you can have reversals depending on how quickly things do change. But obviously, our first priority and commitment is to the balance sheet post-deal. And right now, obviously, this pricing environment is very supportive of that. Operator: There are no further questions at this time. I will now turn the call over to Mr. Rich Sumner. Rich Sumner: All right. Well, thank you for your questions and interest in our company. We hope you'll join us in April when we update you on our first quarter results. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Drilling Tools International Corp. 2025 Year End and Fourth Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard, investor relations. Thank you, sir. You may begin. Ken Dennard: Thank you, operator, and good morning, everyone. We appreciate you joining us for Drilling Tools International Corp.'s 2025 Year End and Fourth Quarter Conference Call and Webcast. With me today are R. Wayne Prejean, Chief Executive Officer, and David R. Johnson, Chief Financial Officer. Following my remarks, management will provide a review of year-end fourth quarter results and 2026 outlook before opening the call for your questions. There will be a replay of today’s call that will be available via webcast on the company’s website that is drillingtools.com. There will also be a telephonic recorded replay available until March 13. Please note that any information reported on this call speaks only as of today, 03/06/2026, and, therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this call will contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Drilling Tools International Corp.’s management. However, various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies. The comments today will also include certain non-GAAP financial measures including, but not limited to, adjusted EBITDA and adjusted free cash flow. The company provides these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. A discussion of why we believe these non-GAAP measures are useful to investors, certain limitations of using these measures, and reconciliations to the most directly comparable GAAP measures can be found in our earnings release and our filings with the SEC. And now with that housekeeping behind me, I would like to turn the call over to R. Wayne Prejean, Drilling Tools International Corp.’s Chief Executive Officer. Wayne? R. Wayne Prejean: Thanks, Ken, and good morning, everyone. I will open with some comments on our full-year results, then hand the call over to David to review fourth quarter financials and our 2026 outlook. After that, I will wrap it up with a few additional thoughts before we open up for questions. We are pleased with our strong performance in the fourth quarter, which enabled us to finish the year on a positive note. These results demonstrate our ability to deliver consistent returns in the face of continued market softness. Despite global rig count declining 7% year over year, we were able to produce resilient results and generate significant free cash flow. In fact, Drilling Tools International Corp.’s annual adjusted free cash flow has grown each year since going public in 2023. This is an achievement we take great pride in and underscores our ability to operate efficiently, capitalize on opportunities in the market, and navigate the evolving energy landscape. Our 2025 results came in at or above the high end of our guidance ranges. We generated total rental revenues of $129,600,000 and total product sales revenues of $30,100,000, or $159,600,000 on a consolidated basis. Adjusted net income for 2025 was $3,400,000, and adjusted diluted EPS for 2025 was $0.10 per share. We generated 2025 adjusted EBITDA of $39,300,000 and adjusted free cash flow of $19,200,000. We completed our fourth acquisition in January 2025 since going public, and we were able to meaningfully reduce our net debt compared to the same period a year ago. This reflects our capital discipline and intentional focus on paying down debt. As the market softened throughout the year, we utilized our flexible CapEx model and pivoted to harvesting cash, which we then used to pay down over $11,000,000 of debt in 2025. We also returned a portion of our free cash flow to shareholders through our share buyback program. These actions reinforce our commitment to enhancing shareholder value and maintaining our solid financial position. Geographically, our Eastern Hemisphere operations experienced continued growth in 2025, and this expansion was a large contributor to the resilience of our results. Year over year, our Eastern Hemisphere revenue grew by 78% and contributed approximately 14% of our total revenue. The Eastern Hemisphere segment has continued to perform well, reflecting significant demand for our tools along with consistent execution and Drilling Tools International Corp.’s growing market presence. Western Hemisphere operations were impacted by soft North American drilling and completions activity in 2025 but managed to see only a low single-digit revenue decline when compared to 2024. As the situation evolves in the Middle East, we are focused on supporting our employees and clients. As of today, most all rigs are operating. Assuming this remains the same, we anticipate a positive baseline of activity with upside driven by oil capacity expansion and strategic gas development. This momentum sends an encouraging signal as we look to further expand our Eastern Hemisphere operations. Our strong alignment with local operators positions us well for continued expansion. And, again, assuming there are no major rig activity or infrastructure disruptions, we expect our customers to scale up their activities heading into 2026, and we expect growing market adoption of our tools to make us the service company of choice in the region. As evidence of the traction that our tools have gained in the Eastern Hemisphere today, our wellbore optimization product line offering continues to benefit from the significant increase in utilization of Drill-N-Ream tools and our ClearPath Stabilizer technology throughout the Eastern Hemisphere. We expect this constructive trend to continue as rig activity in Saudi Arabia stabilizes and selective programs are reactivated, creating incremental demand tailwinds for our Eastern Hemisphere segment. Over the past 24 months, we have completed several strategic acquisitions, and even as market conditions have tempered some of the near-term upside, we have remained focused on disciplined integration and realization of targeted synergies. This has allowed us to strengthen Drilling Tools International Corp.’s foundation and position the company for meaningful financial improvement as activity levels rebound. I am encouraged by our team’s ability to make the best out of a challenging environment, and I firmly believe that this will set us up for future success. David will now take you through our results in greater detail and introduce our 2026 outlook. David? David R. Johnson: Thanks, Wayne. In yesterday’s earnings release, we provided detailed year-end and fourth quarter financial tables, so I will use this time to offer further insight into specific financial metrics. Wayne gave an overview of our full-year results in his opening comments, so I will provide some additional color on our fourth quarter results. However, just to echo Wayne’s comments from earlier, we are pleased to have achieved another record year for adjusted free cash flow. Even with the general industry and typical Q4 seasonal softness, we prioritized generating and preserving cash flow by managing cost and CapEx. We intend to maintain our capital discipline strategy in 2026 by driving operational efficiency across the business. As of 12/31/2025, we had $3,600,000 of cash and cash equivalents, net debt of $42,200,000, and a net leverage ratio of 1.1x, which is down slightly from 1.2x a year ago, despite taking on additional debt to fund the Titan Tools acquisition in 2025. Now turning to our fourth quarter results. We generated consolidated Q4 revenue of $38,500,000. Fourth quarter tool rental revenue was $30,400,000, and product sales revenue totaled $8,100,000. Net income attributable to stockholders for the fourth quarter was $1,200,000 or $0.03 per share. Q4 adjusted net income was $1,500,000 or adjusted diluted EPS of $0.04 per share. Fourth quarter adjusted EBITDA was $10,100,000, and adjusted free cash flow was $6,100,000. Our capital expenditures in the fourth quarter were $4,000,000. Looking at maintenance CapEx for the fourth quarter, it was approximately 10% of total revenue. And just as a reminder, our maintenance capital is primarily funded by tool recovery revenue, which keeps our rental tool fleet relevant and sustainable regardless of market trends. CapEx is just one component of our capital discipline strategy. We take a disciplined approach to all capital deployment, prioritizing opportunities that align with our capital allocation framework and support long-term value creation for shareholders. For example, we paid down $5,500,000 in debt in the fourth quarter and overall approximately $11,000,000 in 2025, bringing down our net debt to EBITDA leverage ratio to 1.1x. We have also been active in our share buyback in 2025, where we purchased approximately $660,000 of common shares averaging $2.17 per share. We remain focused on maintaining a strong financial position and will thoughtfully use our capital allocation levers as attractive opportunities arise. Looking at our geographic segment mix, we continue to benefit from our diversified geographic footprint and customer base, with 14% of our total Q4 revenue coming from our Eastern Hemisphere segment. This growth reinforces the effectiveness of our strategy and commitment to delivering consistent, high-quality performance across our global footprint, especially as we look ahead to a market rebound. As we disclosed in yesterday’s earnings release, and as Wayne alluded to earlier, we have released our 2026 full-year guidance ranges that reflect year-over-year growth at the midpoint. 2026 revenue is expected to be in the range of $155,000,000 to $170,000,000. Adjusted EBITDA is expected to be within the range of $35,000,000 to $45,000,000. Capital expenditures are expected to be between $818,000,000 and $23,000,000. And finally, we expect our 2026 adjusted free cash flow to range between $17,000,000 to $22,000,000. We have constructed these ranges with the assumption that activity will remain relatively flat in 2026 and improve slightly in the second half of the year. Regardless, we continue to believe that our established geographical footprint will provide a meaningful runway for growth as market momentum returns. That concludes my financial review and outlook section. I will now turn the call back over to Wayne for closing comments. R. Wayne Prejean: Thank you, David. We continue to make substantial headway on our synergy program called OneDTI. We have been able to align our operating divisions into integrated systems and processes as well as onboard new business units into our Compass platform to manage assets and transactions from our customers. This represents an important milestone for the company’s growth potential, as it streamlines workflows, enhances accountability, and materially shortens the timeline for integrating future acquisitions into the Drilling Tools International Corp. platform. We also remain active in evaluating additional M&A opportunities that align with our strategic and financial objectives. As we continue to thoughtfully scale our current operations, we believe Drilling Tools International Corp. is the preferred provider for downhole tool rentals supporting wellbore construction and casing installation. Despite the near-term softness we expect to occur within the first half of the year, our outlook for 2026 reflects not only the solid foundation we have established, but also our forward-looking commitment to operational excellence and delivering consistent results. We believe there are several potential catalysts across multiple geographies that offer upside potential later in the year, including rig reactivations in Saudi Arabia, incremental tenders in the broader Middle East, and increased project activity in select international markets where we have recently expanded our presence, among others. These are not built into our guidance but may materialize into areas of outperformance. Looking forward, I am optimistic about the momentum we are building across the organization and the attractive opportunities we see on the horizon. The investments made to date are beginning to gain traction and are positioned to drive meaningful results. We are confident that elevated demand for complex wellbore solutions should further reinforce the need for our differentiated technology and the value-added solutions we deliver to customers around the world. Our ongoing focus on generating shareholder value is supported by the prospect of a more favorable market backdrop emerging later this year. Finally, I want to address the conflict in the Middle East as it pertains directly to Drilling Tools International Corp. As of yesterday, our Middle East personnel were all accounted for, have sheltered in place per local government requirements, and are maintaining continuity with customers’ needs and supporting our operations. We have experienced minimal disruption to our ongoing business thus far. We do not have any American expat employees in the conflict zone, but we do have numerous expat employees from other nationalities who are based in the Middle East. We are diligently monitoring the situation and have launched our crisis response plan, which is providing resources to support our team members in the area. We are conducting frequent meetings, obtaining regular operational updates, and are maintaining communications with our personnel in the region. I want to thank every member of the Drilling Tools International Corp. organization for their continued commitment to working in a safe, inspired, and productive manner, with special thanks to those personnel who are in the Middle East for their continued support of our operations. Our thoughts are with you every day. Our employees’ commitment has been essential in navigating a constantly evolving environment and essential to the success and future growth we are building together. With that, we will now take your questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Thank you. Our first question comes from the line of Stephen Michael Ferazani with Sidoti. Stephen Michael Ferazani: Morning, everyone. Appreciate the detail and color on the call this morning. I also appreciate, Wayne, your message on Middle Eastern safety. I think that is certainly appreciated right now. Couple of really strong numbers that surprised me in the quarter. Wanted to get your thoughts and color around what drove it. First one, the big one was the EBITDA margin this quarter, highest in, it looks to us, like, in six quarters. Six quarters ago, the rig count was much better. What drove that really strong margin this quarter? You want to take that one, please? David R. Johnson: Yes. I think it was just a combination of, you know, we did not see all the Q4 typical seasonal softness in some of our numbers. Then we were further benefiting from some of the cost reductions that we did earlier in the year. So, kind of the combination of that, we had, you know, our product mix was a little bit different. Yes, just an overall good quarter compared to the rest of the year. Stephen Michael Ferazani: Anything specific one-quarter type mix here? Because your margin in the quarter was above the full-year guide for 2026 on the margin line. David R. Johnson: Yes. I think mainly it was a product sale impact. We had some additional product sale that is in a little bit better margin profile, especially on the lost-in-hole DVR type sales. That is driving improved margins there. So it helps support the overall quarter. But, generally, it was steady state, good performance overall. Stephen Michael Ferazani: Got it. And then all of your numbers came in at the, as you noted, very high end of your full-year ranges. The one that beat was adjusted free cash flow. It is a very strong free cash flow quarter. Anything driving that? And you put out really solid guidance for free cash flow again next year. David R. Johnson: Yes, Steve, I think that is a good point. We are definitely seeing kind of that durable free cash flow generation since going public. That was kind of our stated goal, focusing on the M&A front for growth and really demonstrating that we can generate that free cash flow. But typically, and we will see it kind of every year, where a lot of our CapEx is front-loaded in the year. So as we kind of cycle through those first couple of quarters, then I think we saw our third quarter was stronger than the first and second quarter, and then our fourth quarter was even stronger on the free cash flow side for that reason. Stephen Michael Ferazani: Got it. That is helpful. And speaking about free cash flow, your leverage now, I mean, you are barely above 1x. Great place to be. And if we are, theoretically, and I think you think that we are at a trough on your annual EBITDA or very close, by our model, your leverage goes under 1x next year. What is the thought here? What is M&A looking like? Are there opportunities? Would you still reduce debt further? Are you thinking about cash flow? R. Wayne Prejean: Well, we have stated in previous quarters and on previous calls, we have a healthy pipeline of M&A opportunities that we are constantly evaluating, and we will continue to look at the most accretive, most attractive strategic opportunities that are out there. Our use of funds as they flow will be debt service, M&A, some buybacks, but mostly, throughout 2025, we focused on integration and gaining efficiencies from what we acquired. So right now, we are probably looking at a number of opportunities, and they ebb and flow as the market dictates, but there are definitely still opportunities on the horizon. Stephen Michael Ferazani: Got it. That is helpful. And I saw, you know, just going through the new deck you put up, the guidance does show you expect Eastern Hemisphere share of revenue to be even higher next year if we have seen that steady growth. Can you talk about where the opportunities are in Eastern Hemisphere? Also particularly curious about your opportunities in APAC. R. Wayne Prejean: So, throughout, as we have integrated all of the product lines and all the business units and aligned our management team and sales team, they are all firing on all cylinders and doing a great job. So we are getting lots of opportunities throughout Africa with various products. We are moving products around many of the countries in the Middle East, and, despite the ongoing conflict in the Middle East, we are able to continue maintaining our customer support. Surprisingly, most everyone is still in operation. You have probably heard different news reports of different things and facilities and refineries, but drilling operations are still commencing without major disruptions to our knowledge. Then we also have our Malaysian entity up and running with our Asia-Pac focus. So that is starting to gain traction, and we are distributing a lot of our new technologies, such as our Drill-N-Ream, our deep casing products, and our ClearPath product lines, which was an acquisition of the ED Projects Group a year ago. So all of those things are starting to get traction in the Middle East and Asia-Pac. Stephen Michael Ferazani: Got it. That is helpful. What is implied in your guidance in terms of revenue per active rig in the U.S.? How are you thinking about that? I think a lot of us assume we are modeling in sort of a flat rig count January 1 to December 30. How are you thinking about that? Can you grow revenue per active rig in a flattish market? R. Wayne Prejean: We see it as, we model it as, a steady state with opportunistic realities where some of our new technology gains traction. Those things are evolving in different markets. So we think our opportunity to overachieve is as those new technologies gain more traction, that is where we will see our opportunity to increase over and above where we are today. But mostly, the market is a steady state environment. Stephen Michael Ferazani: Got it. That is helpful. Last one for me, and I know this is a totally unfair question, but I have to ask it anyway. In terms of, we are only a week in, but in terms of the Middle East developments we have seen so far, any thoughts? And we do not know how long or how this exactly plays out. How you are positioned one way or the other as this plays out, any thoughts? I know it is an unfair question. R. Wayne Prejean: Well, I will start with, if you will notice, our revenues are about 14%, as we have stated in here, and we hope that they will grow, but they are only—and the Middle East is a part of that 14% of Eastern Hemisphere. So it is still a smaller part of our overall revenue and earnings stream, but it is emerging and growing. It could be—how it is going to be affected is unknown today. All we know today is that things are still operating. I do not think anyone is sure of exactly what the impact might be. We do not have a lot of personnel scattered throughout. We have some personnel that are scattered throughout different parts of that area, and they are all safe and accounted for today and operating. So we are able to move tools about. We are able to support our customers’ operations. They are asking for support. So despite the noise and everything that is going on and the unknowns, what we know today, it feels like it is minimally disruptive. And I do not mean that to minimize the conflict and the impact of it, but, from a business point of view, so far, our team has performed just fantastic. We are operating off our COVID-style playbook of how to do crisis management and deal with remoteness and things like that. So a lot of lessons learned from that experience on how to operate remotely with our clients and coordinate logistics and things like that. All of our team is working well in that regard. Stephen Michael Ferazani: Got it. Okay. Thanks so much, Wayne. Appreciate it, David. R. Wayne Prejean: Thank you. Thank you, Steve. Operator: Our next question comes from the line of John Matthew Daniel with Daniel Energy Partners. Please proceed with your question. John Matthew Daniel: Hey, guys. Thanks for having me. Just three quick ones for you. Assuming this is a safe one here, but the revenue guidance you provided for 2026, I am assuming that was all created pre-Iran. Is that fair? David R. Johnson: Correct. John Matthew Daniel: Okay. And then, good job on paying down the $11,000,000 in 2025. Do you have an established goal for 2026? I mean, look at the free cash flow guidance, which is, say, $20,000,000 at the midpoint. Roughly, what would you envision as being allocated to debt reduction versus buybacks? R. Wayne Prejean: I think if you look at our historical paydown events, such as the one you just described, one could expect continued paydown, majority of the debt. Hopefully, we could probably accelerate that, but it will depend on the occurrences that are happening throughout the year. And as these events unfold, particularly the events in the Middle East, it will help us understand where we need to focus our efforts on investments. If the U.S. market picks up, we can dial that up. If we find that the conflict is less impactful and it returns to more normal, we can dial that up, and so on. So, as other parts of the world, the good news is we are spread out throughout and now established with infrastructure and capabilities in many parts of the world. We have a lot more diversification in how we can deploy our capital in meaningful ways across different geomarkets depending on where the needs are and the adjustments are made. John Matthew Daniel: Last one, and, again, recognizing we are like five days into this thing or whatever. But, yes, there is a little bit of turmoil, right? Just look at crude prices, market concerns, etcetera. R. Wayne Prejean: Sure. John Matthew Daniel: Wayne, the question would be, in a weird way, does this get you excited that there are going to be great opportunities to capitalize on the turmoil, or do you go more defensive? How do you think about just running the business the next few quarters as this is all playing out? R. Wayne Prejean: Well, John, it is a very dynamic and fluid situation because there are so many unknowns of how things will be impacted. Speculation is dangerous on my part, but we kind of feel like we are in a position to deal with the situation in multiple areas, as I just stated. So I think we are flexible with regard to the opportunity that may present itself as a result of this conflict. And when I mean that, I do not mean to diminish the impact of a war, but oil is a dynamic commodity. And so if there is a major supply disruption, someone else will fill that gap, and we are prepared to participate in where that activity may be. Our fleet is relevant and sustainable. We have the diverse geomarket exposure now with different technologies. So we are in a good position to deal with how this dynamically unfolds. John Matthew Daniel: Okay. Last one. I lied. I told you there were three; there are four. Just looking at the chart here at WTI, $88 right now. Brent, better. I mean, there has been a lot of pricing pressure for the service industry the last couple of years. I mean, things have changed. How do you even start thinking about how you are going to start your customer discussions given the backdrop where we are? R. Wayne Prejean: Sure. I mean, particularly in North America, there has been a meandering rig count, mostly meandering downward with capital discipline and the need for improved earnings. But our business has what we call a ceiling and a floor on pricing and how we participate in the market and how we provide our customers value. If the price is too low, no one will invest in it. If the price is too high, everybody will invest in it. So we feel like we are very efficient in the middle to upper tier of that range, participating with our clients. Now, how do we get OFS pricing up? I think it is just a matter of time, in my opinion, that people are going to have to reinvest in equipment, and that will drive the pushback on pricing reductions and get to a more neutral state and maybe upward in the future. And, of course, an activity increase will immediately create probably a stress point in the supply chain throughout the industry. I think we can all make that calculation. John Matthew Daniel: Thanks for having me, guys. Have a great weekend. R. Wayne Prejean: Thanks, John. Operator: We have reached the end of the question-and-answer session. Mr. Prejean, I would like to turn the floor back over to you for closing comments. R. Wayne Prejean: So, thank you, everyone. We had a good quarter and a good year, and we have a pretty positive outlook throughout 2026. But there are some challenges ahead of us, the conflict notwithstanding. We are prepared from a company point of view and our employee point of view, and we have a great customer base and good geographic diversity. We are executing well in all those markets. Thank you for your interest in Drilling Tools International Corp. We appreciate your time on the call. Operator: Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day.
Operator: Good evening, and welcome to Universal Music Group's Fourth Quarter and Full Year Earnings Call for the period ended December 31, 2025. My name is Nadia, and I'll be your conference operator today. Your speakers for today's call will be Sir Lucian Grainge, Chairman and CEO of Universal Music Group; Michael Nash, Chief Digital Officer; and Matt Ellis, Chief Financial Officer. They will be joined during Q&A by Boyd Muir, Chief Operating Officer. [Operator Instructions] As a reminder, this call is being recorded. Please also let me remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ from expected results, please see the Risk Factors section of UMG's 2024 annual report, which is available on the Investor Relations page of UMG's website at universalmusic.com. Management's commentary will also refer to non-IFRS measures on today's call. Reconciliations are available in the press release on the Investor Relations page of UMG's website. Thank you. Sir Lucian, you may begin your conference. Lucian Grainge: Many thanks, and thank you all for joining us on today's call. As you can clearly see from our results, last year was a very good year. Our artists, songwriters and labels once again wrapped up record-breaking successes. We made excellent progress across our strategic initiatives and continued our long uninterrupted streak of strong financial growth. I'm pleased to report that in 2025, both revenue and adjusted EBITDA grew by nearly 9%. I must begin by highlighting the creative excellence and commercial success of our artists and songwriters. Their extraordinary music continues to shape culture across the world. Every year, the IFPI, the Recording Music Industries Global Trade Association, reveals the world's top-selling artists for 2025, 9 out of the top 10 were UMG artists with Taylor Swift at #1. As you let that astonishing fact sink in, let me throw in another one. 2025 was the third year in a row that we have represented 9 out of the top 10 best-selling artists on the planet. The only recording artist whom we did not represent on recorded is Bad Bunny, and he's represented by our Universal Music Publishing division. No other company has ever come even remotely close to UMG's outstanding performance year after year in developing new artists who go on to become global brands. A quick look at the 2025 lists across major platforms reveals our remarkable industry-leading position. This slide highlights just a handful of them. Our extraordinary momentum continues to build with a string of recent #1 albums across genres and geographies from Taylor to Olivia Dean, King & Prince, Mrs. GREEN APPLE, both from Japan, Stray Kids, J. Cole, and I could go on and on. As to the critical acclaim and awards, I'll briefly mention how our artists and songwriters won big at this year's Grammy's. UMG artists and songwriter, Kendrick Lamar was the night's biggest winner with 5 awards, including Record of the Year. Kendrick is now the Grammy's most decorated rap artist of all time with 27 awards. Olivia Dean was named Best New Artist, the fourth time in the past 5 years that a UMG artist has received that honor. That also is an unprecedented achievement. Billie Eilish, Lola Young, Lady Gaga, Jelly Roll, Leon Thomas and UMPG's, Bad Bunny were amongst many other winners. It was also an incredible night at last year's Brit Awards -- sorry, last week's Brit Awards at the weekend, where UMG swept the major categories. Olivia Dean took home 4 awards, including Artist of the Year, Album of the Year, and Song of the Year. Other winners include Sam Fender, Lola Young, Dave and Jacob Alon. The Olivia Dean success is an indication how our U.K. company is developing new artists and once again delivering them to the world across all geographies. The demand for our music continues to grow. The subscriber numbers increase, so does the consumption. Industry data from Luminate shows that on-demand audio streams topped 5.1 trillion last year, an increase of nearly 10%. We unequivocally believe that the growth of the business will continue, hitting the 1 billion subscriber mark in the next few years. Our multipronged strategy to capture this growth, of course, includes our excellence in artist development, along with continued implementation of our Streaming 2.0 initiatives. But we will also make bold moves in 4 key areas of the strategic plan, each of which will create meaningful monetization opportunities, driving growth across an entire interconnected ecosystem, and that word interconnected is very significant. So today, as I want to share with you the progress we're making in those 4 areas: expanding our presence in label and artist services; accelerating our efforts in high potential markets; strengthening our direct-to-consumer and superfan initiatives; and adding to our growing portfolio of responsible AI partnerships. The first critical area is our services to independent labels, entrepreneurs and artists around the world, one of the fastest-growing areas of the business. Those labels operate in a diversity of markets, genres and languages and generate meaningful revenue from artist rosters of varying sizes. As much as they differ, they share a common desire to partner with a company that provides them with the best and widest range of services. In 2021, we established Virgin Music Group to expand our expertise and resources in this fast-growing sector, which will be further accelerated by the recent acquisition of Downtown Music. Matt will go into detail about Downtown's financials later. But for now, I will say that the combination of Virgin Music and Downtown will create a global end-to-end solution designed to meet the evolving needs of independent artists, entrepreneurs and rights holders at every stage of their development. The combined company will offer a broad, more flexible suite of services, ranging from high-touch to self-service platforms, including digital and physical distribution, marketing, business intelligence, neighboring rights, synchronization, royalties as well as publishing rights management. Our last acquisition of this magnitude was in 2011, which, of course, was EMI. At that time, we saw the value that others did not and doubled down on the traditional A&R and catalog business. Today, 15 years later, that acquisition is universally acknowledged as one of the most successful and strategically important in the history of the music industry. I firmly believe that our acquisition of Downtown will be as transformational. It creates a scalable and profitable engine of growth that also elevates UMG's core label, publishing and superfan businesses, enabling us to better cover the entire music industry. It is no small matter that Downtown also expands UMG's global footprint, collectively serving more than 5,000 business clients and more than 4 million creators in 145 countries. That last point leads us to the second critical area of our strategic plan, our growing geographical expansion into high potential markets. UMG's approach is to create a compelling array of business solutions that offer multiple ways for artists, labels and entrepreneurs to engage with us. Always in compliance with our strict investment criteria, we partner with the best of them and then deepen the partnership over time. Here's an example of our strategy in action. In India, Universal Music had operated a multi-label structure for years, already offering artists a compelling choice of brands. Earlier this year, we supplemented that choice by investing in Excel Entertainment. Excel is the leading film and digital content studio in a country where original soundtracks remain at the heart of the fast-growing music market. The deal gave UMG global distribution rights to Excel's future soundtracks, while our Publishing division became Excel's exclusive music publishing partner, and the 2 companies will launch a dedicated Excel Music label. On top of this, through Downtown and Virgin Music Group, we now service approximately 100 clients in the region, including new deals with Punjabi label, Jass Records and South Indian label, Millennium Records. So when you take a step back, you can see how UMG has built multiple points of entry into the Indian market. Each of our business units operate with its own unique creative and commercial expertise, but also has access to UMG's powerful global systems and resources. As a result, our ability to capture growth efficiently is increasing. This is an approach that is working well in many other dynamic, highly populated markets, including China. Moving on to our third key strategic effort. I'm very bullish about superfans, as you all know. Given the enormous demand for great products and exciting experiences, we believe this segment is massively undermonetized. Our own D2C business has grown to 1,600 online stores and generates hundreds of millions of dollars in revenue. This only scratched the surface of our potential. We will further scale our D2C business by stimulating an entire category of third-party superfan platforms, each with its own distinctive approach and model. These will operate alongside the premium tiers being developed by the traditional DSPs as well as what we're creating and how we're creating an ecosystem in which special events, experiences and products will entice superfans in both the virtual and physical worlds. As more common competition develops, more innovation will result. Connectivity to fans will increase and the opportunities to drive monetization will continue to multiply. We recently announced 2 partnerships in this space. The first is with Stationhead, a live music segment platform that connects artists and fans through real-time listening experiences, community interaction and integrated commerce. With over 250 UMG artist events in 2025, Stationhead contributed billions of premium UMG artist streams on subscription platforms across millions of active users. Their week of release listening parties contributed to 11 #1 albums across the entire industry. They've executed very successful fan campaigns for UMG, artists such as Sabrina Carpenter, Billie Eilish, Ariana Grande, KPop Demon Hunters, Nicki Minaj, Olivia Rodrigo and many others. The second partnership is with EVEN, which provides super fans with early access to music, exclusive content and community features. Interscope artist, J. Cole, for example, used EVEN for multiple direct-to-fan campaigns, including the 10th anniversary of Forest Hills Drives and the pre-release strategy for his latest album. Both projects leveraged EVEN's white label solution to reach hundreds of thousands of fans and sell millions of dollars of physical product. The EVEN campaign was a significant factor in The Fall-Off, his new album debuting at #1 in the U.S. We don't need to develop a new platform, but both Stationhead and even integrate directly into UMG's current architecture and its direct-to-consumer architecture, capturing fan data and fostering a deeper relationship between artists and fans. Superfan opportunities are rapidly evolving, and we will be right there at every step of their evolution. This evolution is being supercharged by AI, which leads us to, obviously, the fourth focus of our strategic discussion. Our embrace of responsible AI technologies continues to be very aggressive. We're forging partnerships across a spectrum of artist creation and fan engagement initiatives. And there are 2 separate initiatives. I'm very aware that a large swath of the investment community looks at the intersection of AI and media and sees only some of the risks. I want to be very clear, we fundamentally disagree with that view. We believe AI represents an unprecedented commercial opportunities for UMG and our artists in both the near and the long term. We're working tirelessly to shape the business models and the legal and legislative frameworks that will form the foundation of a responsible AI ecosystem. I encourage people to spend time to really understand the work that's being done and the opportunities that lie ahead. Personally, I've never really been more energized about the possibilities that we are pursuing. And once again, we face another exciting transformation. Here are just a few of the things that I'm excited about. On our last call, we discussed our agreements with Udio and Stability AI. Not long after that, we announced our licensing agreement with Klay Vision. Klay's large music model is trained entirely on licensed music. It will evolve AI experiences for superfans while respecting the rights of artists and songwriters. We're excited about this company's vision and applaud their commitment to ethically -- ethicality in generative AI music. In December, we then revealed we're also collaborating with Splice, the world's most popular music creation platform. Together, we are building a road map for the development of commercial AI tools rooted in creative control and sonic excellence. Last month, we unveiled the first of its kind alliance with NVIDIA, the world leader in AI computing. Our shared ambition is to transform and enrich the music experience for billions of music fans around the world. This collaboration will cover everything from artist tools to music discovery to fan engagement. NVIDIA articulated the relationship perfectly when they said, we're entering into an era where a music catalog can be exploited like an intelligent universe, conversational, contextual and genuinely interactive, and we'll do it the right way, responsibly with safeguards that protect artists work, ensure attribution and respect copyright. How phenomenal. Our work with NVIDIA will be a multiyear partnership and like our other AI initiatives, create significant win-win potential in market-led solutions. Our strategy for these AI deals is informed by a significant amount of consumer research, both our own and third party, we're just not sticking our finger in the wind. Our insights team recently conducted a global study on consumer attitudes towards AI and music. The key takeaway is that consumers want AI driven by human intent or AI as an enhancement of and not as a replacement for human creativity. Plus consumers are asking for transparency with respect to how AI is used in the creation of music. This research underscores our belief that AI isn't just an incremental revenue opportunity. It's going to introduce entirely new formats. The superfan AI experiences I mentioned earlier are just the beginning. We foresee entirely new AI formats that will offer fans greater personalization, hyper-personalization and social expression through artist-centric music experiences. Given the high level of interest in AI from both the creative and investor communities, I've asked Mike Nash, who you know well, our Chief Digital Officer, to present more on this in more detail later on this important topic. So that we can see how excited we are. What I've covered in my remarks today is only a fraction of what we're executing every day at UMG. With an artist roster and a music catalog that is the envy of the industry, we're also the biggest driver of new subscribers to the DSPs. And because we've earned a unique level of credibility and influence working with both established and emerging innovators, we continue to expand our already broad portfolio of revenue streams. Our vision is a stronger, more connected and ever-growing ecosystem that is attracting new entrepreneurs, expanding our full global footprint, accelerating our D2C business creating new products and experiences and leveraging AI to take music to places fans can barely imagine, and in ways in which they can barely imagine. In short, we're designing and building a strong foundation for a profitable and exciting future for our artists and our songwriters for our company, for the industry, and obviously, for our shareholders. We are extremely confident about the path ahead and look forward to a really strong 2026. Now on that basis of excitement and optimism, let me hand it over to Michael, and then we'll hear from Matt. Thank you. Michael Nash: Thank you, Lucian. I'll take a few moments to discuss in more detail how we're advancing the best interest of our artists and their fans with our AI strategy while promoting innovation. I'll do that by addressing 2 topics that are critical to better understanding the risks and benefits of AI for our business. The first topic is the perception of risk of AI revenue dilution and the thoughtful measures we've taken to neutralize any negative impact. The second topic relates to consumer receptivity to responsible AI innovation. First, misunderstandings have resulted from anecdotal press reports that AI-generated content has somehow overtaken the charts. Nothing could be further from the truth. Stories about #1 AI songs have been reported based on digital download charts where 2,500 units of a $0.99 legacy product can manufacture a chart #1. As you can see from the data on this slide, a handful of anecdotes have been completely over-extrapolated. We assembled this top 10 of chart debuting AI acts as identified by Billboard and Luminate. Consumption of this top 10 has been immaterial. The most streamed act didn't break into the top 7,000 globally in 2025, and the #10 act didn't break into the top 92,000. In the aggregate, the most prominent AI content barely registers even in the leading market for this English language repertoire, totaling less than -- excuse me, totaled less than 0.015% of the streams of the top 50,000 artists in the U.S. last year. Some commentators say, "That's right now. What about the future?" We don't have to theorize about the future of AI saturation as it's become a marketplace reality with 60,000 AI tracks being uploaded a day at present. What impact is any streaming of these tracks having on our revenue? Most of this content is AI slop or fraud botter associated with royalty diversion schemes. 85% of AI streams on one representative platform, Deezer, were identified as fraud and then excluded from royalty pool allocation. Apple recently reported that its efforts to address the flood of AI uploads included exclusion of 2 billion fraudulent streams last year. Platforms like Spotify have also outright removed tens of millions of spamming AI tracks from their services. So despite the huge volume of AI uploads, the aggregate organic consumption of AI content by actual consumers is less than 0.5% based on the best available data. That's consumption. What about revenue? It's important to take account -- it's important to take into account all 3 aspects of our deal to protect us from a revenue perspective. In addition to, one, anti-fraud provisions, there's two, demonetization of generic AI slop under UMG artist-centric agreements; and three, anti-AI dilution provisions in numerous UMG agreements we previously announced and discussed. Anti-AI dilution stipulations generally mean that pure AI-generated content, similar to other nonmusic content, is removed from the calculation of share of streams by the DSP for purposes of determining our artist royalties. Therefore, while we remain vigilant in addressing infringing AI services, we're seeing no indication that AI royalty dilution is a material issue for UMG from a revenue perspective. When you take into consideration the significant opportunities to commercialize AI innovation through new products and services that Lucian outlined and the empirical data demonstrating insignificant and comprehensively mitigated risk, thoughtful analysis will conclude that the impact AI will have on our business will be overwhelmingly net positive. The data on this slide makes it very clear that consumers are rejecting AI slop and fakery. What do they want from AI innovation, is applied to their music experience instead. That's the second topic I'll address with another set of data points. As Lucian noted, UMG conducts rigorous consumer research on strategic topics. Related to the highlights he covered, here, you see some key findings that emerged from a survey of 28,000 consumers conducted in 13 countries, representative of the global music marketplace. Use of AI is fast becoming mainstream with 54% of global consumers expressing familiarity. Not surprisingly, the predominant use case is search. And among those users, nearly half report conducting music-based queries such as what to listen to, what merch is available from my favorite artists, what concerts are near me. We see this as an early indication of the promise of AI that it holds for elevating discovery, recommendation and contextualization as AI becomes more integrated into music services. The vast majority of consumers continue to prioritize human artistry. They want clear disclosure in AI labeling and most seek transparency, safeguards and ethicality in AI music development and deployment. Confirming what the consumption data told us on the prior slide, by an almost 7:1 ratio, consumers express disinterest versus interest in so-called AI artists. In fact, over 2/3 of consumers want to be able to block purely AI-generated music entirely. In the U.S., where AI awareness is highest, nearly 3/4 of consumers want to block AI button. With this backdrop of attitudes and preferences, let's focus on music applications. Roughly half of consumers under 45 expressed interest in AI for music, predominantly interest in AI for enhancement of music experience, meaning deeper personalization of the experience and customization of music, restoring, remixing and reinterpreting favorite songs and interactive and co-creative music experiences. These emerge as key triggers of consumer interest and perceived value. The expression of interest translates into some of the most important components we are focused on, with the partners Lucian highlighted, in development of innovative new AI music services. What consumers are rejecting and what they want to embrace will define the business landscape of significant opportunity for UMG moving forward with AI innovation. And with that, I'll turn it over to Matt. Matthew Ellis: Thank you, Michael. 2025 was another excellent year for UMG, both creatively and commercially. Lucian outlined the strong sustained performance of our artists, songwriters and company and how our multipronged strategy will continue to propel our growth. Before I get into the details of our financials, I want to address our proposed U.S. listing. With the uncertainty in the market creating meaningful dislocation in valuations, our Board does not see this as the right time to move ahead with the listing. Should that change, we will update the market. Turning to our results. Once again, in 2025, we achieved healthy growth on both the top and bottom line. As always, we present our results on a constant currency basis. FX movements impacted 2025 revenue growth rates by 3%. And based on currency markets, we expect 2026 to include a 4% to 5% headwind to revenue. For the year, in constant currency, revenue grew 8.7%, which was more than 1 point of acceleration above the previous year's growth rate, and adjusted EBITDA grew 8.6%. This resulted in an adjusted EBITDA margin of 22.5%, in line with the prior year. Cost savings and operating leverage helped us maintain margins for the year despite headwinds from revenue mix and repertoire mix, cost pressures in our merchandising business and incremental overheads from business combinations. 2025 adjusted diluted EPS grew to EUR 1.03, up from EUR 0.96 in 2024. We remain on schedule with our EUR 250 million cost savings program, which began in 2024. We achieved our planned EUR 90 million in cost savings in 2025, including the expected EUR 40 million in savings in the second half of the year. We continue to expect that an incremental EUR 40 million to EUR 50 million in Phase 2 savings will be realized in 2026, with the remaining EUR 35 million to EUR 45 million benefit -- to benefit 2027. Before turning to the results for the quarter, I'd like to mention certain items that impact the comparability of our results versus the prior year. This detail is laid out on the slide you see in front of you as well as in our press release. First, the fourth quarter of 2025 includes a legal resolution contributing revenue of EUR 45 million and EBITDA of EUR 26 million. This is booked in downloads and other digital revenue in Recorded Music. We call out settlements for purposes of comparability. But as a reminder, legal recoveries are common in our business and represent real revenue earned from the copyrights we own. In fact, you may recall the fourth quarter of 2024 included 2 legal settlements. Together, they accounted for EUR 40 million of revenue and EUR 29 million of EBITDA and were booked primarily in Recorded Music licensing with a small amount in Music Publishing. In addition, the fourth quarter of 2024 included catch-up income of EUR 20 million from a DSP partner related to new product rollouts in the second and third quarters of 2024. This was booked in Recorded Music subscription revenue and had associated EBITDA of EUR 12 million. Since its revenue related to activity in the second and third quarters of 2024, it does not impact comparability for the full year results. So with that out of the way, let me turn to the quarterly results, where I will also provide figures adjusted for the items impacting comparability. In the fourth quarter, total revenue grew 10.6% in constant currency. Adjusted EBITDA grew 6.4%, while adjusted EBITDA margin of 22.5% was 70 basis points lower than the prior year quarter. Excluding the items impacting comparability in both years, total revenue grew 11.2% and adjusted EBITDA grew 8.6%. Margin was down 40 basis points to 22.0%, primarily due to headwinds from revenue mix and repertoire mix in Recorded Music and cost pressures in our merchandising business. Now let me turn to the results from each of our business segments. Recorded Music revenue grew a very strong 13.9% for the quarter and 9.3% for the year. Excluding the items impacting comparability, Recorded Music revenue grew 14.4% for the quarter and 9.1% for the year. Recorded Music adjusted EBITDA grew 9.6% for the year. Excluding items impacting comparability, adjusted EBITDA grew 9.7% in 2025 and adjusted EBITDA margin expanded 20 basis points to 25.5%. The benefit of cost savings and operating leverage more than offset margin headwinds from repertoire mix, outsized growth in lower-margin physical sales and incremental overheads from business combinations. The margin pressure from repertoire mix includes strong growth in Virgin Music, which has a different business model and margin structure than our traditional frontline label business. Looking further at Recorded Music revenue, subscription revenue grew 7.7% for the quarter. Excluding the DSP catch-up income in the fourth quarter of 2024, subscription revenue grew 9.6% for the quarter, largely thanks to continued healthy subscriber growth at many global, regional and local DSP partners. 6 of the top 10 markets, including the U.S., saw high single-digit or double-digit subscription revenue growth. The acceleration in subscription growth in the fourth quarter was primarily driven by retail price increases in some smaller markets, which more than offset minor 2024 price increase benefits we have now begun to lap. Subscription revenue grew 8.6% for the year, not very different from the rate of growth seen in 2024, even with a lower contribution from pricing and encouraging result as you look forward to the benefits still to come from our new Streaming 2.0 deals. 2025 growth did include an approximate 1% benefit from various acquisitions. We expect 2026 subscription revenue to benefit from improved wholesale rates in these agreements with the benefits layering in throughout the year. Ad-supported streaming revenue grew 9.3% in the fourth quarter and was up 4.7% for the year. Stripping out some contractual benefits in the quarter, underlying growth was mid-single digits and was driven by slightly better performance of several key platform partners. Physical revenue grew 21.3% in the fourth quarter and 11.4% for the year. The strength in the fourth quarter was largely driven by vinyl sales of Taylor Swift, The Life of a Showgirl, which drove outsized direct-to-consumer growth in the U.S. and Europe. License and other revenue also performed well, up 18.1% in the fourth quarter and 11.0% for the year. Excluding the legal settlements in the prior year, license and other revenue grew 26.8% in the quarter and 13.6% for the year. In addition to underlying licensing growth, the quarter benefited from strong live events and other related income, primarily in Japan, as well as from a compensatory payment as part of a strategic licensing agreement with an AI music platform. Turning now to Music Publishing. Revenue grew 1.4% in the quarter, or 2.8% excluding the prior year settlement referenced earlier. The slower growth in the quarter was due to the timing of collections from certain societies and other sources, which helped results in the fourth quarter of 2024. Underlying growth in the business remains healthy. While the growth rates vary, Music Publishing's reported revenue by quarter in 2025 was much more consistent than 2024. The performance of our publishing business is better viewed on a full year basis. In 2025, Music Publishing revenue grew 9.3%, or 9.8% excluding the prior year settlement. The strong Music Publishing growth for the year was fueled by strength in digital and synchronization revenue, while performance and mechanical revenue also grew. The growth benefited from the inclusion of Chord and a major television studio business win in this year's results, and we have now lapped the inclusion of both of these items. Music Publishing adjusted EBITDA grew 10.0% for the year or 10.5% excluding the items impacting comparability, and adjusted EBITDA margin expanded 20 basis points to 24.3%. Moving to Merchandising. Revenue was flat both in the quarter and for the year as this is a transactional business with release and tour schedule-driven volatility. In the fourth quarter, growth in touring and direct-to-consumer revenue offset lower retail sales. Merchandising adjusted EBITDA for the year declined 61% due to higher manufacturing and distribution costs driven by both product mix and broader cost pressures. We are continuing to take steps to improve the profitability of our merchandising business, including investing in our D2C business and working to reconfigure our manufacturing supply chain. Net profit for 2025 amounted to EUR 1.53 billion compared to EUR 2.09 billion in 2024, resulting in earnings per share of EUR 0.84 compared to EUR 1.14 last year. The decrease in net profit in 2025 was due to a smaller increase in the valuation of investments in listed companies, which increased EUR 283 million in 2025 compared to EUR 1.2 billion in 2024. Net profit included the EUR 227 million in noncash share-based compensation expense for 2025 compared to EUR 329 million in 2024. We expect a similar level of share-based compensation expense for 2026. In addition, net profit reflects restructuring costs of EUR 95 million in 2025 related to our strategic organizational redesign as well as EUR 45 million of costs related to our U.S. listing and certain M&A advisory costs compared to EUR 169 million of restructuring costs in 2024. Adjusted net profit grew 7.0% to EUR 1.91 billion in 2025, resulting in adjusted diluted EPS growth of 7.3% to EUR 1.03 compared to EUR 0.96 in 2024. In line with our commitment to pay a dividend of at least 50% of our net profits as adjusted for certain noncash items, UMG has proposed a final dividend for 2025 of EUR 514 million, or EUR 0.28 per share. If approved at our AGM, this would bring our full year dividend to EUR 0.52 per share, in line with our 2024 dividend. Before I turn to cash flow, I'd like to take a moment to talk about the importance of our long-term minded and financially disciplined reinvestment in our business. With our focus on long-term value creation, we continue to reinvest in the healthy growth we see enduring in our business for years to come. This could take a number of forms. For one, it, of course, includes signing new artists and re-signing, broadening and extending our relationships with existing artists. It includes investing in our infrastructure and technology to maximize opportunities in an evolving landscape, for example, around AI, data and analytics, direct-to-consumer and superfan efforts. It includes the addition of music and publishing catalogs to our best-in-class collection. And it also includes M&A as we strengthen our presence in high-potential music markets and expand our independent label services businesses through Virgin Music Group. I'd like to take a minute to speak about the re-signing of artists and specifically royalty advances. As a reminder, advances are recoupable against artists' future royalties. Cash royalties are paid once an advance is fully recouped. There's a very low level of risk in advances to our most established artists, given that we have a long history of how they have performed, clear visibility of the returns and a unique understanding of where opportunities exist to expand our partnership beyond recorded music or music publishing rights. Further, deals are most often structured to extend until advances are recouped, giving us added protection. The advances are normally recouped not just through the future releases from our artists, but also the catalog of the prior work that audiences continue to engage with. Our spend on advances is a strong reflection of the health of our business. We have an unprecedented roster of the world's best artists, which continues to expand. And we expect continued healthy growth in the monetization of our robust catalog of songs and recordings. In 2025, we proactively extended and expanded deals with some of our biggest recording acts and songwriters as we expect to do in 2026 as well. We view the successful long-term relationships with our superstar artists and songwriters as the truest reflection of the value UMG provides them. In many cases, these artists are not only extending their existing partnership with UMG, but broadening into new areas where they haven't historically worked with us. It's important to recognize that advances in 1 year don't typically relate to revenue in that particular year, and recoupment is not necessarily associated with advances made in the same year. Therefore, it's difficult to draw any meaningful conclusion from looking at net advances in a given year or from advances as a percent of sales. Looking over a longer period allows for a more meaningful analysis, so consider this view of the past 6 years. Between 2019 and 2025, gross advances grew at an 8% CAGR. During the same time frame, UMG's revenue grew by 10%, and adjusted EBITDA improved 14%. In combination with the other areas of investment I mentioned, such as accelerating our investment in Virgin Music and expanding our growth in high-potential markets, we have put in place a EUR 1 billion bridge facility to help fund this investment cycle. With the underlying growth in our EBITDA, our leverage remains unchanged at 0.9x as of December 31, 2025, and we are committed to maintaining our current credit ratings. UMG is the company that is today due to the consistent investment in the future that Sir Lucian and the team have made year after year. We remain financially disciplined and are best positioned to assess and value any music assets in the market. The level of investment in our sector by nontraditional players in recent years shows the conviction that others have about the future of music, and we couldn't agree with them more. Our optimism about the future means that we intend to continue our disciplined investing to ensure that UMG remains the industry leader. Now let me turn to free cash flow. In 2025, our net cash provided by operating activities before income taxes paid was EUR 2.14 billion compared to EUR 2.10 billion in 2024. As I mentioned, 2025 included a step-up in royalty advance payments related to the timing of major artist renewals. Royalty advance payments, net of recoupments, amounted to EUR 402 million in 2025 compared to EUR 186 million last year. Income taxes paid increased to EUR 403 million from EUR 349 million in 2024, and net interest and other financing activities was EUR 90 million compared to EUR 70 million in the prior year. Free cash flow before investing activities amounted to EUR 1.6 billion in 2025, similar to '24. Conversion to free cash flow before investments was 55% of adjusted EBITDA. While this is at the lower end of our historical range, it reflects the variability of the timing of artist advances, which I discussed the importance of a moment ago. This significant cash generation allowed us to continue our long-term investment in the business. We spent EUR 854 million on investments in 2025, including on CapEx, catalogs and other strategic acquisitions, compared to EUR 1.1 billion in 2024. Free cash flow amounted to EUR 702 million compared to EUR 523 million last year, driven by the strong cash generation of the business and lower level of investments year-over-year. To give you a bit more color on our investments, in 2025, we spent EUR 280 million on catalog acquisitions, net of divestments of intangible assets, similar to our net spend of EUR 266 million in 2024. The divestments included catalogs transferred to Chord as well as other intangible sales. We spent EUR 195 million on CapEx and other intangible asset investments, which mostly includes CapEx, like software investments, compared to EUR 183 million in 2024. We expect CapEx to be EUR 100 million to EUR 200 million higher in 2026 due to real estate projects in a number of our key locations. The remainder of our other 2025 investment spending of EUR 379 million focused largely on deals which push forward our strategic initiatives, including deals in Thailand, Vietnam, Indonesia and Japan as well as certain superfan initiatives. We also used EUR 104 million on further funding for Chord. This number will obviously be higher in 2026, with the inclusion of the Downtown and Excel investments, together with activities still to come during the year. Before we move to Q&A, I wanted to take a moment to comment on our recently closed Downtown acquisition. For purposes of comparability, we plan to break out quarterly revenue and EBITDA for Downtown in 2026. To give you a sense of the scale of their business, in 2025, Downtown's unaudited results show revenue of EUR 891 million and EBITDA of EUR 40 million. With the strong 2025 results, we paid a 17x 2025 EBITDA on a pre-synergy basis and expect the post-synergy multiple to be closer to 13x. We're very excited to welcome Downtown to the UMG family and are encouraged about the future for Virgin Music Group. In summary, 2025 was another year of strong financial, strategic and operational performance and provides us with the optimism for the opportunities ahead of us in 2026 and beyond. And with that, Sir Lucian, Boyd Muir, Michael Nash and I will now take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] The first question goes to Omar Mejias of Wells Fargo. Omar Mejias Santiago: Maybe first on subscription growth. You've now delivered subscription growth of 8-plus percent over the past 6 quarters with little to no material benefit from pricing, and now growth is approaching double-digit levels. With Streaming 2.0 agreements kicking in and DSPs implementing price hikes, are there any offsetting items that would prevent subscription growth from further accelerating over the next couple of quarters? Just trying to get a better understanding on some of the puts and takes impacting growth going forward. Matthew Ellis: Thanks, Omar. Let me start with that, and then Michael will add some color commentary as well. So thank you for pointing out the strong growth we've had for 6 quarters now, over 8%, as you say, without really the benefits of Streaming 2.0 benefits kicking in. In terms of any offsetting items, of course, the only thing I'd refer to is, as I said in my prepared remarks, we had a small benefit last year from some of the companies we added. But we expect to see the pricing changes kick in during the course of 2026. You won't see the full effect come in all at once as of January 1. But as you say, we're excited that we've created this level of momentum as we now come into this new period of time. So with that, Michael, I'll let you add. Michael Nash: Let me just add, referencing Capital Markets Day, we provided a framework for thinking about the Streaming 2.0 deals that we were looking to implement. We've now announced 3 of those Streaming 2.0 deals. As Matt said, we're looking for the benefits from the rate rises to start to impact the results. And I would still reference the 8% to 10% CAGR midterm guidance that we gave you for the period from 2023 to 2028. That's the target that we're delivering to. We would be delighted if we had opportunities to accelerate. But at this time, I would just focus on the fact that we established a game plan, we're executing the game plan, and we expect to be able to continue to deliver to the targeted guidance. Operator: The next question goes to James Heaney of Jefferies. James Heaney: Can you just talk about the strength that you saw in streaming revenue in the quarter? How much of that do you think is overall improvements to the ad products at the DSPs versus just general ad market strength? Anything to parse out there would be helpful. Matthew Ellis: Yes. Thank you for the question. As I mentioned in the remarks, we have a diversity of partner services and formats. And every quarter, we see some differences in the comps related to different deal terms and timing of renewals. About half of the growth in 4Q is actually due to a contractual benefit that came through. I think if you look at the low to mid-single-digits underlying growth posted in prior 3 quarters, that gives you probably a better sense of where the -- as we think about that revenue stream going forward there. So certainly enjoyed the jump up there in the fourth quarter, but would expect something more in line with prior quarters going forward. Michael, you can talk a little more about our ongoing efforts in that space. Michael Nash: Yes. Moving forward, we do continuously urge caution in revenue growth expectations here as we have reminded you all on these calls over the last several quarters. But we remain highly focused on driving growth over the midterm. And what we reflect on as we look at market evolution is, there is a secular migration of advertising spend from analog to digital. We see a focus on video and social as being very attractive categories to be recipients of that spend. We believe in working with our partners on better monetization of ad-supported listening, the increased engagement of social video platforms, and we do expect to see sustained growth over the midterm in ad-supported. Operator: The next question goes to Julien Roch of Barclays. Julien Roch: Two questions for Matt, if I may. On catalog acquisition, you did EUR 280 million, which was higher than I thought as my understanding is that Chord Music would do some of the catalog acquisition that you had done directly in the past. So could you give us an indication for catalog acquisition in 2026? I understand it depends on the opportunity, but some indication would be useful. And then you had a whole speech about net content investment in artists, how it comes with positive returns. But you also said that '26 would see an elevated level like 2025. So is the interpretation that the '26 level will be broadly around the EUR 400 million of '25? Is that the right interpretation of what you said? Matthew Ellis: Thank you, Julien. Thank you for the question. So look, '26 advances will depend on when certain artist deals close. But it's really not surprising that in a growing industry where royalties are increasing, that advances would also be increasing. So as I mentioned earlier, since 2019, advances have grown by an 8% CAGR and revenues have grown by 10%. So you can see certainly those things are moving together. And just based off of the -- both the roster of artists that we've had for a while, and you heard from Lucian's comments, the success we've had with new artists again in 2025, as shown at the 2 award shows over the past couple of weeks, that we continue to bring more successful artists into the roster, and that's going to continue to drive advances that we pay out and also recoup again. So we'll wait and see which deals close during the course of the year to see where that goes, but I actually see increases in our advances outstanding as a sign of a healthy growth in the industry going forward. In terms of expectations around catalog acquisitions in 2026, and Boyd, maybe you can jump in on this one as well. Again, it's a little bit of very early in the year here, and we'll see what comes out. We're excited about the progress that Chord has made as they continue to acquire catalogs that we work closely with them. As I mentioned in my remarks, we had not only our investment -- our initial investment in them in 2024. We made an incremental investment last year because they are continuing to find good catalogs to invest in. And we're happy to partner with them and expect to continue to see strong volumes of catalog transactions, and we will be in our fair share or more of those, I'm sure, as the year goes on. Boyd Muir: Julien, I mean, just to add to what Matt said, we've got very clear -- if you look to the priorities that -- the strategic priorities that Lucian ran through, clearly, aligning ourselves in the growth markets to a similar market share position as we have in the more developed markets is incredibly important, particularly as we see the increasing number of subscribers being added into those growth markets. So we've stated that as our objective. One aspect of this is clearly is M&A. It's all local language. The deals are all relatively small. But over the last 3 years, we've acquired 18 businesses in these growth markets, and we're looking at -- we have a pipeline of deals that we're working on at the moment. And just similarly on Chord, I mean, Chord has performed very well, 20 catalog acquisitions and it's basically its first full year as being part of the -- or be associated with Universal Music. And also, what is good is that their ability to attract long-term time horizon investors has been very strong in 2025. So I think we're very positive about where we are with Chord. Operator: The next question goes to Peter Supino of Wolfe Research. Peter Supino: I wanted to ask you a question at the intersection of investment and growth. As your cash investment pace normalizes in the '27 or 2028 time frame as contemplated in your Capital Markets Day, can Universal still maintain a 7% like sales growth rate, which was the view expressed at that time? Or is that a growth rate which includes the normalized benefits of heavy acquisitions like you've made in the last 2 years? Matthew Ellis: Yes. Thank you, Peter. So look, certainly, when we gave Capital Markets Day guidance, we were focused on the view of the business out 5 years at that point in time. I would say, looking at the business today, there is nothing that changes our positive outlook for the business, not just through 2028, but beyond. Certainly, we expect to continue to invest in the business as well, and that will supplement the growth. But there is still significant runway in the core part of streaming and subscription business for both increased subscriber volumes and increase in ARPU. And we don't expect those things to, in aggregate, a flatline 3 years from now. So Michael, I don't know if you want to add anything as we look at that. Michael Nash: I think that everything we've seen with the evolution of the market makes us confident in what we have projected as the performance of the business on an organic basis. So we're not at this point saying that we need to change the allocation of cash to support the objectives that we identified, which we're delivering to. Boyd Muir: And the other thing that I would add, in the guidance that we gave, we did note -- that, that guidance did not include any transformational M&A. And we talked -- Matt and Lucian talked about the acquisition of Downtown, and that clearly is a transformational transaction. Operator: The next question goes to Clay Griffin of MoffettNathanson. Clayton Griffin: Matt, you framed the advance -- the change in advance well, I think. But just maybe just step back and explain or help us think through the competitive dynamics in that space. Are you seeing renewed pressure from PE and some of these JV structures? And how is that impacting your ability to retain top-tier talent? Matthew Ellis: So great question. As I think about it, we see more activity in the catalog space than in the advances space in terms of those what I would refer to as newer entrants to the music business. So that's where we see them show up more. But as I said in my remarks, we're advantaged from the standpoint that our view of the value of any music asset is based off of the largest data set in the industry. So that helps us ensure that we believe we know the right value for each catalog that comes to market and is available. But we do see more of them showing up in processes. We're also involved in, in the catalog space more than the advances space. Boyd Muir: No, you said it well. Operator: The next question goes to Michael Morris of Guggenheim. Michael Morris: I wanted to ask, first, just to go back to the first question and your response about subscription growth in 2026. It sounded like your answer implied that -- or maybe explicitly said that you expect the growth rate to be within the range that you provided at the Investor Day, of 8% to 10%. Is that a fair characterization? Or do you think that this is one of those years where you could exceed that range of growth? And then my second question is about these consumer-facing AI services, if I could. They appear close to rolling out. The majority of the discussion seems to be around newer players like Udio and Klay rather than sort of your established DSP partners. Do you expect the majority of that engagement with AI tools to come from new players? Or do you expect launches from your DSP partners? And do they have the rights to launch products at this point? Matthew Ellis: Yes. Let me start with your first question, Michael. Thank you for both of them. The -- just to be clear, while I provided some factors that will drive subscriber growth this year, and we're certainly excited about having the new deals actually show up in our revenue streams this year, I did not say that our expectation is that subscription growth this year would be in the range that we provided for the full 5-year period of 8% to 10%. So we'll see where it plays out during the year. We're confident that with the continued growth we see and those new price points kicking in, there will be a positive benefit for 2026. Michael, I'll let you... Lucian Grainge: It's Lucian. I'd like to just add there, sorry to interrupt you. The work that we've done over the last 10, 12, 13 years with the DSPs, they feel like our established business partners and of course, that, they are. But you have to remember that 15 years ago, no one had ever heard of them. So the work that we're doing and the work that they're doing, Spotify, Apple, Amazon, YouTube, obviously, what I've seen, I'm extremely encouraged by. And we will be working with them. We are working with them alongside new players. We talked about NVIDIA. I'm not able to talk about the array of other conversations that we're having with companies and platforms which are equally as innovative and exciting and well funded. They're investing many, many billions in infrastructure as we all know. And whenever there's a new technology, a new format comes out of it. So we've got an encouraging environment where we're working to keep every single format that we have going, growing and improving in terms of what the technology and the products can provide at the same time is -- and I've said this before, we want to be and are the hostess with the mostest. We want to be every single dinner party that there is around town, and that's what we continue to do. These formats and these businesses are not mutually exclusive. We are working with them all. And it comes back to why we're as excited about what the products are, about the opportunities for artists. I've seen them. They're incredibly compelling. In the same way that I saw ad-funded streaming and I saw that the dream from ad-funded streaming was going to be into premium subscription. And we are right -- we've seen this. I've done it. We've managed these transformations. If you really want to go down memory lane, I've gone through from LP vinyl into the CD then into the digital downloads. I like what's going on. I like what I see, and we're attacking it, and we're excited by it. Operator: The final question goes to Silvia Cuneo of Deutsche Bank. Silvia Cuneo: I wanted to ask about Downtown Music. Since the completion of the acquisition, could you please elaborate on the first strategic priorities for the business and the main revenue drivers for 2026? Any color on the recent trends will be helpful. And then secondly, regarding your AI partnerships, particularly with Udio, can you comment about what is expected as a contribution of the Udio licensing to your 2026 financials, perhaps at a high level, and from when? And if you could comment about the potential AI licensing opportunities pipeline in 2026. Lucian Grainge: I'd like to just comment before I hand it over to the team on some of the specifics on high-level strategy with regard to Downtown. In the same way that I spoke just a few moments ago about sort of parallel businesses and parallel activities, I see exactly the same with Downtown. You can see our performance year in, year out. For the last 3 years, we've had 9 out of the top 10 best-selling artists in the world. So that's the top of the market. But we are very aware and we can all see that the rest of the market is also growing. So Downtown gives us an opportunity to grow our artists and label services, and we've got a 2-step, twin approach to everything that's going on within the marketplace. So in the same way that we talk about Mrs. GREEN APPLE or King & Prince in Japan or BTS out of Korea, we are also looking at and talking about tuck-in investments and bringing in entrepreneurs and providing label services throughout the rest of the world through the Downtown-Virgin strategy. You have to remember, Virgin is, I suppose, the brand name. It was Virgin that acquired Downtown. And we also have another company in there, which is a white label business called Ingrooves. So we've actually got 3 interfacing businesses at various stages of the artist entrepreneur label services business and function, which is growing. And I'm excited about what we're doing, and I'm excited that we're able to close Downtown, and that's one of the reasons why we did it. We're covering every single blade of grass in terms of region, content, culture, genre, format, technology, and that's how we're doing it. Michael Nash: With respect to the second question regarding the planned launches of some of the announced new services and the pipeline, I think that we've said publicly in the announcement of some of these services that they have plans for launching this year. To be more specific about that, obviously, that would be a conversation with the individual services, but we're working to support the launches of the partnerships that we've entered into. In terms of giving you any guidance with revenue contribution, that's not something that we typically do in any category or would be doing with respect to the launch of new services. But in terms of the pipeline, I would direct you back to Lucian's call to action note in October of 2025 in which he talked about a dozen different partnerships potentially being in the pipeline. And we've obviously delivered on the number of those new deals since then. But you can rest assured that we're speaking with every single relevant party, whether that's a new entrant or that's an established platform, about the potential to harness AI innovation in developing their services. So we're very focused in delivering on that pipeline. With respect to scope of opportunity, one point that I would make is, we've talked about super premium, and our research suggesting that 20% of the current subscriber base is the target for a significantly improved offer, they'd be willing to pay double the current subscription price for. What's happened over the last year is that AI innovation has kind of overtaken the conversation around technology innovation with all the service providers and with respect to the evolution of music, we're going to see AI being a significant component of what will become the super-premium tiers of 2026 and beyond. So that gives you some sense of scope of opportunity. But then as Lucian mentioned, AI is not just an incremental revenue opportunity. AI is an introduction of a new set of formats. This is a paradigmatic change in the landscape with respect to innovation and the evolution of music. So we believe that this is something that, over time, implemented in a number of different ways, including things like agent AI, could potentially lead to significant opportunity for customer value realization at the end of this decade and into the next. Operator: Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: Ladies and gentlemen, hello, and welcome to the Bnode Fourth Quarter 2025 Analyst Conference Call. On today's call, we have Mr. Chris Peeters, CEO; and Mr. Philippe Dartienne, CFO. Please note, this call is being recorded. [Operator Instructions] I will now hand over to your host, Mr. Chris Peeters, CEO, to begin today's conference. Please go ahead, sir. Chris Peeters: Thank you, and good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. Today, I will be presenting our fourth quarter and full year 2025 results as CEO of Bnode. With me, I have Philippe Dartienne, our CFO; as well as Antoine Lebecq from Investor Relations. We posted the materials on our website this morning. We will walk you through the presentation, and we'll then take your questions. As always, two questions each, would ensure everyone gets the chance to be addressed in the upcoming hour. Let's get to the highlights of the full year results, and Philippe will then walk you through our fourth quarter '25 results. On Page 3, you can see that Bnode, as we are now called, and I will come back to this in a few minutes, delivered results at the upper end of the EUR 150 million to EUR 180 million EBIT, guidance range that we set at the same time last year and progressively derisked quarter-after-quarter. Despite pressure on top line development, we delivered an EBIT of EUR 179.7 million, while at the same time, remaining fully committed to the transformation of our business. At bpost as anticipated, top line decreased by around EUR 90 million. Mail and Press revenues declined by approximately EUR 100 million, reflecting both the accelerating structural volume erosion and the base effect as 2024 still included 6 months of the Press concession. On the Parcel side, revenue increased slightly by around EUR 10 million as our volume growth was limited to 2%, notably impacted by the strikes actions we faced during the year. In response to these challenges, we progressed on important cost measures, particularly through operational reorganizations and a reduction of around 4% in FTEs. The full impact of these actions were mainly visible in the last 2 quarters of the year. EBIT came in at EUR 67 million, down 50% year-on-year. The decline was primarily concentrated in the first half, reflecting the scope impact of the Press concession, while performance roughly stabilized in the second half of the year. At Paxon, top line growth was primarily driven by the continued expansion of our European activities and even more significantly by the consolidation of Staci. This positive momentum was, however, largely offset by a 21% revenue decline at North America. As announced last year, Radial faced the departure of several major clients. Since then, we have been actively addressing this through a progressive reshaping of the customer portfolio towards the midsized segment. At the same time, we maintained a strong focus on productivity with Radial, once again, delivering substantial cost savings. Supported by the contribution from Staci, EBIT increased slightly by EUR 7 million year-on-year, reaching just under EUR 59 million. At Landmark Global, our U.S. business was as expected, impacted by tariff measures. Nevertheless, top line posted slight growth overall. This was supported by sustained activity in Canada and most importantly strong momentum in Asian volumes across all key destinations, including, of course, Belgium, which is particularly accretive from an EBIT standpoint. Combined with continued productivity gains, notably true or Transport Center of Excellence, this enabled us to increase EBIT to EUR 85 million. Let me make one final remark on our financial highlights. As you can see, on a reported basis, the group recorded a net loss of EUR 39 million, in line with the dividend policy reaffirmed at our Capital Markets Day in June. And with no change to that framework, the Board of Directors will recommend to the general meeting in May, not to distribute a dividend this year. This reported net loss is primarily explained by one-off costs recognized at Radial North America, Philippe will elaborate on this in a moment. But before handing over, I would like to briefly reflect on our key strategic priorities in 2025 and how they continue to shape our transformation journey. In 2025, our transformation gathered significant momentum across Bnode, delivering tangible results and reaffirming the strength of our strategic direction. We restructured and strengthened the Bnode Executive Committee with a new CEO for Paxon North America and Paxon Europe as well as the people's management committee, including Group CEO and four members of the Group Executive Committee to accelerate strategy execution and better address emerging challenges. We simplified the group brand architecture, moving from 31 brands to a clear 4-brand structure, bringing consistency and focus fully aligned with the group strategic repositioning. At bpost, we made the operating model shift accelerated the transformation of our Belgian operating model across multiple tracks, including bulk rounds, now fully operational in all sorting centers, centralized preparation of Mail rounds and the reorganization of 138 distribution offices to adapt the cost base to new volumes, among others, due to lower Press volumes. We also developed Out-of-Home at scale, expanded the locker network at record pace, reaching 2,500 bbox installations driving a 50% growth in locker volume in 2025. We also successfully launched Night Bbox Delivery, enabling time-critical deliveries before 7:00 a.m. with early phase pilots underway in the omnichannel segment. At the retail network, we strengthened the strategic relevance and commercial contribution of our retail network by expanding multiple partnerships in among others, telco, utilities and banking, while reinforcing our societal inclusion role. For Paxon, we continue to transition to mid-market client portfolio driven by the successful launch of Fast Track offering rapid and seamless integration with existing systems with 22 Fast Track clients onboarded, representing EUR 38 million of in-year revenue. We also successfully integrated Staci into our new Paxon organization. We established an integrated country structure across Staci, Radial Europe and Active Ants, paving the way for accelerated commercial development and we exceeded the initial cost synergies target with the 2026 target already secured. And for Landmark Global, we achieved strong progress in leveraging group-wide capabilities, notably through the introduction of a Transport Center of Excellence, realizing EUR 50 million of group-wide savings in 2025. Staci transport synergies, Last Mile group contracts, et cetera, are included in this. And in terms of market resilience, we demonstrated the ability to navigate an increasingly complex trade environment including rapidly involving trade tariffs, while maintaining operational stability and commercial momentum. I will now hand over to Philippe for the quarterly results, and I will then take the floor to share with you our strategic priorities for 2026 and the financial outlook. Philippe Dartienne: Thank you, Chris, and good morning to all. As you can see on the highlights on Page 5, our group operating income for the fourth quarter came at EUR 1.242 billion, a decrease of EUR 93 million or 7% year-on-year. This performance reflects a combination of factors. As expected, we saw the impact of contract terminations at Radial U.S., which we already flagged earlier this year. This termination materialized through the quarter and drove a 20% revenue decline year-on-year on EUR 82 million, largely offsetting the 4% top line growth at Paxon Europe. In parallel, the 9.2% decline -- 9.2% decline in domestic Mail volume, excluding Press which was only partially compensated by close to 3% Parcel growth volume in Belgium. Note that Parcel volumes were impacted by several national strikes in October and November. In terms of cross-border activities, we also recorded higher Asian inbound volumes, which supported overall Parcel growth. Overall, while our top line remained under pressure, we continue to adapt our cost base effectively, sorry. As a result, group adjusted EBIT reached EUR 83 million, broadly in line with last year. This outcome reflects the positive effect of our reorganization measures and improve peak efficiency at bpost as well as margin actions at Paxon U.S. Before turning to the financial performance of our business units, let me highlight, as shown on Slide 6, that our group reported EBIT stands at EUR 10 million. Beyond the usual PPA adjustment, this mainly reflects the EUR 55 million one-off charges related to the real estate portfolio rationalization and technology stack simplification at Radial U.S., in line with maximize the core initiative presented to you at the Capital Market Day in June. Let's move now to the details of our three segments. I'm on Page 7. With the bpost segment previously Last Mile. We see that the revenue declined by EUR 70 million to EUR 574 million. Domestic Mail recorded around EUR 17 million decline in revenue, of which EUR 11 million stemmed from transactional and advertising mails and EUR 5 million from Press. Excluding Press, Mail volumes contracted by 9.2% in the quarter compared to 8.1% same quarter last year. The decline in Mail volumes had a negative revenue impact of around EUR 21 million and was partially offset only by half, through positive price and mix effect of plus 4.2% or roughly EUR 10 million. As a result, the Domestic Mail revenue were down 4.9% or EUR 11 million year-over-year. Note that on a full year basis, this Mail volume declined by 9.8% at the upper end of our guidance and was mitigated by a price/mix impact of plus 4.3%. Our Parcels revenue increased by EUR 3 million or plus 1.7% year-over-year, driven by volume growth of close to 3% and a slightly negative price/mix effect of 1.2% in the quarter. On the volume side, the reported 9.2% actually correspond to an average daily growth of plus 1.3% and include a shortfall of just under 1% due to national strike that took place in Belgium in October and November. Over the past months, and particularly during the peak, growth was mainly supported by strong performance of marketplaces, which also contribute to our negative price/mix impact of about 1.2%. For the full year, our average daily volume grew by 2.4% despite the negative impact of the fourth quarter strike and more importantly, the bpost strike in February during which a significant share of volume shifted temporarily to competitors. These disruptions resulted in our overall volume shortfall of a bit more than 1% for the year. Excluding this impact, our volume would have landed at the low end of our annual volume guidance. Revenue from our other activities, including Retail, Value Added Services and Personalize Logistics decreased by 3% year-over-year, notably with lower revenue from fine solutions partially offset by higher revenues at DynaGroup. Let's move to the P&L of bpost on Page 8. Including the higher intersegment revenue from inbound cross-border volumes handled in the domestic network, our total operating income was down by 2.3% or EUR 14 million. On the cost side, OpEx and D&A decreased by 2.7% or EUR 16 million, mainly driven by two effects: lower staffing with FTEs and interims down 5%, reflecting improved peak efficiency and lower volumes. The benefit from the ongoing reorganization of our distribution rounds and retail offices implemented over the previous quarters and which ultimately concluded in line with annual plan target despite delays accumulated until June due to strikes. And on the other hand, higher salary cost per FTE up plus 2% following March '25 salary indexation. In contrast with the first half of the year, when EBIT had contracted sharply by almost EUR 64 million year-on-year, mainly due to the end of the Press concession in June '24, we see now that despite the structural Mail decline, Parcel growth and the benefits of our organization are helping to mitigate EBIT erosion. EBIT decline was limited to EUR 3 million in the second half of the year and even showed a slight improvement in this fourth quarter. I would like to highlight that our peak efficiency improved not only versus last year, but for the first time ever also versus the full year run rate. Moving on to Paxon, previously, 3PL, on Page 9. In terms of Paxon revenues, two effects came into play. First one, at Paxon Europe, revenue remained broadly stable year-over-year, while we recorded around 4% growth this quarter across European businesses and geographies, with some activities even achieving high single-digit growth. We also felt the negative impact at Staci Americas, which is reported on the Paxon Europe, where a contract termination led to a significant revenue decline during the quarter. At Paxon North America, revenues decreased by EUR 82 million. At constant exchange rate, this represents a 20% decline, driven by revenue churn from contract termination announced in '24 and '25. Mid-single-digit negative same-store sale and partially offset by the in-year contribution of a bit less than EUR 30 million from new customers of which 60% relating to Radial, Fast-Track clients. As expected, despite seeing positive and encouraging seniors on that front, we continue to feel the impact of the churn announced in '24 and '25. We remain focused on executing our plans and we are confident that the ongoing stretch to core actions presented at the Capital Markets Day, expanding into, as Chris said it, new industries, client size and channel and strengthening our portfolio will deliver the intended benefits. Let's move to the P&L of Paxon on Slide 10. With this total operating income decreased by 14.4% or EUR 82 million, while operating expense and D&A decreased by 13.2% or EUR 69 million. The reduction was primarily in North America, driven by lower variable OpEx in line with revenue evolution at Radial U.S. and sustained variable contribution margin. As a result, adjusted EBIT decreased by EUR 13 million to EUR 33 million in the quarter. This was mainly due to the outgoing top line pressure at Radial U.S. and to some extent, at Staci Americas to temporary productivity issues and an IT incident. Note that Radial U.S. reached another record high margin during the peak season. And on a full year basis, Radial U.S. continued focus on productivity improvement delivered a 2% increase in variable contribution margin, equivalent to our cumulative benefits of EUR 16 million. Looking at our reported EBIT of minus EUR 35 million, this reflects the EUR 55 million one-off charge related to the real estate portfolio rationalization and the technology stack simplification, at Radial U.S. I've mentioned earlier in the call, this is being totally in line with "Maximize the Core" initiative presented at our Capital Markets Day in June. Moving on to Landmark Global, previously Cross-Border, on Page 11. Landmark Europe revenues increased by EUR 4 million or 4% year-over-year. This growth was driven by a solid volume increase from China across all major destinations, notably Belgium fueled by large Chinese platforms and U.S. Other European lanes continue to grow well with the exception of U.K. where adverse market conditions remain. At Landmark North America, we continue to face volume headwinds, while the broader tariff environment is weighing on existing business and delaying new opportunities. However, this was offset by strong domestic volume growth in Canada and a strong peak period resulting at North America level in a high single-digit percentage growth in revenue, equivalent to 0.5% increase or EUR 0.4 million increase in euro, when including the negative FX impact development. Overall, our Landmark Global operating income increased by roughly EUR 7 million or 3.9%. As shown on Page 12, OpEx and D&A increased at the same time by 3.1%, mainly reflecting higher transportation costs, driven by volume growth partially offset by lower rates on the new transport contracts. This links back to the Transport Center of Excellence that we presented at the Capital Markets Day. And from which we are now seeing tangible benefits across our various business units. Adjusted EBIT increased slightly to just under EUR 26 million. And the productivity gains across the board resulted in margin improvement compared to last year. Moving on to the Corporate segment on Page 13. Adjusted EBIT continued to improve as cost control measures on third-party and expand services as well as facility management initiatives helped offset higher payroll costs driven by additional FTEs in the March '25 salary indexation. This quarter also benefited from a one-off favorable impact from operational taxes. And as a result, our adjusted EBIT improved by EUR 7 million to minus EUR 2 million. Let's now move to the cash flow on Slide 14. The net cash inflow from the quarter amounted to EUR 35 million compared with EUR 118 million last year, mainly reflecting the variation in working capital and higher coupons on the bonds. Overall, the main items to highlight are the following: cash flow from operating activities before changing working capital stood at EUR 149 million, a decrease of EUR 11 million versus last year, mainly driven by lower EBITDA and lower corporate tax payment. Change in working capital and provisions amounted to EUR 57 million, the negative EUR 39 million variance year-on-year reflect the termination of the Press concession in June last year as well as some lower suppliers balances. The net cash outflow from investing activities totaled EUR 61 million, driven by CapEx for parcels, lockers and capacity expansion, our domestic fleet and international e-commerce logistics. Note that on a full year basis, CapEx amounted to EUR 147 million, below our initial guidance of EUR 180 million, reflecting disciplined spending behavior. This constitutes the main variation in our free cash flow and the net cash outflow from financing activities amounted to EUR 110 million, mainly reflecting higher lease liabilities payment and higher bond coupons linked to the EUR 1 billion bond issuance in November 2024. Chris, this brings us now to the strategic priorities of '26 and our financial outlook. Chris Peeters: Thank you, Philippe. As we move in 2026, the focus shifts from piloting to scaling. Accelerating what works, executing with discipline and embedding successes structurally. For bpost, that means that the operating model will further shift to accelerate the transition towards a 24/7 logistics company. This includes the structural embedding of efficiencies and flexibilization levers. For example, the dual density rounds or the delayed curve that we will do. At the Out-of-Home, we will further scale, expand the network coverage of 3,400 Bboxes installed and doubling the parcels delivered via lockers. We will continue to pilot and scale promising B2B services in omnichannels and for technicians. And also, we will negotiate an agreement for the Retail network with the Belgian state and entering into force as of January 2027. For Paxon in North America, we will leverage and scale the proven Fast Track solution to deepen our presence in the mid-market segment. And for Europe, we will capitalize on the integrated country structure to accelerate up and cross-selling, improving asset utilization and driving commercial growth. For Landmark Global, we will drive the full utilization of the Transport Center of Excellence, ensuring group-wide efficiencies and boosting profitable growth in a scale-driven market. And for the market, we will leverage our ability to navigate trade complexity to better support clients in managing cross-border complexity and evolving tariff dynamics. These strategic priorities lead me to our outlook for 2026. I'm on Page 16 now. We are engaged in a profound transformation of our group and the strategic shift we have initiated is a multi-year journey. 2026 will be another important step in that transition. At a high level, the continued acceleration of our international logistics activity is expected to be the main driver of EBIT growth at group level. At the same time, in our historical Belgian operation, we will remain focused on mitigating the structural mail decline, while further advancing our operational shift toward a more parcel-centric model. Overall, at group level, we are targeting an adjusted EBIT in the range of EUR 165 million to EUR 195 million for 2026. For Paxon, we expect total operating income to grow in the low to mid-single-digit range in 2026. While in Europe, we anticipate mid- to high single-digit growth, supported by continued commercial momentum and further leveraging of our integrated logistics capabilities. In North America, the ongoing portfolio shift towards the midsize segment, notably through our Fast Track initiatives should offset the impact of customer share. On profitability, we expect an EBIT margin increase from 3.5% in 2025 to between 6% and 8% in 2026. This uplift will be driven by the combined strength of our new regional setup, realization of cost synergies and continued real estate optimization. Then we turn to Landmark Global, where we are targeting a mid-single-digit top line growth for 2026. In Eurasia, momentum remained strong in our commercial activities, particularly driven by Asian volumes, while Postal volumes are expected to remain resilient. In North America, growth should be more moderate. Market overcapacity continues to intensify competition and the uncertainty surrounding tariff measures is creating limited visibility and implied pressures on flows to and from the U.S. across most lanes. In terms of profitability, the evolving business mix with a lower contribution from Postal and a higher share of commercial volumes is likely to weigh on margins leading to an expected EBIT margin in the range of 10% to 12%. Finally, regarding bpost, we anticipate a low single-digit decline in revenue in 2026. This mainly reflects three factors: first, Mail volumes are expected to decline in the mid-teens range, while this will be partly mitigated by a favorable price/mix effect of around 5%, 6%, structural volume erosion remained significant. As you observed in 2025, decline already accelerated, reaching around 10% at the upper end of our 8% to 10% guidance range. In 2026, we will also face the full impact of mandatory B2B e-invoicing in Belgium as well as the loss of certain advertising contracts. Second, on the Parcel side, volumes should grow in the mid- to high single-digit range, primarily driven by large customers. As a result, despite the usual price adjustments, the overall price/mix is expected to remain broadly stable. In addition, as discussed during our Capital Markets Day, we will see the full year revenue impact from the loss of the 679 banking contract which was retendered and transferred to BNP Paribas Fortis as of January 1. From a profitability perspective, this marks another year of revenue contraction, which will inevitably put pressure on margins. That said, we remain fully focused on aligning our cost base notably true, intensified distribution around reorganizations and further productivity gains. Altogether, this should translate into an EBIT margin of around 1% in 2026. We are now ready to take your questions. Again, two questions each, please, so that everyone gets the chance to be addressed during the session. Operator, please open the lines. Operator: [Operator Instructions] The next question comes from Michiel Declercq from KBC Securities. Michiel Declercq: I had some questions on the 3PL or the Paxon business. First on profitability, a bit lower than what you guided for, for the start of the year. I was just wondering, can you give a bit more color on the temporary productivity issues and the IT incident at Staci in the Americas? And maybe quantify this and maybe also looking at the margins of Staci, are we still in the 10% to 12% range there? That would be a bit my first question. Then secondly, would also be on the 3PL Europe, you guide for mid- to high single-digit growth in 2026. Looking at the fourth quarter, it was flat, you had, of course, a customer loss and some headwinds at Staci Americas. But I would expect this also to somewhat continue in 2027. So I'm just wondering where will this step up from a flat growth in the EU in Q4 to mid- to high single digits in '26 come from? Can you -- do you see some reassuring trends there? Or just a bit more color on that, please? Chris Peeters: Do you take the first? Philippe Dartienne: Yes. I'll take the first one. Thank you, Michiel, for the question. Very, very, very interesting question indeed. When it comes to Paxon profitability as a whole, we are impacted by -- mostly impacted by the loss of customers that we faced at -- from Radial, as we mentioned it. Despite the fact that they have been able to maintain the variable contribution margin, even a slight improvement year-over-year. Nevertheless, in absolute value, indeed, it weighed on the EBIT generation. When it comes to Paxon Europe, so the -- what I would say is that we have a profitability at the level of Paxon Europe so mostly from -- resulting from the acquisition of Staci. We always guided in the range of 10% to 12%. And in '25, we nearly reached the bottom end of the range. Why do I say nearly very close to, which is mainly explained by the fact that we had an IT incident in the U.S. that weighted on the profitability. Chris Peeters: And on the second question, so if you look at the Staci growth, you see indeed that there was a bit of a slowdown due to a combination of economic circumstances, mainly in France and the U.K. last year and also probably a focus, which was on the integration and the setup of the new structure. Now we have a team fully dedicated to developing the top line. And what we see there is that we have, especially around cross-sell and up-sell on these clients. And when we talk about cross-sell, it's both geographical, but also in other product ranges. And up-sell where we see that we expand our services within the same service line with those same clients, we see that we have an attractive pipeline on which we feel comfortable that, that growth is a feasible figure. Michiel Declercq: Okay. Clear. Maybe a quick follow-up, if I may. If I then plug in the guidance for the growth in the EU also for Paxon business, is it then fair to assume that growth in the U.S. or in North America, Radial North America will be flat? And if so, can you maybe give a bit more color on the phasing there? Chris Peeters: Yes. Indeed, growth in the U.S. will be flat. It's the effect of the historic client losses that we see to have a full impact. And obviously, if you see, although we see a ramp-up at the Fast Track side. These are substantially smaller clients, meaning that you need a lot of more onboarding to compensate for the loss of a large client. And so that effect of clients that were shared -- was already announced for the non-renewal of contracts that we will have the impact from gets compensated by new mid-market clients, but the one is balancing out the other. Philippe Dartienne: If you allow me to add one element, Chris, also what we are seeing in terms of evolution of same-store sales, so on existing customers, we are still believing that we will be in negative territories in '26 compared to '25. Chris Peeters: Which is again an effect of that historic portfolio of, let's say, older brands that are more in decline than the overall market. Operator: The next question comes from Frank Claassen from Degroof Petercam. Frank Claassen: Two questions, please. First of all, on the transfer of the 679 banking contract, could you help us how much revenue would that roughly be? That's my first question. And then second, on the corporate cost line, you indicate that it will go up some -- or will have the negative EUR 35 million delta in '26. That's quite a step-up. Could you elaborate what kind of investments or costs you're going to make on that corporate cost line? Chris Peeters: So on 679 -- thanks for the question, Frank. We'll -- we don't use to disclose individual contracts, neither the profitability. So we will not do it for the 679. But this being said, you know that the contribution of this contract was solid, very solid. So it's weighing on the profitability. When it comes to corporate, it's -- in fact, we are adding some resources very limited compared to the '25 situation. And those resources are geared towards supporting the transformation initiative. They are hosted at the level of corporate, but they benefit to the integrity of the group. So they are, in fact, also the natural evolution of the cost base, which -- because those corporate costs are mostly people-related costs. And we expect also to have, as we mentioned for BeNe Last Mile, we also expect to have a one step of inflation of 2% and that helps explaining the evolution of the corporate cost. Operator: The next question comes from Henk Slotboom from the IDEA! Henk Slotboom: Chris, Antoine and Philippe. A few questions about the bpost division. I'm a bit surprised about the Parcel growth you indicate for the current year. Last year, it was 2.9%. There was a 0.7% negative impact of the strikes you experienced. Now you're aiming for mid- to high single-digit growth. I assume you must have had a good start of the year. But at the same time, there are some things happening in the Middle East which could spur inflation again and weigh on consumer confidence. How do you look at that, Chris? Chris Peeters: So on the Parcel growth, I think the fact that you see in the terms of growth of last year, main mainly the effect of a little bit lower growth fix has to do with the strike impact of which we have two major events, one in the early part of the year with a quite significant impact. As you know, we had a couple of days of non-operation and a blocking of our sorting center that had quite an important impact in number of parcels. And while we could mitigate last minute to a large extent, the national strike against the government in the end period. Some of our clients took at that moment of time, whether it was late at already the batches to have some of those volumes deviated. And so there, you see two elements where you have some volume leakage as a result of the strike. That being said, if we look at the start of the year, well, as always, at the start of the year is a -- is not the most relevant period. But if we see in terms of client development and contract conversion, we are on a positive flow. And so we expect, in that perspective, a good year. If we look at the impact of what we see in Middle East. I think, there's very little, let's say, direct flow from us from that side with some Postal flows, but they're quite limited. 12 countries are blocked in terms of Postal flow, but that's a financially a very minor impact on our total volume. We don't see today a reduction on the Chinese flows. Obviously, I agree with you. If there is an impact on consumer behavior likely you will see some impact on the overall spend. Still, what we've seen in the last times when that was happening was that there was a further shift towards the products which are available within the e-commerce space. And so that is something where we don't expect that there will be a massive impact on the year. Henk Slotboom: Then on the Mail volume, Chris, we have a shock-wise decrease this year, partly because of the loss of some advertising clients and the introduction of e-invoicing in Belgium, especially the latter impact. Do you think that this will mitigate the decrease in Mail volumes as of 2027 when this has been absorbed? Chris Peeters: I don't understand the question, to be honest. Can you repeat the question? Henk Slotboom: Well, if this year was the introduction of e-invoicing, if I'm correct, in Belgium. So that means that you have a shock-wise decrease in volumes, paper invoices being replaced by electronic invoices. Normally, I assume that will lead to a lower contraction of transaction Mail volumes in the year thereafter, because there's less left. Chris Peeters: Yes. I mean, I can understand what you say. But overall, we don't count on that. I think that you've clearly seen that our strategy is now to move as fast as possible towards a parcel-centric operator, and so we want to become a logistical company. You see that, that Mail decline also if we look at comparable countries that were ahead of the curve have mostly had the Nordic countries are ahead of the curve. The Baltic states are also ahead of the curve in that perspective. You see that, that decline continues to be fairly steep also in the end phase of Mail. If you look at the Denmark case still until the last year, you saw a continued steep decline in the Mail business. We see the same happening in the other Nordic countries, which actually are already at a further progressed decline in Mail that we are. And so in our plans, we don't count on that difference anymore. We actually have -- are preparing ourselves for a continued accelerated decline in Mail. And obviously, what we will do as a consequence of that, start to prepare ourselves for the usual discussion, which will be -- we will have a new user as of the 1st of January '28. And so that preparation of discussion is happening now to ensure that our operating model can follow the reality of the volumes that we have to treat. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions. So I will hand it back to Chris to conclude today's conference. Thank you. Chris Peeters: We would like to thank everybody in the call for having taken the time to be with us and for your interesting questions. Please note that we will release our annual report 2025 on April 2nd. We look forward to staying in touch and Philippe will present you our first quarter results on May 6. Thank you very much and have a great day. Operator: Thanks for participating to the call. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim Fourth Quarter and Full Year 2025 Results Conference Call webinar. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest, if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com, by clicking on financial information on the homepage and then click on the annual report presentation. [Operator Instructions] As a reminder, this conference is being recorded March 5, 2026. With us on the line today are Mr. Yadin Antebi, CEO of Bank Hapoalim; Mr. Ram Gev, CFO; Mr. Victor Bahar, Chief Economist; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. In the event of the siren in Israel, we will pause briefly and resume the call as soon as possible. Mr. Antebi, would you like to begin? Yadin Antebi: Thank you. Good afternoon, and thank you for joining us for our review of the bank's 2025 results. We are publishing our financial statements and holding this call at a time when the geopolitical environment in the Middle East and around the world is undergoing material change. We continue to witness Israel's unique resilience and its ability to adapt rapidly. Throughout its history, Israel has consistently emerged stronger from periods of adversity. And we believe that after the current conflict, the economy is positioned to regain strength and to continue to grow. With this environment, Bank Hapoalim will continue to play a meaningful role in supporting the recovery and growth of the economy. Let us now turn to the results. We ended 2025 with very strong results. Net profit of ILS 9.8 billion, return on equity of 15.9%, loan growth of 13.4%. These results reflect the disciplined execution of our strategy, which I will touch on shortly. Alongside these strong financial results, this was a year of significant activity across the bank. We addressed a number of innovative and impactful initiatives, including growth across all business segments. The introduction of 2-year financial targets, the distribution of bank shares to our customers under the Bank of Israel outlined, the launch of an AI bot that supported the share distribution process, a new marketing strategy of proactive banking and a major step forward in the development of Bit, our payment app. All these efforts led us to deliver results that exceeded the targets we published a year ago. Net profit of ILS 9.4 billion excluding income of insurance versus a target of ILS 8.5 billion to ILS 9.5 billion. Return on equity of 15.3% excluding net income versus a target of 14% to 15%. Credit growth of 13.4% compared with a target of 7%, dividend payout of 50% for the year, or 53% for the moment the Bank of Israel permitted to distribute more versus a target of at least 50%. Looking ahead, it is clear that the macroeconomic environment has changed compared with a year ago, when we published our targets for '25 and '26. GDP growth assumptions have improved, but market implied interest rate and inflation are lower for the next 2 years than they were a year ago. Nevertheless, most of the updated 2-year targets we are publishing today are higher than the previous ones. For '26 to '27, we expect net profit of ILS 9 billion to ILS 10 billion, return on equity of 14% to 15%, accelerated loan growth of 8% to 9% and a higher payout ratio of 50% to 60%. It is important to note that towards the end of the year, we will begin the relocation to the new Poalim Center building. As part of this transition, we intend -- initiated steps to realize and enhance our own real estate assets. Accordingly, starting in 2027, we expect to recognize pretax gains of between ILS 800 million to ILS 900 million, which we have reflected in the updated targets. Regarding special tax on banks, our assumptions reflect an impact similar to that of the past 2 years. I would like to briefly review the progress we have made in executing the strategic focus areas we approved about a year ago. As a reminder, our strategic focus are -- areas are sales growth, leadership in service and fairness, Bit as an innovation engine, operational and efficiency, GenAI and data. In our retail activity, the focus is on strengthening sales capabilities across all channels, branches, call centers and digital. To support this, the division underwent an organizational restructuring designed to enhance sales effectiveness and customer service. We adopt a proactive service model and introduce new service standpoints. Naturally, many of these processes intersect with technology and here, too, we made a substantial leap forward with the implementation of an AI bot as a foundation for future automation. In mortgages, we made a major improvement in SLA, which also helped us improve pricing. Here as well, we are already seeing results, including an increase in our marginal market share. In corporate banking, our goal is to accelerate growth with maintaining excess portfolio quality and healthy margins. One of our key achievements this year was a significant reduction in the end-to-end credit approval process, benefiting both our customers and our growth objectives. We also enhanced our digital offering for corporate clients, and today we provide fully digital end-to-end services. In our capital markets activity, we are the #1 player in Israel, both the country's largest brokerage and as leading trading. Poalim Equity, our real asset investments arm, continued to grow at an average pace of about ILS 1 billion per year. This year, it also recorded substantial realizations resulting in strong profitability. Bit is a success story I am extremely proud of. With 3.5 million active customers and an annual P2P transaction volume of ILS 30 billion, notably, 2/3 of our Bit customers conduct their primary banking activity with other banks, representing a major growth opportunity for us. Over the past year, Bit reached an important milestone with the launch of new products and services that generate revenue and/or reduce costs. We intend to continue expanding our offering to provide Bit users with solutions that simplify and enhance their financial management. We are already a highly efficient bank with a cost-income ratio of below 35%, but we still see room for further improvement. We have a retirement program under which about 10% of our workforce will retire by 2028. In addition, we are making significant efforts to reduce other operating expenses. These are not. There are no shortcuts here, just virtuous management. We are already seeing solid results with a nearly 8% reduction in other expenses this year. Alongside this potential I described, I would like to highlight several strengths as we enter 2026. We have accumulated the largest credit loss reserves in the sector, which I believe will decline in a more stable geopolitical and economic environment. We have the highest financial margin in the industry, reflecting profitability-oriented growth, and disciplined balance sheet management. We hold significant gains in the available for sale portfolio, while competitors carry losses. And as noted, we intend to sell our real estate assets, similar to steps already taken by peers, and recognized pretax gains of ILS 800 million to ILS 900 million starting 2027. Today, nearly every bank or company speaks about GenAI and data. We're not only talking, we have made substantial progress in this area. Our goal is to expand the use of capabilities to support operational and business processes, reduce SLA and more. One of our successful use cases is Danit, our AI bot, which handled thousands of customer calls during the share distribution campaign we conducted. The bot handled the most calls and completed the process end-to-end. Before I hand over to Ram to review the quarterly and annual results, I would like to reiterate our targets for '26 and '27. Net profit of ILS 9 billion to ILS 10 billion, return on equity of 14% to 15%, accelerated loan growth of 8% to 9% and higher payout ratio of 50% to 60%. Thank you, and Ram, please go ahead. Ram Gev: Thank you, Yadin, and good afternoon to everyone on the call. I'm happy to walk through the bank's fourth quarter and full year 2025 results in the next few minutes, and discuss the key drivers behind what we consider an exceptional year for the bank. A year marked by a high return on equity, nearly ILS 10 billion in net profit, strong business momentum and all supported by excellent capital strength and high-quality credit metrics. Let's dive into the numbers and start with Slide 20, where we are showing the continuous growth in profitability. This morning, we reported a 15.9% return on equity for the full year with net profit of ILS 9.8 billion and an EPS of ILS 7.43. Adjusted for the ILS 380 million income we recorded from insurance reimbursement in the third quarter, ROE is 15.3% and the net profit is ILS 9.4 billion, both comfortably above our financial targets. The fourth quarter profitability was impacted by a negative CPI and a onetime ILS 200 million provision made in respect of the labor dispute. As a result, the reported ROE of 13% for the quarter does not fully reflect the bank's underlying profitability. Next, let's talk about our credit book. We continued to deliver strong and high-quality growth throughout the year. In 2025, total credit increased by 13.4%, of which 4.9% in the last quarter, to a balance of more than ILS 500 billion. Another important key quality of our portfolio is its diversification across segments. This is a key parameter not only from a growth and risk balancing perspective, but also because it gives a greater flexibility to be selective in how we grow, and to allocate growth to areas where we see stronger profitability profile. And indeed, growth was recorded across all segments in 2025 and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strength of the remarkable Israeli economy into growth in our activity. Corporate credit grew 25.8%. Commercial credit, essentially middle market businesses, grew 11.3%, and retail activity, consumer mortgages and small businesses grew roughly 7% to 12%. The next slide, Slide 23, presents our financing income. The consistent growth trend in our financing income and margins reflects 2 key factors. Increased business activity combined with government bond portfolio repositioning. As a reminder, as part of this process, we realized losses on legacy securities, mostly in 2024, and we invested in higher-yield and longer-duration assets. This resulted in 9.6% growth in total financing income and a slight increase in the financial margin. This was achieved despite the lower contribution from the CPI and ongoing competitive pressure on margins and unlike all our peers. On the right-hand side, we show the income from regular financing activity excluding the CPI, which is consistently growing, and further highlights the aforementioned key strengths. In this slide, we take a quarterly view of financing income. The volatility of the CPI resulted in a gap of over ILS 650 million between the fourth and third quarters. This is the reason for the decrease in income from regular financing activity and margins. Here as well, we show the income from regular financing activity excluding the CPI which due to the growth in activity continued to grow nicely. On fees, the positive trend continues across various types of fees. So our business activity continues to expand. Total fees grew 11.3% in 2025 driven by most fee types such as securities conversion differences and account management fees. The increase in credit card fees is mainly attributed to one-off revenues received from the international card organizations. Let's move to present our disciplined cost management. The takeaway here is that even alongside the impressive growth in our activity, total expenses are down, or if we adjust for one-off, total expenses remained flat year-on-year. Looking at the cost-income ratio in both presented years, there were one-offs. In 2024, we provisioned for an early retirement plan of almost ILS 600 million. And on the other hand, 2025 income included the insurance reimbursement. So if we look at the adjusted figures, the cost-income ratio is down to the mid- to low 30s. This is among the lowest efficiency ratios globally. In the fourth quarter, expenses increased due to several nonrecurring items, primarily the provision related to labor dispute at the bank. Just to give you some color, we are currently working on structural changes to the bank's employment framework, changes that will yield benefits for many years to come. While no agreements have been finalized yet, we have recognized a provision in anticipation for future settlement. On Slide 27, our productivity ratios, which have been improving over time, both income per employee and credit per employee support the positive jaws effect. Moving on to discuss provision for credit losses and the quality of our book on Slides 28 and 29. Provision for credit losses amounted to ILS 421 million or 0.31% of our credit book, driven completely by collective allowance and net automatic charge-offs. The increase in the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. Individual provision, however, saw income due to recoveries. It's important to highlight that this prudent approach places us in the strongest position entering 2026 relative to peers with high reserve levels and the highest reserve ratio across a range of scenarios. On credit quality metrics, on the left-hand side, we see the NPLs continue to drop, now at 0.48%, while the NPL coverage ratio continued to rise to more than triple the NPLs as we continue to increase the collective allowance. On the right-hand side, the allowance to loans ratio remained high at 1.72% and over 95% of the total allowance is collective. In the next slide, the bank has the largest retail deposit base in the sector, which provides a significant competitive advantage. Our deposit base continued to grow in 2025, 3.2% in the last 12 months. Retail deposits decreased this year but still represent 54% of total deposits. Liquidity ratios, LCR and NSFR, continue to be well above the minimum requirement. Now let's move to present our capital position, which continues to benefit from strong organic generation capabilities, leading to 11.2% growth in the last year. The CET1 capital measure was 11.98%. And you can see in the waterfall graph, the contribution of our strong profitability, and to a lesser extent, the positive OCI allowing for substantial growth in activity as well as substantial profit distribution to our shareholders. On dividends, our strong capital position allowed us to increase our profit distribution where in addition to the 50% payout, we declared a distribution of additional ILS 200 million. This sums up to 60% distribution for the fourth quarter, 48% by cash dividend, ILS 0.79 per share, and the rest through share buybacks. So for 2025, total shareholder distribution amounted to 50% of net profit, consistent with our financial target, driven by a ILS 4.1 billion cash dividend, reflecting a 4.6% yield and ILS 4.9 billion total distribution. Before we move to briefly discuss macroeconomics, I'm moving to Slide 33 for a quick update on our expected real estate asset sale. As you know, and as some of you have noticed when passing by, we are currently constructing the bank's next headquarters building in Tel Aviv called Poalim Center. Beyond the financial significance of this move, which will allow us to further align our organizational culture with our future plans, including by bringing all headquarters employees together under one roof, rather than being scattered across several buildings as we are today. The planned relocation will start at the end of this year, and we expect to sell existing properties from 2027 onwards. As this event is approaching, and we are already progressing with the betterment of assets and sale processes, we have provided disclosure in the financial statements regarding initial estimates for the expected profit from the sale of our main properties, estimated at ILS 800 million to ILS 900 million before tax. Let's now talk briefly about macro situation in Israel. While each military conflict is unique, past episodes offer a useful framework for assessing the current operations economic impact. We expect a temporary slowdown in activity broadly similar to the second quarter of 2025 contraction and dependent mainly on the operations duration followed by a partial rebound. The economy entered the year with solid momentum and assuming the operation remains short, GDP growth is still expected to exceed 4% this year. As shown on right-hand chart, the shekel has strengthened as markets view geopolitical risk as moderating, supported by another strong year in high tech, including several large acquisitions. Headline inflation has eased to 1.8% year-on-year, partly due to currency operation. Our base case assumes low persistent inflationary impacts from the current operation, keeping near-term inflation contained. The policy rate has been cut to 4% with inflation expectations well anchored, and market pricing implies roughly three additional cuts by year end. So to summarize, 2025 saw very strong performance across all metrics, well above our financial targets. Return on equity was 15.9% or 15.3% adjusted for the income from insurance. Financing income and margins continue to be strong, driven by the growth in activity and asset rollover. The strong growth in credit of 13.4% during 2025 was broad-based across all segments and economic sectors. This was achieved with no compromise on the quality of the book as reflected in the NPL ratio of only 0.48%, and allowance to NPL ratio of 310%. In the fourth quarter, we declared on a 50% distribution plus ILS 200 million from existing capital services. So the overall payout ratio in 2025 was 50%. And then lastly, we introduced updated financial targets for 2026 and 2027. ILS 9 billion to ILS 10 billion net profit, ROE target remains 14% to 15%, credit growth target base increased to 8% to 9%, and profit distribution of 50% to 60%. To conclude, we are proud of the strong performance this year and of the clear, ambitious targets we have set for the next 2 years. We are well positioned to continue delivering substantial plan. We will now be happy to take your questions. So back to you, operator. Operator: [Operator Instructions] The first question is from David Kaplan. David Kaplan: I have first couple of questions on the bank's sensitivity to interest rates. You have those tables that you gave at the beginning of the report. And I'd like you to help us understand a little bit why is it that the 1% change in the interest rate has a greater impact on the equity of the bank than it does on the P&L. Start with that. Yadin Antebi: I'm not sure I understood the question, David. I can repeat. We give -- we, of course, disclosed our interest rate sensitivity. It's around ILS 800 million. As you refer to the equity side? David Kaplan: I'm talking about the table that's on Page 90 of the report where you talk about an increase or a decrease in the interest rate by 1%, and the impact it would have on the equity of the bank after tax, right? And it's about ILS 1 billion, whether it's up or down. But on the table that's just above that on the same page, you -- where you go through the income statement, the impact is much smaller or much different. And so how does that work through the P&L of the bank? And why do we see a greater impact on the income than we do on the -- sorry, on the equity that we do on the income of the bank. Yadin Antebi: The important figure here is the ILS 800 million, David. That's the full influence the bank's top line and the income. We probably have disclosure on the capital as well, but it's not -- I don't think it's a material disclosure. David Kaplan: Okay. I guess maybe the second question I have is on -- you mentioned in your presentation and in fact, it's true that you managed to maintain first of all a higher NIM in 2025 than in 2024, which given the interest rate environment was already surprising given the -- what we see the trends we've seen in other banks in the market here. What is it about your mix of business that allows you to do that? Yadin Antebi: It's not -- I think it's not the mix of the business, but it's the discipline of the organization and the emphasis that we put on spreads. There are areas that spreads are going down, of course, but we put a lot of value not only growing the business, but also pricing both the deposit side and the credit side was the right measures. Of course, we have a lot of competition around. And we have to deal with that as well. But pricing is very important from our point of view, both deposit and credit side. Ram Gev: Maybe if I add to what Yadin said. Well, the main factors on the NIM, globally and here in Israel as well are the interest rate environment, inflation environment and the margins. So what is important to us is to be with the highest NIM in the industry. And you can see that we are well positioned entering 2026 relative to our peers in our NIM. And we want to keep -- to be in that situation to hold the highest NIM in the industry. Obviously, the impact of changes in the interest rate is -- will affect everyone. But like Yadin mentioned, discipline on pricing and what we did when we repositioned our -- part of our securities portfolio when we sold it in 2025 and extended duration enable us to maintain relatively stable NIM during this year compared to 2025, and that's positioned us more favorably looking at the future. David Kaplan: Okay. And then just one last question on the financial targets that you gave for '26 and '27. Presumably, you're taking into account there the market expectations for inflation and for interest rates. At any point, do you look at it from your internal projections for those things? Or do you always look at it from a market perspective? That's the first question. And second of all, if something were to change drastically and expectations were to see rates or inflation, the expectations for rates or inflation change significantly, would you update your targets? Yadin Antebi: Yes. Thank you, David, for that. We spent a lot of time last time on March before we published our '25 and '26 results. And we have different ideas and discussions internally, what will be the right figures to publish. What we decided last time and we were consistent with last year's decision is we don't want to play around any goals or projections of interest rates or inflation because that will make your life much harder in analyzing our profitability. So what we decided was just to take market pricing for both inflation and Bank of Israel interest rate because we're very sensitive to that, as you, of course, know. So moving those numbers and taking other figures will make our projections and our targets seem like not eligible enough. Regarding the second part of your question, we don't intend to update on every move of the interest rate. And you can see that we just discussed the sensitivity. There are many metrics that move around, not only interest rates, we feel comfortable with the guidance and the targets that we have published for these 2 years. David Kaplan: Okay. Great. Sorry. I actually do have just one more question. I was looking at the tables towards the back of the report, the volumes versus pricing. And in this current year, volume had a much greater impact on the change in net interest income than did pricing. And I guess that partly had to do with the lower-than-expected inflation, I guess, over the course of the year. But in comparing it to the change in volume and pricing in the previous year, where there was a much greater split, can you talk a little bit about how you managed to generate so much income simply off of the volume growth? Yadin Antebi: The book is growing and the balance sheet is growing. So we're making, of course, more profit on a larger balance sheet. And we're balancing it or we're mitigating or we're trying to mitigate where we have pressure from the market in terms of pricing. So that will be like our normal course of handing the bank, the business. David Kaplan: Okay. And what was the impact here though, from inflation? Or was it a minimal? Yadin Antebi: Can you ask that again, please? David Kaplan: What was the impact of inflation on the change in pricing here when I look at that table? Or is it not really an effect. Yadin Antebi: The change in pricing? David Kaplan: How do -- how did the CPI affect the change in income within pricing? Yadin Antebi: No. Inflation more or less doesn't change pricing. Okay. You're talking about pricing of the credit spreads? David Kaplan: We can take this offline and discuss it later. Operator: The next question is from [ Jan ] Benning. Canberk Benning: Just one on the cost-to-income ratio. So both the adjusted and the stated cost-to-income ratio came down quite -- I think, quite significantly from last year. I'm just wondering if, going forward, you have a specific cost-to-income ratio in mind. I know you haven't published anything, but I'm just trying to think -- obviously, cost efficiency is an important objective for you. And I'm just trying to, one, think about how far you think that cost-to-income ratio can come down. And whether -- sort of a secondary question to that is whether any artificial intelligence initiatives you are implementing across the bank can support both the revenue line and also bring costs down. Yadin Antebi: Thank you, Jan, for that. Yes, of course, we have an internal cost-to-income target or ratio that we follow both for '26 and '27. We follow and we have a lot of work. I talked about it in my part, and Ram also talked about it. Operational efficiency is a major issue internally. We put a lot of effort to make sure that we're continuing on the right path of making the bank more efficient than it is today. You know we discussed in previous meetings the efficiency program that we have and the reduction of the number of employees. We believe AI, and I talked about that as well, will have a major impact on the bank, okay, in terms of the call centers, in terms of the people that write code here. We have a very large technology division, hundreds of people that write code. So this is something that will dramatically affect AI the way we write code here. We do have different AI initiatives internally also within writing code, for example. But I'm very open at this stage. None at this stage has gone down to the bottom line of the P&L in terms of reducing expenses up to 2025. Looking forward, I'm sure that we will have dramatic changes that will implement -- will be implemented both in the call centers, both in writing software, changing the way we operate in terms of SLA regarding how fast we reach our clients. So these will all go down to our cost base. Last part of your question, you asked about the technology expenses. Yes, they are high. We're taking the best engineers in Israel. I think we discussed at the time that we got in the guy that ran the tech division of Playtika. He is running today since I think March 2025, the IT division within the bank, building internally new people, new ways of writing software, going faster to market, using AI better, different metrics and know-how that he knew and grew up actually from the gaming industry, which is a very, very sensitive industry in terms of AI and technology. So going back to your question, yes, these will all be impacted on the P&L of the bank looking forward. Canberk Benning: That makes a lot of sense. And then my second question is just looking at the credit growth target that you've got. So you've got 8% to 9% across '26 and '27. I'm just wondering is there any specific areas of the credit book that you're looking to grow? And any areas that you're looking to gain market share and whether that's greater market share in the retail segment or in corporate? Just some color on that would be useful. Yadin Antebi: Just like 2025, we're a very large bank in Israel, more or less 25%, 30% market share depending on the different areas that we bank with. So we will sell credit all around, whether it be retail or small businesses or middle market companies or large corporates, it will be on different sectors. It will be on infrastructure in Israel. It will be on real estate, it will be with hotels. So we're all around. There's no specific sector that I think we will say this is where we want to grow because we're very strong on all sectors. Operator: The next question is from David Taranto. David Taranto: This is David Taranto with Bank of America. The first question is a follow-up to my colleague's question on efficiency. Could you please elaborate a bit on your existing efficiency plan? Is the program tracking in line with your initial expectations in terms of pace, headcount reduction and cost savings? Or should we expect any change to the timing, or magnitude of the planned savings? Yadin Antebi: David, congratulations for your first call with us, and thank you again for covering the banks in Israel. Cost program, as we said in our December '24 financial statements, it's a 770 employee reduction done through 4 years, starting 2025. We started to implement it. Our full savings will be realized 2028. We disclosed that figure of ILS 300 million. There is -- there are conflicts internally in terms of our internal union. They didn't like the plan too much. So we do have discussions. Discussions have started. They are not concluded yet. We will -- I believe we will meet our 770 program on time. David Taranto: Okay. And the second question is on the asset quality. Your coverage ratios are extremely high and most of the provisioning remains collective. And can you break down how much of the collective allowance reflects managed macro overlay versus what comes purely from credit models? And what would trigger you to release any excess overlays this year? Yadin Antebi: Yes. Thank you, David, for this question as well. This is something we were very different in 2025 compared with our peers. We thought that 2025 is a year that we should be very conservative in terms of provisions. Even though you will not see within our books any material specific losses, we thought it would be right to be conservative and to continue to accumulate more credit provisions. We did that through the year and also Q4 2025. Looking forward, we think -- and I mentioned that when I talked about entering '26 and '27, we think that this is one of our key strengths looking forward because if we were right -- if we are right and Israel is going on the right track in terms of the geopolitical situation, in terms of the growth of the economy, in terms of things going back to normal in Israel, we have high reserves that we hope we will be able to release. But this is looking forward, and will be managed, of course, during '26 and '27. Ram Gev: David, if I can add to what Yadin said and elaborate. So we implement the CECL methodology on provisioning on credit losses. And overall, we run, let's say, 3 scenarios. So -- and we weigh those 3 scenarios into a combination. We have a baseline scenario of pessimistic and optimistic. By the way, the reality is better than the optimistic scenario actually. So it's hard to separate the elements that you mentioned because the actual figures are a combination of these 3 scenarios. Adding to that, some qualitative elements that we put to reflect uncertainty. But I think you can get a figure to -- what you asked, if you look at our coverage ratio standing at 1.72% and compare it, let's say, to our peers, you'll see that we have, let's say, roughly 30 basis points up to the average. So that reflects -- roughly reflects our conservative approach, hopefully, to meet the positive and optimistic scenario. David Taranto: That's clear. And 2 more, please. The first one on the expected pretax real estate gains, should we assume standard corporate income tax on these proceeds? And will the regulator allow you -- allow this profit to flow into the regular payout calculation? Or should we expect it to be treated separately in terms of payout? Ram Gev: Yes. Usually, it's the regular, but we may have from time to time some losses to offset from that. We don't know exactly what will be the final outcome for that. That's the reason why we disclosed the -- let's say, the before tax estimates. Obviously, if we will have some losses to deduct from that, then it doesn't matter whether it's included in the tax, let's say, the super tax or no. But if there won't be any, let's say, deductible losses, then generally speaking, it's included in the super tax as well. David Taranto: Okay. And the last one is on the AFS book. You have a strong unrealized gain position in your AFS book. And if the rates continue to come down, this position should build up further. Can you give us more color on the portfolio structure, in particular, what share of the AFS book is in fixed rate securities and how sensitive the unrealized gains are to, let's say, 50 bps lower yields? Ram Gev: We have a disclosure on our book we can direct you later on, on the sensitivity for 1% change on our fair value and equity. The overall effect, but part of it is from the AFS is the overall effect is about ILS 1 billion, but the available for sale is only part of it. So I can direct you to our disclosure on that on Page 19 in our statements. Operator: The next question is from Chris Reimer. What is driving your confidence around the increased loan growth target? And given potential for further leveraging of technology, do you see a case for further year-on-year decline in expenses? Yadin Antebi: Thank you for that. We feel strength of the market, and that's why we thought it would be right to increase our credit target -- credit growth target. We saw the strength of the market '24 and then in '25. We see the pipeline of the different projects that we're handling both infrastructure and others. We -- even before the Iran war now, the growth in Israel and the projections were very high. And after the war once it ends, we're sure that Israel is going to be in a new era in terms of the geopolitical environment. So that gives us a lot of comfort regarding the credit growth. The second part of the question in terms of the technology, I think I answered this before. Yes, we're spending a lot of money on IT and technology. But we also see that in different areas, the IT costs may go down because of different infrastructure that will be used here through AI, for example. This is not for the -- as I said, not right for '25. But looking forward, this might be material. We're trying to manage both costs or actually 3 different costs, the employees' cost, the technology cost and all our other costs. Operator: The next question is from Valentina Stoykova of Barclays. Given ongoing lion's war, I was wondering whether you could briefly outline the best and worst-case stress scenarios for Hapoalim and the key macro assumptions used. Where do you see your COR in a worst-case scenario? And also, should we think about the upcoming Tier 2 callable option? And as a follow-up, could you outline the main risks you see to delivering on the ROE target? Yadin Antebi: Great. Thank you for that. Good question. Actually, I believe that whatever happens, Israel is going to get out of this war dramatically stronger than what -- from the position we were 10 days ago. And that is mainly because the whole geopolitical here may change -- environment may change. It goes back to the fact that a very aggressive country is already in a different position. It goes down to different agreements with our Arab neighbors that we've been talking for years about extending, for example, the Abraham Accords. So this might happen as well. So whatever happens, I think Israel is going to be a much stronger country and a much stronger economy looking forward. And that, of course, reflects on the bank. The 2 -- you asked about the 2, the best-case scenario and the worst-case scenario and maybe I'll think out loud. The best-case scenario will be a very short war, just like the 12 days war, ending with a new regime in Iran and having Abraham Accords with all the Arab countries around, including Iran. That's like the best-case scenario. The worst-case scenario is a long war that is taking a long time. I don't think that will happen, but it might happen. And that will, of course, influence government and businesses in Israel and deficit. I don't think this option is really relevant. But if you're looking for something which is extreme, that may happen. Reflecting on the ROE can change on the different scenarios. But personally, I'm very optimistic because I think that like the essence of the Mediterranean is really changing day by day over the last week. Ram Gev: Yes. And to add to what Yadin said, Valentina, you asked about the cost of risk and the effect. So we have a disclosure in Page 81 of the financial report. Like I mentioned before, while calculating the collective allowance, we are using different scenarios, pessimistic base scenario and optimistic, and we are creating some combination of that. So we have disclosure there if we work only by the pessimistic scenario, what will be the additional effect on the provision. And if we work only according to the optimistic scenario, what will be the decrease in the provision. So you have full disclosure there. And like I mentioned before, what we saw after 2025 in the first campaign with Iran is actually that the reality was better even than the optimistic scenarios that we ran. Operator: There are no further questions at this time. This concludes the Bank Hapoalim Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Atos Group FY 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Philippe Salle, Group Chairman and CEO. Please go ahead. Philippe Salle: Hello. Good morning, everybody. Thank you for joining us for this call of the full year results of 2025. I'm here in the room with Jacques-Francois, the CFO; and Florin, our CTO, because we're going to talk also a lot about technology. And of course, we're going to talk about the future of the company. So the agenda of today is 4 topics. The first one is the 2025, let's say, business and strategic highlight that I will manage. Then Florin will take the floor to have a tech update. And today, we are announcing 2 things with the launch of Atos sify and launch of our agentic studios. Then I will come back on operational and financial results with Jacques-Francois. We're going to have together this section. And then I will finish by the outlook, and then we'll take Q&A. So let's start with the first part, and I'm going to go on Page 6. So 2025 was the year for me of the reset. Remember that I want to have 3 phases, I would say, in the turnaround of the company, reset, rebound, acceleration. So '25 is a reset and '26 is the rebound. In 2025, first, we have a very good financial improvement with clear signs of recovery, we'll see that. Second, a significant progress, of course, of our Genesis plan. And the third is that we have a positive business momentum and a commercial, I would say, traction. If we go on Page 7, the key numbers of the company, first in terms of top line, the revenues at EUR 8 billion, EUR 8,001 million to be really clear, so above the target that we have set during the Q3 the last call, in fact. Operating margin, EUR 351 million, it's 4.4%. Just for information, that's the best margin we have for the last 5 years. And I think I'm very pleased to say that we have doubled the margin versus last year with a decrease in top line of minus 14%. And remember that we have guided EUR 340 million at the beginning of '25. Net change in cash, it's minus EUR 326 million, although we have accelerated, I would say, Genesis, and we paid in fact, EUR [ 250 ] million roughly of exit cost and it's better, of course, than our guidance that we say that it will be EUR 350 million or below. And then the liquidity, and we published this already in Jan is EUR 1.7 billion. So it's far above, of course, I would say, the covenant that we have in our debt package that is EUR 650 million. So we have ample cash to finish the Genesis plan. And in fact, this year, we'll be already cash flow positive and the debt, in fact, will go down. Now if we go on Page 8, you can see the inflection point in terms of revenues. So the fourth quarter and that's the figures we have published, in fact, in Jan was around minus 9%. So you can see, I would say, quarter-by-quarter that we had, in fact, a deceleration or, let's say, less momentum, I would say, better momentum in terms of revenue decrease. And then you can see also the number between Atos and Eviden and the organic growth that we have, which is around minus 9% in Q4. In terms of the OEM for the EBIT, the pro forma of '24 for the information we hold are that -- we have sold in '24 and at a constant exchange rate is EUR 1.72. So you can see that we have more than doubled the margin and the margin was beyond 2% in '24 and in terms of '25 is at 4.4%. And in terms of cash flow, the net change in cash was roughly minus EUR 700 million in '24, and we have roughly minus EUR 300 million in '25. If we go to Page 9, you can see also that the backlog -- the book-to-bill has also improved in the course of '25 at 94% for H2. And the total book-to-bill, in fact, for '25 was 89% versus 82% in '24. Now if we go to Genesis on Page 10, remember exactly, I would say, the plan that we have sketched in May '25 with the 7 pillar. This is, I would say, exactly what we have shown, in fact, in May. And I will now -- if I go on Page 11, a little bit deep dive on what we have done. So on the first pillar, we have reviewed the top 100 accounts, and it has, I would say, produced EUR 1 billion plus of opportunities. Remember that during the CMD, I have said that the number of business line per account was around 1.4, and we want to push it, of course, to 2 or above, I would say, that level. And then we have also in terms of growth streamlined, I would say, the processes and also with, I would say, a better organization in terms of sales with salespeople in the different geo than in [indiscernible]. In terms of HR, so we have reviewed the bonus framework. We have launched our LTI plan with a share plan for the top 200, and we have started also to have a leadership culture. And this year, we're going to push very hard on the AI culture. In terms of country reviews, so we have roughly 10 countries that are exited or in inactive. Remember that we want to go probably above around, let's say, 40 countries. We have also sold 7 countries in Latin America and also in Nordics, which is Norway and Finland. And this year, we want to continue to probably, let's say, close or inactive around 20 countries. In terms of portfolio review, first, we have sketched, I would say, the different branding. So you have Atos Group, which is the holding. And under Atos Group, you have 3 brands. Atos, of course, service, let's say, company, Eviden product and software and Atos Amplify, the new name that we are launching today for the consulting arm. So we have 6 -- in Atos, 6 business lines and 6 geos. And with Eviden after the disposal of the high-computing, we have 3 product lines. In terms of PM and GM, so in terms of project margin and gross margin, so that's the way we look at our P&L internally, you have revenues, project margin, gross margin. And then EBIT margin. So we have, I would say, a plan, remember that we are looking at EUR 650 million of savings, and we have already achieved 88% of it, EUR 350 million roughly are in the P&L in fact of '25. And EUR 200 million more to come in the course of '26. We have increased the reliability ratio by 3x. We are now above 80%. We have also continue, I would say, to push the offshoring. And as you can see, we have also a different, I would say, actions on the reduction of the -- It's just switching, I would say, a bench people. We prefer, of course, to use I would utilize people on the bench and of course. Just for information, very important, the discipline also on the new contracts we have signed. Remember that we want to have a margin of 25% to 26% in the future. And in fact, if you look at without the black contracts, we are already at that level. And on average last year, we have signed roughly all the contracts on the book-to-bill and for the EUR 8 billion plus -- EUR 7 billion is around 24%, which is roughly 2.5% above what we have done in the course of '24. And it's very important to understand that we could have probably a better book-to-bill in the course of '25, but the idea was really to protect the margin, and I prefer to say no for some tender, then I would say, to have, let's say, more revenues and less margin in the future. Pillar 6 is the cost review, it's the G&A. So we have done a lot of things there for your information, we reduced the G&A by roughly 26%. Remember that the target we have in G&A is 5%, and we are close to 6%. So we still have 1 point to gain in the course of this year and next year. And then in terms of cash for the Pillar #7, the DSO is at target. We have reduced over by 13%, reduced all the, in fact, by roughly 27%. And we have managed quite very well, I would say the CapEx, and we felt good, we are roughly at EUR 100 million plus. Just on the bottom, you see also that we have completely reviewed the target operating model and also the government has been satisfied. Now if we go on Page 12, today, we are launching, as I said, 2 things. I'm going to talk on Amplify and then we're going to talk on the Agentic Studio with Florin. So Amplify, that's the consulting arm or body, I would say, of Atos, still the brand of Atos because it's very linked to the services that we provide with Atos. And the idea is that we're going to refocus Amplify on AI. The idea for us, it's a door opener, in fact, in artificial intelligence that will help us after that, of course, to push the studio that we are going to. In terms of workforce on Page 13, we are now at 63,000. So you can see the hiring, the levers and also the restructuring we have done. And if you want to see without Latin America and without view, we are close to 57,000 people. That's the number of staff that we're going to have after the divestment. Last, on Page 14, that's the order book. So we have roughly -- we have the key numbers. As you can see, the renewal rate, in fact, is 92%. It's not bad. I want to have a little bit more this year. And in fact, in this year for the large accounts, what we call the large bit over EUR 30 million per year, we estimate that we're going to win most of them or all of them, in fact, a number of strategic deals 19. It was 10 in fact in '24. And there is a good traction in fact, in cloud, cyber and data AI where the business line we are pushing more than the rest. You can see, I would say, different names on the, I would say, extension or win. And for Siemens, of course, we continue to work with them. We're going to do probably EUR 250 million, in fact, the course of '26. Last on Page 15, just to also recognize that we also continue, I would say, to be recognized as a sustainability in the IT sector, it's very important. So we have won or renewed, I would say, some award in terms of sustainability, you can see it on the left and then many business awards from the analysts that we continue to have in the course of '25. I go quite fast, in fact, because I think it's very important that we spend some time on the technology today because there have been a lot of buzz on AI and probably a completely crazy movement for me on the share price in a different company as -- and we estimate in fact that for us, we are very well placed in AI. And in fact, we don't do BPO that is probably, I would say, the business that is going to be attacked for me by Agentic. And definitely, I think that there is a big opportunity for us, in fact, with AI going forward. So with this, I'll give the floor to Florin, who is in the room with us, and he's going to talk about you about, I would say, the AI and the agentic we're going to launch this year, in fact, today. Florin Rotar: Thank you so much, Philippe. Good morning, everybody. Thank you for joining us. Delighted to be here. So what I suggest we do for the next few minutes is for me to walk you through the way that we see the market developing in general in the space of technology, and I will double-click on AI, of course. And I will share with you how we are planning on attacking and delivering this very exciting space. So I'm sure you're well familiar with the fact that global AI spending is booming, a lot of increase in AI infrastructure, AI services, AI software, AI cyber. And we genuinely and truly believe that Atos is very well placed to win in all of those areas. We do have some very strong moats. So the background and the history of Atos, as you all know, is to work and help our clients in highly regulated environments where security is a top concern, where sovereignty is increasingly becoming a priority, where the IT landscape is very complex and where a lot of the systems are truly life and death and are genuinely mission-critical. And what we see happening is that in all of those environments, there is a flywheel convergence happening between sovereignty, AI and cyber. And the fact that we have this decades-long managed services relationships with the clients, the fact that we have really deep know-how of their environment of their data has truly enabled us to progress very fast into packaging those into agentic AI as a service offerings, and I'll cover this in more detail. As you know, the technology space is quite complex right now. It's evolving super fast. There are daily announcements front and left, right and center. And our clients are really hungry for a level of clarity and assurance. And I think we play a very important role as if I'm allowed to use the word Switzerland of governance. The ones which are able to provide secure cross-platform neutral agentic AI. And we're doing this through a very exciting set of partnership with the big players, but also through a set of unique partnerships with AI native and sovereign start-ups. So let me double-click on all of this into more detail. So if we go on the next slide, what you'll see is the 3 big bets for Atos going forward. We believe these 3 pillars are going to be substantial drivers of growth for us in 2026 and beyond. The first one is mission-critical agentic AI. This type of agentic AI is fairly different to the type of AI that is most commonly mentioned in media. When you're doing agentic AI in really complex regulated environment with high level of governance, requirements around sovereignty, reliability, security and responsibility, the type of technology and the type of services is fairly different. We're also seeing digital sovereignty be super important for our clients. And actually, this is the case in North America, in Europe and international markets as well. And what we're doing is that we have embedded digital sovereignty as a core design principle across all of our portfolio. And last but not least, cybersecurity, of course, continues to be a high area of focus. Developments in AI are, of course, helping us to deliver cybersecurity services in a better, faster and more efficient way. But AI actually, of course, also opens up new attack surfaces and new potential vulnerabilities. So what we see happening is that there is this flywheel of self-reinforcement powers between AI, sovereignty and cyber. And we believe we have the right to be winners in all of these 3 areas. So sovereignty, of course, requires security controls to be able to be fully enabled. Sovereignty is, by definition, more complex than non-sovereign solutions, and therefore, AI can play a role to make them more affordable and more innovative. As I mentioned, AI has a huge impact on security. There is a quest to secure AI, but also to use AI to drive more security solutions. So you will hear us going forward really focusing and doubling down on these 3 areas. And what I would like to do is to double-click into each and every single one of those to give you a flavor of what we're doing, the success we've seen so far, what we see happening in the marketplace and to give you a glimpse into the future. So if we go to the next slide, Slide 19, we are very excited to have 4 Atos sovereign agentic studios come out of stealth mode in U.K., in U.S., France and Germany. This will serve the local markets based on their needs, the focus industries, their requirements, and they're all built for truly mission-critical production from day 1 with extraordinarily high focus on the topics which make AI adoption at scale more difficult in most organizations, which is governance, sovereignty, reliability, security and responsibility. So the reason we're launching the studios is that we see that our client spend is converging services and technology budgets into a unified value pool. This value pool and the size of those budgets are increasing, of course. But they're also a very high demand for measurable value generation at scale. Everybody is sick and tired of pilots and proof of concepts and prototypes. Organizations really want to make sure that they have AI, which is secure, which is reliable, which adds business value at scale. And the main challenges in this space is governance and orchestration. And this is where we believe that Atos is an absolute key power player. And then we're actually also seeing sovereignty emerge for AI as a very high priority. So our clients are very happy to use closed black box models for the typical back-office functions, which are important, but which are not differentiated. But they actually are increasingly becoming wary of developing their own brains, so to say, so they own their future, and they have full control of their data, the controls and the intelligence, which they're building. So we are very excited to announce a unique partnership with one of the absolute leaders in foundational models for agentic enterprise, which is [indiscernible]. And this will allow us to deploy and develop sovereign solutions in Europe, in North America, in international markets. And this will help and is helping already our clients to harness the full power of AI on their terms and without compromise. We're, of course, also working with the major market leaders here such as Google Cloud, SAP, IBM, AWS, Microsoft. As a little anecdote, we've just received Frontier partner status with Microsoft given the fact that we're one of the leading organizations leading the path around AI and innovation. But we're also working with this really interesting set of AI native start-ups, which allow us to add unique value across the entire value chain of AI. So we're using KYP, which stands for Know your Potential to help our clients mine and redesign processes and to really understand the business case and the value generated with AI on a very specific and data-driven manner. We are working with the likes of EMA and [ NAN ] as to create and orchestrate and manage the digital AI employees, the agents. We're working with AI to really be able to measure and value the highly, how should I put this, movable cost of AI consumption and to have the causality and the correlation to value. And we're working with clarity around helping our clients drive this continuous change. And we're using all of this technology for our own back office and front office transformation as well. So I know I've used a lot of words here, a lot of concepts, but let me move to the next stage and try to make this very real for you with a number of client examples. So to be honest, we have more demand than we can almost handle right now. We have incredible interest in this agentic AI studios and just sharing with you a couple of examples here. One is Scottish Water, where we're working together to really transform the way they are doing operational planning, risk assessment, decision-making across the entire national and wastewater networks. And this is really mission-critical environments where AI agents are used to continuously monitor the network, to analyze proposed changes to automatically generate contextual risk assessment. And as you can imagine, this is the type of AI, which really needs to work, which really needs to be secure, which really needs to be accurate and timely. Another example is Defra, the U.K. Department for Environment, Food and Rural Affairs. Their mission is to make the air purer, the water cleaner, the land greener and food more sustainable. So obviously, very important mission and vision. So what we're doing with Atos is that we're using a new set of highly differentiated agentic AI solutions we have developed to rapidly modernize and transform their entire application portfolio. We call those digital transformation engineers. They're AI agents which work in collaboration with our human experts to achieve things which frankly wouldn't have been possible to achieve just a few months ago. So we're seeing a close to 30% time-to-market efficiency gain around how to modernize those mission-critical applications. Another example is mBank. We are really working very closely with them to develop their entire advanced digital foundation. And again, this is not AI, which is an add-on. It is mission-critical AI, which is being used to improve operational resilience, to create real efficiency in their business, to manage risk and to really make a difference around their customer experience. And there are many, many, many more examples of this. So we're very proud about this sovereign agentic AI studios, much more to come in this space going forward. If I go to the next slide, I'd like to share with you a perspective around how we're approaching the sovereign space. So what we see is that clients, they have an increasing desire to retain control, authority and accountability over their data, their infrastructure, their applications and digital operations and to have this be in compliance with all the applicable regulations to minimize dependency, exposure and disruption risk. And I think it's important to note that this is not just a European development. We see sovereign requirements being very high in North America as well, both in United States and in Canada and also in our international markets. And in actual fact, there are data points which point to the fact that over 80% of requirements from clients going forward are going to include a critical demand for sovereignty. And this is a massive business opportunity. It's currently estimated to be in the EUR 40 billion to EUR 50 billion of total addressable market, and it is growing quite fast. And frankly, we believe that we are one of, if not the best player in this space. I'd like to draw your attention to the quote on the bottom right corner from one of the leading independent analysts, which is basically and I'm quoting, "Few players can claim the unique combination offered by the Atos Group, an umbrella of sovereignty, which provides the whole with an unprecedented coherence." So we are able to do this in a variety of models because sovereignty takes different shapes and forms in different countries. What U.K. means by sovereignty is slightly different than what France and Germany means by sovereignty, which is different than what U.S. means by sovereignty and so forth. So we're able to offer this full spectrum of solutions ranging from enhanced native clouds to controlled clouds to trusted clouds to disconnected clouds to fully sovereign AI, as I mentioned previously. So I would like to give you, again, a little example of this. One of them is Eurocontrol. Eurocontrol, you might be familiar with, they are the organization, which manage and control the European skies. They are providing a really mission-critical service to the entire continent. If their systems and operations wouldn't work, then flights would not fly, that would obviously have a very, very high impact on the entire economy. So what Atos is doing is that we're one of their leading partners to ensure the strict resiliency, safety, security compliance requirements around the entire IT value chain. And we do this in a way which is coherent, is aligned with the industry regulation and generally spans infrastructure, application, artificial intelligence and so forth. And this is a solution where we are partnering with Microsoft as well around the Azure cloud. If we move on to cyber, that is, of course, a very hot topic and it continues to be so. And what we're seeing is that AI security has really changed the game. So it's become the primary focus area for the way our clients spend. AI is truly redefining threats, defenses and vastly expands the attack surface. And cybersecurity is shifting to an always-on compliance model where our clients are requiring very much verifiable controls and sovereignty aware architectures. And again, this is a space which is moving super fast and really redefining the game. So to give you a little anecdote, it is estimated that there are 80x more machine identities in any organization today compared with human identities. And this is, of course, because of the advent of agentic AI. So that type of AI where you have agents which perhaps only need to have split second life cycles. They need to be controlled. They need to have verifiable access controls. They need to be spun up and potentially terminated in under a second really redefines the rules of the game. So we believe that we are super well positioned in this space. We have very much an end-to-end best-in-class set of cybersecurity services ranging from advisory which, Philippe just mentioned. We have very much embedded AI agents in our entire life cycle of threat intelligence, threat detection, investigation and response. We're also, we believe, one of the market leaders in post-quantum cryptography. And of course, with the Eviden Group, we have some fantastic EU, European sovereign cybersecurity products. So again, to make this real, I'd like to give you a sense of the work that we're doing with the European Commission. This is one of the most important cybersecurity services in Europe, full stop. And Atos is on point and has won a substantial framework agreement to provide operations, incident response, digital forensics, threat intelligence, threat monitoring, offensive security in the areas of vulnerability management, penetration testing and red teaming. And again, I draw your attention to a number of independent analysts, which continue to recognize us as a market leader in the cybersecurity space. So let's move on to the next slide and try to give you a big picture of where we're at and how we see AI impacting our businesses. So this might be a little bit of a busy slide, so please give me a chance to walk you through it. So at the bottom of the slide, you're seeing our different historical business lines with data and AI, cyber, Eviden and so forth. Then the Harvey balls are representing the way we see AI impacting those specific business areas. So on the top row, you're seeing how AI is impacting the addressable market expansion with the full Harvey ball, meaning it is very high expansion, i.e., more opportunities for us or a limited partial Harvey ball demonstrating or indicating a limited expansion. And then the AI top line pressure row is basically a way of indicating how we see AI impacting or having the potential to impact our top line revenue ranging from low to high. So all in all, all in all, we see AI being a strong driver for growth in Atos. We are very much on the offensive. We believe that AI is a game changer, and we are super well positioned in this space. But the important bit to mention here is that we have a leading position in a number of these building blocks in the colorful table below. But what we are doing very successfully is to combine and recombine them into this 3 big bets that I've been talking to you for the last few minutes. So again, please remember the growth engines of Atos are agentic AI digital sovereignty and cybersecurity. And we're seeing substantial opportunities and a lot of momentum in those areas. And we truly believe we have the right to win. So moving on to the last slide as a little bit of summary. We are still going through a massive transformation. We've turned the corner. We are reimagining and we have reimagined the entire technology function in Atos. We're attracting some absolute top-notch talent. We have done a full portfolio redesign, doubling down on agentic AI and AI in general, digital sovereignty and cyber. We have a very unique and differentiated approach to sovereignty and security. We're boldly and ambitiously embracing this new world of services software where increasingly, we are building very unique, very specialized AI solutions powered by software to augment and enhance our services. And the Agentic Sovereign Studios, which we have just launched are really a showcase of much more to come. We really look forward to sharing with you progress and a lot of success in this space. So having said that, handing over to my colleague, Jacques-Francois, to walk you through some interesting numbers. Philippe Salle: So thank you, Florin. I will take the lead before Jacques-Francois if that's okay. And in fact, Florin, you're right, we're going to have a special press release on the agentic next week on the other. We're going to much comment, let's say, much more in detail on what exactly we're going to do in the coming weeks and months, of course. So now going back on the number -- topic #3 on the presentation. So we go to Page 26. So you can see the revenues of '25 versus last year. We call also the pro forma without the foreign exchange and scope. Scope is world grade, of course, in '24. And as you see, minus 14% in terms of sales. If we go to Page 27, you have the EUR 8 billion between Eviden and also Atos in blue. And then in the different countries, Germany is #1, North America, France, U.K. and an international market and what we call BNN, which is Benelux, Netherlands and Nordics. And if you look on the right, this is the EUR 7.2 billion, that's the pro forma of '25 without Latin America and without BNN. And you can see that the base we're going to rebound for this year. And you see now, I would say, what is the split of revenues between Eviden, now, of course, much smaller on the EUR 300 million plus and I would say Atos with different yields. Now if we go to Page 28, I'm very proud to say that we have doubled the margin in terms of EBIT and in terms of percentage more than that. So pro forma in '24, we were at EUR 172 million of EBIT, and we -- last year, we touched the EUR 351 million. So it's more than doubling in fact, the profitability and also a margin at 4.4%. And as I said, that's the biggest margin we have since 2021. Now if you look at the operating margin by geography on Page 29, I will not go into detail but you can see on the left column, that's the results of '25. And on the right, that's the pro forma without -- and without Latin America. So that's the rebound. So the EUR 7.2 billion and EUR 314 million, that's the base impact of the rebound for '25 -- '26. Now I will go very quickly on the different business units. But you can in fact that in Atos for the 6 geos, we have done quite a very good job. Germany, we start first minus 10% on the top line. So tough year. We know also that some of the clients have decided to exit. For example -- of their platform. So it was nothing to do with Atos. Germany is for the first time probably of many years on a positive territory. And as I said to you, this year, we'll be probably close to EUR 100 million. I think the budget is EUR 90 million. So we have, I would say, with Genesis, more to come, of course, in the course of '26. Atos North America on Page 31, that's the area that has been touched more, I would say, in terms of top line. A lot of clients have been frightened in the course of '24 and we -- they stopped, of course, some of the contracts. But as you can see, of course, the EBIT in terms of quantum is less than '24. But in terms of margin, we are double digit, and I think it has been a very good job done by the U.S. team. Now if we go to France, the decrease is around minus 10%. And also, I would say, however, we have a decrease in terms of top line. We have been able, I would say, to stabilize the earnings a little bit more, in fact. And of course, with Genesis, there is more to come in the course of '26. U.K. and Ireland also is an area on Page 33, where we have had also a -- it's like in the U.S. In fact, it has been a tough year because of a lot of clients stopping to work with us and stopping contracts. But as you can see, we have been flat in terms of EBIT and roughly at EUR 83 million versus EUR 82 million. But in terms of margin, we have increased the margin by roughly 1.6%. International market is down also at minus 15%, but we have more than doubled the profitability. We have done a very good job, in fact, in the Genesis transformation in different countries in Middle East, in also South Europe and also in Asia. And last, Benelux, where I would say probably we have been the more resilient in terms of top line. And so we are on Page 35, minus 4% in terms of organic -- inorganic growth, so a decrease in terms of organic, let's say, and a very, very good job from the team on the bottom line. As you can see, we have multiplied by 10 the EBIT with a margin around 7%. So as you can see, in fact, despite, of course, the top line, I would say, pressure, we have been able, I would say, to manage very well the bottom line. Last slide on 36 is on Eviden. Of course, this is the part that is growing and mainly of the advanced computing activity. This activity was losing money, in fact, in '24, and we have done quite a good job to restore some profitability. It's still too low for me. But definitely, there is more to come in this business unit. With this, I hand over to Jacques-Francois to go more on the P&L and balance sheet. Jacques-François de Prest: Okay. Thank you, Philippe. Good morning, everybody. Now that Philippe has gone through the drivers of our business operational performance, let me walk you through the P&L items below operating as well as the cash flow statement and the balance sheet. So as Philippe indicated, our operating margin amounted to EUR 351 million in fiscal year '25. We incurred reorganization and rationalization charges for EUR 642 million in total, of which EUR 540 million reorganization costs as we made significant progress in the execution of our restructuring program and EUR 102 million provision related to leases and real estate asset impairment. We impaired EUR 166 million of goodwill this year as a result of the upcoming disposal of the Advanced Computing business. Other items reached a negative EUR 331 million. They included losses related to some onerous contracts for EUR 123 million and litigation provisions for EUR 145 million. The net cost of our debt reached EUR 333 million, up from EUR 178 million last year, reflecting our new debt structure post '24 refinancing and including PIK interest as well as the amortization of 2024 fair value adjustment. Other financial expenses were EUR 102 million in fiscal year '25 due to debt lease pensions and provisions on nonconsolidated investments. As a result, our net income group share amounted to minus EUR 1.4 billion. On the next page, we see the cash flow generation, which improved significantly year-on-year from minus EUR 735 million in '24 to minus EUR 326 million in fiscal year '25. We generated EUR 883 million OMDA in fiscal year '25, and we expensed EUR 170 million in CapEx and EUR 278 million in leases. Our change in working capital requirement, once we neutralize for the working capital actions, you recall that the unsolicited cash received in advance from some customers, this amounted to a positive EUR 33 million. It essentially reflected a lower activity level in 2025. Going forward, we expect further sustainable working capital improvement. Our cash restructuring expense was EUR 445 million. As expected, cash out accelerated in the second half of the year. Tax paid was EUR 31 million and cash cost of debt EUR 160 million. Onerous contracts and litigations amounted to EUR 157 million. As a result, our net change in cash was limited to EUR 326 million, better than anticipated despite higher restructuring costs, cash at EUR 445 million. Now the net debt as at December 31, '25. The net debt was EUR 1.8 billion compared to EUR 1.2 billion as at December 31, 2024. Beyond free cash flow, it reflected the impact of the change in working capital actions for EUR 43 million, negative ForEx impact for EUR 104 million and other elements such as the PIK component of the debt. Net debt consisted firstly, of cash and cash equivalents for EUR 1.265 billion. And secondly, borrowings for a nominal value of EUR 3.64 billion. As at December 31, '25, the group financial leverage ratio was very similar to the end of '24 level at 3.17x. I remind you that our target is to reduce leverage below 1.5x at the end of the year 2028. Thank you. And I now hand over back to Philippe. Philippe Salle: Thank you, Jacques-Francois. So let's go over to the section, which is the outlook. So on Page 42, first, we want to come back on what is Atos -- do that we will give the keys at the end of the month, in fact, the end of March without also Latin America that we have sold and the closing is expected in fact in April and also the small divestiture that we have done in the Nordics. So on the left side, you can see that the revenue is EUR 7.2 billion. Operating margin is EUR 314 million and that's the pro forma without, as I say, the new perimeter, roughly 57,000, 58,000 people without -- in Latin America and 54 countries of operation. And as I say, we want to be below the 40 threshold, so we continue to reduce the perimeter in this topic. On the right, you can see the different business lines, the different geography. #1 market is now Germany. North America, #2. France, #3. And U.K. and Ireland, #4. And as you can see, these 4 countries is roughly more than 70% of our total revenues. And then you can see also the industries. Now the financial ambition is on Page 43, and I know that a lot of people are waiting this moment. So the guidance for the 3 elements, which is top line, bottom line and cash. So on the top line, we are looking for a positive organic growth. That's the budget that we have internally. But we want to say that there is also a downside scenario possible that is limited to minus 5%. So it's very important that we are cautious. We don't want to over give, I would say, confidence. It's very important that we deliver the numbers that we announced. And that's why we say that, of course, the budget is and our target internally is to grow. It could, I would say, there are some less good news in terms of top line. The maximum we can see this year is minus 5%. And remember, it went over minus 14%. So of course, the first half year will be negative, and we estimate that we will be probably around minus 9%, minus 10% in Q1. And then it will, of course, stabilize in Q3 and a rebound in Q3 or in Q4. Operating margin around 7%. So it means that it's indeed, let's say, around EUR 500 million. So it's an increase by 60% versus '25, which is very important. And we are on, I would say, to the journey to touch this 10% margin by '28 and a positive net change in cash. So it's without, I would say, a divestiture of course, of -- So it means that with the cash that we're going to produce this year plus, of course, the cash we're going to have from the M&A, the debt will be reduced. The EBIT will increase. So the leverage for sure is going to decrease strongly, in fact, in the course of '26. And we are very, I would say, very confident that we're going to produce cash this year. And I think it's the result, of course, of this Genesis plan that we have accelerated in the course of '25. Now for '28, we continue to say that the 3 phase, as I say, reset in '25, rebound in '26, accelerate now in '27 and '28. We continue to see an acceleration of the top line between 5% and 7%. We track probably do better than that. Still looking at an operating margin around 10% and of course, deleveraging to be below the 1.5% net debt by the -- the way we calculate this in the course of '28. So to have, let's say, a profile of BB and BBB probably in the course of '29. That's the goal we have. Now if I have to sum up, I would say, what we have said today with Florin and Jacques-Francois. So on Page 44. First, we have a restore the foundation of Atos. We are very pleased to say that we have met or exceeded, I would say, the financial guidance that we have set. We have done a lot of job, in fact, in the commercial strategy, and I definitely think it's going to yield a lot of results. In fact, I would say the Genesis cost, it's a 1- to 2-year effect. We have done most of the plan in '25, we will finish in '26. And the rebound, it's a 2-, 3-year effort. We have done a lot of job in '25. We're going to see some of the results in the course of '26 and I definitely thing that we're going to accelerate in the course of '27. As I said, the Genesis plan, we have done roughly 88% in terms of savings. It's a pro forma. So we have, of course, part of it in the P&L of '25, and there is more to come, of course, in the P&L of '26. Second, I think we are very well placed for the AI journey, and I think Atos has as a unique position. We're going to reinforce, as I said, the 3 tech pillars that the Florin has said. So agentic AI with the launch of the studios, more to come next week, sovereignty and in cyber. And remember also that we have launched also the consulting we rebranded, I would say, the Atos Amplify. So today, we are announcing the launch of Amplify and also the launch of the Agentic Studio. And we have, in fact, a new website that you can see on the Atos group. And then we have quite a promising outlook on the right part of this page. So stabilization in '26 with a rebound in H2 and then acceleration of top line and of course, production of a lot of cash in the course of '27 and '28 when we can probably resume M&A, we'll see if there are targets that are interesting, but it's also possible that we do probably less because we estimate that with agentic, we have a lot of opportunities we're going to have we probably will try also to invest also in the company more in our studios. With this, I turn to the Q&A session that is open and then I will give the floor to Florin or Jacques-Francois depending on your questions. Operator: [Operator Instructions] The first question today is from Frederic Boulan from Bank of America. Frederic Boulan: Two questions for me. Interesting discussion on your AI offering. Would be keen to understand how you define your competitive edge versus your key global competitors and players. And more broadly looking at your midterm targets, 5% to the kind of growth ambition, what kind of upside have you -- do you anticipate and have you penciled in on that kind of segment versus potential pressure on traditional, I mean, digital transformation, as you mentioned on that slide? And maybe as a second question, is there any -- would be good to have an update on the kind of current pricing environment any kind of areas of your business where you do see kind of margins going down on new projects. I mean you mentioned some of competitive bids where you walked away. But where you do see already today Gen AI driving some price deflation? Philippe Salle: So in fact, Frederic, you have to understand, I think the slide of Florin, which I think is not the most important, but I would say in the Page 23. The way we look at it is very simple. In fact, AI is going to touch the company in 2 types of impact. There is an impact on the coding, so the digital applications where we definitely think we're going to go faster and cheaper. And that's why we said there is an equal to negative impact. But here, in fact, what we see is that we're going -- it's not going to impact the top line that much, but we're going to produce much more for the same price. And what we see from CIOs and the budget right now is that they are accelerating, in fact, their plan because there is a lot to do, in fact, in digitalization in many companies. And in fact, we can probably -- do probably twice as much that we were able, I would say, to provide in the past. We definitely think that, in fact, with AI, coding and testing is very simplified, and we can produce much more than we have done in the past with probably less people. And -- but for us, I think there is no impact on the top line. It's just the fact that we're going to accelerate the project and we're going to provide more. The second impact for the rest is the agentic studio, so the AI on our operations, for example, on CMI, et cetera. And there, we definitely think that it's a big opportunity because we definitely think that with AI, we're going to provide more services or accelerate, for example, some work that we ask, I would say, by the client. So we don't see for the moment, for example, for a big tender, we're going to announce one probably in the course of March, a very big one. We -- and it's a very long contract on CMI. In fact, the margin is up because also we apply also agentic on our own delivery. We pass, of course, some, I would say, the savings to the clients, but we protect the margin of Atos in fact in the future. So we -- that's why we say we are quite positive. Probably Florin, you want to answer on the strategic, I would say, advantage or competitive advantage we have versus the competition. Florin Rotar: Yes, sure. Thanks. So if we go to Slide 17, I'll give you a summary of it. So I think one of the key differentiators is the fact that we have this very long relationships and know-how with a number of really important clients. And what we've been able to do is to bottle up this decades-long insights and data from running hundreds, if not thousands of managed services and long-running engagement into a series of agents, which are sitting on unique Atos foundational models. So if you remember previously in the presentation, I mentioned our collaboration with Poolside. So we are creating a frontier level model, which is Atos native, which packages up this know-how developed the processes and the data built over decades, which we're providing on an Agentic-as-a service model. I think the other differentiation we would have is this experience of working in highly regulated, secure mission-critical environments. So you need to remember that most of the time when people talk about AI today and agents, it's around things like customer service or B2C or call centers. And AI is, frankly, fairly easy to implement in those environments. The accuracy just needs to be good enough. And to be very direct, if a customer who calls a call center does not get the right answer, the sky does not fall down. On the other hand, the type of agentic AI that we specialize in, like the super mission-critical one, it's a completely different ball game in terms of robustness and industrialization. So if our AI agents would not work properly when there is a flooding in Scotland, then we have a serious problem. If the AI solutions that we're creating together with Eurocontrol would not work properly. Well, then you have massive flight delays in Europe and the entire economy loses $1 billion a day. So I think this know-how we have based on our heritage of working in areas which some people consider non-sexy, if I'm allowed to use that word, it's turning into a competitive advantage for us. We really know how to make AI work in those environments. And you see some of the recognition we have in this space. So ISG has recognized us as an absolute leader in advanced analytics and services. We've just made a leader in all market segments with Nelson Hall around transforming business operations with Gen AI and so on and so forth. So to summarize, we are neutral. We're the Switzerland of governance. We know how to make AI work in this super difficult environment. And we have bottled and packaged this know-how into unique models and unique agents, which nobody else would be able to replicate. Philippe Salle: Thank you, Florin. Operator: We'll now take the next question. This is from Nicolas David from ODDO BHF. Nicolas David: I have 3 questions on my side. The first one is regarding the cash guidance. Can you help us reconcile how this net change in cash you expect for 2026 is comparable to what could be a free cash flow to equity definition? What could be the difference between the 2 in terms of cash collection or cash outflow? The second question is regarding the provisions you have passed in 2025, the EUR 123 million on onerous contract notably. Can you help us understand if it's just a cost overrun on this year -- on last year, and it was linked to cash out last year? Or is it a provision for multiyear upcoming losses on the contract you identified? And do you expect more in 2026 if you review more contracts? And also regarding the litigation, when do you expect the potential cash out? And the last question I have is what is -- what would be your strategy regarding the debt refinancing given that the debt market for tech companies is getting more tight right now? Philippe Salle: Okay. I will just answer the last question, and then I give the floor to Jacques-Francois for the first 2. As we say, the door is open for us to renegotiate the debt after 1 year, in fact, it was on December last year in '25. And as you -- what we have done is that we are prepared, I would say, to take any opportunity to refinance the debt. And as you said, right now, the door is closed just because the markets are not in a good shape. So we will wait until I would say there is an opportunity. So we will see. So it could be in March, could be, I would say, in different other period. I think the message is that we are ready to do part of the refinancing as soon as the door is -- I would say the window is opening again, we will probably decide an opportunity on this, okay? So we'll see what happens in the course of '26. I don't have a crystal ball. It's difficult also because, of course, you said for the tech, it has been shaky, I would say, in Feb. Now with Iran, I'm not sure it's going to be less shaky in the course of March. So let's wait and be patient. But if there is an opportunity, we're going to take it. Now for the two first questions, I'll let Jacques-Francois answer to answer. Jacques-François de Prest: Yes, Nicolas. So the net change in cash is the way we call internally this free cash flow, which you're referring to. There are no reasons for differences just in our guidance, we are excluding the repayment of debt. We keep in there the interest to serve the debt, but repayment of debt is excluded, so is FX impact, so is M&A. So that's the first question. Second question is regarding the provisions for onerous contracts and other items basically. So in terms of onerous contracts, Philippe has mentioned quite regularly in the calls that we had still a couple of significant black accounts on which we are losing some money. We have, can I say, the duty to assess these contracts regularly. Of course, management is trying to mitigate with action plans to reduce the losses. And to be clear, we're also trying to exit. But so far, we are bound. So in our reviews at the end of fiscal year '25, we have decided to provide more for future losses. So at this stage, you should not expect additional provisions to be added in '26 because the review we have done is quite prudent and should be comprehensive to cover all the future. And in terms of litigation, well, by definition, it's a bit uncertain and it doesn't depend on us. So I'm afraid I cannot give you really a timing for the cash out of these provisions. But you will recall that the bulk of the litigation provisions has already been booked in H1 '25. So there is not so much which has been added in the second half of '25. Philippe Salle: And in terms of black accounts, there are no new brand accounts, so don't worry. We are -- as I say, we have signed quite a very healthy project, and we are still managing the last 2 accounts in the U.K. Again, one account should finish mid-'27. So that's the goal that is to stop one. And the second one, we are in negotiation also to stop it, but the end of the contract is 2034. Operator: We'll now take our next question. This is from Sam Morton from Invesco. Sam Morton: So in the release, I think you talked about considering to repurchase bond debt. Can you talk a little bit about what that would look like? Is there a particular tranche that you're looking at? Or is that just sort of repurchasing across the board? And then I'd like to dig into the refinancing. Obviously, the window is challenging at the moment. But when you think about the refinancing, is this a piecemeal approach? Or will you -- are you looking to do all of the refinancing of the first lien and the 1.5 lien at the same time? Philippe Salle: So I would say on the refinancing, the goal is first to refinance the 1L because it's 13% and we definitely think that we can be much cheaper right now with B- and also with a positive outlook. And then after that, if we can do 1 and 1.5, of course, we will do both. I would say it will depend on the depth of the market. But I would say 1L is more important for us just because it's too expensive. The 1.5L in fact, is cheaper and it's around 8% plus in terms of yield. So 1L is the priority. But if we can do 1L and 1.5L so that we can stop also the, I would say, the procedure that was in place since '24 for Atos, we will try to do both. But I would say the priority is 1L. Jacques-Francois, probably you want to... Jacques-François de Prest: Yes, on the repurchase of bonds, so forgive me, I'm not going to give you a straight answer. However, I can tell you that what is guiding our actions is we are making a standard calculation of value and we are targeting the instruments where there is the better value. Sam Morton: Okay. Sorry, can I just dive into that? So would you look at the lowest cash price? Or would you -- I mean, I'm just -- I mean, like what's the philosophy. You're looking at the lowest cash price? Or you're trying to facilitate the refinancing? I'm just trying to understand how you think about it. Philippe Salle: Well, in the URD, which is going to be published next week, you will see that in '25, we have already bought a little bit of second lien bonds, a very tiny amount because it was not very liquid, but we have bought a little bit of 2L already in '25. Now we are looking at NPV, IRR. The first reason -- the first objective is to look at what's generating more money, what's -- because we are -- today, we consider we're a little bit in excess cash. We have some big proceeds coming on, namely with the proceeds for the closing of the advanced computing division in a few weeks. So we are trying to make the best use of our money. Operator: [Operator Instructions] The next question is from the line of Derric Marcon from Bernstein. Derric Marcon: I've got 4 questions, if you authorize me. The first one is on the range given for the guidance -- you gave for the guidance. So minus 50 plus or positive. Could you try to help us understand the difference between the low end of the range and the upper end of the range. At the bottom of the range, does it take into account significant revenue reduction with Siemens. And can you also explain us where you land with Siemens in 2025 versus 2024? And what do you expect in 2026? Just to understand if it's an important moving part in the construction of this range. My second question is on the -- your commercial momentum. If we look to the full qualified pipeline number at the end of 2025, it does not improve much compared to previous quarters despite FX. So I'm trying to understand here what KPI do you have to, let's say, assess a much better, as you said, not Q1, but maybe Q2 or Q3 or Q4? And do you see really this momentum improving quarter after quarter? Because, unfortunately, on our side, we can't see through that number. My third question is on CapEx. So as you said, really good performance in 2025 on that side. Do you expect CapEx to remain at the same level in 2026? Or will you be impacted by the massive price increase on memories? And what percentage of the CapEx of this EUR 150 million plus is linked to server plus memory, hardware, let's say. And that's it for me. Philippe Salle: Okay. So on your first question on Siemens, roughly revenues of '25 was EUR 300 million. And this year, we anticipate the EUR 250 million plus. So it's only EUR 50 million, so it's less than 1% in terms of impact on the top line. Remember that with Siemens, we work with 3 different entities, in the Healthcare segment, Energy and Siemens AG. And in fact, we do roughly EUR 150 million plus and EUR 50 million, EU 50 million with the 2 others. And in fact, I would say there are also different dynamics with different accounts. But as I said, this year, we'll be at EUR 250 million plus because some of the contracts will stop also in the course of '25. But there is no, I would say, a big impact on Siemens, as you can see. Now between minus 5 and 0 plus, as you, as you say, we want to be cautious this year. I don't want to say we're going to grow, I would say, and sign it today. The goal, of course, for us is to do it. But we want to be a little bit cautious and give you a range between minus 5% and 0% plus, let's say, between minus 5% and plus 1%. And then you will pick the number you want. But I think it's a cautious stance in the beginning of the year, and we will have probably more to give in the course of this year. For the qualified pipeline, you're right, it's stable, but I think it's much more quality, I would say, for me than it was 1 year ago. And in fact, what makes me, let's say, more optimistic is that the win ratio is increasing right now. So I would say that the qualified, it's a pipeline where we are quite confident we can make a lot of wins in this pipeline. And then your last point was what about CapEx number. Remember that is going away. After that, I would say for Eviden, the chips, it's not a big problem for us. And in fact, for some of our data centers, most of our contracts will pass, I would say, the increase that we see from our providers directly, I would say, to the client. So there is no much risk in fact in terms of CapEx. The CapEx we are looking for this year is at EUR 100 million plus without -- So that's the target that we have for this year. Derric Marcon: Can I add just a small follow-up because on your explanation on AI, very helpful and interesting. And I'm on the same line than you about compensating price deflation with volume on most activities you are doing. But I was wondering if this reasoning can apply or could apply to digital workplace and cloud and infrastructure and modern infrastructure because here, I struggle to understand you will get this price deflation for sure, but I don't see where the increased volume will come from. Philippe Salle: Florin, you can explain that. Florin Rotar: Yes. So it's a great question. So actually, if we go into the cloud and modern infrastructure, so we see a quite substantial uptick around the work that we're doing based on the sovereign movement. So there is -- it is a quite complicated area where clients need a lot of help, everything from advisory to try to understand which workloads they do sovereign and which version of sovereign and to move and redesign both the application and the infrastructure space from those areas. I would also say that we have substantially improved our partnership with a number of the hyperscalers. So we're driving a lot of additional new joint go-to-market campaigns and solutions in this space, which is acting as a net positive. And I would also say that on cloud and modern infrastructure, actually, AI is opening up new opportunities, which historically wouldn't have been possible to do for our clients. So as AI is making the modernization and the digitalization of legacy applications possible in a way which, frankly, again, wouldn't have been realistic or cost efficient in the past. That drives substantial requirements for infrastructure and cloud modernization. So AI is actually a tailwind for us in cloud and modern infrastructure. And when it comes to digital workplace, we are expanding the type of services we provide in digital workplace. So again, AI is, to some extent, a headwind because some of the services which we historically would have done with people are now done by agents, but we're able to improve our margins in that case. But we're also seeing AI act as a multiplier. So one of the key demands we see from clients is how to have their people truly be able to use AI constructively, usefully and in a meaningful way. So we're actually adding AI enablement and AI capabilities as part of our digital workplace services. We're also using AI to make the digital workplace experience a lot more enhanced to help with self-healing. So we're basically adding additional services, additional value-adding services in our digital workplace portfolio, which again are quite nicely balancing those tailwinds are nicely balancing the headwinds we would have had traditionally with digital labor replacing human labor. I hope that answers your question. Operator: We'll now take the last question today. And the question is from Laurent Daure from Kepler Cheuvreux. Laurent Daure: As for Derric, I have also 4 questions. First, I'd like to -- if you could come back on the way you have built your revenue plan for 2026. I mean, if you start the year with the first quarter close to minus 10, and you're not going to have much easier comps the following quarter. Does it mean that you're expecting to win sizable deals that will start during the year? Or what makes you so confident that you're going to end the year with strong growth in order to offset the first quarter? Then my second question is, first, thanks for the clarification on Siemens. But if you could share with us exactly your relationship with your clients as of today. And in particular, I understand that you have 2 more years of business. But do you already have a visibility on what's going to happen for that client as of 2028? And the last 2 questions, one is on the one-offs. At which timing do you expect the P&L to start to be quite clean with limited restructuring and provisions? Is it 2027? And the final question is on the nice improvement you're expecting on EBIT. Could you share a bit the building blocks to go from 4% plus to 7% the main savings, that would be helpful as well. Philippe Salle: So on your first one on Siemens, so we have what we call -- that was signed in 2020. It was a 5-year plus 2 year contract. So there is 2 more years. But after that, in fact, in the course of what we want is not to have any -- whatever with Siemens. It's to continue with Siemens exactly the way we continue with other clients. We just answer tenders and one project. So in fact, in '28, we will continue to answer the tender and win some of the projects. In fact, and when you look at the backlog in Siemens, we have already revenues for '28 and '29 for some of the projects that we have won in fact in the course of '25. So I would say it's a normal client. There is no need, I would say, to resign whatever, it doesn't make sense. Also because, in fact, in the time that we have signed in 2020, you should know that there was a signing bonus that makes, in fact, the margin of the contract not that good. And in fact, now the margin has been restored in the course of '26. So we are quite happy on it. And the idea for me is to continue with the Siemens, like all other clients. There is no specific agreements that we need, I would say, with Siemens. And remember also that, as I said, Siemens, it's 3 different entities with 3 different, I would say, clients. So in fact, we have also client partners addressing the different entities of Siemens. Now for your second question. Of course, if we start at minus 10 and we want to be positive, there is no magic. We need to be a strong growth in Q4. That's the anticipation that we have. I cannot go into details on which contracts we want to win or not. It's too difficult to do that. And I'm not sure it's very useful. But of course, that, I would say, the goal that we have in our budget is that to be roughly at 0 plus in Q3 and then have an acceleration of the growth in the last quarter. And I would say that it would if we are able to be at 0 plus, it's a very good result for us because it means that we are have, let's say, growth going forward in the course of '27. The bar is high, Laurent, I don't say it's an easy one. Please be careful on that. Don't estimate that everything is easy. But of course, we have an ambition, and we definitely think that we have the pipeline and the projects to rebound, I would say, in the course of Q3 and Q4. For your other question, I don't remember. Yes, go on, Jacques-Francois. Jacques-François de Prest: Well, I think, Laurent, you were asking when do we stop the one-offs and do we when do we have a P&L which is clean. Well, I think already '26. I mean, for me, the numbers we are publishing now are taking everything we know into account. So of course, in '26, we still have the continuation of the Genesis restructuring plan because we said that we booked a large chunk in '25. If you remember, the full envelope was EUR 700 million. So we're still a bit below. So there is still somehow -- a portion of that to come in '26. But beyond that, I would say that '26 already should be expected to be clean. That's the question on the one-offs. Your last question, I don't know if you want to take it, which is the further -- the building blocks of the path to the 9% to 10% margin. Philippe Salle: I think yes, well, first, we were at 6% in H2. Remember that we have roughly EUR 200 million of savings of Genesis in the P&L coming this year. So if you start with EUR 300 million plus, plus the EUR 200 million, we are already at EUR 500 million, then you need to get rid, of course, we're going to have an increase of salaries and it's an impact of EUR 70 million plus. So your building block is EUR 314 million, plus EUR 200 million, minus EUR 70 million and then plus the other actions that we are going to take in the course of this year. But that's why we are quite confident on the 7% margin. Laurent Daure: Philippe, if I could add on the new scope question on the seasonality of the margins because you improved nicely from first half to second half. But do you have part of that is coming from seasonality? Or going forward, do you expect when you will have stabilized the operations to have a similar margin level between the 2 halves? Philippe Salle: In fact, it's going to be always more marginal in H2 than H1, but with less Eviden -- is out. And that's most of the explanation why H1 and H2 are very different. It's not going to be the case in the course of '26. So you will see a more stable revenue and I would say, EBIT stream between H1 and H2. But usually and all the companies, and it's the case of, there is more margin in H2 than H1, but not, I would say, like it was, in fact, in the course of '25, to a smaller extent. And remember that I said already in the CMD last year that there will be close to 0, I would say, nonrecurring expense in terms of cash in '28. We cash out, I would say, Genesis. So this year, we estimate that it's going to be between EUR 150 million and EUR 200 million. We have done EUR 450 million last year and then the rest in the course of '27. No more, I would say, cash out in '28. Same thing for the litigations, we estimate that most of the litigation will be done. And then for the black account, as I said, there will be probably only one in '28. So it will be, I would say, a small impact in terms of cash. So EBIT will be clean this year, but I would say, in terms of cash also it will be clean in the course of '27 and '28. Operator: There are no further questions at this time. So I will hand the conference back to the speakers for any closing comments. Philippe Salle: Okay. So thank you, everyone, for this long call. We are very happy as you have seen, I think the focus was on technology today because there were a lot of questions on our industry and also on Atos. Have a good day. And of course, we will talk to you probably for Q1 and in the coming months, and we are, of course, focused to the rebound of the company. Have a good day. Bye-bye. Operator: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.
Operator: Good day, and thank you for standing by. Welcome to the Profound Medical Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephen Kilmer, Investor Relations. Sir, please go ahead. Stephen Kilmer: Thank you, and good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements within the meaning of applicable securities laws in the United States and Canada. All forward-looking statements are based on Profound's current beliefs, assumptions and expectations and relate to, among other things, any expressed or implied statements or guidance regarding current or future financial performance and position, and expectations regarding the efficacy of Profound technology. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those implied by such statements. No forward-looking statement can be guaranteed. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Profound undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise, other than as required by law. Representing the company today are Dr. Arun Menawat, Profound's Chief Executive Officer; Rashed Dewan, the company's Chief Financial Officer; Dr. Mathieu Burtnyk, Profound's President; and Tom Tamberrino, our Chief Commercial Officer. Please note that our prepared remarks today will be a little longer than normal as we present to you the dynamics of the market and our strategies to create a profitable growth company. With that said, I'll now turn the call over to Rashed. Rashed Dewan: Good afternoon, everyone, and welcome to our Fourth Quarter and Full Year 2025 Conference Call. On behalf of the management team and everyone at Profound, I would like to thank you for your ongoing interest in our company. For those of you who are shareholders, we appreciate your continued interest and support. I will turn the call over to Mathieu in a moment to provide commercial updates. However, before I do, I would like to provide a brief summary of our fourth quarter 2025 financial results. To streamline things, all of the numbers I will refer to have been rounded. So they are approximate. For the 3 months period ended, December 31, 2025, the company recorded revenue of $6 million, with $2.3 million from recurring revenue and $3.7 million from onetime sales of capital equipment. Fourth quarter 2025 revenue was up 43% from $4.2 million for the same 3-month period a year ago. Gross margin in Q4 2025 was 67% compared to 71% in Q4 2024. The lower than usual fourth quarter 2025 gross margin was primarily due to product mix and new market introductory prices with international distributors in Saudi Arabia and Australia. Total operating expenses in the 2025 fourth quarter, which consists of R&D and SG&A expenses were $11.4 million compared with $11.3 million in the fourth quarter of 2024. Overall, the company recorded fourth quarter 2025 net loss of $8.2 million or $0.27 per common share, compared to a net loss of approximately $4.9 million or $0.20 per common share in the 3 months ended December 31, 2024. As of December 31, 2025, Profound had cash of $59.7 million. As Arun will discuss later in the call, we believe that we are now on a path to profitable growth. In keeping with that, we expect our cash burn to decline and eventually turn cash flow positive as our revenues continue to grow and our margin remains high. With that, I will now turn the call over to Mathieu for an update on clinical and development activities. [Technical Difficulty] Arun Menawat: Again, I'm sorry, let me cover Mathieu's part here. So again, Mersa, thank you. Last year, we completed recruitment in CAPTAIN, the first multicenter, randomized, controlled trial directly comparing a new technology to robotic radical prostatectomy for men with localized prostate cancer. CAPTAIN completes the foundational pillars of clinical evidence, validating TULSA as the new platform for prostate disease management. From gold-standard treatment, treat and resect data through track durable 5-year outcomes, CAPTAIN now positions us to demonstrate with statistical rigor, TULSA's superior quality of life profile while delivering whole-gland treatment efficacy. CAPTAIN was designed for world-leading -- I'm sorry, CAPTAIN was designed by world-leading experts in prostate cancer clinical trials. They built a practical study that ensured successful enrollment and more importantly, a scientifically robust protocol with endpoints that matter to patients, clinicians and payers. Let me repeat that point. CAPTAIN's endpoints are those that matter to the patients, the clinicians and the payers. Patients were randomized 2:1 using an intelligent stratification algorithm, resulting in highly balanced arms, a cornerstone of credible randomized trials, balanced arms allow us to make definitive comparative conclusions about safety and efficacy. And critically, CAPTAIN measures efficacy in a meaningful way, determining whether clinical significant cancer remains after treatment. Patients and their oncologists want to know whether cancer has been killed and eliminated not merely whether it had progressed. As discussed last quarter, completing treatments in CAPTAIN locks in the timeline for data readouts, including the imminent release of preliminary -- imminent release of primary safety and quality of life endpoints. Last year, we shared initial perioperative outcomes showing faster recoveries after TULSA than robotic prostatectomy with 0 blood loss or overnight hospitalization, reduced pain, and earlier return to daily function and overall health. These advantages echo the same drivers that fueled early adoption of robotic surgery. Mathieu Burtnyk: Thank you, for taking over. I can jump back in if you want? Arun Menawat: Okay. Go ahead. Mathieu Burtnyk: I'll go ahead. So ahead of schedule, we will present the first clinical outcomes from CAPTAIN next week at the meeting of the European Association of Urology in London, U.K. EAU is the premier academic urology meeting, and we were pleased that our data has been selected for inclusion in the late-breaking and the high-impact session. The presentation will be delivered by Dr. Laurence Klotz on Friday, March 13, between 1:00 and 3:00 p.m. Greenwich Mean Time, which is 8:00 to 10:00 a.m. Eastern time. These data include complete 90-day perioperative results and the 6-month primary safety and quality of life endpoints. Six-month quality of life outcomes are an increasingly important and modern endpoint. They reflect meaningful patient recovery and provide a more relevant early indicator of functional preservation. At EAU, we will report 6-month urinary incontinence rates, the single most important quality of life outcome for patients, along with 90-day hospital readmissions and time to return to work. At EAU, we will also report positive surgical margin rates in the prostatectomy arm, which we will later compare against TULSA biopsy outcomes in late Q4. CAPTAIN provides the first true apples-to-apples comparison of safety, quality of life and efficacy, the information required to support a new treatment paradigm. CAPTAIN is the most comprehensive truly Level 1 trial. But let me also take the time to outline the fundamental differences between CAPTAIN and other ongoing studies, namely WATER IV, FARP and HIFU. First, WATER IV. WATER IV is a multicenter randomized trial comparing Aquablation to radical prostatectomy in men with low- and intermediate-risk localized prostate cancer. The inclusion of low-risk patients is a critical distinction because these men harbor minimal disease and are unlikely to progress within the study's follow-up period, limiting any meaningful assessment of cancer control. Equally important is what the trial measures. WATER IV's primary endpoints are quality-of-life only. That means that the study is not designed or powered to demonstrate comparative oncologic efficacy. This is particularly notable considering there are no other peer-reviewed data using the Aquablation procedure to eliminate cancer in prostate cancer patients. The trial includes a single cancer-related secondary endpoint assessed only in the Aquablation arm, which is the stable or improved grade group at 1 year versus baseline. In practice, that means a patient who entered the study with grade Group 3, an unfavorable intermediate risk clinically significant cancer will be counted as a success even if the same grade Group 3 disease remains after treatment. That is not the same as a limiting cancer or even improving the cancer grade, and is not a randomized head-to-head efficacy readout. Frankly, this is not a Level 1 cancer trial. Next FARP. The focal ablation versus radical prostatectomy study. FARP is a single center European trial, which inherently limits generalizability to broad clinical practice, particularly to high-volume U.S. surgeons. Its population like WATER IV includes low and intermediate risk patients with disease localized to one side of the prostate. While FARP does include a comparative efficacy measure, the bar is not oncologic eradication. The focal therapy arm is deemed effective if patients avoid upgrading to grade Group 4. In other words, men who start with grade Group 1, 2 or 3 are considered successfully treated as long as they do not progress to grade Group 4. This is a very different endpoint than [ curing ] and eliminating clinically significant cancer. Even though TULSA was part of the study and to the best of our knowledge, the TULSA arm did better than any other arm, including HIFU, the reason we think is that not the most credible study is the endpoint itself. Avoiding upgrade is not the same as proving cancer has been cleared. Patients want to know plainly whether they still have cancer or not. Lastly, HIFU, a large multisite French comparison of HIFU versus prostatectomy did not randomize patients and therefore, is not considered a Level 1 trial. The result is significant selection bias and unbalanced arms. For example, HIFU patients were on average roughly a decade older than surgery patients. Age differences directly confound the study's primary endpoint of salvage treatment-free survival and erectile function. Older patients are less likely to undergo salvage treatment. Older patients have lower baseline erectile function, which means they have less function to lose after treatment. Without balanced randomization, you cannot make definitive comparative conclusions. Let me conclude. TULSA is solving the debate between focal and whole-gland treatment for prostate cancer. CAPTAIN measures efficacy to the same standard as robotic surgery, an essential requirement to establish a new standard of care. TULSA is the only technology capable of whole-gland, focal and customized treatment. Patients often choose focal therapy to preserve quality of life. With TULSA, patients achieve the benefit of focal side effects with the efficacy of whole-gland treatment. I will now turn the call over to Tom. Thomas Tamberrino: Thank you, Mathieu. As Rashed mentioned, we achieved a year-over-year revenue increase of 43%. We had 78 TULSA-PRO sites as of December 31, 2025. The company's TULSA-PRO qualified sales pipeline is also growing and currently stands at 110 new systems being classified within one of the verify, negotiate and contracting stages, which are the final 3 phases of our sales process. Q3 2025 was a true commercial inflection point, and we saw the momentum continue in Q4. We're continuing to see broader adoption of TULSA-PRO across both academic and community hospitals. That's largely due to increased awareness of the system's clinical benefits and the establishment of a reimbursement pathway made possible by the Category 1 CPT codes for the TULSA procedure. TULSA reimbursement was confirmed again for 2026 at urology Level 7, which is appropriate as TULSA utilized real-time MR, which is crucial to better clinical outcomes. Our team has also initiated engagement with private insurance carriers, and we expect coverage decision from carriers in the second half of 2026. Our global commercial leadership team has never been stronger than it is today. This includes sales, marketing, business development, health economics, market access, patient education, patient access, clinical service and strategic initiatives. We have a world-class team of professionals here in the U.S. and around the world. It is noteworthy that we have launched a strategic TULSA program team, which will use our organizational leverage to ensure successful TULSA program launches and this team will grow procedural volume thereafter. Our team remains focused on targeting high-volume urology centers and supporting physician training. We're leveraging positive clinical outcomes and patient testimonials to drive engagement and deepen relationships with our customers. Looking ahead, I'm confident in our ability to further accelerate this growth. We're well positioned to capitalize on the expanding interest in image-guided interventions and we continue to scale our commercial footprint while validating our technology in the prostate care market. And as Arun will also highlight, there are a number of important catalysts coming in 2026, that continue to drive our relief that we will reach high double-digit to low triple-digit revenue growth. Importantly, we believe we are now on a path to not just growth but profitable growth with this selling approach. The math to achieve this target is simple, with just 200 TULSA programs cases using existing MR installed base, assuming a conservative 50 TULSA procedures per site per year and a $5,500 recurring revenue to Profound per procedure, we would be at $55 million in procedural revenue. Add on to this $10 million in annual service revenue, and another $20 million in new capital sale revenue based on an estimate of 40 new TULSA-PRO systems sold per year at an average sales price of $500,000 per system. Altogether, this will put us around $85 million in annual revenue. With 70% plus gross margin already achieved, we would be profitable. We're also building strategic partnerships on a global basis. Recent distribution agreements with Al Faisaliah Medical Systems in Saudi Arabia and Getz Healthcare in Australia and New Zealand have already started to bear fruit with multiple systems sold in Q4 2025. Our partnerships with OEMs such as Siemens, are also progressing well, and there's more exciting opportunity to come on the partnership front as 2026 progresses. Thank you for your time. I will now turn the call over to Arun. Arun Menawat: Thank you, Tom, and good afternoon, again. Prostate cancer treatment has been a bipolar world up till now. Whole-gland robotic prostatectomy or radiation therapy are the primary tools for treating prostate cancer today. Trying to take some share away from these mainstream whole-gland modalities are focal therapy alternatives such as HIFU, cryoablation and IRE that treat typically less than 35% of the gland by focusing only on the visible cancer within the prostate. But TULSA is establishing itself as a third distinct category. TULSA-PRO can treat the whole-gland, a small portion of the gland and everything in between. At the same time, the TULSA procedure provides the best of both worlds. The same good clinical outcomes of whole-gland prostate cancer treatment but with lower side effect of focal gland treatment. The fact that the TULSA procedure is a third category all by itself is an important message. But it can be difficult for urologists and hospitals to understand the differences as they're getting bombarded by the focal messages from multiple companies. Difficult, but not impossible. Virtually, all surgeons who have used both TULSA-PRO and other technologies have ended up favoring TULSA by far because of its expanded capability to treat the full spectrum of prostate disease while minimizing quality-of-life side effects like urinary incontinence and erectile dysfunction. Today, we believe that whole-gland robotic prostatectomy and radiation therapy have run their course. And alternative focal prostate therapies are not enough. The TULSA-PRO system stands apart in its proven ability to treat the full spectrum of prostate disease as well as providing better economics to providers and more value to payers. TULSA uses real-time MR imaging that has several significant clinical and economic advantages. First, the real-time MR thermometry enables continuous visualization and autonomous temperature adjustment throughout the procedure. This level of precision allows the physicians to tailor therapy to each patient while minimizing side effects typically associated with robotic surgery or radiation. Second, MR produces standardized to the cross-sectional images enabling AI analysis unlike what may be possible using other imaging modalities, such as ultrasound. Using this capability, TULSA-PRO incorporates an AI-based treatment plan. Upon one click, the AI software segments the prostate and shows the surgeon a treatment design while keeping the nerve bundle and the sphincter muscle region safely outside the boundaries. Using a digital pen, the surgeon can either accept the AI-generated plan or quickly modify it, if necessary, making overall treatment planning fast and reliable. The TULSA-AI contouring assistant is based upon treatment designs by the best-known radiologist and is proven to be superior to surgeon designs. Third, MR enables real-time temperature monitoring. Using this capability and directional ultrasound from a catheter placed in the urethra, TULSA-PRO, gently heats tissue only to kill temperature between 55 to 57 degrees centigrade without boiling or charring the tissue. The net effect is that the whole-gland or any surgeon prescribed region can be treated effectively and the dead tissue is reabsorbed by the body. In the FDA registered TACT clinical trial, post-treatment prostate size was measured over time. The data showed that the median reduction in prostate size was 91% by effectively shrinking the prostate around the urinary channel, which is proactively protected during the procedure. Fourth, TULSA-AI enables cleaner margins. During TULSA procedure, real-time MR enables the treating surgeons to see abundance of cancer in the prostate. If necessary, the surgeon can engage another TULSA-AI module, Thermal Boost to apply additional heat to the region and ensure [ kill ] temperatures to the outer margin of the prostate or even slightly beyond the margin. Fifth, not to confuse things, we believe even TULSA partial gland or focal procedures are superior to other focal modalities, which all rely on ultrasound imaging. TULSA procedures are based upon real-time MR diffusion and T2 images. These images combined together visualize the abnormal cell regions of the prostate, which may be cancers. This real-time visualization allows surgeons to define the treatment region to completely include the suspicious zones, thereby increasing the likelihood of a more durable focal/partial gland treatment while maintaining minimal side effects. And finally, advanced real-time MR imaging provides confirmation and precision of cell kill at the end of the procedure, no matter what the intent to kill it in turn improves predictability of outcomes. To summarize, TULSA-PRO solves a debate about whether prostate cancer treatment should be whole-gland or focal without compromise. TULSA-PRO can be used to treat the whole-gland, a small portion of the gland or anything in between in large prostates, small prostates or even radio recurrent prostate, and with the clear benefit of MR imaging and guidance. And it is being used successfully to treat low, medium or high-risk cancers as well as salvage cases. Switching briefly to BPH. Mainstream treatment with transurethral resection of the prostate or TURP is largely unchanged over the past 100 years. Many alternative treatment methods have emerged that aim to improve the patient experience and reduce the rate of complications such as bleeding, erectile dysfunction, loss of ejaculation, and the need to stay in the hospital overnight for 1, 2 or more days. As demonstrated in the recently published study from the University of Turku, TULSA offers significant improvements in International Prostate Symptom Score, peak urine volume rates and discontinuation of BPH medications. That said, while urologists have been treating lots using TULSA-PRO since we received 510(k) clearance in 2019, and the technology is only 1 capable of treating hybrid patients suffering from both prostate cancer and BPH. Our BPH patient volumes have been low to date due to the relatively larger treatment duration compared to other modalities. The latest TULSA-AI module volume reduction is changing the BPH treatment paradigm. TULSA-AI volume reduction is designed to maintain all of the many proven advantages of treating cancer with TULSA, while leveling the playing field on the time it takes for a urologist to plan and complete the procedure by quickly identifying the overgrowing region of the BPH. The software streamlines the workflow and reduces procedure times to 60 to 90 minutes. Adoption of TULSA-PRO is also making more and more business sense. The economic proposition of an interventional MR has become stronger as of January 2026. CMS has studied reimbursement for prostate biopsy and made the determination that reimbursement for real-time MR in-bore biopsy should be separated from the method, which is prevalent today, which uses real-time ultrasound with prior diagnostic MR image registered to it. This allows the surgeon to visualize the cancerous region through the registered MR image, but have the convenience of ultrasound to perform the biopsy. While this technique is better than one where MR images are not used, clinical data shows that registration of MR images still create an error of about 20%. For that reason, CMS has now provided separate reimbursement for real-time in-bore MR biopsy as it is more accurate but more costly to perform. The reimbursement for a standard MR registered ultrasound image biopsy is about $3,500, whereas reimbursement for the real-time MR biopsy has been set at about $5,500, which is 57% higher. This is a huge change, and the implication is just beginning to get attention. And comparing Medicare national average payments hospital reimbursement for the TULSA procedure in 2026 is $13,479 compared to $10,860 for robotic surgery and $9,672 for focal therapies like HIFU and cryoablation. So now at the start of 2026, there is superior reimbursement for both in-bore MR prostate biopsy and the TULSA Procedure. Putting all this together, our thesis that the future of prostate disease care will be MR centered is coming true. This sufficient clinical evidence -- there is sufficient clinical evidence that if prostate cancer is visible on an MR, it should be treated immediately, making iMRI, in-bore biopsy and diagnostic modality of choice. Typically, there are 3 to 5 biopsy procedure performed for each one prostate cancer treatment and whereas there are about 1 million prostate biopsies done every year. No one single prostate cancer treatment modality is currently used for more than 100,000 patients per year. Doing the math, there is currently a clear disconnect between the preferred MR-guided diagnostic approach and mainstream treatment modalities. We believe only TULSA is suited to bridge that gap as we move forward. Our strategy in the near term is to focus on existing MRs and achieve the installed base of 200 TULSA-PRO sites. At the same time, we are in the final stages of achieving compatibility for the new Siemens Interventional MR, the Free.Max. We believe that as early as later in 2026, TULSA plus sites with the Free.Max plus TULSA-PRO will be operational, opening the door to the future and interventional MR suite with TULSA. These sites will further streamline the patient and staffing workflow, making it easier to further drive adoption. We continue to get confirmation that hospitals that are being paid for all qualified Medicare patients and that they are satisfied with the amount received. In addition, many commercial payers are also now covering the procedure on a case-by-case basis. And we are excited by the recent upgrading of our AI-powered software to include simpler patient workflow for patients who suffer from BPH symptoms. Having the flexibility to safely, effectively and efficiently treat a variety of patients with prostate cancer and now with BPH, gives our sites the flexibility to stack cases, creating a full TULSA Procedure day, which leads to efficiency and easier scheduling for the hospital staff. It also significantly expands our TAM. And the economics associated with real-time iMRI procedures, in prostate cancer, like MR in-bore biopsy and TULSA are becoming increasingly compelling. Before my closing remarks, I would like to take a few minutes to talk about our second large opportunity, Sonalleve. This technology, which is currently offered primarily as a onetime capital sale uses same MR imaging and thermographic technology, as TULSA-PRO and combines that with focused ultrasound from outside the body delivers -- delivered via a disk to treat disease. There are currently 10 Sonalleve devices operational in parts of Europe, China and Southeast Asia, where over 4,000 women have already been treated with the technology for adenomyosis and uterine fibroid diseases of the uterus that can cause chronic pain and heavy and/or prolonged menstruation. Treatment with Sonalleve has demonstrated pain and symptom relief without affecting the ovarian reserve and with reports of women preserving their fertility. Sonalleve is also now being used in research and clinical trials in Europe for the ablation of pancreatic cancer tissue and other oncological disease. We are working on an FDA regulatory strategy for the technology and a potential new recurring revenue opportunity on top of the initial capital sale for the device. And we'll provide more details on our progress later this year. To summarize, Profound is pioneering iMRI procedures, which enable precise incision-free therapies that improve clinical confidence, procedural control, and patient outcomes. By leveraging real-time MR guidance, Profound technology -- the technologies are designed to replace uncertainty with clarity across treatment planning, delivery and confirmation. We're the only company that has the technology to kill tissue from the inside of the body, via a catheter that is placed via a natural orifice, which is our TULSA technology, or from the outside via a disc, which is the Sonalleve technology. In either product configuration, MR is used to image and measure temperature in real time and enable cell kill with a minimum energy requirement. Our sales team is clearly delivering, and the pipeline as we define is now growing over 110 as compared to 97 at the end of 2025. TULSA-PRO install base was at 78 at year-end, and we expect that to reach approximately 120 by end of 2026. The new AI volume reduction module to treat patients with BPH symptoms is significantly reducing the procedure time, making it very competitive with other BPH treatment technologies. This application has the potential to add 400,000 patients to our annual TAM essentially tripling our previous TAM. Having the BPH module also enables physicians to create a full TULSA day during which both their prostate cancer and/or BPH patients are treated. From the perspective of the ease of scheduling and creating a vibrant TULSA program, this ability is particularly important. Our second technology platform, Sonalleve is poised to start becoming a more core part of our story in the coming months and quarter, both internationally and in the United States. And finally, we believe that on the basis of the many catalysts we see ahead, we can reach high double-digit to low triple-digit revenue growth. This ends our prepared remarks for today. With that, we're happy to take any questions you might have. Operator? Operator: [Operator Instructions] Our first question will come from the line of Ben Haynor with Lake Street Capital Markets. Benjamin Haynor: First one for me on the private payers, I appreciate the commentary on giving commercial insurers to pay for it, you think in the second half of the year. I was wondering if you can give us any sense of what your customers are seeing now. I know I think on the Q3 call, you mentioned that commercial insurers were reimbursing roughly $25,000 to $65,000 is the range you had seen. And then any commentary on whether you're being successful in getting any commercial rejections overturned ultimately? Arun Menawat: Ben, yes. So the number of patients who are going through the private is increasing. The typical payments are between -- I would say, most of them are between 1.5x to 2.5x of Medicare. So we're pretty satisfied and our sites are happy with the numbers. With respect to coverage and reversals from rejections were tracking better than 90% at this point. Just recently, I saw one very strategic reversal. There are certain independent organizations in the U.S. like Maximus and so on. These companies actually make independent determinations that hospitals use as guides or whether or not a new technology is considered experimental or standard of care, and they recently deemed our TULSA as standard of care. So we're pretty optimistic actually. We're very, very satisfied with the numbers that we're seeing, and we are very optimistic we'll start to see actually converting these reductions into coverage decisions in the second half this year. Benjamin Haynor: That's very helpful. Great. And then I apologize if I missed this, but can you maybe comment here on the dynamics of the sequential decline you saw in noncapital revenue here? Arun Menawat: We lost you a little bit. Could you repeat the question? Benjamin Haynor: Yes. I was wonder -- I apologize if I missed this, but could you maybe comment on the dynamics that you saw in terms of utilization? It looks like there was a sequential decline in noncapital revenue here from Q3 to Q4. Arun Menawat: [Technical Difficulty] Benjamin Haynor: Could you comment on the dynamics of utilization from Q3 to Q4 and whether the movement in noncapital revenue sequentially? Arun Menawat: Yes. Yes. Got it. Okay. Yes. No, I think the number of -- I think the trend that we have talked about is pretty much every site is slowly but surely increasing usage. And I think last quarter we had a specific number that quarter-over-quarter we were up about 20-plus percent. I think that trend continues in terms of procedures. I think as Tom talked about also a little bit in his presentation that I think this year, with the new catalysts, I think the CAPTAIN data coming out next Friday, the BPH module now being distributed to our customers, I think that certainly we expect that the rate of usage will increase at a faster pace in 2026. With respect to your question, if you're asking about the dynamics on the capital. I think, we are still in the early innings and capital is harder to predict than recurring revenue is for sure. And we did give a couple of market introductory prices to a couple of sites. In Q4, as Rashed mentioned, and I think at the moment, you will see the ratio of capital versus recurring in our total product mix is going to become a little bit more capital heavy, because we are selling the devices now. And as Tom mentioned, the pipeline is pretty strong. But over the long haul, I think that, we remain primarily a recurring revenue company. Over 70% of our revenue ultimately will come from recurring revenue. But in the next couple of years as we build the installed base, I think you'll see that ratio to be closer to -- it will range between 40% to 60% capital per quarter. Benjamin Haynor: Okay. Got it. And then just talking about the installs for this year and looking at for 40-or-so more units, and that's roughly 1/3 of the pipeline that you have. Are there any bottlenecks on year-end that need to be taken care of in terms of the capacity to install new units? Is there anything that you can improve on your side of things? Arun Menawat: Ben, we are a growing company. So most certainly, Q4 was a very dynamic quarter. And because we shipped for the first time systems in double digits. And yes, we are increasing our logistics and operations side, we're actually looking to put a warehouse in the U.S. that would allow us to streamline some of the shipments. We are also putting all the ERP systems to make sure all the scheduling and building of the devices are taking place. Nothing that is anything out of the ordinary that we would not do at this time in our company. But yes, there is a lot of dynamics along the lines of making sure that, as Tom and his team starts to build the top line that we are able to deliver appropriately. Operator: Our next question comes from the line of John McAulay with Stifel. John McAulay: I want to put a finer point on the recurring revenue question that's been asked. So just as I do the back of the envelope math here, if procedures grew roughly 20% quarter-over-quarter, as you said, total recurring revenue, $2.3 million, it implies that revenue per procedure declined significantly, something like more than 50% quarter-over-quarter. So I just want to understand how much of this is driven by the more capital-focused mix? Was there some kind of onetime conversion or discounting in here? And what should we expect go-forward on a revenue per procedure basis? Arun Menawat: Yes. So John, first of all, the 20% was year-over-year, not quarter-over-quarter. So when I say that -- yes, year-over-year. And we do look at inventory. And so we do sort of manage it a little bit. So I think when you see recurring revenue quarter-over-quarter, it does not necessarily reflect almost exactly through the usage of the product. And we do kind of manage that a little bit. Generally, actually, they will buy in the third quarter to use it in the fourth quarter. So you see that a little bit of up and down like that. So I would not directly correlate, but if you look at 6 months over 6 months, I think it will be relevant instead of quarter -- each quarter. There was no discounting at all. Our price for disposables is $5,500 fixed. And the sites that do not own the equipment is very few at this point. But in those cases, we do have higher number than $5,500. So there is absolutely no discounting on the disposable price. John McAulay: Understood. That's helpful. And switching gears to 2026, you talked about high double-digit, low triple digit growth. Consensus is currently, I think it's something like 120%. Our numbers closer to 100%. Where do you hope we end up in this range? I mean if I try to read between the lines here and I assume a range of 90% to 110%, not with specific numbers, it seems like 100% might be a median, but maybe you could just help us out on where you would hope estimates end up for the year ahead. Arun Menawat: Yes. So when we did not particularly provide official guidance on revenue at the moment, we certainly feel very confident in terms of the number of sites. And I think if your analysis though is in the right ballpark, in the sense that we're looking at, at least 42 sites this year, which we have provided. And if you look at the math that Tom provided in his presentation, I think you add up all of those, you're sort of going to end up with the range that you just described. John McAulay: Understood. That's helpful. And I could just sneak in one more question. You talked about the dynamic of recurring versus capital mix in the future, and you still believe in that 70-30 longer-term range, but in this year ahead, I mean I'm just looking at the fourth quarter results, I mean, the mix was something closer to 40% recurring, 60% capital, roughly. I mean is that the sort of mix we should be thinking about for 2026? Arun Menawat: I think so. John, I think that the number of sites is going to increase, and you can see if we're adding 42 sites that $0.5 million, you can see the number is going to be dominating. So I would say, at least -- on average, I would say, at least for the first few years, 50-50 or 60-40 is probably reasonable. But I want to sort of -- don't want to lose sight for the fact that we are primarily a recurring revenue company. And I think we went through a lot of detail today on purpose because it helps you see how TULSA is positioned against everybody. And you can hopefully see how confident we are about our positioning. And so part of the reason for that confidence is that when we see TULSA being placed, our devices are being used and the use is definitely increasing. And so I think that long term, that 70-30 mix is a very reasonable thing to expect. Operator: Our next question will come from the line of Michael Freeman with Raymond James. Michael Freeman: I'm going to ask a question on the CAPTAIN trial. It's exciting that you've decided to disseminate information on the trial next week. Can you go over the -- I guess, the decision-making process for releasing this data early. Was -- does getting an early look at this trial compromise the trial at all. Does it remain a Level 1 trial? And then following up on -- as a follow-up question, do you expect the early dissemination of this data to potentially accelerate reimbursement time lines for private payers? Arun Menawat: So yes, thank you. That's -- those are important questions actually. So let me answer your second question first. I do expect that the earlier data will suddenly gives us more confidence in getting coverage decisions this year. But to your first question, a little bit more technical. We are very careful, as you know, on making sure that our data when we present that our trials are pristine, and then with proper analysis and guidance from leading physicians. So as we looked at this, and it just happened in the last couple of days, as we looked at all this, those precedents and typically used and the reality is that 6-month data actually is a very important milestone data set. In fact, particularly for urinary incontinence, and it's used routinely in BPH trial, for example. And we have, as Mathieu described, there is sufficient data already out on the robotic prostatectomy arm with respect to margins, so which is a sort of indicator of the success of early treatment or not. So there's we're not presenting any data that will be considered out of the ordinary here. These are standard endpoints, and they are measured in a way that are very credible. So we are not going to compromise anything. We are running the company. We certainly execute every day, but we are running the company with a very strategic mindset. So we're absolutely not going to compromise anything. But having said that, I think you will see meaningful standard data that will be credible. Michael Freeman: Okay. All right. I wonder there was some discussion in the remarks about progress towards cash flow positivity. I wonder if you could provide a threshold, whether that's scale or time line to when you expect Profound to be -- to have reached cash flow positivity? Arun Menawat: Yes. So I can -- if you look at the data that we have been publishing and if you look at, for example, the first half of this year, our cash burn was just over $10 million, each quarter. If you look at third quarter, our cash burn was about $8 million. If you look at -- if you analyze the data in the fourth quarter, you will see the cash burn is down to around 6 -- a little bit above -- a little less than $6.5 million. So I think you can start to see the trend already and it is matching with the increase in the revenue. And again, they won't be perfect. It will be -- in some quarters, you'll see a little bit up or down because we are adding people and maybe they're not going to be completely synchronized. But I think the reason we are comfortable and confident and presented it because I think we can start to see the trend. And I think if you project your numbers, what as Tom mentioned, the end point is we think that we can be profitable in the range of $80 million to $85 million revenues. So you can see where we are in about $24 million, $25 million revenues with the cash plan, you can see the $80 million, $85 million. And I think with the growth rates that you can probably predict from the installed base, and it's just expectation, I think you'll be able to get pretty close. Michael Freeman: Okay. All right. I'm going to squeeze a quick one in. You provided good guardrails on TULSA install expectations for the year. I guess, more granularly looking at the first quarter as we're well progressed. Wondering if you could provide some commentary on, I guess, the pacing of those installations through the year and how first quarter is proceeded. Arun Menawat: I'm sorry, I couldn't hear everything you said. If you could please repeat it? Michael Freeman: Sure. I was looking for some color on TULSA installation progress during the first quarter. And also how we might expect pacing of those procedures through the year, given your expectations that you provided earlier in the call. Arun Menawat: Oh, I see. What you mean -- so you're looking for granularity quarter-over-quarter basis? Michael Freeman: That's right. Arun Menawat: So we're trying to get to a standardized way of announcing numbers, and we think more standardized is end of this quarter. So which is why we were at 78. We are higher than that today, for sure than we were at the time. But I would say, again, I think generally speaking, med tech companies growths are generally in the second half of the quarter. So I would say if you're modeling, I would model it sort of increasing quarter-over-quarter and not linearly every quarter. Operator: [Operator Instructions] Our next question will come from the line of Scott McAuley with Paradigm Capital. Scott McAuley: Already been covered, but maybe I could just ask on the BPH module. Any granularity on how many of the installations are currently using it? Arun Menawat: Good question, actually. I would say there are at least 10 sites that have already started using it. In terms of the forecast, I think the numbers are increasing pretty rapidly, I would say, by midyear, we will have at least 30, 40 sites using it. Scott McAuley: That's great. And there was a few announcements around international expansions and agreements. And I think in the margin discussion, there was a comment on some kind of introductory pricing, I believe, maybe for international, but I may have misread that. Any kind of progress on the international front for TULSA? Arun Menawat: Yes. Very good question, Scott. So in the second half of last year, we also started to get quite a bit of attention in the international markets. And historically, we've always talked about U.S. being are really, really the only focus. And U.S., most certainly is 90% of our focus today. But we felt that it was important that, in fact, the healthcare world is far more global than it might look. So getting incoming calls and getting opinion leaders in international markets, not serving them did not make sense. And so what Tom and the team have done is we've signed up with a number of distributors, the couple that he mentioned. And the discounts were only to those new distributors to get them going. But there was no discounting in the U.S., and we don't expect discounting in the future, which is why Rashed was very confident that the 70-plus percent margin that we've maintained for the year and for most of other quarters that, that is very much intact. So our strategy in the international market is still very careful, but it is through distributors. And we will have support people and high-level senior people who will manage the distributors, but we don't plan to grow a direct sales team in the international market. That is only for the U.S. But we're seeing, for sure, very good interest in number of -- I think Europe is going to be slow until there is reimbursement decisions in Europe. But I think the Asian markets are definitely very strong. Scott McAuley: That's great. And down the road, as that international kind of presence and impact grows, is that something you're going to separate out a bit more in terms of U.S. installations versus global installations and revenue relative to each of those areas. Arun Menawat: Yes. Over time, we will. Once they become material, we will. Rashed Dewan: Just one clarification. We do break out the international revenue. So there is a segment reporting, that's where we do break out revenue source where is it coming from. Scott McAuley: Yes, yes, definitely. I think it was more the international revenue specific to TULSA, but as it becomes more meaningful down the road, maybe be more specific around that. Operator: Our next question comes from the line of Chris Potter with Northern Border Investments. Christopher Potter: Just on the utilization question. From your customers' perspective, can you just talk about how many procedures per site they're looking for in terms of it making economic sense for them. In other words, I think if I'm doing the math right, each of your sites is doing 20 or 25 procedures a year now, which didn't sound like a whole lot. You gave the example of having 200 systems doing 50 procedures a year, is 50 procedures a year kind of the ideal for your typical customer? Or is it higher than that? I would think it would be higher than that. Arun Menawat: Yes. So at the moment, a number of these sites are very new. And so the sites that we installed in Q4 virtually is non-existent in terms of the utilization. So I think just that math of taking the whole installed base and that is probably, I would say, take 60% of the installed base and use that would give you a better number. Having said that, I think your key question, we think 50 is a very reasonable number. We have sites today that are doing well over 100. We do have some research sites that acquired the system early on that we're doing maybe 10 procedures per year and now that there's reimbursement there. These are large hospitals that are slow moving, but they are very slow moving here. But they are all looking to finally increase. And again, as reimbursement, particularly from private insurance companies kick in, they're going to start increasing as well. So I think to answer your question, do we think that the ultimate number is going to be better than 50? We do. But at the moment, since we are below 50, we think 50 is a good average target to hit. And 200 sites is not a very big number. We think we can achieve that also. And so I think over the long haul, I can certainly tell you if we hit average of 50, we're not going to be -- we're going to be a bit disappointed. But I think, particularly, as I was talking about in the prepared remarks, I think as they start establishing TULSA day with the ability to then treat whole-gland and partial-gland and BPH altogether, there's enough patient volume now with this model that I think 50 is a very achievable number. Christopher Potter: That's helpful. Would you expect that the average utilization per site would increase materially in 2026? Arun Menawat: I think in the second half of '26, I do believe that, yes. One of the things that Tom has talked about is that as we update our sales design and we described it a little bit for you. We are starting to put -- to go to the much more of a hunter/farmer model where the farmers are -- is a team that we're building that will pay attention to utilization more than before. Historically, because we've not had reimbursement, it's not been a big thing, but we've moved our genius team in the commercial organization. We're building a sales team that is a farmer-based team. I think that team together will drive better startup for these new sites, and better utilization over time. Operator: And I'm showing no further questions at this time. And I would like to hand the conference back over to Dr. Menawat for closing remarks. Arun Menawat: Thank you so much for spending the time with us. We really appreciate the attention. We are excited about where we're going, and we look forward to updating you at the end of Q1. Have a good evening. Operator: This concludes today's conference call. Thank you for participating, and you may all disconnect. Everyone, have a great day.
Reshmee Soni: Good morning, and welcome to Grindrod's 2025 Annual Financial Results Presentation. My name is Reshmee Soni from Investor Relations. I am delighted to welcome our analysts, shareholders and members of our management team this morning. Thank you for your interest in Grindrod. A special welcome to our nonexecutive directors who are also online. Today's session, we will cover the 2025 financial performance, having a look at our financial performance, our divisional performance, ending with our outlook. We will then proceed to a question-and-answer session. With us this morning are CEO, Kwazi Mabaso; and Fathima Ally, our CFO. Before we commence, please take note of the forward-looking slide on your screen. I will allow you to peruse this at your own time. And with that, I hand over to Kwazi. Kwazi Mabaso: Thank you, Reshmee. Good morning, everyone, and thank you for taking time to join us today. The year 2025 was marked by geopolitical tensions and trade policy uncertainty. Our success in executing our strategy and continued focus on operational excellence has assisted in limiting the impact of this volatility. We closed off on key strategic milestones in 2025. We concluded the ZAR 1.4 billion TCM acquisition, which is now under our full control. We successfully executed an exit from our shareholding in our nonstrategic Marine Fuels business, securing cash of ZAR 102 million. We exited our exposure to KwaZulu-Natal, North Coast property and secured ZAR 500 million in the process. Now let's take a closer look at the macroeconomic environment. As I have stated earlier, the period under review reflects a complex global operating environment, one that is characterized by elevated geopolitical risks and challenging environment. This has placed pressure on regional economic conditions resulting in shifting demand for commodities that we move for our customers. Looking at the key regions where we operate and where our customers export to, starting with China, China recorded an economic growth rate of 5% despite reduced iron ore demand resulting from a 4.6% decrease in steel production. This decline was attributable to a slow property sector and a weak infrastructure investment. India, the key importer of South Africa's thermal coal grew its economy by 7.3% in 2025, continuing its streak as the fastest-growing economy in the world. Although South Africa's economic growth at 1.3% is an improvement from the sub 1% growth, this still falls short of the required rate to mitigate the structural economic challenges such as high unemployment rate. Mozambique economy grew 1.1%, a substantial drop in the performance we have seen in the past, but LNG project activity is expected to underpin a recovery going forward. The rest of the SADC region's economic growth is expected to be supported by the strengthening of the mining sector. On the next slide, we'll take a closer look at the 2025 price performance of the commodities we handle for our customers. Overall prices outside copper continued to underperform. Chrome ore prices experienced notable fluctuations during the year. We saw an increase in chrome ore exports as South Africa's smelting capacity slowed due to energy challenges. On the other hand, iron ore prices started softer into 2025 and peaked in the second half of the year as China stimulated its steel sector. Coal prices fell in 2025 as India's output rose, which had an adverse effect on South African coal demand. Now I'll take you through our performance overview. Safety remains a priority at Grindrod. Our focus on driving a safe working environment for our employees through BASSOPA safety awareness campaign resulted in Grindrod achieving a year of 0 fatalities. We achieved a record lost time injury frequency rate of 0.16 across all our operations. This demonstrates the employees' dedication to maintaining safe practices. We delivered record volumes in Maputo and Matola terminals, delivering growth rates of 6% and 22%, respectively. I'll give more color to this performance in the next section. However, it's safe to say that our decision to buy up shareholding in Matola Terminal TCM was a strategic breakthrough. As a result of the record volumes, our EBITDA grew by 13% to ZAR 2.3 billion, translating into headlines growth of 17% to ZAR 1.2 billion. We generated ZAR 2 billion of cash from operations at decent EBITDA cash conversion rate of 1.3%, and we held ZAR 3.9 billion in cash at year-end. Consistent with our dividend policy, the group has declared an ordinary dividend of ZAR 0.252 per share for the 6-month period. This brings the total ordinary dividend for the year to ZAR 0.482 per share, marking a 21% increase. We have received more than ZAR 1 billion from noncore assets for the year. The Board has subsequently approved a further once-off special dividend of ZAR 0.43 per share for the 6-month period. As a result, 49% of noncore proceeds have been returned to shareholders. Between ordinary and special dividend, Grindrod has returned ZAR 476 million to shareholders for the 6-month period, bringing the total number returned to shareholders for the full year to ZAR 862 million. Now let us look at our Port and Terminals volume performance. Strong chrome market, partly buoyed by increased chrome ore export from South Africa and Zimbabwe contributed to yet another strong volume growth in Maputo port, culminating in a record performance of 15.2 million tonnes. Maputo has achieved a compounded annual growth rate of 14% since 2021. Moving to Matola. Conclusion of strategic buy-up of control of Matola Terminal was key in enabling Grindrod to unlock operational efficiencies. The reduction of vessel turnaround time by 30% and 11% for coal and magnetite, respectively, resulted in the terminal achieving a record of 9.9 million tonnes, marking the highest throughput in its history. This performance is at 83% of the committed capacity expansion to 12 million tonnes required in the sub-concession extension. Now let's move on to our Logistics segment. The Logistics segment remains a critical enabler to our Port and Terminals business. This segment gives Grindrod the ability to offer an integrated logistics solution to our customers, a solution that is cost effective and efficient. This ability remains Grindrod's market differentiator. Performance in ships agency and clearing and forwarding was soft. Our graphite operations slowed down last year, but recent market development points to a recovery in this business. We have substantially concluded our locomotives refurbishment program we announced previously, which we managed in line with our expected timing of rail open access in South Africa. Engagement with Transnet Rail Infrastructure Manager, TRIM, on Rail Open Access continues with expectation to close the negotiations after the revised network statement has been issued, which is expected in April. I'll now hand over to Fathima to share more insight on the financial performance. Fathima Ally: Thank you, Kwazi. Good morning, everybody, and a warm welcome from my side. It's certainly a pleasure this morning to deliver Grindrod's performance for financial year 2025. Before you, you'll see our income statement and the numbers that we're presenting today, both from an income statement and a balance sheet perspective, have been put together on a segmental basis, which means that the impact of our joint ventures are proportionately included based on our effective shareholding on a line-by-line basis. Our core business performed well for us in 2025. Core revenue up 1% and core EBITDA up 13%. This is largely attributable to the stellar performance coming out of the Matola terminal with volumes up 22%, as Kwazi mentioned earlier. This was offset somewhat by performance in our Logistics segment, which we'll delve into further once we look at the segmental performance in detail. Pleasingly, overall EBITDA margins for the group improved year-on-year by 11%, reflected at 30% for the financial year 2025. Significant corporate activity prevailed for us in 2025 and reflected, you will see nontrading items on screen at ZAR 927 million. The Matola buy-up contributes ZAR 937 million of that, comprising both a gain on disposal as required by the accounting standards as well as the release of foreign currency translation reserves. The Marine Fuels investment, as divested from in the first half of the year, attributing to the drop of revenue and EBITDA, also contributed to nontrading items in terms of a net gain of ZAR 34 million. Our share of associate earnings, which represents performance of the port in Maputo is up 3% year-on-year. Volumes were up 6% and record milestones were met. The performance was slightly offset by tax obligations that was recorded due to the change in tax regimes in the United Arab Emirates. Our overall effective tax rate for the group sat at 31%. Now if you take profit before share of associate earnings and ignore the effects of nontrading items as well as withholding tax effects, which were elevated in the current year following repatriation of dividends from Matola post the buy-up, that's how we arrive at the 31%. Overall, net profit attributable to our ordinary shareholders are reported at ZAR 2.1 billion, 559% up on the prior year, and our core headline earnings at ZAR 1.2 billion, 17% up on the prior year. Our core headline earnings in cents per share closed at ZAR 1.765. If we look at our segmental performance, Port and Terminals doing really well for us. Revenue and EBITDA margins up 20% and 44%, respectively. Again, big contributor being Matola. Matola has been transformational for Grindrod in terms of financial performance as well as financial position. The acquisition has played out exactly as we expected with it being and reflecting as a major earnings and cash contributor. We are excited in moving forward with this asset. Our overall normalized margins, reflecting the impacts of the Matola acquisition and the overall uptick in our Port and Terminals volumes, dry bulk specifically, are reported at 44%, firmly up from the 36% I had reported to you in H1 of this year. Our headline earnings for this segment closed at ZAR 1.1 billion with strong return on equity at 24%. Our Port and Terminals business remains a U.S. dollar-anchored business with 89% of our EBITDA earned offshore. Our Logistics segment faced headwinds in the current financial year. Commodity prices saw a downward shift in our transport brokering business, which put pressure on an already low-margin business. Our graphite contract was renegotiated in the current year, and we moved from a fixed fee model and now earning a variable fee. Revenue and earnings, respectively, moving forward will now be aligned to volumes that we report. Our rail deployment was low. However, we have significantly advanced on our refurbishment program. Ships agency and the container business performance was subdued, largely linked to market challenges. Overall, revenue and EBITDA down 10% and 18%, respectively. And normalized margins, once you ignore transport brokering as well as the COVID-19 business interruption reported in the first half, sat at 25%, whilst at the low end of management's target, still within the range that we target for our enabling business. And this is an important principle. The Logistics business, as Kwazi mentioned, is an enabler to Port and Terminals. It is imperative to how we bring our integrated, efficient and cost-effective solutions to our customers. Overall, this segment gave us ZAR 212 million of headline earnings. And this segment, again, strongly rooted as a rand-anchored business with 83% of our EBITDA earned onshore in South Africa. From a balance sheet perspective, due to the significant impacts of the Matola acquisition, we have represented the December 2024 balance sheet. This will allow better comparability by us notionally including 100% of Matola as it reflects in the December 2025 numbers. We spent ZAR 1.5 billion in terms of capital expenditure in the current year, 81% of that being expansionary. And of that, 75% largely underpinned by the Matola acquisition. The remaining ZAR 362 million was invested in property, plant and equipment, largely in all our facilities and to name a few, our upgrade and our development of our Matola buildings in the current year as well as our Salt River facility in Cape Town linked to our container business and new undercover warehousing facilities in Walvis Bay. Aside from this, other capital acquisitions this year related to steel business, yellow equipment, vehicles and Jersey barriers. Our PPE dropped 5% December '24 to December '25. Whilst additions were significant, we did see depreciation impacts as well as a strengthening of the rand by 12%, which impacted on the translation differences that we booked in the current year. Our intangible assets grew significantly. The Matola acquisition brought on book $86 million of intangibles, both recognized in the form of goodwill as well as customer relationships. In terms of our working capital, our current assets reduced in the current year by 22%. It was very pleasing to see improved collections robustly across our businesses, a testament to the hard work of our finance and commercial teams. This coupled with the down trading in logistics as well as the capitalization of prepayments for rolling stock investments in the prior year contributed to that difference. Our bank and cash balances are up together with our current liabilities. What we experienced this year was significant prefunding that came through from our fuel customers in both the ships agency as well as the clearing and forwarding businesses. What happens here is that the cash is collected and sits on our balance sheet until it is paid over to SARS based on deferment arrangements that we have in place in these businesses. From a liabilities perspective, we saw significant repayments of borrowings. What we also saw was lease liabilities coming to book on renegotiation of the GML concession as well as the Matola acquisition. Our other liabilities have also grown. This is largely in view of the fact that we agreed to certain deferred consideration payments under the COG transaction as well as the fact that we had to recognize deferred tax liabilities linked to the intangible assets that we brought on book and that I mentioned earlier. Overall, we closed this financial year with Grindrod's balance sheet healthy and stable. Our asset base is now rooted firmly to just our core business with all material noncore assets materialized. If we look at how our net debt progressed in this financial year, we closed last year with net debt reported at ZAR 1.5 billion. This was post us ring-fencing funds of ZAR 1.1 billion in anticipation of closing the Matola transaction. Together, this gives us a net restated opening net debt position of ZAR 413 million. We raised in excess of ZAR 2 billion in terms of cash generated from our operations in this financial year. This stemmed from both operational performance as well as the efficient working capital measures that I talked about earlier. Our cash conversion was at 1.3x EBITDA, certainly a record for us looking back into a 10-year history for Grindrod. 27% of this cash was spent towards our interest, tax and dividend obligations. On acquisition of Matola, we brought net cash on book of ZAR 316 million. This comprised of both cash on hand at the time, offset by lease liabilities that were on book. We put ZAR 1.4 billion away in terms of capital expenditure. Again, this largely linked to the Matola transaction where we spent ZAR 1.1 billion, as mentioned earlier. Proceeds on our disposal also amounting to ZAR 1.1 billion and proceeds from noncore taking up 93% of that amount. Our overall noncash movements amounted to ZAR 412 million, again, through the introduction of lease liabilities when the Maputo concession was signed in November this year. We closed the year in a net cash position of ZAR 699 million. If we look at what this comprises, our total debt moved from ZAR 2.9 billion to ZAR 3.2 billion, 10% up. Our borrowings reduced, as indicated earlier, from ZAR 2 billion to ZAR 1.4 billion. We saw net repayments in the year of ZAR 710 million. We saw a significant uptick in our lease liabilities. The Maputo acquisition as well as the signing of the GML concession brought concession-linked lease liabilities onto our book of ZAR 1.1 billion. Our overdraft movements are linked to timing of cash flows. From a cash perspective, we closed the year on ZAR 3.9 billion. Our ZAR 1.4 billion, including ring-fenced cash of last year, give us a net increase in cash of ZAR 1.4 billion in 2025. This resulting in ZAR 700 million arising from the Matola acquisition and ZAR 700 million stemming from the timing of cash flows linked to the prefunding in the ships agency and clearing and forwarding. We closed this year with Grindrod's balance sheet largely ungeared, and we sit with debt capacity that approximates ZAR 4.5 billion. We have plans in place on how to take up this capacity. And to tell you more about that, I'll hand you back to Kwazi. Thank you. Kwazi Mabaso: Thank you, Fathima. Our capital allocation framework directs how we deploy capital through the business cycle, enabling us to shift between stay in business CapEx, growth investments and shareholder distributions. Over the past 3 years at Grindrod, the management team has done well to have a business evolution that supported a balance sheet restructuring. This restructuring improves access to both optimized debt capacity and cash reserves. This work was undertaken to position Grindrod to act on growth opportunities as they emerge. Grindrod has completed its strategic reset. The foundation for growth has been laid. We are now moving into disciplined growth execution. We are focusing on strategic infrastructure initiatives for the short to medium term. Several projects are already underway and additional opportunities are being actively pursued. Starting with the Phase 1 of TCM expansion project, the Back-of-Terminal, this project will lift the terminal's capacity to 12 million tonnes. This project is making good progress. We are still on track for the hot commissioning at the beginning of 2027. The Richards Bay container handling facility, which will give Grindrod direct access to the quayside in South Africa remains on track and is expected to be commissioned in 2028. On the Rail Open Access, as I've alluded earlier, negotiations are ongoing, and we are in the process of procuring 50 wagons this year, specifically for rail slots. MPDC is planning to commence a dredging campaign. This is in line with its commitment to grow and develop the Port of Maputo as part of the concession extension to 2058. This will be project funded against the balance sheet of the port dredging company of MPDC. The capital dredging program, once completed, will allow the handling of ultra-large container vessels and the full handling of the Cape size vessels at Matola Terminal. This will increase the quayside capability of TCM to handle 170,000 tonne vessel size. This project should be completed by the end of 2027. During the month of February this year, Transnet released a request for qualification to identify and prequalify potential private sector partners for the Richards Bay dry bulk terminal, in short DBT. Transnet seeks to partner with the private sector to modernize and expand DBT, which is one of South Africa's largest dry bulk export terminals. DBT mainly handles chrome, magnetite and coal. The terminal currently handles around 17 million tonnes with the potential of expanding to 27 million tonnes, which is plus/minus 59%, 60% improvement that is expected. Now for nearly 2 decades, Grindrod has been a long-term partner in the Port of Maputo through our investment in MPDC and as a terminal operator in TCM Matola. Over that period, we have transformed a legacy dry bulk terminal, TCM, into a modern, high-performance export gateway that today plays a critical role in the regional trade. At Matola, we have invested in the upgrading of a berth, deepening key walls, modernizing handling equipment and deploying integrated terminal operating systems. The results speak for themselves. Matola has consistently delivered record volumes. For the last 11 years, we moved from moving 4 million tonnes at Matola to now moving 10 million tonnes, which is about 150% increase. This clearly illustrates Grindrod's capacity to invest and operate reliably on large scale. And we would like to demonstrate that in South Africa. Therefore, Grindrod will participate in this RFQ for Richards Bay. In closing, our strategy is clear. We provide our customers with integrated logistics solutions that are both cost effective and efficient. We are delivering strong operational and financial results. We will continue to deliver incremental volumes through operational excellence underpinned by our tenacious employees who are the heartbeat of Grindrod. Our commitment to generating value for both shareholders and stakeholders will continue to be a priority. Thank you. I'll now hand over to Reshmee for the Q&A. Reshmee Soni: Thank you, Kwazi, and thank you, Fathima. We will now open the floor for questions. [Operator Instructions] We have our first question online. Fathima, I think this one is for you. Thank you, Blessing Phakula from Vunani Securities. What hedging strategies are in place to manage U.S. dollar or foreign currency exposure? Fathima Ally: Thank you, Blessing. A really good question. We are fortunate at Grindrod. Our significant and material businesses that are anchored in Mozambique, all operate to functional currency of U.S. dollars. Customer collections are U.S. dollar denominated. And where we do see some foreign currency exposure is where we have our cost base that's denominated in local currencies. But again, these close out very quickly within the working capital cycle. So we do not face significant foreign currency fluctuation in the construct of how our businesses operate. We also ensure that when capital expansion happens, we secure funding in the functional currencies of the entity, which eliminates the need for any functional currency or the volatility that could come through from foreign exchange. Where we are exposed as Grindrod is when we translate into our reporting currencies, we use average exchange rates in the income statement and then, of course, closing rates for the balance sheet. Again, the upside here impacts on the earnings that you report, but you can't really apply hedging strategies for this. It's an accounting construct. In this year, we saw close to ZAR 1 billion worth of impacts from foreign currency on translation. These impacts were not absorbed into our earnings. They were absorbed on balance sheet when we translated those assets. So in closing, very simple construct. Grindrod is naturally hedged. And where we do have exposures, we seek forward covers when needed. Reshmee Soni: Thank you, Fathima. The next question, thank you, Rowan from Chronux Research. Is there any impact expected from the current Middle East conflict? Kwazi Mabaso: Yes. Let me take that one, Reshmee. I think that talks to the geopolitical risk that we have alluded on. And I think it's affecting everyone. And certainly, nowadays, you can't predict what's going to happen. And really, for us, as Grindrod, we tend to focus on what's within our control. We've got our strategy that we are executing. We've got short-term to medium-term infrastructure initiatives that we are highlighting. Safe to say that for us, we are looking at how the commodity prices are behaving as it has a direct impact on the commodities that we are handling. We've already seen at Navitrade, the coal coming to Navitrade increasing because of the slight uptick that we have seen on the coal price. We are already tracking at a run rate of about 2.5 million to 2.8 million tonnes at our Navitrade facility. And even when you look at the inbound volumes that is coming into our Navitrade has increased by over 50% on rail predominantly as well as on road. So that is what we are seeing. But our focus really is what is within our control currently. Reshmee Soni: Thank you, Kwazi. The next question from Toko, Oystercatcher Investments. Thank you, Toko. I'll perhaps split this for Fathima and Kwazi. The first section, Kwazi, perhaps from your perspective. Please provide an outlook on chrome volumes for the year given government support for the domestic ferrochrome sector. I think the second one, Fathima, perhaps on your side. What is the medium-term margin outlook in each segment over the next 3 to 5 years? Are there any choke points in the current value chain that may attract additional capital or I suspect CapEx? What is the net debt outlook given the strong balance sheet and growth ambitions? And lastly, what is the maximum net debt and EBITDA you can tolerate? Maybe I'll ask Kwazi to start. Kwazi Mabaso: Thanks. Obviously, with the discussions that are happening between the producers of chrome so that they can process and only ship ferrochrome, it can only be an uptick for us because ferrochrome also moves through our port of Maputo. However, we know that for every tonne of ferrochrome you produce, you need about 3x of chrome ore for you to process that. So maybe there can be a reduction on chrome ore, but there's sufficient demand in the market for chrome ore. We are currently handling chrome from South Africa and Zimbabwe. And right now, I think even the market share of Zimbabwe chrome ore in our port of Maputo has been hovering around 5% to 7%. And maybe we can see that also becoming strong if the chrome from South Africa subside. Fathima Ally: Thank you, Reshmee. Reshmee, you keep me honest here, but I think the first part of the question was around margin stability in our segments. So from a Port and Terminals perspective, we believe that our 44% margin is sticky. You must remember that in the current financial year, we actually consolidated Matola for 7 months in the year. So the first 5 months still came in at 35%. So we've got 5 months' worth of EBITDA uplift that can prevail. But as we've communicated before, our business is cyclical. And the thresholds that we hold for our Port and Terminals business are within a construct of between 35% and 40%, and we stick to those thresholds. From a Logistics perspective, with this business being an enabler to Port and Terminals and with us really moving forward on our integrated solutions strategy, as mentioned, our low end of the threshold is 25%. So it would need to be a really compelling customer opportunity that will allow us to work in breach of those thresholds. But we do have limits in place, and we do believe that those EBITDA margins based on our current business is sustainable. In terms of our net cash, the question was whether we expect the ZAR 699 million to prevail. With the dividend declarations that we have now, that will actually eat up -- both from an ordinary as well as preference dividends, it will eat up ZAR 510 million of that capacity. Overall, long term, depending on when those opportunities that Kwazi mentioned come into fruition, we expect that our net debt position will be depressed as Grindrod. But we are in a growth phase, and that's certainly not abnormal for business planning or in anticipation of growth. I think the last bit of the question was how much we can tolerate in terms of our net debt or EBITDA. We work to tolerating 2x our EBITDA. And again, if we're presented with a really good opportunity, we might work to 2.5x, but we hold ourselves accountable to 2x, again, because of the cyclicality of our business. Reshmee Soni: Thank you, Fathima. Maybe perhaps to move towards the Logistics segment, Kwazi. We have 2 questions in this regard. The first from Alistair Lea of Coronation. Your logistics businesses have not performed well for a while now. What is the short and medium-term outlook for these businesses. Thank you, Alistair. And the second one from Mike Lawrenson. Thank you, Mike. Congrats on an excellent set of results. What can be done in the short term to optimize resources in Logistics division and improve operating performance without impacting long-term aspirations? Kwazi Mabaso: Thanks for that, Reshmee, and thanks for those questions, Alistair and Mike. When you look at our Logistics business, our Logistics business, you've got rail there, you've got our graphite business, you've got container business and then you've also got road transport as well as our ship agency business. Our ships agency business, it's always solid. So there isn't much movement there. Road transport is directly linked with the coal commodity cycle. If coal is down, we'll see road transport also going down. Our graphite business, as also Fathima alluded earlier on, is that we are now moving into a variable contract with our customer after we were earning a fixed fee from the customer. But what is exciting is that the developments in the future is that we are now going to be getting consistent volumes from our graphite customer, the indication of roughly about 30,000 tonnes a quarter, and they are preferring to use our Pemba facility, the dry bulk instead of the Nacala Intermodal facility. So there is an uptick there. On the rail side, where we've seen really a decrease over the last year or so, it's because we deliberately went on an aggressive locomotive refurbishment program. I mean, last year, we refurbished 10 locomotives out of the 13 locomotives that we repatriated from Sierra Leone. And we did that so that we get ready for the Rail Open Access opportunities. But however, even this year, our focus on the rail will be to increase our deployment rate because currently, it's below 50%. And this year, we're going to up that, our local deployment rate, because we have now completed our aggressive locomotive refurbishment program. And then lastly, we've seen the container improving from last year, and we're hoping that it will continue to improve as we move forward. I think I've covered all the segments. Reshmee Soni: Thank you, Kwazi. The next one from Cobus, Value Capital Partners. Thank you, Cobus. Congrats on a good set of results. What is the expected time line for the PSP opportunity in the Richards Bay dry bulk terminals? Does the Richards Bay dry bulk terminal generate revenue in USD or ZAR, or does it depend on the commodity handled? Kwazi, maybe I'll take the second part on the U.S. dollar and ZAR. And on that Cobus, the terminal, as we understand it, does ZAR. Remember, we are at a request for qualification. So we are indeed in an early stage, and that level of detail has not been made available. Kwazi, if you can assist with the time lines? Kwazi Mabaso: Yes. The time line, the RFQ will close in August. And thereafter, then the RFP process will commence. Certainly, from our side, like I alluded earlier on, we are ready for this opportunity. We know that it's still at an early stage, but we've been waiting for this opportunity to come in the market, and we are ready. Reshmee Soni: Thank you, Kwazi. Perhaps, Fathima, we can go back a little to the debt. [ Jaco from Rena Investments ]. Thank you for your question. Are you perhaps contemplating reducing interest-bearing debt with the cash that you have? Fathima Ally: Thank you so much for the question. I think the question is an important one. In fact, it talks to a significant project that we have ongoing at the moment, whereas Grindrod, we're looking to restructure our debt and put it into what's commonly known as a common terms arrangement structure involving all of our main bankers. What this construct will do based on our indicative models that we've put together is reduce our interest burden over the period of our debt, which is lower than 5 years, up to ZAR 40 million over that period triggered by the refinancing. So we are constantly looking at measures on how it is we can be efficient from a cost perspective. But again, how it is we have a construct that would allow us to move forward in terms of our growth plans. Reshmee Soni: Thanks, Fathima. Kwazi, maybe perhaps this is back to you. Wallace Steyn from Steyn Capital Management. To what extent can you expect the dredging program and Matola upgrade to disrupt volumes in the short term? Kwazi Mabaso: That's a good question, Wallace. I think our approach in executing this program has been a modular approach. I mean if you remember, even our Matola expansion program, there was an option of going big, but we decided to do it -- split it into 2 Phase 1, Phase 2, so that we minimize disruption to our operation. So with the capital dredging program, the same approach will be adopted. We don't want to disrupt the ongoing operation in our operations. So we're going to continue taking a modular approach in executing our projects. Reshmee Soni: Thanks, Kwazi. Fathima, maybe back to you. There's a few questions on CapEx, and it may be worthwhile noting what's in the booklet versus the presentation. The first question is from Matthew, Blue Quadrant. Thank you, Matthew. What is the guidance for CapEx in 2026? And what is that split between H1 and H2? The second is from Alexa of Fairtree. Regarding the CapEx plans you've provided for the years ahead, how much of the CapEx is fixed? And how much wiggle room do you have to back out of certain capital commitments? Fathima Ally: Thank you. I think if we go back to the first question, in the booklet that we released on SENS this morning, a capital expenditure and commitment note is included as Note 9 in that booklet. If you look at that booklet, in terms of the future years, we've actually disclosed all of our authorized capital expenditure, which is reflected at approximately ZAR 1.2 billion. A big part of this is skewed toward Port and Terminals. We are currently a go on our Back-of-Terminal project, as Kwazi mentioned earlier, looking to do all the heavy lifting in 2026. Again, with respect to how it plays out between H1 and H2, it's difficult to say. A project is dependent on various eventualities, weather being one of them, engineering milestones, et cetera. But like I said, we are targeting to close this project and do all the heavy lifting in 2026 with commissioning early in 2027. I think the second question was around whether we see the CapEx fixed or is there wiggle room. In the booklet, we also disclosed how much of this authorized CapEx is contracted for. And you will see a significant portion of that is contracted for. Of course, the timing on our cash flows is what we can control depending on how projects advance. Reshmee Soni: Thanks, Fathima. The next one, Kwazi, I think perhaps from your perspective. Thank you, Bruce, for your question. Kwazi, can you please give us information on the top 2 to 3 destinations for coal exports and chrome exports? Kwazi Mabaso: Thank you, Reshmee, for that. When you look at the 16.7 million tonnes that we have moved as Grindrod, of that 16.7 million tonnes, 41% is magnetite and that entire magnetite is destined for China. And 34% has been coal, and that is destined for South Asia as well as some parts of Europe, but predominantly, it's in the Asia part of the world. Chrome is also following the same route, which is mostly China and South Asia. So that is where predominantly our destination of the commodities that we are exporting. Reshmee Soni: Thank you, Kwazi. The next question from Mike again. Thank you, Mike. I think, Fathima, this is perhaps for you. Working capital release of approximately ZAR 500 million in FY '25 appears to be largely due to ships agency prefunds of ZAR 700 million. Can you provide guidance as to whether this is a once-off or permanent benefit? Fathima Ally: Thank you for the question, Mike. As I mentioned earlier, these cash flows come from prefunding that customers give to our ships agency and clearing and forwarding business. And again, it's prefunding because we have deferment arrangements within which we need to pay those funds over to SARS in the form of VAT. That construct is here to stay. It is very critical to how our clearing and forwarding and our ships agency businesses operate. But what is volatile is the quantum of prefunding we can hold. That is entirely customer dependent. So in short, the ZAR 700 million timing and not permanent. Reshmee Soni: Thank you, Fathima. Having a look, there seems to be no further questions online. With that, I think that concludes our morning presentation. I thank everyone for their insightful questions. We appreciate your support, and we appreciate you joining us this morning. If you have any further questions, please do not hesitate to reach out to Investor Relations. My details are on the slide that is currently being presented. With that, thank you again for your support. Thank you, and have a good day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim Fourth Quarter and Full Year 2025 Results Conference Call webinar. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest, if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com, by clicking on financial information on the homepage and then click on the annual report presentation. [Operator Instructions] As a reminder, this conference is being recorded March 5, 2026. With us on the line today are Mr. Yadin Antebi, CEO of Bank Hapoalim; Mr. Ram Gev, CFO; Mr. Victor Bahar, Chief Economist; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. In the event of the siren in Israel, we will pause briefly and resume the call as soon as possible. Mr. Antebi, would you like to begin? Yadin Antebi: Thank you. Good afternoon, and thank you for joining us for our review of the bank's 2025 results. We are publishing our financial statements and holding this call at a time when the geopolitical environment in the Middle East and around the world is undergoing material change. We continue to witness Israel's unique resilience and its ability to adapt rapidly. Throughout its history, Israel has consistently emerged stronger from periods of adversity. And we believe that after the current conflict, the economy is positioned to regain strength and to continue to grow. With this environment, Bank Hapoalim will continue to play a meaningful role in supporting the recovery and growth of the economy. Let us now turn to the results. We ended 2025 with very strong results. Net profit of ILS 9.8 billion, return on equity of 15.9%, loan growth of 13.4%. These results reflect the disciplined execution of our strategy, which I will touch on shortly. Alongside these strong financial results, this was a year of significant activity across the bank. We addressed a number of innovative and impactful initiatives, including growth across all business segments. The introduction of 2-year financial targets, the distribution of bank shares to our customers under the Bank of Israel outlined, the launch of an AI bot that supported the share distribution process, a new marketing strategy of proactive banking and a major step forward in the development of Bit, our payment app. All these efforts led us to deliver results that exceeded the targets we published a year ago. Net profit of ILS 9.4 billion excluding income of insurance versus a target of ILS 8.5 billion to ILS 9.5 billion. Return on equity of 15.3% excluding net income versus a target of 14% to 15%. Credit growth of 13.4% compared with a target of 7%, dividend payout of 50% for the year, or 53% for the moment the Bank of Israel permitted to distribute more versus a target of at least 50%. Looking ahead, it is clear that the macroeconomic environment has changed compared with a year ago, when we published our targets for '25 and '26. GDP growth assumptions have improved, but market implied interest rate and inflation are lower for the next 2 years than they were a year ago. Nevertheless, most of the updated 2-year targets we are publishing today are higher than the previous ones. For '26 to '27, we expect net profit of ILS 9 billion to ILS 10 billion, return on equity of 14% to 15%, accelerated loan growth of 8% to 9% and a higher payout ratio of 50% to 60%. It is important to note that towards the end of the year, we will begin the relocation to the new Poalim Center building. As part of this transition, we intend -- initiated steps to realize and enhance our own real estate assets. Accordingly, starting in 2027, we expect to recognize pretax gains of between ILS 800 million to ILS 900 million, which we have reflected in the updated targets. Regarding special tax on banks, our assumptions reflect an impact similar to that of the past 2 years. I would like to briefly review the progress we have made in executing the strategic focus areas we approved about a year ago. As a reminder, our strategic focus are -- areas are sales growth, leadership in service and fairness, Bit as an innovation engine, operational and efficiency, GenAI and data. In our retail activity, the focus is on strengthening sales capabilities across all channels, branches, call centers and digital. To support this, the division underwent an organizational restructuring designed to enhance sales effectiveness and customer service. We adopt a proactive service model and introduce new service standpoints. Naturally, many of these processes intersect with technology and here, too, we made a substantial leap forward with the implementation of an AI bot as a foundation for future automation. In mortgages, we made a major improvement in SLA, which also helped us improve pricing. Here as well, we are already seeing results, including an increase in our marginal market share. In corporate banking, our goal is to accelerate growth with maintaining excess portfolio quality and healthy margins. One of our key achievements this year was a significant reduction in the end-to-end credit approval process, benefiting both our customers and our growth objectives. We also enhanced our digital offering for corporate clients, and today we provide fully digital end-to-end services. In our capital markets activity, we are the #1 player in Israel, both the country's largest brokerage and as leading trading. Poalim Equity, our real asset investments arm, continued to grow at an average pace of about ILS 1 billion per year. This year, it also recorded substantial realizations resulting in strong profitability. Bit is a success story I am extremely proud of. With 3.5 million active customers and an annual P2P transaction volume of ILS 30 billion, notably, 2/3 of our Bit customers conduct their primary banking activity with other banks, representing a major growth opportunity for us. Over the past year, Bit reached an important milestone with the launch of new products and services that generate revenue and/or reduce costs. We intend to continue expanding our offering to provide Bit users with solutions that simplify and enhance their financial management. We are already a highly efficient bank with a cost-income ratio of below 35%, but we still see room for further improvement. We have a retirement program under which about 10% of our workforce will retire by 2028. In addition, we are making significant efforts to reduce other operating expenses. These are not. There are no shortcuts here, just virtuous management. We are already seeing solid results with a nearly 8% reduction in other expenses this year. Alongside this potential I described, I would like to highlight several strengths as we enter 2026. We have accumulated the largest credit loss reserves in the sector, which I believe will decline in a more stable geopolitical and economic environment. We have the highest financial margin in the industry, reflecting profitability-oriented growth, and disciplined balance sheet management. We hold significant gains in the available for sale portfolio, while competitors carry losses. And as noted, we intend to sell our real estate assets, similar to steps already taken by peers, and recognized pretax gains of ILS 800 million to ILS 900 million starting 2027. Today, nearly every bank or company speaks about GenAI and data. We're not only talking, we have made substantial progress in this area. Our goal is to expand the use of capabilities to support operational and business processes, reduce SLA and more. One of our successful use cases is Danit, our AI bot, which handled thousands of customer calls during the share distribution campaign we conducted. The bot handled the most calls and completed the process end-to-end. Before I hand over to Ram to review the quarterly and annual results, I would like to reiterate our targets for '26 and '27. Net profit of ILS 9 billion to ILS 10 billion, return on equity of 14% to 15%, accelerated loan growth of 8% to 9% and higher payout ratio of 50% to 60%. Thank you, and Ram, please go ahead. Ram Gev: Thank you, Yadin, and good afternoon to everyone on the call. I'm happy to walk through the bank's fourth quarter and full year 2025 results in the next few minutes, and discuss the key drivers behind what we consider an exceptional year for the bank. A year marked by a high return on equity, nearly ILS 10 billion in net profit, strong business momentum and all supported by excellent capital strength and high-quality credit metrics. Let's dive into the numbers and start with Slide 20, where we are showing the continuous growth in profitability. This morning, we reported a 15.9% return on equity for the full year with net profit of ILS 9.8 billion and an EPS of ILS 7.43. Adjusted for the ILS 380 million income we recorded from insurance reimbursement in the third quarter, ROE is 15.3% and the net profit is ILS 9.4 billion, both comfortably above our financial targets. The fourth quarter profitability was impacted by a negative CPI and a onetime ILS 200 million provision made in respect of the labor dispute. As a result, the reported ROE of 13% for the quarter does not fully reflect the bank's underlying profitability. Next, let's talk about our credit book. We continued to deliver strong and high-quality growth throughout the year. In 2025, total credit increased by 13.4%, of which 4.9% in the last quarter, to a balance of more than ILS 500 billion. Another important key quality of our portfolio is its diversification across segments. This is a key parameter not only from a growth and risk balancing perspective, but also because it gives a greater flexibility to be selective in how we grow, and to allocate growth to areas where we see stronger profitability profile. And indeed, growth was recorded across all segments in 2025 and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strength of the remarkable Israeli economy into growth in our activity. Corporate credit grew 25.8%. Commercial credit, essentially middle market businesses, grew 11.3%, and retail activity, consumer mortgages and small businesses grew roughly 7% to 12%. The next slide, Slide 23, presents our financing income. The consistent growth trend in our financing income and margins reflects 2 key factors. Increased business activity combined with government bond portfolio repositioning. As a reminder, as part of this process, we realized losses on legacy securities, mostly in 2024, and we invested in higher-yield and longer-duration assets. This resulted in 9.6% growth in total financing income and a slight increase in the financial margin. This was achieved despite the lower contribution from the CPI and ongoing competitive pressure on margins and unlike all our peers. On the right-hand side, we show the income from regular financing activity excluding the CPI, which is consistently growing, and further highlights the aforementioned key strengths. In this slide, we take a quarterly view of financing income. The volatility of the CPI resulted in a gap of over ILS 650 million between the fourth and third quarters. This is the reason for the decrease in income from regular financing activity and margins. Here as well, we show the income from regular financing activity excluding the CPI which due to the growth in activity continued to grow nicely. On fees, the positive trend continues across various types of fees. So our business activity continues to expand. Total fees grew 11.3% in 2025 driven by most fee types such as securities conversion differences and account management fees. The increase in credit card fees is mainly attributed to one-off revenues received from the international card organizations. Let's move to present our disciplined cost management. The takeaway here is that even alongside the impressive growth in our activity, total expenses are down, or if we adjust for one-off, total expenses remained flat year-on-year. Looking at the cost-income ratio in both presented years, there were one-offs. In 2024, we provisioned for an early retirement plan of almost ILS 600 million. And on the other hand, 2025 income included the insurance reimbursement. So if we look at the adjusted figures, the cost-income ratio is down to the mid- to low 30s. This is among the lowest efficiency ratios globally. In the fourth quarter, expenses increased due to several nonrecurring items, primarily the provision related to labor dispute at the bank. Just to give you some color, we are currently working on structural changes to the bank's employment framework, changes that will yield benefits for many years to come. While no agreements have been finalized yet, we have recognized a provision in anticipation for future settlement. On Slide 27, our productivity ratios, which have been improving over time, both income per employee and credit per employee support the positive jaws effect. Moving on to discuss provision for credit losses and the quality of our book on Slides 28 and 29. Provision for credit losses amounted to ILS 421 million or 0.31% of our credit book, driven completely by collective allowance and net automatic charge-offs. The increase in the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. Individual provision, however, saw income due to recoveries. It's important to highlight that this prudent approach places us in the strongest position entering 2026 relative to peers with high reserve levels and the highest reserve ratio across a range of scenarios. On credit quality metrics, on the left-hand side, we see the NPLs continue to drop, now at 0.48%, while the NPL coverage ratio continued to rise to more than triple the NPLs as we continue to increase the collective allowance. On the right-hand side, the allowance to loans ratio remained high at 1.72% and over 95% of the total allowance is collective. In the next slide, the bank has the largest retail deposit base in the sector, which provides a significant competitive advantage. Our deposit base continued to grow in 2025, 3.2% in the last 12 months. Retail deposits decreased this year but still represent 54% of total deposits. Liquidity ratios, LCR and NSFR, continue to be well above the minimum requirement. Now let's move to present our capital position, which continues to benefit from strong organic generation capabilities, leading to 11.2% growth in the last year. The CET1 capital measure was 11.98%. And you can see in the waterfall graph, the contribution of our strong profitability, and to a lesser extent, the positive OCI allowing for substantial growth in activity as well as substantial profit distribution to our shareholders. On dividends, our strong capital position allowed us to increase our profit distribution where in addition to the 50% payout, we declared a distribution of additional ILS 200 million. This sums up to 60% distribution for the fourth quarter, 48% by cash dividend, ILS 0.79 per share, and the rest through share buybacks. So for 2025, total shareholder distribution amounted to 50% of net profit, consistent with our financial target, driven by a ILS 4.1 billion cash dividend, reflecting a 4.6% yield and ILS 4.9 billion total distribution. Before we move to briefly discuss macroeconomics, I'm moving to Slide 33 for a quick update on our expected real estate asset sale. As you know, and as some of you have noticed when passing by, we are currently constructing the bank's next headquarters building in Tel Aviv called Poalim Center. Beyond the financial significance of this move, which will allow us to further align our organizational culture with our future plans, including by bringing all headquarters employees together under one roof, rather than being scattered across several buildings as we are today. The planned relocation will start at the end of this year, and we expect to sell existing properties from 2027 onwards. As this event is approaching, and we are already progressing with the betterment of assets and sale processes, we have provided disclosure in the financial statements regarding initial estimates for the expected profit from the sale of our main properties, estimated at ILS 800 million to ILS 900 million before tax. Let's now talk briefly about macro situation in Israel. While each military conflict is unique, past episodes offer a useful framework for assessing the current operations economic impact. We expect a temporary slowdown in activity broadly similar to the second quarter of 2025 contraction and dependent mainly on the operations duration followed by a partial rebound. The economy entered the year with solid momentum and assuming the operation remains short, GDP growth is still expected to exceed 4% this year. As shown on right-hand chart, the shekel has strengthened as markets view geopolitical risk as moderating, supported by another strong year in high tech, including several large acquisitions. Headline inflation has eased to 1.8% year-on-year, partly due to currency operation. Our base case assumes low persistent inflationary impacts from the current operation, keeping near-term inflation contained. The policy rate has been cut to 4% with inflation expectations well anchored, and market pricing implies roughly three additional cuts by year end. So to summarize, 2025 saw very strong performance across all metrics, well above our financial targets. Return on equity was 15.9% or 15.3% adjusted for the income from insurance. Financing income and margins continue to be strong, driven by the growth in activity and asset rollover. The strong growth in credit of 13.4% during 2025 was broad-based across all segments and economic sectors. This was achieved with no compromise on the quality of the book as reflected in the NPL ratio of only 0.48%, and allowance to NPL ratio of 310%. In the fourth quarter, we declared on a 50% distribution plus ILS 200 million from existing capital services. So the overall payout ratio in 2025 was 50%. And then lastly, we introduced updated financial targets for 2026 and 2027. ILS 9 billion to ILS 10 billion net profit, ROE target remains 14% to 15%, credit growth target base increased to 8% to 9%, and profit distribution of 50% to 60%. To conclude, we are proud of the strong performance this year and of the clear, ambitious targets we have set for the next 2 years. We are well positioned to continue delivering substantial plan. We will now be happy to take your questions. So back to you, operator. Operator: [Operator Instructions] The first question is from David Kaplan. David Kaplan: I have first couple of questions on the bank's sensitivity to interest rates. You have those tables that you gave at the beginning of the report. And I'd like you to help us understand a little bit why is it that the 1% change in the interest rate has a greater impact on the equity of the bank than it does on the P&L. Start with that. Yadin Antebi: I'm not sure I understood the question, David. I can repeat. We give -- we, of course, disclosed our interest rate sensitivity. It's around ILS 800 million. As you refer to the equity side? David Kaplan: I'm talking about the table that's on Page 90 of the report where you talk about an increase or a decrease in the interest rate by 1%, and the impact it would have on the equity of the bank after tax, right? And it's about ILS 1 billion, whether it's up or down. But on the table that's just above that on the same page, you -- where you go through the income statement, the impact is much smaller or much different. And so how does that work through the P&L of the bank? And why do we see a greater impact on the income than we do on the -- sorry, on the equity that we do on the income of the bank. Yadin Antebi: The important figure here is the ILS 800 million, David. That's the full influence the bank's top line and the income. We probably have disclosure on the capital as well, but it's not -- I don't think it's a material disclosure. David Kaplan: Okay. I guess maybe the second question I have is on -- you mentioned in your presentation and in fact, it's true that you managed to maintain first of all a higher NIM in 2025 than in 2024, which given the interest rate environment was already surprising given the -- what we see the trends we've seen in other banks in the market here. What is it about your mix of business that allows you to do that? Yadin Antebi: It's not -- I think it's not the mix of the business, but it's the discipline of the organization and the emphasis that we put on spreads. There are areas that spreads are going down, of course, but we put a lot of value not only growing the business, but also pricing both the deposit side and the credit side was the right measures. Of course, we have a lot of competition around. And we have to deal with that as well. But pricing is very important from our point of view, both deposit and credit side. Ram Gev: Maybe if I add to what Yadin said. Well, the main factors on the NIM, globally and here in Israel as well are the interest rate environment, inflation environment and the margins. So what is important to us is to be with the highest NIM in the industry. And you can see that we are well positioned entering 2026 relative to our peers in our NIM. And we want to keep -- to be in that situation to hold the highest NIM in the industry. Obviously, the impact of changes in the interest rate is -- will affect everyone. But like Yadin mentioned, discipline on pricing and what we did when we repositioned our -- part of our securities portfolio when we sold it in 2025 and extended duration enable us to maintain relatively stable NIM during this year compared to 2025, and that's positioned us more favorably looking at the future. David Kaplan: Okay. And then just one last question on the financial targets that you gave for '26 and '27. Presumably, you're taking into account there the market expectations for inflation and for interest rates. At any point, do you look at it from your internal projections for those things? Or do you always look at it from a market perspective? That's the first question. And second of all, if something were to change drastically and expectations were to see rates or inflation, the expectations for rates or inflation change significantly, would you update your targets? Yadin Antebi: Yes. Thank you, David, for that. We spent a lot of time last time on March before we published our '25 and '26 results. And we have different ideas and discussions internally, what will be the right figures to publish. What we decided last time and we were consistent with last year's decision is we don't want to play around any goals or projections of interest rates or inflation because that will make your life much harder in analyzing our profitability. So what we decided was just to take market pricing for both inflation and Bank of Israel interest rate because we're very sensitive to that, as you, of course, know. So moving those numbers and taking other figures will make our projections and our targets seem like not eligible enough. Regarding the second part of your question, we don't intend to update on every move of the interest rate. And you can see that we just discussed the sensitivity. There are many metrics that move around, not only interest rates, we feel comfortable with the guidance and the targets that we have published for these 2 years. David Kaplan: Okay. Great. Sorry. I actually do have just one more question. I was looking at the tables towards the back of the report, the volumes versus pricing. And in this current year, volume had a much greater impact on the change in net interest income than did pricing. And I guess that partly had to do with the lower-than-expected inflation, I guess, over the course of the year. But in comparing it to the change in volume and pricing in the previous year, where there was a much greater split, can you talk a little bit about how you managed to generate so much income simply off of the volume growth? Yadin Antebi: The book is growing and the balance sheet is growing. So we're making, of course, more profit on a larger balance sheet. And we're balancing it or we're mitigating or we're trying to mitigate where we have pressure from the market in terms of pricing. So that will be like our normal course of handing the bank, the business. David Kaplan: Okay. And what was the impact here though, from inflation? Or was it a minimal? Yadin Antebi: Can you ask that again, please? David Kaplan: What was the impact of inflation on the change in pricing here when I look at that table? Or is it not really an effect. Yadin Antebi: The change in pricing? David Kaplan: How do -- how did the CPI affect the change in income within pricing? Yadin Antebi: No. Inflation more or less doesn't change pricing. Okay. You're talking about pricing of the credit spreads? David Kaplan: We can take this offline and discuss it later. Operator: The next question is from [ Jan ] Benning. Canberk Benning: Just one on the cost-to-income ratio. So both the adjusted and the stated cost-to-income ratio came down quite -- I think, quite significantly from last year. I'm just wondering if, going forward, you have a specific cost-to-income ratio in mind. I know you haven't published anything, but I'm just trying to think -- obviously, cost efficiency is an important objective for you. And I'm just trying to, one, think about how far you think that cost-to-income ratio can come down. And whether -- sort of a secondary question to that is whether any artificial intelligence initiatives you are implementing across the bank can support both the revenue line and also bring costs down. Yadin Antebi: Thank you, Jan, for that. Yes, of course, we have an internal cost-to-income target or ratio that we follow both for '26 and '27. We follow and we have a lot of work. I talked about it in my part, and Ram also talked about it. Operational efficiency is a major issue internally. We put a lot of effort to make sure that we're continuing on the right path of making the bank more efficient than it is today. You know we discussed in previous meetings the efficiency program that we have and the reduction of the number of employees. We believe AI, and I talked about that as well, will have a major impact on the bank, okay, in terms of the call centers, in terms of the people that write code here. We have a very large technology division, hundreds of people that write code. So this is something that will dramatically affect AI the way we write code here. We do have different AI initiatives internally also within writing code, for example. But I'm very open at this stage. None at this stage has gone down to the bottom line of the P&L in terms of reducing expenses up to 2025. Looking forward, I'm sure that we will have dramatic changes that will implement -- will be implemented both in the call centers, both in writing software, changing the way we operate in terms of SLA regarding how fast we reach our clients. So these will all go down to our cost base. Last part of your question, you asked about the technology expenses. Yes, they are high. We're taking the best engineers in Israel. I think we discussed at the time that we got in the guy that ran the tech division of Playtika. He is running today since I think March 2025, the IT division within the bank, building internally new people, new ways of writing software, going faster to market, using AI better, different metrics and know-how that he knew and grew up actually from the gaming industry, which is a very, very sensitive industry in terms of AI and technology. So going back to your question, yes, these will all be impacted on the P&L of the bank looking forward. Canberk Benning: That makes a lot of sense. And then my second question is just looking at the credit growth target that you've got. So you've got 8% to 9% across '26 and '27. I'm just wondering is there any specific areas of the credit book that you're looking to grow? And any areas that you're looking to gain market share and whether that's greater market share in the retail segment or in corporate? Just some color on that would be useful. Yadin Antebi: Just like 2025, we're a very large bank in Israel, more or less 25%, 30% market share depending on the different areas that we bank with. So we will sell credit all around, whether it be retail or small businesses or middle market companies or large corporates, it will be on different sectors. It will be on infrastructure in Israel. It will be on real estate, it will be with hotels. So we're all around. There's no specific sector that I think we will say this is where we want to grow because we're very strong on all sectors. Operator: The next question is from David Taranto. David Taranto: This is David Taranto with Bank of America. The first question is a follow-up to my colleague's question on efficiency. Could you please elaborate a bit on your existing efficiency plan? Is the program tracking in line with your initial expectations in terms of pace, headcount reduction and cost savings? Or should we expect any change to the timing, or magnitude of the planned savings? Yadin Antebi: David, congratulations for your first call with us, and thank you again for covering the banks in Israel. Cost program, as we said in our December '24 financial statements, it's a 770 employee reduction done through 4 years, starting 2025. We started to implement it. Our full savings will be realized 2028. We disclosed that figure of ILS 300 million. There is -- there are conflicts internally in terms of our internal union. They didn't like the plan too much. So we do have discussions. Discussions have started. They are not concluded yet. We will -- I believe we will meet our 770 program on time. David Taranto: Okay. And the second question is on the asset quality. Your coverage ratios are extremely high and most of the provisioning remains collective. And can you break down how much of the collective allowance reflects managed macro overlay versus what comes purely from credit models? And what would trigger you to release any excess overlays this year? Yadin Antebi: Yes. Thank you, David, for this question as well. This is something we were very different in 2025 compared with our peers. We thought that 2025 is a year that we should be very conservative in terms of provisions. Even though you will not see within our books any material specific losses, we thought it would be right to be conservative and to continue to accumulate more credit provisions. We did that through the year and also Q4 2025. Looking forward, we think -- and I mentioned that when I talked about entering '26 and '27, we think that this is one of our key strengths looking forward because if we were right -- if we are right and Israel is going on the right track in terms of the geopolitical situation, in terms of the growth of the economy, in terms of things going back to normal in Israel, we have high reserves that we hope we will be able to release. But this is looking forward, and will be managed, of course, during '26 and '27. Ram Gev: David, if I can add to what Yadin said and elaborate. So we implement the CECL methodology on provisioning on credit losses. And overall, we run, let's say, 3 scenarios. So -- and we weigh those 3 scenarios into a combination. We have a baseline scenario of pessimistic and optimistic. By the way, the reality is better than the optimistic scenario actually. So it's hard to separate the elements that you mentioned because the actual figures are a combination of these 3 scenarios. Adding to that, some qualitative elements that we put to reflect uncertainty. But I think you can get a figure to -- what you asked, if you look at our coverage ratio standing at 1.72% and compare it, let's say, to our peers, you'll see that we have, let's say, roughly 30 basis points up to the average. So that reflects -- roughly reflects our conservative approach, hopefully, to meet the positive and optimistic scenario. David Taranto: That's clear. And 2 more, please. The first one on the expected pretax real estate gains, should we assume standard corporate income tax on these proceeds? And will the regulator allow you -- allow this profit to flow into the regular payout calculation? Or should we expect it to be treated separately in terms of payout? Ram Gev: Yes. Usually, it's the regular, but we may have from time to time some losses to offset from that. We don't know exactly what will be the final outcome for that. That's the reason why we disclosed the -- let's say, the before tax estimates. Obviously, if we will have some losses to deduct from that, then it doesn't matter whether it's included in the tax, let's say, the super tax or no. But if there won't be any, let's say, deductible losses, then generally speaking, it's included in the super tax as well. David Taranto: Okay. And the last one is on the AFS book. You have a strong unrealized gain position in your AFS book. And if the rates continue to come down, this position should build up further. Can you give us more color on the portfolio structure, in particular, what share of the AFS book is in fixed rate securities and how sensitive the unrealized gains are to, let's say, 50 bps lower yields? Ram Gev: We have a disclosure on our book we can direct you later on, on the sensitivity for 1% change on our fair value and equity. The overall effect, but part of it is from the AFS is the overall effect is about ILS 1 billion, but the available for sale is only part of it. So I can direct you to our disclosure on that on Page 19 in our statements. Operator: The next question is from Chris Reimer. What is driving your confidence around the increased loan growth target? And given potential for further leveraging of technology, do you see a case for further year-on-year decline in expenses? Yadin Antebi: Thank you for that. We feel strength of the market, and that's why we thought it would be right to increase our credit target -- credit growth target. We saw the strength of the market '24 and then in '25. We see the pipeline of the different projects that we're handling both infrastructure and others. We -- even before the Iran war now, the growth in Israel and the projections were very high. And after the war once it ends, we're sure that Israel is going to be in a new era in terms of the geopolitical environment. So that gives us a lot of comfort regarding the credit growth. The second part of the question in terms of the technology, I think I answered this before. Yes, we're spending a lot of money on IT and technology. But we also see that in different areas, the IT costs may go down because of different infrastructure that will be used here through AI, for example. This is not for the -- as I said, not right for '25. But looking forward, this might be material. We're trying to manage both costs or actually 3 different costs, the employees' cost, the technology cost and all our other costs. Operator: The next question is from Valentina Stoykova of Barclays. Given ongoing lion's war, I was wondering whether you could briefly outline the best and worst-case stress scenarios for Hapoalim and the key macro assumptions used. Where do you see your COR in a worst-case scenario? And also, should we think about the upcoming Tier 2 callable option? And as a follow-up, could you outline the main risks you see to delivering on the ROE target? Yadin Antebi: Great. Thank you for that. Good question. Actually, I believe that whatever happens, Israel is going to get out of this war dramatically stronger than what -- from the position we were 10 days ago. And that is mainly because the whole geopolitical here may change -- environment may change. It goes back to the fact that a very aggressive country is already in a different position. It goes down to different agreements with our Arab neighbors that we've been talking for years about extending, for example, the Abraham Accords. So this might happen as well. So whatever happens, I think Israel is going to be a much stronger country and a much stronger economy looking forward. And that, of course, reflects on the bank. The 2 -- you asked about the 2, the best-case scenario and the worst-case scenario and maybe I'll think out loud. The best-case scenario will be a very short war, just like the 12 days war, ending with a new regime in Iran and having Abraham Accords with all the Arab countries around, including Iran. That's like the best-case scenario. The worst-case scenario is a long war that is taking a long time. I don't think that will happen, but it might happen. And that will, of course, influence government and businesses in Israel and deficit. I don't think this option is really relevant. But if you're looking for something which is extreme, that may happen. Reflecting on the ROE can change on the different scenarios. But personally, I'm very optimistic because I think that like the essence of the Mediterranean is really changing day by day over the last week. Ram Gev: Yes. And to add to what Yadin said, Valentina, you asked about the cost of risk and the effect. So we have a disclosure in Page 81 of the financial report. Like I mentioned before, while calculating the collective allowance, we are using different scenarios, pessimistic base scenario and optimistic, and we are creating some combination of that. So we have disclosure there if we work only by the pessimistic scenario, what will be the additional effect on the provision. And if we work only according to the optimistic scenario, what will be the decrease in the provision. So you have full disclosure there. And like I mentioned before, what we saw after 2025 in the first campaign with Iran is actually that the reality was better even than the optimistic scenarios that we ran. Operator: There are no further questions at this time. This concludes the Bank Hapoalim Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Good morning, everyone. Welcome to Maple Leaf Foods Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Omar Javed, Vice President of Investor Relations at Maple Leaf Foods. Please go ahead, Mr. Javed. Omar Javed: Thank you, and good morning, everyone. Before we begin, I would like to remind you that statements made on today's call may constitute forward-looking information, and our future results may differ materially from what we discuss. Please refer to our fourth quarter and full year 2025 MD&A and financial statements and other information on our website for a broader description of operations and risk factors that could affect the company's performance. We've also uploaded our fourth quarter and full year 2025 investor presentation to our website. As always, the Investor Relations team will be available after the call for any follow-up questions you may have. With that, I'll turn the call over to our President and CEO, Curtis Frank. Curtis Frank: Okay. Thank you, Omar, and good morning, everyone. Thank you for being with us here on our call today. Joining me this morning is our Chief Financial Officer, David Smales. After my opening remarks, Dave will walk through our financial results in a bit more detail. And then I'll come back to close the call. And of course, we will open the line to your questions. Before we begin, I want to take a moment to express my gratitude to all of our stakeholders for their continued support throughout our transformational journey. I also want to thank and acknowledge the Maple Leaf team for their dedication to delivering on our strategic blueprint with nothing short of excellence. The headline for today is that we have reached a clear inflection point. The heavy investment phase is behind us. We are now firmly in a delivery and return phase where our team is executing with focus, with discipline, and with care. We delivered a strong fourth quarter that capped off a year of significant financial progress in 2025. We delivered on our commitments, and we have strengthened the business in meaningful and durable ways. Most importantly, we are now seeing the tangible benefits of our transformation into a purpose-driven, protein-centric, and brand-led CPG company following the Canada Packers spin-off. Strong execution, brand leadership and the returns from our strategic investments are driving sustained growth, margin expansion, improving consistency and are positioning us for long-term value creation. We entered 2026 with operational momentum, a strong and healthy balance sheet and a sharper strategic focus. Our identity and our priorities are clearer than ever. Now let's begin today with unpacking our fourth quarter performance, a quarter of continued momentum in top line growth and growing adjusted EBITDA. We are executing against our 5 core growth platforms, which have proven resilient through difficult market conditions, leveraging our leadership in Sustainable Meats, investing in our portfolio of leading brands to grow consumer demand and loyalty, accelerating the pace of impactful innovation, expanding our geographic reach into the U.S. markets, and embedding Maple Leaf's unique and differentiated capabilities into our customer strategies. As a result, sales were $991 million in Q4, up 8.1% year-over-year, outpacing North American CPG and our competitive peer set. Performance in Q4 showed strength across both of our operating units. Prepared Foods grew 6.1%, driven by pricing and improved mix. We increased our Canadian branded market share in the quarter and branded volumes grew a clear sign of competitive strength. Poultry sales grew 13.1% in the quarter, driven by improved channel mix and volume growth across both retail and foodservice. Value-added poultry remains a structural growth engine with London Poultry, enabling sustainable mix improvements, and our Sustainable Meats business performed strongly including double-digit growth in our Prime Raised Without Antibiotics brand, helping us to expand our branded market share in the fresh poultry category this past quarter. Turning to profitability. Adjusted EBITDA was $117.3 million, up 8.3% with a margin of 11.8%, in line with last year, and an improvement sequentially from 11.1% in Q3. Input cost inflation in Prepared Foods remained elevated as we had anticipated. And while pricing actions have not yet fully recovered the inflation experienced by year-end, the path forward is clear, and our team is focused on executing the actions within our control. We implemented an inflation-based pass-through price increase in mid- to late February, which we expect will support the delivery of our outlook for this year. Apart from our financial performance, we also successfully navigated a major transformation. The spin-off of our pork operations into Canada Packers at the start of Q4 was 1 of the most significant portfolio transformations in our company's history. With this separation now complete, Maple Leaf Foods now operates as a protein-focused CPG with a clear vision to be the most sustainable protein company on earth. Our ongoing relationship with Canada Packers including a 16% ownership stake and an evergreen supply agreement securing high-quality, sustainably raised pork is functioning as designed. The focus gained through this separation allows us to concentrate resources on what we do best, build love and trust, innovate with discipline and operate an efficient, resilient supply chain at scale. Turning to the full year. While 2025 was certainly not without its challenges, we are pleased with the meaningful progress we delivered against our commitments. First, we committed to and delivered strong revenue growth. Sales were $3.9 billion for the full year, up 7.7%, reflecting industry-leading performance driven by our proven growth platforms, leading in Sustainable Meats, brand investment, innovation, U.S. expansion, deeper customer integration and continued support from structural demand for protein. We launched more than 50 impactful innovations, including 2 new brands: Musafir and Mighty Protein, both of which are tracking to plan. Our brand presence extended beyond the shelf, including the Look for the Leaf campaign, our partnership with Schneiders and the Toronto Blue Jays and our latest Team Canada Olympic program, which I will return to shortly. Second, we had committed to and delivered adjusted EBITDA growth and expanded our structural margin. Here too, we showed significant progress in 2025. Adjusted EBITDA was $476 million, up 21% and adjusted EBITDA margins expanded 140 basis points to 12.2%. We delivered $83 million of EBITDA growth through improved mix, operating efficiency, capital project benefits and our Fuel for Growth initiatives. Third, we are committed to strengthening the balance sheet. We reduced leverage to 2.1x at year-end, firmly within our investment-grade range while maintaining discipline in capital expenditures. This balance sheet strength enabled enhanced shareholder returns. We increased the annual dividend by 9%, repurchased approximately 700,000 shares under the NCIB, and paid a $0.60 per share dividend, totaling approximately $75 million. That special dividend marked a clear transition from deleveraging to a balanced investor-friendly focused capital allocation strategy, supporting both growth investment and shareholder returns. To put a fine point on it, disciplined execution defined 2025 and that same discipline will guide us through 2026. Our priorities for 2026 are clear. First, to continue to scale the core business, driving sustainable volume and revenue growth through our proven growth platforms; second, to expand our structural margins, growing profit faster than sales through mix improvement, productivity and structural cost reduction as well as pricing to recover the inflationary impacts we felt in the back half of 2025; and third, to continue to demonstrate smart and disciplined capital allocation, acting as prudent stewards of capital and prioritizing long-term value creation. In January, we provided our 2026 outlook, reflecting confidence in sustaining our operational momentum and strategic focus. To recap, our 2026 outlook is as follows: We expect mid-single-digit revenue growth from 2025. We expect adjusted EBITDA of approximately $520 million to $540 million, driven by revenue growth and margin improvement. We expect to maintain leverage below 3x, supported by strong free cash flow and prudent capital allocation. We expect capital investments of approximately $160 million to $180 million, focused on maintenance and productivity. We expect annual dividend growth of approximately 10% based on an increase in the quarterly dividend from $0.19 to $0.21 per share marking the 11th consecutive year of an annual dividend increase, and we intend to file a notice of intention with the TSX to renew the NCIB in Q1 of 2026. All to say, we remain highly optimistic about our future and at our Investor Day next week on March 10, we will provide deeper insight into our strategic blueprint, our execution playbook and showcase the strength of our leadership team that will drive long-term value creation across our business. Before I conclude, I want to come back to the Team Canada Olympic partnership, which embodied our spirit of competition. As Team Canada's official protein partner, which started last month at Milano Cortina, for the 2026 Olympic Winter Games, and we'll continue through the Los Angeles 2028 Olympic Summer Games. We are aligning our protein brands with the foundation of everyday performance, whether the day starts at work, at school or in training. The program is showcasing Maple Leaf, Maple Leaf Prime, Maple Leaf Natural Selections and Maple Leaf Mighty Protein in partnerships with Team Canada athletes serving as yet another example of strengthening our consumer connection at scale, while connecting the Maple Leaf brand to moments where Canadians come together. With that, I will now turn the call over to Dave to walk you through some additional financial context. Dave? David Smales: Thank you, Curtis, and good morning, everyone. Today, I'll comment on results for the fourth quarter and the full year before turning to the balance sheet and outlook for 2026. Overall, the key financial takeaway from 2025 is that achieving another year of profitable growth and strong free cash flow led to a further reduction in balance sheet leverage to well within our targeted range, and in turn, gives us the flexibility to increase the return on capital to shareholders. Turning to our results. Sales in the fourth quarter were $991 million, an increase of 8.1% compared to last year. This exceptional level of growth was driven by both Poultry and Prepared Foods, which grew by 13.1% and 6.1%, respectively. In Poultry, sales increased compared to the same quarter a year ago due to improved channel mix with growth in both retail and foodservice volume as well as pricing impacts. Prepared Foods sales growth was driven by a combination of inflationary pricing taken earlier in the year, along with improved product mix in the quarter. For the full year, sales were $3.91 billion, an increase of 7.7% over 2024. Prepared Foods and Poultry both contributed to this increase, driven by similar factors to those that drove our fourth quarter sales performance. Adjusted EBITDA of $117 million in the quarter increased by 8% versus the fourth quarter of last year, with an adjusted EBITDA margin of 11.8%, which was in line with last year. Increased profitability was primarily driven by favorable Poultry mix tied to retail and foodservice volume growth as well as improved operating efficiencies. These improvements were partially offset by input cost inflation in Prepared Foods, which was a headwind to further margin expansion, although sequentially, adjusted EBITDA margin improved 70 basis points from the third quarter. We have implemented pass-through price increases in the first quarter of 2026 to recover the impacts of inflation. For the full year, adjusted EBITDA increased by 21% to $476 million, representing an adjusted EBITDA margin of 12.2%, an increase of 140 basis points over 2024. Full year profitability improved in both Poultry and Prepared Foods, driven by similar factors to the fourth quarter, but also included a full year of benefits from the investments in London Poultry and Bacon Centre of Excellence. SG&A increased by $3 million in the fourth quarter over the prior year, mainly driven by the impact of variable compensation. For the full year, SG&A was up by $6 million with the impact of higher variable compensation and advertising and promotional expenses, partially offset by a high level of consulting fees that were incurred in 2024. Earnings were $391.2 million for the quarter or $3.14 per basic share compared to earnings of $53.5 million or $0.43 per basic share last year. The increase in earnings for the quarter was driven by strong operating performance and also includes the impact of 3 significant onetime items; a gain from the spin-off of the company's pork operations, a noncash impairment charge related to plant protein intangible assets, and a noncash settlement gain on a pension annuity purchase. After removing the impact of the noncash fair value changes in derivative contracts, start-up and restructuring costs, items included in other expense that are not representative of ongoing operations, and the impact of the 3 onetime items just noted, adjusted earnings represented $0.32 per share for the quarter compared to $0.18 per share in the fourth quarter of 2024. Earnings for the full year were $541.6 million or $4.36 per basic share compared to earnings of $96.6 million or $0.79 per basic share in 2024. Full year adjusted earnings were $1.09 per share compared to $0.15 per share in 2024. Capital expenditures totaled $126 million for the year compared to $94 million in 2024. The increase was mainly due to increased spend on maintenance projects. Looking ahead to 2026, we expect capital investments in the range of $160 million to $180 million, with spend focused on maintenance and productivity enhancement initiatives. Free cash flow generation remains strong with $70 million of free cash flow generated in the quarter and $318 million generated in fiscal 2025. This strong free cash flow generation was reflected on the balance sheet, which along with the repayment of $389 million of debt upon closing of the Canada Packers spin-off on October 1, resulted in net debt ending the year down by $521 million versus a year ago to $995 million. This is down nearly 50% from a peak level of $1.8 billion during our large capital project investment phase. In line with our stated capital allocation priorities, our leverage ratio remains well within an investment-grade range with a net debt to trailing 12 months adjusted EBITDA ratio of 2.1x at the end of the quarter, in line with 2x at the end of the third quarter and down from 2.7x a year ago. With strong free cash flow generation and an investment-grade balance sheet, we now have the flexibility to take a more balanced approach to capital allocation with 2025 seeing an increasing return of capital to shareholders through payment of a fourth quarter special cash dividend of $75 million or $0.60 per share, executing on our NCIB to repurchase approximately 0.7 million shares, and increasing our annual dividend at the start of 2025 by approximately 9%, and a further 10% for 2026. Our 2026 guidance reflects confidence in the growth potential of the business, and we expect to deliver mid-single-digit revenue growth and adjusted EBITDA in the range of $520 million to $540 million. I'll now turn the call back to Curtis. Curtis Frank: Okay. Thanks, Dave. Let me step back for a moment. Over the past several years, we have made significant investments to transform Maple Leaf Foods, investing more than $2 billion in world-class assets, strengthening our brands, simplifying the portfolio and building a more resilient operating model. That heavy investment phase is complete. And today, we are harvesting the benefits. We are a more focused protein CPG company with structurally stronger margins, materially lower leverage and consistent free cash flow generation. In 2025, we expanded margins by 140 basis points, reduced net debt by over $500 million and transitioned from a period of balance sheet deleveraging to balanced capital return. That's not a cyclical improvement. That's a structural one. And as we look to 2026, the strategic blueprint is clear: scale the core, expand our margins, and allocate capital with discipline. We entered this year with momentum, financial flexibility and a sharper strategic focus more so than any point in recent memory. The team is executing, and we are confident in our ability to deliver sustained profitable growth and long-term shareholder value creation. Operator, with that, we can now open the line to questions, please. Operator: [Operator Instructions] Your first question comes from Luke Hannan with Canaccord Genuity. Luke Hannan: I wanted to unpack if we could, the Poultry performance during the quarter. So you put up very strong results there, top line growth there in Q3. That seems to have extended now into Q4 as well. So I'm just curious to find out what the key drivers were, if those have changed at all? And maybe a little bit more specifically, if the volume growth was felt a little bit more in retail versus foodservice? Curtis Frank: Okay. Great. Luke, thanks for your question. Yes, we had a very solid quarter again in the Poultry business. Revenues were up just over 13%. And really, that's quite in line with a very solid full year. I think we're up a little over 10% from a revenue perspective in the Poultry business over the course of the full year. I would describe that as the real value of London shining through. And practically, that allows us to take increased allocations from supply management and get them into more and more value-added sales -- convert them into more and more value-added sales. Within Q4, our retail volume, to your point, was up significantly on the volume side, a little over 10% actually. So that was positive. It was led by our Prime Raised Without Antibiotics brand and our Mina halal brand. So we had a very positive quarter from a retail perspective. And foodservice also grew volume in the double-digit range as well. So the ability to get more value-added poultry into more value-added channels was certainly a positive for our quarter on the Poultry side. We also grew our branded market share, I think, around 1.7 share points in the quarter, which was positive as well. So it was a good strong quarter, but also a great year in the Poultry business, and we expect to be able to sustain that and carry that forward into next year as well. Luke Hannan: That's great. And then for my follow-up here, you did touch on the pricing actions that you took in mid-February. Have you seen any volumetric response to those price increases that's outside of what you would have expected from the consumer? And then also at this point, are the price increases that you intended to pass through, have those fully been implemented at this point? Curtis Frank: Yes, we've passed through the pricing in and around mid-February. So we'll get a partial impact of that within the quarter here. A little early, Luke, to determine the volume response. We're only 3, 4 weeks into the execution mode here. So I think it would be a little bit early to draw any conclusions on the volume side. I haven't seen anything abnormal to be clear. But I just think it's a little bit soon from a consumer perspective in terms of getting a view of the response to the pricing that's in the market today. Operator: Your next question comes from Irene Nattel with RBC Capital Markets. Irene Nattel: Curtis, I was wondering if you could expand a little bit on what you're seeing, more broadly speaking, in terms of consumer behavior, seeing sort of the premium end of your product mix seeing volume gains. So what are you seeing across the portfolio? And where are you seeing sort of the most pressure points and the greatest upside? Curtis Frank: Yes. Thanks, Irene. I continue to describe -- I use this word frequently, the consumer environment is quite stable. That doesn't mean it's certainly not optimized and the consumer continues to be under pretty significant stress. I mean there's even events unfolding in real time in the world that I think have the potential to add even more stress or different stress from the consumer side. So I'm cautiously optimistic, but I think stability can also be a good thing. We are seeing more of a flight to value from a consumer perspective than we have seen in previous years. Again, that environment is stable. They're buying more certainly on promotion. So we have to be really sharp from a revenue management point of view in terms of optimizing our offer to the consumer. I think protein has proven to be pretty resilient inside of that, Irene. And I really like the combination of how our growth strategies, whether it be U.S. Sustainable Meats, the work we're doing in our brands, bringing new brands to market, aligning to our customer strategies. We don't necessarily -- and we're not perfect in any every one of those in any given quarter. But the way that our growth strategies are working in combination, I think, has proven to be pretty effective for us over the course of the last year. And if you look at our outlook for 2026, we do expect that to continue as well. So I think the headline consumer-wise would be stable, still under material stress, looking for value and a lot of shopping on promotion, and we're finding ways within protein to meet their needs today. Irene Nattel: That's great. And then you just mentioned the new brands. What has been the consumer response to the brands that you recently launched? Curtis Frank: Yes, it's been positive. I mean one of the things we're proud of inside of the company is the ability to incubate and build brands over the course of time. If you think about Greenfield Natural Meat Company is a great example. What we did in our halal business with our Mina brand is a great example. And now these 2 new brand launches in Musafir and Mighty Protein . And Mighty Protein in particular, is going really well, maybe a little bit running ahead of what we would have planned. So that's been really positive in terms of the response. Musafir probably on track to what we would have expected early on. But in brand building, Irene, as you know, this is very early innings. The products haven't been in market all that long, certainly not a full year yet. And they're helpful to our results, but we should be cautious on the materiality of that help. But they are one of the many reasons that we believe we can deliver the outlook we have for next year, which is somewhere in the mid-single-digit revenue growth arena. Operator: Your next question comes from John Zamparo. John Zamparo: I wanted to ask about promo spending, and it sounds like Maple Leaf is generating a healthy return on these investments. So I wonder how you expect that to evolve in '26? And are there any products or categories where this has seen outsized investments and anything worth noting in terms of seasonality for this year? Curtis Frank: I don't think anything abnormal in terms of seasonality outside of what you would have seen in historical years. So I think a more normalized environment there. If your question, John, is around more promotional intensity? From that perspective, I mean, we have seen early on, as we passed through inflation last year, Poultry and Sustainable Meats in particular was affected quite significantly. And we've seen a good recovery there, modest. Again, I don't think we're optimized. But the fact that we're growing our Prime Raised Without Antibiotics market share, which is the premium branded player in the Poultry category, I think, is a good sign of, again, stability in the category. So I like that that's materializing. I always say that we operate at the premium end of our category for sure, and we've built that premiumness into our business over the course of time. But we don't operate in premium categories necessarily. We offer good value to the consumer. And when you think about categories like poultry, which is a great example of consumer staple, I think that's given us a lot of resiliency. So similar comments to what I shared earlier, we're seeing lots of resiliency in our portfolio, and we're not yet optimized in terms of the consumer environment. And we're hopeful or optimistic that over the course of time, that will provide some level of help, but unclear exactly how and when that will unfold. John Zamparo: Okay. That's helpful. And then on the plant side of the business, has there been any evolution on the thinking behind this, particularly in light of the recent write-down? Does management feel it needs to be in this category still? And is there anything you could say about EBITDA generation or margins in that category? Curtis Frank: Yes. We're going to -- I'll let Dave offer a couple of comments if he's got anything extra to share, but we're going to unpack that a little bit more next week at our Investor Day. So I think hold tight on that answer to that question, because I do think there's a longer-term story to be shared around plant protein. But the punchline is, we continue to be of the view that there's a pathway to profitable growth. We should always keep in mind that it's less than 5% of the revenue in the enterprise today. And I, at this stage, view it more as an upside opportunity than anything else, because we have stability in the earnings profile of the business today. And we have upside potential in terms of reaching, call it, portfolio average margins in the Plant Protein business, which I'm very confident that we have a pathway to deliver, and we'll share some more details around that next week. Dave, anything you would add or anything I missed in that? David Smales: No, I don't think so other than we see it as a very relevant long-term category within the broader demand for healthy protein. And so nothing's changed in terms of our view of the relevance of the plant protein business to our overall portfolio. Operator: Your next question comes from Mark Petrie. Mark Petrie: Just a couple of follow-ups, I guess, on topics you've covered already. But clearly, mix is helping you guys. I know it's moved around and you've been able to leverage London Poultry specifically. But where would you say you are in the evolution of mix and the specific levers you have at your disposal to try and move that in your favor? And how should we think about mix as an impact in 2026? Curtis Frank: Well, the outcome in mix was a positive one inside of the core. It was kind of the core driver of our revenue growth. So it's been very positive. We still think we have room in 2026. And again, you see that in our outlook in terms of what we've provided in terms of the revenue growth and the EBITDA margin expansion for next year, and mix will play certainly a role in that as well. I talked earlier about the Poultry benefits, which we're quite pleased with. But I would also note, in Q4, I think an important part of our story is the fact that our branded volumes in Prepared Foods grew in the 4% to 5% range. So when you get a volume growth of 4% to 5% inside of a quarter in our core brands, that's very positive to our mix. And again, proof that our brands have proven to be resilient in the most difficult market conditions here. So I view mix as a positive driver in the near term, and I think there's more to play out looking forward as well, Mark, particularly as the consumer environment continues to normalize here to a certain extent. Mark Petrie: Yes. Fair enough. Okay. And then on the last call, you sort of went through some of the tools that you have available to you as you try to sort of manage volatility in pricing and costs following the spin-off. I'm not sure if you're able to, but is there an update on those? And I guess, specifically, your price mechanisms and your approach to hedging were 2 that were sort of in the works, I guess, so to speak. I'm curious if there's an update on those? Curtis Frank: Yes. Nothing material. Again, Dave can add any color to this, that might be helpful. Nothing material. I mean those instruments, physical hedges, financial hedges, pricing mechanisms, the utilization of inventory, meaning physical hedge are things we constantly review for optimization, I think, would probably be the right way to describe it. In our business, there's no silver bullet for managing risk, but the combination of those tools can be helpful in stabilizing earnings to the best of our ability. I mean we don't give quarterly guidance for a very specific reason, which is we expect some level of normal CPG food change quarter-to-quarter in our margin structure, and we try our best with those instruments to smooth the outcomes the best we can. But again, there's no silver bullet. We've been reviewing them from day 1 or before day 1 of the separation, and we'll continue to do that moving forward. But Dave, is there anything you'd add? David Smales: No, I think the key comment was there's no silver bullet or step change. It's just a question of ongoing optimization of our approach and things we can do to offset in the short term. But we'll still be operating in an environment where there's time lags in terms of passing on pricing. But everything we can do in and around that is what we're focused on. And it's something that won't change going forward in terms of our focus, but don't expect an ability for us to come and say we've taken all volatility out of the business and you'll never see any change in margin from quarter-to-quarter that isn't ultimately realistic, but we'll continue to work away at managing any variance in input costs, et cetera, as much as we can in the short term. Operator: Your next question comes from Vishal Shreedhar with National Bank. Vishal Shreedhar: Related to the margins, my understanding was that there could have been some sequential pressure on margins quarter-over-quarter [Audio Gap] quite resilient. I want your perspective on that. Is there some fuel from growth initiatives helping? Or is that just that quarter-to-quarter volatility that you referred to? Curtis Frank: Vishal, sorry, you cut out a little bit there in your question. Were you asking about from Q3 to Q4, the kind of change in margin and whether it was in line with what we would have expected? Vishal Shreedhar: Correct. It appeared to be a bit more resilient than I would have anticipated given the commodity pressure which I anticipated. Curtis Frank: Yes. Well, we saw -- I think the big thing is, you saw a seasonal decline in input costs, seasonal, Q3 to Q4. That's quite normal in our business. I wouldn't say it's perfect, but quite normal to see a seasonal decline, but still elevated year-over-year. So really important to put that in context. Seasonal decline in raw material input costs, meat costs predominantly, but still elevated year-over-year, which drives the need for the pricing change we've made. The big story, though, was the mix improvement year-over-year, and that's where the positive resiliency came from. What I commented on in the Poultry business earlier, more retail and foodservice sales and the 4% to 5% branded volume growth in the Prepared Meats side. Those were really a positive and mitigated some of those challenges. That, along with the work we put in place in our Fuel for Growth kind of cost playbook initiatives, those 2 things were positive. The inflationary environment was a headwind. And all in all, we made a decent sequential improvement quarter-over-quarter. Vishal Shreedhar: Okay. And looking at your 2026 outlook, you talked about some of your branded volumes growing in kind of mid-single digits, and you're expecting that kind of revenue growth, but you've also taken pricing. So is the takeaway that you expect the volume growth to slow through 2026 and pricing to be the majority driver of revenue? Curtis Frank: Well, pricing will play a role. I don't think I can break it out perfectly, but I expect a positive contribution next year from price for certain, because we'll be advancing our pricing early in the year from volume, maybe to a lesser -- 4% or 5% volumetric growth in a quarter is positive, but I don't know that, that's the sustainable long-term view that you should take. And I think that's running maybe a little bit hot from an overall portfolio perspective. And I also expect mix to be positive again next year. So I think we can think about it as a relatively balanced combination of mix of volume and a price-led growth for 2026. Vishal Shreedhar: Okay. And I just wanted to get your take on industry growth currently, not necessarily MFI growth, but industry growth in the categories that you participate in versus the longer term. This increased demand for protein from consumers, are you seeing that play out in the industry? And is that a factor that you'd anticipate as well to benefit your 2026? Can you give us some context around how strong that demand is? Curtis Frank: Yes. I can. Yes. Thanks, Vishal. On the revenue side, the consumer packaged goods revenues in North America are growing depending whether it's Canada or the U.S., but they're in the 2% to 3% range in North American consumer packaged goods broadly as an industry. If you narrow that down to poultry, and we track -- the best way I could describe that to you is in peer comps, there are 4 we track really closely. And that's probably running a little bit maybe around double that rate, 4%, 5%. So 2% to 3% CPG, 4% to 5% in our protein peers. And then our revenue in the last 12 months running at 7.7%, so ahead of that. So protein outgrowing CPG, Maple Leaf outgrowing protein, I think, would be the headline. Operator: Your next question comes from Etienne Ricard. Etienne Ricard: You've talked multiple times about expanding your reach in the U.S. market with, I believe, about a dozen products on the shelves currently. How have you been able to gain traction in this market? And would you say it will be easier to move from a dozen products to, let's say, 20? Curtis Frank: Well, that's what I always tell my commercial team. I always describe it as getting the first 12 in a new market is an incredible feat, very, very difficult. You need to have a meaningful point of difference to enter a new market. We have that in our Sustainable Meats business. I need to establish a trust and credibility with customers. That's everything from relationships to supply chain and so on. So those are foundational. But once you have the first 12, at least in theory, it's easier to scale from 12 to 20 than it is from 0 to 12. So we have those relationships in place. We have the platform in the U.S. We've got a great team of people on the ground in Chicago, an office and innovation center, a portfolio of great products in both meat and plant protein. So I'm confident in our ability over the next few years. And again, we'll be talking about this next week at our Investor Day in our ability to continue to scale up our U.S. platform at a reasonable pace that will contribute to long-term growth in the company. Etienne Ricard: Okay. Looking forward to it. And just to circle back on the new products that you've introduced recently, how long does it typically take for these to reach profitability levels that are similar to company average? Curtis Frank: It depends. There isn't a golden rule in that area. And it depends on things like -- some are accretive from day 1, some take a little longer. The marketing investment plays a role in that. The manufacturing footprint plays a role in that, internal, external scalability of volumes, all those factors. So I don't think there's a golden rule. But certainly, we would expect, within the first 12 months or so, for the innovations to be running at portfolio average or accretive margins to the balance of the portfolio. Operator: [Operator Instructions] Your next question comes from Michael Van Aelst. Michael Van Aelst: I might have missed it earlier, but I was impressed by the double-digit growth in RWA Prime on the poultry side. But it kind of conflicts with your comments on the stressed consumer. So can you kind of explain what you think is happening with the consumer when it comes to RWA Prime? Because we know that consumers traded down and away from that when the stress started to increase. What are you doing to get it to come back? Curtis Frank: Yes. We're seeing a real bifurcation in the market. I mean it started to show up first in the U.S. data, and it's finding its way in the Canadian market as well to a certain extent. But when we say the consumer is under stress, and I believe that's true, and we definitely see that in our business, Mike, there are places where we've shown more resiliency than others. Poultry is a great example of that. I mean it's the most consumed protein. It's the fastest-growing meat protein. It's a staple in the consumer diet. And I think largely consumers care about the offering that they're putting into their bodies. And what we offer in our Prime Raised Without Antibiotics portfolio is a strong proposition. Our market share in branded poultry is nearly -- it's 15x to 20x, Mike, our next branded competitor, 15x to 20x. So we have a market positioning that I think is admirable, and we've been able to capitalize on that. So it's not something we take for granted. We work hard to earn that right in the Poultry business. But at the same time, it is one pocket of really great news in a tough consumer environment. Michael Van Aelst: Yes, that's interesting. And then on your price increases, I know you said you implemented them mid-February roughly. I don't know if that was a little delayed from original expectations by a few weeks or not. But can you just talk about whether you were able to get the full price increase you were expecting given how much the retailers have been pushing back on suppliers in general? Curtis Frank: Yes. I mean I'm not going to comment on any specific customer relationship. I don't think that's appropriate. But at the end of the day, yes, we implemented our pricing in the quarter. And how much of that sticks, I think, will be more consumer. The stickiness of that pricing will be more about optimizing the offer to the consumer than anything else, and balancing price mix and volume here looking forward. And again, I said it earlier, 2 or 3 weeks later isn't the time to evaluate the consumer response. It's too soon, 2, 3, 4 weeks. But we'll see how that unfolds here in the coming months. It's normal, as you know, in our business, Mike, you've been around our story for a long time to see some consumer response in the near term following pricing to volume. That's a normative bit of a drop-off in volume following pricing. A little period of time goes, you get the volume and the market share back. I think we've had a pretty -- you continue to use the word resilient response in the last 24 months, but we're being mindful of and watching closely what the volumetric response is. And I do expect some period of adjustment like there normally is, but we'll see how that plays out here in the next little while. Michael Van Aelst: Does the volume growth that you talked about for brand volumes of 4% to 5%, poultry volumes strong, does that give you any maybe confidence that you might be a little bit more resilient to a volume reaction this time or at least a negative volume reaction to the price increase? Curtis Frank: It could be. I hope that's the case, but we'll watch it very closely. I think we'll watch it very closely. And I hope that's the case. Operator: Your next question comes from Mark Petrie. Mark Petrie: I want to follow up, and I understand there are constraints on your ability to buy back stock as a result of the spin-off and the shareholder agreement. But just in terms of setting expectations, how should investors think about the targeted pace of buybacks for 2026? Curtis Frank: David, do you want to do it? David Smales: Yes. So our intention is to renew the NCIB looking forward over the next 12 months, and to be active with the NCIB. We'll talk a little bit more next week about capital allocation priorities and where the NCIB fits into that. But we expect to be active in buying back shares over the next 12 months. Mark Petrie: Can we look at the activity in Q4 as an appropriate sort of run rate level? David Smales: Yes. I don't want to set expectations that this is going to be a consistent run rate based on any one particular quarter. As I said, we'll talk a little bit more about it next week, but we have been active. We still think the share price is fundamentally not reflecting the underlying value of the business. And that's why we'll continue to be active -- within the constraints you noted in your question, we'll continue to be active in buying back shares. Operator: Your next question comes from Irene Nattel. Irene Nattel: I just wanted to follow up on the comment you made earlier on in the call, Curtis. On the Poultry side, you said that the investments in London Poultry have allowed you to take increased allocations from supply management and convert them to more value-added sales. And I'm wondering how easy or not it is to do that, and what we should be expecting on that front as we move through '26 and beyond? Curtis Frank: Well, the big benefit or one of the big benefits, Irene, that London Poultry gave us, as you know, we consolidated 4 plants into one. And the previous network didn't have the capacity or the capabilities. In some cases, it was maybe wet chilled chicken versus air chilled chicken, different format, didn't have the capacity or the capabilities to convert all of our raw material into a premium air-chilled chicken. And London increased the capacity to process chicken into more tray pack, so retail tray pack out of industrial, out of the low-margin industrial channel and into the higher-margin tray pack retail channel, more value-added sales. So we see stronger consumer demand for poultry. Poultry demand is growing. Allocations for poultry that are set through supply management are growing in response to that higher demand. And our ability to take those higher allocations and get them into a value-added tray is secured by London Poultry. And that makes us, I think, distinctive and unique in the marketplace. From a competitive position, I think it's a structural competitive advantage to be able to do that. And it's one of the reasons, again, why we had such a strong year, and we think we'll have a solid year in 2026 as well. Irene Nattel: I appreciate that. But to clarify, and I apologize if I don't know this already, but if there's an increase in the allocation from the supply management, can you take larger than your pro rata share of that increase in allocation? Curtis Frank: No, no. No. So then it's just a question of whether or not every participant can take that higher allocation and process it into the highest value areas that they would prefer to, and we can. Irene Nattel: Okay. So you can do what you want with the increased allocation, but you can't take more than your pro rata share? Curtis Frank: Roughly correct. Yes. Operator: There are no further questions at this time. I will now turn the call over to Mr. Frank for closing remarks. Curtis Frank: Okay. Great. Thank you, everyone, for joining us today. We had certainly what we view as a strong Q4 that capped off a year of material progress in 2025. Our sales grew at 7.7%, our adjusted EBITDA at 21% and our margin by 140 basis points to 12.2%. So it was a year that I think our people and our stakeholders can be pleased with and proud of. That said, our work is not yet done, and our 2026 outlook certainly reflects that, another material step forward in executing our strategic blueprint. And of course, we have our Investor Day next week. So I put in a plug that I hope all of you will be joining us and where we aim to unpack our strategic blueprint of the future. So looking forward to the discussion next week, and thank you very much for joining us here today. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Greetings, and welcome to the Bridger Aerospace Fourth Quarter 2025 Conference Call. As a reminder, today's call is being recorded. It is now my pleasure to introduce your host, Eric Gerratt, Chief Financial Officer. Thank you. Mr. Gerratt, you may begin. Eric Gerratt: Good afternoon, and thank you for joining us today. Joining me on the call this afternoon is Chief Executive Officer, Sam Davis; and incoming CFO, Anne Hayes. Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements are based on various assumptions, risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include, but are not limited to, those disclosed in the company's filings with the U.S. Securities and Exchange Commission, including our expectations regarding financial results for 2026. Management cannot control or predict many factors that impact future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only as of today. We anticipate that subsequent events and developments will cause our assessments to change. However, we undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements. Throughout this afternoon's earnings release and call today, we refer to the non-GAAP financial measure adjusted EBITDA. The definition, calculation and reconciliation to the financial statements of adjusted EBITDA can be found in Exhibit A of our earnings release, which is available on our website. We believe adjusted EBITDA is useful in evaluating our reported results as a supplement to and not a substitute for results reported under GAAP. With that, I'd like to turn the call over to Sam. Sam Davis: Thank you, Eric. First, I wanted to say how proud I am of our team throughout this period of incredible growth. They have risen to the occasion and have been the champions of Bridger culture and focused on the mission and dedicated to safety. Their execution drove record operational and financial performance again in 2025. We generated positive net income and posted a second year of positive cash flow with revenue and adjusted EBITDA both growing by more than 20%. It's important to note that this record performance was achieved during what was statistically a below-average fire year. This financial resilience underscores the strength of our business model, the growing diversification of our revenue streams and the benefits of securing longer-term task orders for our aircraft. While the reported number of wildfires nationwide was noticeably higher in 2025 at nearly 78,000 fires compared to the 5- and 10-year averages of around 62,000, they burned far below the normal acreage nationwide of 5.1 million acres, more than 30% below the 5- and 10-year averages. This is likely the result of our federal and state customers' growing emphasis on early detection, initial and direct attack, and a more rapid response to wildfire. This proactive approach, combined with the impressive performance of our scoopers and enhanced Air Attack assets helped drive strategic prepositioning of our fleet and improved utilization in 2025. Utilization, which is measured in days on contract, was up almost 10% year-over-year. Our multi-mission aircraft almost doubled their flight hours year-over-year and remained deployed well into November. The increased utilization rates have paralleled an ideological shift in how the U.S. fights wildfires. Throughout 2025, we saw many federal and state customers place increased emphasis on initial and direct attack. Fortunately, for Bridger, we have the aircraft best suited for this aggressive wildfire management style. We are directing our efforts to maximize the use of aircraft we have while finding other opportunities to expand our capacity with additional aircraft. Looking at the 2025 wildfire statistic for Super Scoopers specifically, there continues to be unmet demand, as demonstrated by over 60 orders that were unable to be filled due to aircraft already deployed in fires. Of the total requests made, this represented a 48% unfilled rate. So far this year, we have deployed 2 Pilatus PC-12s and 2 Super Scoopers to fight fire. Of the PC-12s, 1 multi-mission aircraft mobilized to Oklahoma and 1 mobilized to Texas to provide aerial intelligence for early season wildfires. The call-up of our enhanced Air Attack platform demonstrates the aforementioned prioritization of early detection and the proven effectiveness of our advanced sensors and imaging systems. Demonstrating our ongoing commitment for year-round readiness, at least 3 of our Super Scoopers have remained ready throughout the winter months to be dispatched or to support training. Early in the year, we even prepositioned aircraft in Arizona as a proximity advantage as wildfire threats began to rise in the southern states. Let me now provide an update on our contracting as we look out to 2026. We continue to target multiyear and exclusive-use contracts to build resiliency in our revenue and drive utilization. Maximizing the number of these exclusive-use commitments helps to ensure our fleet remains dedicated to critical wildfire response efforts. We are in active discussions with numerous states to provide exclusive use of our firefighting assets and are optimistic that current budgeting and planning cycles will lead to future opportunities in the coming months. Just this week, we announced a 5-year multiple award, indefinite delivery, indefinite quantity, or IDIQ, contract for call-when-needed fixed-wing transportation services in Alaska. We will be supporting personnel and cargo movements for the U.S. Department of Interior and other federal agencies on an as-needed basis. Although this is not a guarantee, this contract is estimated at $18.6 million. This contract allows Bridger to create additional work for existing aircraft as well as answer demand as we grow our fleet with similar capabilities at the state and federal levels. Through our FMS subsidiary, we are dedicating resources for modification work on several internal aircraft to enhance our technology platforms. These modified aircraft are becoming a growing part of our contracting discussions. We're also in active firefighting contract discussions for our first 2 Spanish scoopers in Europe, having purchased them from our partnership with MAB Funding, LLC in the fourth quarter. The third and fourth Spanish scoopers continue to undergo the final stages of their return-to-service work by our Spanish subsidiary, Albacete Aero. As they become available later in 2026, we will look to enter discussions with MAB to potentially acquire these aircraft as well. Let me now provide a quick update on FMS and Ignis, our 2 acquisitions. FMS contributed $7.9 million in revenue for 2025. As I mentioned, much of their resources have been dedicated to internal aircraft modifications for Bridger aircraft to solidify our competitive edge. These technology-enhanced platforms are in high demand and have been instrumental in our ability to position Bridger for high-margin work. We also continue to see a number of contracting opportunities, primarily with the DOD in active bids with FMS' capabilities that put Bridger uniquely positioned to respond to. In addition to awarded work with our partner, positive aviation for the FF72 aircraft, our recent wins include a small award with the U.S. Air Force and Borsight. While revenue in FMS saw delays due to federal budgeting uncertainties through 2025, we do see momentum in federal funding with recent increases through the National Defense Authorization Act for 2025 for $895 billion. With our integrated services, we remain well positioned for a wide range of defense as well as commercial work. We're in the middle of repurposing our business development team to target this work. And much of the opportunities are fairly small and strategic with potential to scale into large volume, nonfire, nonseasonal, complementary to the services we already provide. Also, a quick update on the Ignis Technologies platform. Since launching the mobile platform to support firefighters in the field over a year ago, pilot programs utilizing the platform with counties, crews and incident management teams continue. We are now linking Bridger's real-time sensory image with the Ignis app, creating a seamless data flow from air to ground. Already this year, we have been live streaming wildfire progression, delivering perimeter mapping and even providing drop targets for aerial support as we deliver our imagery to ground firefighters, pilots and incident commanders to make effective real-time decision and enhance the safety of all operations in the fire stack. This capability is unlocking new levels of situational awareness and supporting multi-mission aviation contracts and enhances both operational effectiveness and safety. With the continued success of our sensor-enhanced aircraft in this field, the need for interactive live data streaming is stronger than ever, and we intend for this to be a critical part of our sensor-enhanced aviation contracts this year. As we look out to 2026, we are well positioned for another year of greater than 25% growth. This includes revenue from our 2 new Spanish scoopers as well as 2 new Air Attack aircraft, which we added in the fourth quarter. Our improved balance sheet provides the financial flexibility to acquire additional aircraft in response to contract expansion opportunities and further drive EBITDA growth and long-term shareholder value. This growth stands against the backdrop of recent federal initiatives to restructure our national wildland firefighting system. This includes the executive order in early 2025 that called for the establishment of a national wildland firefighting task force, the establishment of the wildland fire service and passage of the Fire Ready Nation Act and Aerial firefighting Enhancement Act of 2025, all of which are focused on improving wildfire response. With Bridger's significant Air Attack fleet, including modern fire imaging and surveillance aircraft and the world's largest private Super Scooper fleet, we believe we are uniquely positioned to protect lives, property critical infrastructure and the environment as the nation focuses on preparedness and aggressive wildfire suppression. We have exciting opportunities before us, and I remain grateful and humbled to lead this exceptional team. Let me now turn it back to Eric, who will talk about our strong financial performance in 2025. Eric Gerratt: Thanks, Sam. Looking at our results for the fourth quarter of 2025. Revenue was $8.5 million compared to $15.6 million in the fourth quarter of 2024. The decline year-over-year was partially related to the later deployment of our Super Scoopers in the fourth quarter of 2024 compared to the fourth quarter of 2025. Excluding revenue from -- for return-to-service work performed on the Spanish Super Scoopers as part of our partnership agreement with MAB Funding, LLC, which was $0.8 million in the fourth quarter of 2025 and $5.1 million in the fourth quarter of 2024, revenue from ongoing operations, including FMS, was approximately $7.7 million compared to approximately $10.5 million in the fourth quarter of 2024. Cost of revenues was $14.1 million in the fourth quarter of 2025 and was comprised of flight operations expenses of $5.7 million and maintenance expenses of $8.4 million. This compares to $15.4 million in the fourth quarter of 2024, which included $5.8 million of flight operation expenses and $9.6 million of maintenance expenses. Cost of revenues associated with the return-to-service work on the Spanish Super Scoopers declined $4.2 million in the fourth quarter of 2025 compared to the fourth quarter of 2024. Selling, general and administrative expenses were $13.4 million in the fourth quarter of 2025 compared to $7.7 million in the fourth quarter of 2024, primarily reflecting an increase in the fair value of our warrants and an increase in earn-out consideration compared to the fourth quarter of 2024. Interest expense for the fourth quarter was $6 million compared to $5.9 million in the fourth quarter last year. Other income was $10 million in the fourth quarter of 2025 compared to $0.3 million in the fourth quarter of 2024. The increase was primarily attributable to a gain of $16.9 million related to the sale-leaseback transaction, partially offset by a loss of $7.8 million on the extinguishment of debt in conjunction with our debt refinancing in the fourth quarter of 2025. For the fourth quarter of 2025, we reported a net loss of $15.1 million or $0.40 per diluted share compared to a net loss of $12.8 million or $0.36 per diluted share in the fourth quarter of 2024. Adjusted EBITDA was negative $9.5 million in the fourth quarter compared to negative $2.9 million in the fourth quarter of 2024. A reconciliation of adjusted EBITDA to net loss is included in Exhibit A of our earnings release distributed earlier today. Looking at our results for the full year 2025. Revenue was $122.8 million compared to $98.6 million in 2025 -- 2024, a 25% increase. Excluding return-to-service work on the Spanish Super Scoopers, revenue was $108.8 million compared to $88.5 million in 2024, which was up 23%. Cost of revenues was $71.1 million comprised of flight operation expenses of $31.9 million and maintenance expenses of $39.2 million. Cost of revenues for 2024 was $57.5 million comprised of $31 million of flight operations expenses and maintenance expenses of $26.5 million. Cost of revenues for 2025 included an increase of approximately $5.4 million of expenses associated with the return-to-service work on the Spanish Super Scoopers compared to 2024. SG&A expenses were $36.3 million compared to $35.8 million in 2024, with the increase primarily driven by an increase in the fair value of our warrants partially offset by a decrease in noncash stock-based compensation expense. Interest expense for 2025 was $23.3 million compared to $23.7 million in 2024. We also reported other income of $11.8 million for 2025, inclusive of the gain of $16.9 million on the sale leaseback transaction, partially offset by the loss of $7.8 million on the extinguishment of debt. Other income was $2.1 million for 2024. Net income was $4.1 million in 2025 compared to a net loss of $15.6 million in 2024. Adjusted EBITDA was $45.3 million in 2025 compared to $37.3 million in 2024. Turning to the balance sheet. We ended 2025 with total cash and cash equivalents of $31.4 million. During the fourth quarter, we completed our previously announced sale-leaseback transaction with SR Aviation infrastructure for our Bozeman Yellowstone International Airport campus facilities. We also entered into a new senior secured facility for up to $331.5 million led by Bain Capital's private credit group. Together, these transactions were used to refinance Bridger's $160 million municipal bond with Gallatin County and consolidate the majority of our other existing debt. Most importantly, our new credit facility provides significant capacity and financial flexibility through a delayed draw facility of up to $100 million designed to fund future fleet expansion to support the economic growth we are pushing. Let me now turn the call over to Anne Hayes, our incoming CFO, to go over our 2026 guidance. Anne Hayes: Thanks, Eric. We are starting 2026 with the addition of 6 new aircraft on balance sheet. This consists of 2 previously leased PC-12 with contracts through 2027, 2 King Air multi-mission aircraft and the 2 Spanish scoopers purchased in December. These new assets, coupled with increased utilization on the existing aircraft, will help us achieve growth of over 25% from last year when excluding the 2025 return-to-service work in Spain. We are initiating 2026 guidance ranges of $135 million to $145 million for total revenues and $55 million to $60 million for adjusted EBITDA. The company also expects continued improvement in cash provided by operating activities in 2026 and positive net income. Company is evaluating several different international operating contracts for the 2 scoopers that we closed in December, which are currently stationed in Spain. The contribution from the scoopers and the 2 new MMA aircraft is expected to be roughly 10% to 15% of 2026 revenue at a approximate 40% EBITDA margin. While we've had a good start to the year with 2 scoopers and 2 Air Attack flying in late February, we expect to report a net loss in the first quarter due to the winter maintenance activity. With that, I'll turn it back to Sam for final comments. Sam Davis: Thank you, Anne and Eric. As we announced in November, Eric is officially retiring at the end of the month, and Anne is taking over the CFO role officially on March 10. I want to again express our gratitude to Eric for his financial leadership over the last 3.5 years and his dedication to building Bridger into the resilient and profitable company that it is. I also want to take the opportunity to say how excited we all are to welcome Anne Hayes officially as our new CFO, having joined us after serving as Audit Chair of our Board of Directors. She is ideally suited to lead us through our next chapter of growth and is clearly bought into the mission, evidenced by her step from Audit Chair to join the Bridger team. I also want to welcome Bill Andrews, our new Chief Operating Officer, announced earlier this week. He joined us most recently from Lockheed Martin as Vice President and Executive Program Manager for C-130s, C-5s and P-3s from development to support. As a U.S. Air Force and Air National Guard veteran for over 25 years, he served as an aircraft commander and C-130 evaluator pilot. We're privileged to have him join us both for his stellar career and his exemplary military service, which are an incredible fit for the Bridger mission. He has the right skill set to help grow Bridger into a robust and scalable organization. Having led multibillion-dollar programs at Lockheed Martin across aircraft delivery, upgrade, support and readiness initiatives, he is exactly who we need to grow our organization in size and year-round operation. This includes his experience supporting the C-130 MAFFS aerial firefighting aircraft for the California Air National Guard. We also see his unique service and support in the defense space as instrumental as we pursue additional opportunities adjacent to our firefighting missions. To recap 2025, we flew in 21 states. We provided support for 380 fires and dropped 7.3 million gallons of water. We had the earliest deployment in customer history with scoopers dispatching to the Palisades fire in California in January. Across the fleet, we flew record hours greater than 10% above 2024 in a relatively slow fire year. And when we came home from the field in November, we had maintained 96% uptime on contracts, had driven 125,000 miles in our support vehicles, and most notably, every Bridger employee came home safe. As we sit here today, 3 of Bridger's scoopers have completed winter maintenance and 2 of those are already responding to early season wildfire activity in Texas. One MMA is on contract in Oklahoma and one Air Attack is in Texas. Air Attack aircraft are on standby here in Bozeman, preparing work for early 2026. The remaining 3 scoopers are finishing up winter maintenance and should be ready over the course of the second quarter. Our staged winter maintenance program ensures we can provide flexibility within our fleet, utilize the excess capacity of our scoopers and deliver year-round readiness. Legislation and greater appropriations to prioritize preparedness, early detection and suppression are making a difference to how we fight wildfire, and Bridger is uniquely positioned to support our federal and state customers. As Anne stated, we are on track for another record year, supported by a much improved balance sheet with significant capacity and financial flexibility to fund future fleet expansion, drive organic growth and build on our long-term vision to innovate and deploy the most advanced technology in our industry and deliver on our mission to protect lives, property, critical infrastructure and the environment. Together, our team is ready to answer the call to serve year-round. We're excited for and positioned to make 2026 another incredible year. With that, I'd like to open up the call to the operator for any questions. Operator: [Operator Instructions] Our first question comes from Austin Moeller with Canaccord. Austin Moeller: So just my first question, I was going to ask about the appointment of Bill Andrews. Is the intent there for him to help build out the FMS business? Or does this potentially signal that you might buy like C-130s or other government aircraft after the recent legislation that permits that? Sam Davis: Yes. So primarily, Bill's focus is -- good to talk to you again, Austin. Thanks for the question. Primarily, Bill's focus is going to be on making sure that our fleet is deployed and ready to go year-round across the country and really focus on our operational excellence and build upon that. But it's more aligned with your first comment where we're looking at all of the expertise and the years of experience he has of leading very large programs, obviously, at a much different scale that he can bring that context into the Bridger family. And we're uniquely positioned, I think, with our integrated services to do defense work adjacent to the mission we're doing in firefighting with all of the services we have in-house and really taking the opportunity with the funding going on in the defense space and the work that we have in the team and have Bill help identify and lead the team to capitalize on some of that. There's a lot of appropriately sized work for us to do, both on modification, flight test and design to go after defense work and other smaller jobs that maybe the larger primes can't quite capture. And we have the quick ability to do turnkey solutions, and FMS is a key part of that. Austin Moeller: Okay. And can you give us any update on the return-to-service work for the second 2 Super Scoopers being worked on under MAB Funding and when they might be returned to service and you could potentially purchase and take ownership of those aircraft? Sam Davis: Yes. Great question. So I think last we left off, the third aircraft is quite near certification of airworthiness. And so there's a clear opportunity if we're focused on the first 2 getting firefighting work in Europe this year and then exploring potentially moving them even back to North America for fighting fire in the future. So the third is near completion, and that obviously makes that a much closer target for us from an acquisition perspective. The fourth is a little bit further out. We're sourcing parts and working to get that underway. That would probably be a little bit later in the year, if not toward the end of the year, that we would get that complete. But again, focusing on folding in the first 2 to doing firefighting, and 3 and fourth are a nice dovetail in to work that we find for the first pair. Austin Moeller: Okay. And just one more here. Can you speak to the potential contract opportunities in Europe, which ones you -- which countries you think are perhaps the highest probability that you could get deployed in advance of the fire season in Q2? Sam Davis: Yes. And I'll be as direct as I can be without being too speculative or leading here because we're in communication and negotiations. But the 2 leading countries, I would say, that have shown great interest in committing to the scoopers stationed in Spain would be Portugal and Turkey. We're working with our partner overseas in Europe, Avincis, that has helped us both on the return-to-service work and flight operations to pursue those countries with the economics we have in mind together as well as the mentality of the first come first serve basis as they get set up for the fire season. In terms of timing, the appropriations are a little bit later than ideal in Europe, not as quite as early as a commitment as you get in the U.S. So we're hoping to have something in line and defined by March or maybe end of April. So that's kind of the time line we're managing to. There are other countries that would be interested. They just haven't gone as far down their appropriation cycle as the first 2. Operator: [Operator Instructions] At this time, there are no further questions in queue. I will now turn the meeting back to Sam Davis for any additional or closing remarks. And my apologies. We actually did get an additional question. We'll move to Mark Williams with EmergingGrowth.com. Mark Williams: Great. Congratulations on another strong quarter. Just real quick, with the 2026 guidance removing the return-to-service revenue and profitability from that, how should we think about normalized EBITDA margins across core missions? And what will be driving the expansion forecasted? Sam Davis: Yes. Thanks, Mark, and appreciate you asking the question. I'll answer kind of the first part, and then I'll let Anne jump in if she can. We're focused on the expansion with the expanded capacity in the current fleet we have and capitalizing more on the margins with the core fleet, not including the return to service as you mentioned. So improving both the utilization, including the days and hours we have on contract for our scoopers and Air Attack aircraft in hand as well as the addition of 2 scoopers in Spain, which we're factoring in as well as 2 additional sensor-enhanced planes we -- will add to contract here shortly. And as everybody should know on the call, those sensor-enhanced planes have quite attractive margin versus nonsensor enhanced, so continuing to drive those margins up overall, an improvement. Anne, I don't know if there's anything else you want to add there. Anne Hayes: Yes. No. So we had -- in 2025, we had about $14 million in revenue from the return to service, so we're increasing 29% when excluding that in 2026. And as far as the margins, as Sam mentioned, our scoopers are generally over 40% adjusted EBITDA margin, and our newer MMA aircraft can be as high as 40% to 50% or above. So any aircraft that we're adding at this point are increasing EBITDA margins compared to the more simple Air Attack that did not have the sensors could have a lower EBITDA margin. Mark Williams: Okay. Great. And then along those lines, maintenance expenses increased in 2025 as aircraft were added. And with the addition of the new aircraft, how should we think about how expenses, maintenance expenses should scale with those aircraft? Sam Davis: Okay. I'll take the first part of this, Mark, again and then let Anne put some numbers behind it. But excluding, again, the return to service, we see -- we saw less of an increase in our cost of revenue as opposed to the revenue that we saw year-over-year and continue to see that as we set guidance for this year because we're seeing more economies of scale as the fleet grows and we become more efficient with spend. There were some additional costs -- variable costs that are associated with being deployed more and having more activities such as travel, obviously, wear and tear on aircraft and more of the maintenance intervals that we have to perform. However, it grows at a less of a rate than the revenue grows. So we're -- we have that factored into a more profitable gross profit this year with our core fleet and the aircraft that we're adding. Anne Hayes: Yes. I would just add that, in 2025, the aircraft maintenance did include that Spain return-to-service work, so we will see that decrease in 2026. And we are seeing margins, as mentioned earlier, with that decrease; and the high-margin aircraft, we are seeing margins increase. Mark Williams: Okay. Great. And then last question, just real quick. With the refinancing and the liquidity available under the DDTL that occurred this past year, do you see any need for additional funding throughout the next year or 2? Or especially bringing on the 2 new scoopers, I don't know if they were funded under the DDTL or part of other parts of that funding that -- how should we think about that? Sam Davis: Yes. So good question. The DDTL that we have in hand, which at close was $100 million, we built that around what we see for the next couple of years in terms of opportunity of aircraft that we could go out and add to contract and contribute the same as the fleet we have, which does include aircraft 3 and 4 scoped into that amount. So we don't yet foresee any problem of outpacing -- of our growth outpacing that from an aircraft acquisition perspective. We could obviously revisit that if the demand necessitated that many aircraft. But right now, including the aircraft we added at the end of the year, that was factored into the model at the time we closed it. And so we're on pace for that. And that, again, is a good outlook for us for the next couple of years. Eric Gerratt: Yes and just... Anne Hayes: And just to provide -- sorry. Go ahead. Eric Gerratt: Well, just real quick, Mark, just the other thing to add. So the purchase for the first 2 Spanish scoopers was included in the overall term loan. So we didn't tap the deferred draw facility for those. And to Sam's point, the 2 surveillance aircraft we added at the end of the year did come out of the DDTL facility, but there's still about $90 million left in it. So the first 2 Spanish scoopers came out of the term loan that's already on the balance sheet, and we still have, like I said, about $90 million of capacity on that deferred draw facility. Operator: There are no further questions at this time. I'd now like to turn it back to Sam Davis for any additional or closing remarks. Sam Davis: Thank you. Thanks again for joining our conference call today. We look forward to updating you on our progress when we report our Q1 results in May. If anyone has any follow-up questions, please reach out to our Investor Relations. Thanks, and have a good day. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Reshmee Soni: Good morning, and welcome to Grindrod's 2025 Annual Financial Results Presentation. My name is Reshmee Soni from Investor Relations. I am delighted to welcome our analysts, shareholders and members of our management team this morning. Thank you for your interest in Grindrod. A special welcome to our nonexecutive directors who are also online. Today's session, we will cover the 2025 financial performance, having a look at our financial performance, our divisional performance, ending with our outlook. We will then proceed to a question-and-answer session. With us this morning are CEO, Kwazi Mabaso; and Fathima Ally, our CFO. Before we commence, please take note of the forward-looking slide on your screen. I will allow you to peruse this at your own time. And with that, I hand over to Kwazi. Kwazi Mabaso: Thank you, Reshmee. Good morning, everyone, and thank you for taking time to join us today. The year 2025 was marked by geopolitical tensions and trade policy uncertainty. Our success in executing our strategy and continued focus on operational excellence has assisted in limiting the impact of this volatility. We closed off on key strategic milestones in 2025. We concluded the ZAR 1.4 billion TCM acquisition, which is now under our full control. We successfully executed an exit from our shareholding in our nonstrategic Marine Fuels business, securing cash of ZAR 102 million. We exited our exposure to KwaZulu-Natal, North Coast property and secured ZAR 500 million in the process. Now let's take a closer look at the macroeconomic environment. As I have stated earlier, the period under review reflects a complex global operating environment, one that is characterized by elevated geopolitical risks and challenging environment. This has placed pressure on regional economic conditions resulting in shifting demand for commodities that we move for our customers. Looking at the key regions where we operate and where our customers export to, starting with China, China recorded an economic growth rate of 5% despite reduced iron ore demand resulting from a 4.6% decrease in steel production. This decline was attributable to a slow property sector and a weak infrastructure investment. India, the key importer of South Africa's thermal coal grew its economy by 7.3% in 2025, continuing its streak as the fastest-growing economy in the world. Although South Africa's economic growth at 1.3% is an improvement from the sub 1% growth, this still falls short of the required rate to mitigate the structural economic challenges such as high unemployment rate. Mozambique economy grew 1.1%, a substantial drop in the performance we have seen in the past, but LNG project activity is expected to underpin a recovery going forward. The rest of the SADC region's economic growth is expected to be supported by the strengthening of the mining sector. On the next slide, we'll take a closer look at the 2025 price performance of the commodities we handle for our customers. Overall prices outside copper continued to underperform. Chrome ore prices experienced notable fluctuations during the year. We saw an increase in chrome ore exports as South Africa's smelting capacity slowed due to energy challenges. On the other hand, iron ore prices started softer into 2025 and peaked in the second half of the year as China stimulated its steel sector. Coal prices fell in 2025 as India's output rose, which had an adverse effect on South African coal demand. Now I'll take you through our performance overview. Safety remains a priority at Grindrod. Our focus on driving a safe working environment for our employees through BASSOPA safety awareness campaign resulted in Grindrod achieving a year of 0 fatalities. We achieved a record lost time injury frequency rate of 0.16 across all our operations. This demonstrates the employees' dedication to maintaining safe practices. We delivered record volumes in Maputo and Matola terminals, delivering growth rates of 6% and 22%, respectively. I'll give more color to this performance in the next section. However, it's safe to say that our decision to buy up shareholding in Matola Terminal TCM was a strategic breakthrough. As a result of the record volumes, our EBITDA grew by 13% to ZAR 2.3 billion, translating into headlines growth of 17% to ZAR 1.2 billion. We generated ZAR 2 billion of cash from operations at decent EBITDA cash conversion rate of 1.3%, and we held ZAR 3.9 billion in cash at year-end. Consistent with our dividend policy, the group has declared an ordinary dividend of ZAR 0.252 per share for the 6-month period. This brings the total ordinary dividend for the year to ZAR 0.482 per share, marking a 21% increase. We have received more than ZAR 1 billion from noncore assets for the year. The Board has subsequently approved a further once-off special dividend of ZAR 0.43 per share for the 6-month period. As a result, 49% of noncore proceeds have been returned to shareholders. Between ordinary and special dividend, Grindrod has returned ZAR 476 million to shareholders for the 6-month period, bringing the total number returned to shareholders for the full year to ZAR 862 million. Now let us look at our Port and Terminals volume performance. Strong chrome market, partly buoyed by increased chrome ore export from South Africa and Zimbabwe contributed to yet another strong volume growth in Maputo port, culminating in a record performance of 15.2 million tonnes. Maputo has achieved a compounded annual growth rate of 14% since 2021. Moving to Matola. Conclusion of strategic buy-up of control of Matola Terminal was key in enabling Grindrod to unlock operational efficiencies. The reduction of vessel turnaround time by 30% and 11% for coal and magnetite, respectively, resulted in the terminal achieving a record of 9.9 million tonnes, marking the highest throughput in its history. This performance is at 83% of the committed capacity expansion to 12 million tonnes required in the sub-concession extension. Now let's move on to our Logistics segment. The Logistics segment remains a critical enabler to our Port and Terminals business. This segment gives Grindrod the ability to offer an integrated logistics solution to our customers, a solution that is cost effective and efficient. This ability remains Grindrod's market differentiator. Performance in ships agency and clearing and forwarding was soft. Our graphite operations slowed down last year, but recent market development points to a recovery in this business. We have substantially concluded our locomotives refurbishment program we announced previously, which we managed in line with our expected timing of rail open access in South Africa. Engagement with Transnet Rail Infrastructure Manager, TRIM, on Rail Open Access continues with expectation to close the negotiations after the revised network statement has been issued, which is expected in April. I'll now hand over to Fathima to share more insight on the financial performance. Fathima Ally: Thank you, Kwazi. Good morning, everybody, and a warm welcome from my side. It's certainly a pleasure this morning to deliver Grindrod's performance for financial year 2025. Before you, you'll see our income statement and the numbers that we're presenting today, both from an income statement and a balance sheet perspective, have been put together on a segmental basis, which means that the impact of our joint ventures are proportionately included based on our effective shareholding on a line-by-line basis. Our core business performed well for us in 2025. Core revenue up 1% and core EBITDA up 13%. This is largely attributable to the stellar performance coming out of the Matola terminal with volumes up 22%, as Kwazi mentioned earlier. This was offset somewhat by performance in our Logistics segment, which we'll delve into further once we look at the segmental performance in detail. Pleasingly, overall EBITDA margins for the group improved year-on-year by 11%, reflected at 30% for the financial year 2025. Significant corporate activity prevailed for us in 2025 and reflected, you will see nontrading items on screen at ZAR 927 million. The Matola buy-up contributes ZAR 937 million of that, comprising both a gain on disposal as required by the accounting standards as well as the release of foreign currency translation reserves. The Marine Fuels investment, as divested from in the first half of the year, attributing to the drop of revenue and EBITDA, also contributed to nontrading items in terms of a net gain of ZAR 34 million. Our share of associate earnings, which represents performance of the port in Maputo is up 3% year-on-year. Volumes were up 6% and record milestones were met. The performance was slightly offset by tax obligations that was recorded due to the change in tax regimes in the United Arab Emirates. Our overall effective tax rate for the group sat at 31%. Now if you take profit before share of associate earnings and ignore the effects of nontrading items as well as withholding tax effects, which were elevated in the current year following repatriation of dividends from Matola post the buy-up, that's how we arrive at the 31%. Overall, net profit attributable to our ordinary shareholders are reported at ZAR 2.1 billion, 559% up on the prior year, and our core headline earnings at ZAR 1.2 billion, 17% up on the prior year. Our core headline earnings in cents per share closed at ZAR 1.765. If we look at our segmental performance, Port and Terminals doing really well for us. Revenue and EBITDA margins up 20% and 44%, respectively. Again, big contributor being Matola. Matola has been transformational for Grindrod in terms of financial performance as well as financial position. The acquisition has played out exactly as we expected with it being and reflecting as a major earnings and cash contributor. We are excited in moving forward with this asset. Our overall normalized margins, reflecting the impacts of the Matola acquisition and the overall uptick in our Port and Terminals volumes, dry bulk specifically, are reported at 44%, firmly up from the 36% I had reported to you in H1 of this year. Our headline earnings for this segment closed at ZAR 1.1 billion with strong return on equity at 24%. Our Port and Terminals business remains a U.S. dollar-anchored business with 89% of our EBITDA earned offshore. Our Logistics segment faced headwinds in the current financial year. Commodity prices saw a downward shift in our transport brokering business, which put pressure on an already low-margin business. Our graphite contract was renegotiated in the current year, and we moved from a fixed fee model and now earning a variable fee. Revenue and earnings, respectively, moving forward will now be aligned to volumes that we report. Our rail deployment was low. However, we have significantly advanced on our refurbishment program. Ships agency and the container business performance was subdued, largely linked to market challenges. Overall, revenue and EBITDA down 10% and 18%, respectively. And normalized margins, once you ignore transport brokering as well as the COVID-19 business interruption reported in the first half, sat at 25%, whilst at the low end of management's target, still within the range that we target for our enabling business. And this is an important principle. The Logistics business, as Kwazi mentioned, is an enabler to Port and Terminals. It is imperative to how we bring our integrated, efficient and cost-effective solutions to our customers. Overall, this segment gave us ZAR 212 million of headline earnings. And this segment, again, strongly rooted as a rand-anchored business with 83% of our EBITDA earned onshore in South Africa. From a balance sheet perspective, due to the significant impacts of the Matola acquisition, we have represented the December 2024 balance sheet. This will allow better comparability by us notionally including 100% of Matola as it reflects in the December 2025 numbers. We spent ZAR 1.5 billion in terms of capital expenditure in the current year, 81% of that being expansionary. And of that, 75% largely underpinned by the Matola acquisition. The remaining ZAR 362 million was invested in property, plant and equipment, largely in all our facilities and to name a few, our upgrade and our development of our Matola buildings in the current year as well as our Salt River facility in Cape Town linked to our container business and new undercover warehousing facilities in Walvis Bay. Aside from this, other capital acquisitions this year related to steel business, yellow equipment, vehicles and Jersey barriers. Our PPE dropped 5% December '24 to December '25. Whilst additions were significant, we did see depreciation impacts as well as a strengthening of the rand by 12%, which impacted on the translation differences that we booked in the current year. Our intangible assets grew significantly. The Matola acquisition brought on book $86 million of intangibles, both recognized in the form of goodwill as well as customer relationships. In terms of our working capital, our current assets reduced in the current year by 22%. It was very pleasing to see improved collections robustly across our businesses, a testament to the hard work of our finance and commercial teams. This coupled with the down trading in logistics as well as the capitalization of prepayments for rolling stock investments in the prior year contributed to that difference. Our bank and cash balances are up together with our current liabilities. What we experienced this year was significant prefunding that came through from our fuel customers in both the ships agency as well as the clearing and forwarding businesses. What happens here is that the cash is collected and sits on our balance sheet until it is paid over to SARS based on deferment arrangements that we have in place in these businesses. From a liabilities perspective, we saw significant repayments of borrowings. What we also saw was lease liabilities coming to book on renegotiation of the GML concession as well as the Matola acquisition. Our other liabilities have also grown. This is largely in view of the fact that we agreed to certain deferred consideration payments under the COG transaction as well as the fact that we had to recognize deferred tax liabilities linked to the intangible assets that we brought on book and that I mentioned earlier. Overall, we closed this financial year with Grindrod's balance sheet healthy and stable. Our asset base is now rooted firmly to just our core business with all material noncore assets materialized. If we look at how our net debt progressed in this financial year, we closed last year with net debt reported at ZAR 1.5 billion. This was post us ring-fencing funds of ZAR 1.1 billion in anticipation of closing the Matola transaction. Together, this gives us a net restated opening net debt position of ZAR 413 million. We raised in excess of ZAR 2 billion in terms of cash generated from our operations in this financial year. This stemmed from both operational performance as well as the efficient working capital measures that I talked about earlier. Our cash conversion was at 1.3x EBITDA, certainly a record for us looking back into a 10-year history for Grindrod. 27% of this cash was spent towards our interest, tax and dividend obligations. On acquisition of Matola, we brought net cash on book of ZAR 316 million. This comprised of both cash on hand at the time, offset by lease liabilities that were on book. We put ZAR 1.4 billion away in terms of capital expenditure. Again, this largely linked to the Matola transaction where we spent ZAR 1.1 billion, as mentioned earlier. Proceeds on our disposal also amounting to ZAR 1.1 billion and proceeds from noncore taking up 93% of that amount. Our overall noncash movements amounted to ZAR 412 million, again, through the introduction of lease liabilities when the Maputo concession was signed in November this year. We closed the year in a net cash position of ZAR 699 million. If we look at what this comprises, our total debt moved from ZAR 2.9 billion to ZAR 3.2 billion, 10% up. Our borrowings reduced, as indicated earlier, from ZAR 2 billion to ZAR 1.4 billion. We saw net repayments in the year of ZAR 710 million. We saw a significant uptick in our lease liabilities. The Maputo acquisition as well as the signing of the GML concession brought concession-linked lease liabilities onto our book of ZAR 1.1 billion. Our overdraft movements are linked to timing of cash flows. From a cash perspective, we closed the year on ZAR 3.9 billion. Our ZAR 1.4 billion, including ring-fenced cash of last year, give us a net increase in cash of ZAR 1.4 billion in 2025. This resulting in ZAR 700 million arising from the Matola acquisition and ZAR 700 million stemming from the timing of cash flows linked to the prefunding in the ships agency and clearing and forwarding. We closed this year with Grindrod's balance sheet largely ungeared, and we sit with debt capacity that approximates ZAR 4.5 billion. We have plans in place on how to take up this capacity. And to tell you more about that, I'll hand you back to Kwazi. Thank you. Kwazi Mabaso: Thank you, Fathima. Our capital allocation framework directs how we deploy capital through the business cycle, enabling us to shift between stay in business CapEx, growth investments and shareholder distributions. Over the past 3 years at Grindrod, the management team has done well to have a business evolution that supported a balance sheet restructuring. This restructuring improves access to both optimized debt capacity and cash reserves. This work was undertaken to position Grindrod to act on growth opportunities as they emerge. Grindrod has completed its strategic reset. The foundation for growth has been laid. We are now moving into disciplined growth execution. We are focusing on strategic infrastructure initiatives for the short to medium term. Several projects are already underway and additional opportunities are being actively pursued. Starting with the Phase 1 of TCM expansion project, the Back-of-Terminal, this project will lift the terminal's capacity to 12 million tonnes. This project is making good progress. We are still on track for the hot commissioning at the beginning of 2027. The Richards Bay container handling facility, which will give Grindrod direct access to the quayside in South Africa remains on track and is expected to be commissioned in 2028. On the Rail Open Access, as I've alluded earlier, negotiations are ongoing, and we are in the process of procuring 50 wagons this year, specifically for rail slots. MPDC is planning to commence a dredging campaign. This is in line with its commitment to grow and develop the Port of Maputo as part of the concession extension to 2058. This will be project funded against the balance sheet of the port dredging company of MPDC. The capital dredging program, once completed, will allow the handling of ultra-large container vessels and the full handling of the Cape size vessels at Matola Terminal. This will increase the quayside capability of TCM to handle 170,000 tonne vessel size. This project should be completed by the end of 2027. During the month of February this year, Transnet released a request for qualification to identify and prequalify potential private sector partners for the Richards Bay dry bulk terminal, in short DBT. Transnet seeks to partner with the private sector to modernize and expand DBT, which is one of South Africa's largest dry bulk export terminals. DBT mainly handles chrome, magnetite and coal. The terminal currently handles around 17 million tonnes with the potential of expanding to 27 million tonnes, which is plus/minus 59%, 60% improvement that is expected. Now for nearly 2 decades, Grindrod has been a long-term partner in the Port of Maputo through our investment in MPDC and as a terminal operator in TCM Matola. Over that period, we have transformed a legacy dry bulk terminal, TCM, into a modern, high-performance export gateway that today plays a critical role in the regional trade. At Matola, we have invested in the upgrading of a berth, deepening key walls, modernizing handling equipment and deploying integrated terminal operating systems. The results speak for themselves. Matola has consistently delivered record volumes. For the last 11 years, we moved from moving 4 million tonnes at Matola to now moving 10 million tonnes, which is about 150% increase. This clearly illustrates Grindrod's capacity to invest and operate reliably on large scale. And we would like to demonstrate that in South Africa. Therefore, Grindrod will participate in this RFQ for Richards Bay. In closing, our strategy is clear. We provide our customers with integrated logistics solutions that are both cost effective and efficient. We are delivering strong operational and financial results. We will continue to deliver incremental volumes through operational excellence underpinned by our tenacious employees who are the heartbeat of Grindrod. Our commitment to generating value for both shareholders and stakeholders will continue to be a priority. Thank you. I'll now hand over to Reshmee for the Q&A. Reshmee Soni: Thank you, Kwazi, and thank you, Fathima. We will now open the floor for questions. [Operator Instructions] We have our first question online. Fathima, I think this one is for you. Thank you, Blessing Phakula from Vunani Securities. What hedging strategies are in place to manage U.S. dollar or foreign currency exposure? Fathima Ally: Thank you, Blessing. A really good question. We are fortunate at Grindrod. Our significant and material businesses that are anchored in Mozambique, all operate to functional currency of U.S. dollars. Customer collections are U.S. dollar denominated. And where we do see some foreign currency exposure is where we have our cost base that's denominated in local currencies. But again, these close out very quickly within the working capital cycle. So we do not face significant foreign currency fluctuation in the construct of how our businesses operate. We also ensure that when capital expansion happens, we secure funding in the functional currencies of the entity, which eliminates the need for any functional currency or the volatility that could come through from foreign exchange. Where we are exposed as Grindrod is when we translate into our reporting currencies, we use average exchange rates in the income statement and then, of course, closing rates for the balance sheet. Again, the upside here impacts on the earnings that you report, but you can't really apply hedging strategies for this. It's an accounting construct. In this year, we saw close to ZAR 1 billion worth of impacts from foreign currency on translation. These impacts were not absorbed into our earnings. They were absorbed on balance sheet when we translated those assets. So in closing, very simple construct. Grindrod is naturally hedged. And where we do have exposures, we seek forward covers when needed. Reshmee Soni: Thank you, Fathima. The next question, thank you, Rowan from Chronux Research. Is there any impact expected from the current Middle East conflict? Kwazi Mabaso: Yes. Let me take that one, Reshmee. I think that talks to the geopolitical risk that we have alluded on. And I think it's affecting everyone. And certainly, nowadays, you can't predict what's going to happen. And really, for us, as Grindrod, we tend to focus on what's within our control. We've got our strategy that we are executing. We've got short-term to medium-term infrastructure initiatives that we are highlighting. Safe to say that for us, we are looking at how the commodity prices are behaving as it has a direct impact on the commodities that we are handling. We've already seen at Navitrade, the coal coming to Navitrade increasing because of the slight uptick that we have seen on the coal price. We are already tracking at a run rate of about 2.5 million to 2.8 million tonnes at our Navitrade facility. And even when you look at the inbound volumes that is coming into our Navitrade has increased by over 50% on rail predominantly as well as on road. So that is what we are seeing. But our focus really is what is within our control currently. Reshmee Soni: Thank you, Kwazi. The next question from Toko, Oystercatcher Investments. Thank you, Toko. I'll perhaps split this for Fathima and Kwazi. The first section, Kwazi, perhaps from your perspective. Please provide an outlook on chrome volumes for the year given government support for the domestic ferrochrome sector. I think the second one, Fathima, perhaps on your side. What is the medium-term margin outlook in each segment over the next 3 to 5 years? Are there any choke points in the current value chain that may attract additional capital or I suspect CapEx? What is the net debt outlook given the strong balance sheet and growth ambitions? And lastly, what is the maximum net debt and EBITDA you can tolerate? Maybe I'll ask Kwazi to start. Kwazi Mabaso: Thanks. Obviously, with the discussions that are happening between the producers of chrome so that they can process and only ship ferrochrome, it can only be an uptick for us because ferrochrome also moves through our port of Maputo. However, we know that for every tonne of ferrochrome you produce, you need about 3x of chrome ore for you to process that. So maybe there can be a reduction on chrome ore, but there's sufficient demand in the market for chrome ore. We are currently handling chrome from South Africa and Zimbabwe. And right now, I think even the market share of Zimbabwe chrome ore in our port of Maputo has been hovering around 5% to 7%. And maybe we can see that also becoming strong if the chrome from South Africa subside. Fathima Ally: Thank you, Reshmee. Reshmee, you keep me honest here, but I think the first part of the question was around margin stability in our segments. So from a Port and Terminals perspective, we believe that our 44% margin is sticky. You must remember that in the current financial year, we actually consolidated Matola for 7 months in the year. So the first 5 months still came in at 35%. So we've got 5 months' worth of EBITDA uplift that can prevail. But as we've communicated before, our business is cyclical. And the thresholds that we hold for our Port and Terminals business are within a construct of between 35% and 40%, and we stick to those thresholds. From a Logistics perspective, with this business being an enabler to Port and Terminals and with us really moving forward on our integrated solutions strategy, as mentioned, our low end of the threshold is 25%. So it would need to be a really compelling customer opportunity that will allow us to work in breach of those thresholds. But we do have limits in place, and we do believe that those EBITDA margins based on our current business is sustainable. In terms of our net cash, the question was whether we expect the ZAR 699 million to prevail. With the dividend declarations that we have now, that will actually eat up -- both from an ordinary as well as preference dividends, it will eat up ZAR 510 million of that capacity. Overall, long term, depending on when those opportunities that Kwazi mentioned come into fruition, we expect that our net debt position will be depressed as Grindrod. But we are in a growth phase, and that's certainly not abnormal for business planning or in anticipation of growth. I think the last bit of the question was how much we can tolerate in terms of our net debt or EBITDA. We work to tolerating 2x our EBITDA. And again, if we're presented with a really good opportunity, we might work to 2.5x, but we hold ourselves accountable to 2x, again, because of the cyclicality of our business. Reshmee Soni: Thank you, Fathima. Maybe perhaps to move towards the Logistics segment, Kwazi. We have 2 questions in this regard. The first from Alistair Lea of Coronation. Your logistics businesses have not performed well for a while now. What is the short and medium-term outlook for these businesses. Thank you, Alistair. And the second one from Mike Lawrenson. Thank you, Mike. Congrats on an excellent set of results. What can be done in the short term to optimize resources in Logistics division and improve operating performance without impacting long-term aspirations? Kwazi Mabaso: Thanks for that, Reshmee, and thanks for those questions, Alistair and Mike. When you look at our Logistics business, our Logistics business, you've got rail there, you've got our graphite business, you've got container business and then you've also got road transport as well as our ship agency business. Our ships agency business, it's always solid. So there isn't much movement there. Road transport is directly linked with the coal commodity cycle. If coal is down, we'll see road transport also going down. Our graphite business, as also Fathima alluded earlier on, is that we are now moving into a variable contract with our customer after we were earning a fixed fee from the customer. But what is exciting is that the developments in the future is that we are now going to be getting consistent volumes from our graphite customer, the indication of roughly about 30,000 tonnes a quarter, and they are preferring to use our Pemba facility, the dry bulk instead of the Nacala Intermodal facility. So there is an uptick there. On the rail side, where we've seen really a decrease over the last year or so, it's because we deliberately went on an aggressive locomotive refurbishment program. I mean, last year, we refurbished 10 locomotives out of the 13 locomotives that we repatriated from Sierra Leone. And we did that so that we get ready for the Rail Open Access opportunities. But however, even this year, our focus on the rail will be to increase our deployment rate because currently, it's below 50%. And this year, we're going to up that, our local deployment rate, because we have now completed our aggressive locomotive refurbishment program. And then lastly, we've seen the container improving from last year, and we're hoping that it will continue to improve as we move forward. I think I've covered all the segments. Reshmee Soni: Thank you, Kwazi. The next one from Cobus, Value Capital Partners. Thank you, Cobus. Congrats on a good set of results. What is the expected time line for the PSP opportunity in the Richards Bay dry bulk terminals? Does the Richards Bay dry bulk terminal generate revenue in USD or ZAR, or does it depend on the commodity handled? Kwazi, maybe I'll take the second part on the U.S. dollar and ZAR. And on that Cobus, the terminal, as we understand it, does ZAR. Remember, we are at a request for qualification. So we are indeed in an early stage, and that level of detail has not been made available. Kwazi, if you can assist with the time lines? Kwazi Mabaso: Yes. The time line, the RFQ will close in August. And thereafter, then the RFP process will commence. Certainly, from our side, like I alluded earlier on, we are ready for this opportunity. We know that it's still at an early stage, but we've been waiting for this opportunity to come in the market, and we are ready. Reshmee Soni: Thank you, Kwazi. Perhaps, Fathima, we can go back a little to the debt. [ Jaco from Rena Investments ]. Thank you for your question. Are you perhaps contemplating reducing interest-bearing debt with the cash that you have? Fathima Ally: Thank you so much for the question. I think the question is an important one. In fact, it talks to a significant project that we have ongoing at the moment, whereas Grindrod, we're looking to restructure our debt and put it into what's commonly known as a common terms arrangement structure involving all of our main bankers. What this construct will do based on our indicative models that we've put together is reduce our interest burden over the period of our debt, which is lower than 5 years, up to ZAR 40 million over that period triggered by the refinancing. So we are constantly looking at measures on how it is we can be efficient from a cost perspective. But again, how it is we have a construct that would allow us to move forward in terms of our growth plans. Reshmee Soni: Thanks, Fathima. Kwazi, maybe perhaps this is back to you. Wallace Steyn from Steyn Capital Management. To what extent can you expect the dredging program and Matola upgrade to disrupt volumes in the short term? Kwazi Mabaso: That's a good question, Wallace. I think our approach in executing this program has been a modular approach. I mean if you remember, even our Matola expansion program, there was an option of going big, but we decided to do it -- split it into 2 Phase 1, Phase 2, so that we minimize disruption to our operation. So with the capital dredging program, the same approach will be adopted. We don't want to disrupt the ongoing operation in our operations. So we're going to continue taking a modular approach in executing our projects. Reshmee Soni: Thanks, Kwazi. Fathima, maybe back to you. There's a few questions on CapEx, and it may be worthwhile noting what's in the booklet versus the presentation. The first question is from Matthew, Blue Quadrant. Thank you, Matthew. What is the guidance for CapEx in 2026? And what is that split between H1 and H2? The second is from Alexa of Fairtree. Regarding the CapEx plans you've provided for the years ahead, how much of the CapEx is fixed? And how much wiggle room do you have to back out of certain capital commitments? Fathima Ally: Thank you. I think if we go back to the first question, in the booklet that we released on SENS this morning, a capital expenditure and commitment note is included as Note 9 in that booklet. If you look at that booklet, in terms of the future years, we've actually disclosed all of our authorized capital expenditure, which is reflected at approximately ZAR 1.2 billion. A big part of this is skewed toward Port and Terminals. We are currently a go on our Back-of-Terminal project, as Kwazi mentioned earlier, looking to do all the heavy lifting in 2026. Again, with respect to how it plays out between H1 and H2, it's difficult to say. A project is dependent on various eventualities, weather being one of them, engineering milestones, et cetera. But like I said, we are targeting to close this project and do all the heavy lifting in 2026 with commissioning early in 2027. I think the second question was around whether we see the CapEx fixed or is there wiggle room. In the booklet, we also disclosed how much of this authorized CapEx is contracted for. And you will see a significant portion of that is contracted for. Of course, the timing on our cash flows is what we can control depending on how projects advance. Reshmee Soni: Thanks, Fathima. The next one, Kwazi, I think perhaps from your perspective. Thank you, Bruce, for your question. Kwazi, can you please give us information on the top 2 to 3 destinations for coal exports and chrome exports? Kwazi Mabaso: Thank you, Reshmee, for that. When you look at the 16.7 million tonnes that we have moved as Grindrod, of that 16.7 million tonnes, 41% is magnetite and that entire magnetite is destined for China. And 34% has been coal, and that is destined for South Asia as well as some parts of Europe, but predominantly, it's in the Asia part of the world. Chrome is also following the same route, which is mostly China and South Asia. So that is where predominantly our destination of the commodities that we are exporting. Reshmee Soni: Thank you, Kwazi. The next question from Mike again. Thank you, Mike. I think, Fathima, this is perhaps for you. Working capital release of approximately ZAR 500 million in FY '25 appears to be largely due to ships agency prefunds of ZAR 700 million. Can you provide guidance as to whether this is a once-off or permanent benefit? Fathima Ally: Thank you for the question, Mike. As I mentioned earlier, these cash flows come from prefunding that customers give to our ships agency and clearing and forwarding business. And again, it's prefunding because we have deferment arrangements within which we need to pay those funds over to SARS in the form of VAT. That construct is here to stay. It is very critical to how our clearing and forwarding and our ships agency businesses operate. But what is volatile is the quantum of prefunding we can hold. That is entirely customer dependent. So in short, the ZAR 700 million timing and not permanent. Reshmee Soni: Thank you, Fathima. Having a look, there seems to be no further questions online. With that, I think that concludes our morning presentation. I thank everyone for their insightful questions. We appreciate your support, and we appreciate you joining us this morning. If you have any further questions, please do not hesitate to reach out to Investor Relations. My details are on the slide that is currently being presented. With that, thank you again for your support. Thank you, and have a good day.
Operator: Ladies and gentlemen, welcome to the Lufthansa Group Q4 2025 Results Conference Call and Live Webcast. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir. Marc-Dominic Nettesheim: Yes. Thank you very much. And also from my end, a very warm welcome, ladies and gentlemen, to the presentation of our full year results 2025. With me on the call today are our CEO, Carsten Spohr; and our CFO, Till Streichert. Both of them will present the results for the past year and discuss our commercial outlook for 2026, and afterwards, as always, you will have the opportunity to ask questions. [Operator Instructions] Thank you very much. And with that, Carsten, over to you. Carsten Spohr: Yes. Thank you, Marc, and a warm welcome from me as well to this full year '25 conference, which I think will start in a little bit of a different tone, not because it's our famous 100-year celebration this year, which makes it a special year for us anyway. But while we were focusing on this to a certain degree, obviously last weekend when everything was changed again. So maybe I'll share with you a few thoughts on where we are when it comes to the situation at the Gulf first, which is, as you know, very dynamic. And of course, with a few thoughts on the whole year before I hand over to Till for more details and expected by you feedback on our numbers. And of course, also, we'd like to give you a view ahead as much as possible in such a dynamic environment. On the Gulf situation, like many of us, I would assume, we're a little bit surprised by the various dynamic turns this takes. In the end, our crisis management always asks us for safety first, which, in our case, meant we stopped flying a day early to the region, which also allowed us to have hardly any aircraft on location because we brought them home before. We then brought our crews home and then went into the next phase of our management of the situation by deciding to close 10 destinations initially, which included Larnaca. We are opening this next -- this Saturday, again, we'll keep the others closed for probably a few more days at least to remain. I think there's more and more now doubts. This is a question of days of reopening or was it weeks, we prepare for both, and we'll take you through this in the Q&A session, if required. Second, of course, big impact spike on fuel prices. Till will come back to that. We actually believe, due to the fact that we are hedged higher towards our main competitors, actually only other airline hedged the way we are is Ryanair with which who, as you know, hardly overlap, should give us a relative advantage where now prices in the markets need to go up to cover for higher fuel prices, especially, of course, for our American competitors and partners to more or less are not hedged at all. Third, extension or extra sections to be flown to markets beyond the Gulf. We have seen huge demand since day 1 for bookings coming in from Asia, to Asia, also South Africa, also very much in China towards Beijing and Shanghai. So we now decided to put extra sections into the air with spare aircraft we have due to the cancellations, spare crews we have and also by the fact that we're still in the winter schedule which doesn't put our fleet to the max. So we already announced quite a few extra flights to Bangkok. There will be more coming to Singapore, to Shanghai, to Cape Town, and to India, which will probably confirm the course of the last day from our revenue management teams that we have record inbound bookings, especially to those regions I mentioned. And that will allow us probably give also later on to a more positive outlook on the commercial output, at least of this initial phase of this crisis than we otherwise would have been able to do. Last but not least, the mother of all questions probably for European airlines. How much is the situation changing the view and the behavior of travelers, customers on this obvious Achilles' heel of geopolitical topics beyond aviation but surely in aviation. So we all -- I think we, the Gulf carriers will reopen eventually but how our traffic flows, how are cargo flows being directed in the future based on this terrible experience locally, I think is the mother of our questions for our industries, and we're sure we'll be discussing that later on. With that, let me, nevertheless, take you, of course, now back to '25, which, as you might recall, we have called a transition year from the very beginning. Various topics in the pipeline, we have addressed to you before, and of course, happy to also discuss today. Overall, the turnaround of the Lufthansa Airline remains our utmost priority. As also mentioned in the former quarterly result sessions, starting from operations. We have seen significant improvements, which also allowed us to reduce our flight irregularity costs by 43%, equivalent of EUR 362 million, significant input into our improved numbers of '25. And overall, also, we were quite cautious with our capacity increase, which only resulted a 4% or a little less, even 3.8% growth by lifting our revenues to a new record of EUR 39.6 billion. Nevertheless, of course, we're able to improve our profits, as you know, to at least by 19% compared to '24. This is a delta of EUR 350 million, far away from where Till and I want to take the company, talk about the 8% to 10% margins, but at least a step in the right direction and especially when it comes to the core airline operational stabilization was the basis for everything to come. We once again saw strong earnings contribution from MRO and Logistics. But for us, important that also in the core of the core, we are moving forward. We also have seen the first but only the first positive impacts of our fleet modernization and the associated product improvements. As you know, we finally were able to certify our Allegris seats also the 787, which is a big part of the 23 new aircraft deliveries we received. As a matter of fact, 7 of these 23 were 787 with now more or less all certified seats across all classes. That fleet alone, Boeing 787 will grow to 32 aircraft by the end of the year, '27 will have a significant impact on our modernization. Allegris, our new product in Lufthansa and SWISS Senses are now underway out of 3 hubs: Munich, Zurich and Frankfurt. Not only we are receiving very positive feedback but maybe more important for you in numbers, we have been able to achieve 12% higher yields for Allegris than for the former business class. To give you an example on business class, that's a big element of bringing up our ancillary revenues, which already went up 15% last year. And I'm pretty sure we'll show you some good numbers for '26 a year from today. Overall, that, of course, forced us to discuss how much we want to make sure that shareholders already participate from this improvement. We decided to increase the dividend by 10% to EUR 0.33 per share, which is a 10% increase, resulting in a dividend yield of 4% and a payout ratio of 30%. With that, let me turn to the traffic regions. I think we all remember Liberation Day last spring, when there were doubts about the development of the North Atlantic, it turned out as expected that the North Atlantic remained strong. And by the way, continues to do so. We'll come back to that later. And we managed to expand and sell capacity on this most profitable market segment of ours by 5%. In the fourth quarter, with an overall capacity growth of roughly 4%, we even managed to slightly increase unit revenues on a currency adjusted basis, which was clearly a trend reversal to the demand situation we saw in Q3. Going forward, I think the backbone of North Atlantic will remain but I think it's already fair to say we will see an increased shift of point of sales to the U.S. This stage where American customers tend to book earlier than European customers in Q3, in Q2, we are almost at a 60% above share of point-of-sale U.S. and obviously below 40% in Europe. Again, due to the later booking patterns of Europeans this will shift a little bit. But again, I'm convinced the trend of last year where we grew our American passengers by 10%, and our European passengers only by 1%, will probably result in even stronger dynamics this summer. Second largest intercontinental area for Lufthansa is not anymore China but by now India, which is also obviously one of the fastest-growing aviation markets in the world. We signed a partnership agreement with our long-term partner, Air India, following just a few weeks after the EU and India had concluded a new trade agreement. We, in this case, includes not only Lufthansa but the German economy, the German business environment, are quite positive and bullish on India. And of course, Lufthansa Group wants to be part of it. But also in South Korea and Japan, where we slightly increased capacity, along with demand, we were able to bring up profitability. And that is also true for South America, which, as you know, becomes more important for us also due to the fact that with IATA, we were able to double our capacities to Argentina and Brazil. The idea for '26 is to grow 6% on intercont and more or less stay flat on cont. And as I said, this, of course, does not include our recent extra sections, we are now in the process of offering. So these numbers, of course, are based on the regular flight pattern, which probably will change due to the short-term demand we are trying to take advantage of. Nevertheless, focused growth will remain our fundamental principle. We've seen the upside of this '25 and we'll probably see more of this in '26. Coming to the next slide. Let me talk a little bit about our obviously unique business model based on the fact of not having the same home market as our main competitors in Paris and London. We will be even more focused on the 4 business segments, and we'll also show them now also in our financial reporting with the 4 strategic pillars we know. Network Airlines will continue to be our core of the core by 70% turnover share. Of course, with Lufthansa Airlines being the biggest part of it. But we will also now be more transparent on our success in the point-to-point business where Eurowings is continuous, not only going strong to defend our non-hub home markets. You all know this is the utmost priority for Eurowings historically, we also see due to the fact that other airlines have been leaving Germany due to the high cost structure, additional market opportunities on the leisure side, we are continuously exploring. Third pillar, Logistics. Not surprisingly, the more unplannable the global economy is, the better for cargo. We've seen a good year in '25. Till will give you more numbers on in a minute. And already, the way things are starting now after the Chinese lunar year with a complete mix up of traffic lanes and supply chains due to the situation at the Gulf, we're probably looking at a good year here as well. And on top of that, new consumer behavior when it comes to e-commerce, I think combined, will make this big. This is a strong part of our company to come. That's even more true for Technik. We all have discussed with you before that '25 due to tariffs, there has been a little bit of a slowdown of our increase of margin and profits, which we don't expect to see again in '26. And obviously, the more or less new part of the Technik business being defense will probably also get more headwinds -- sorry, tailwinds, tailwinds from the unfortunate military developments in Iran over the last days and more to come. So I'm sure we'll be talking this -- we will be talking about this rather more than less in the future. Till with that little call it, 360 and almost hourly dynamic situation where we are, I hand over to you and talk to you in a few more minutes with some outlooks on my side on the strategic path before we are ready for your questions. Till Streichert: Yes. Thank you, Carsten, and also a warm welcome from my side. Exactly as Carsten said, I'll deal with the 2025 looking backwards. And then, of course, looking into 2026 and commenting on our outlook and then Carsten and I will try to answer your questions, in particular, to 2026 as much as we can in the best possible way. But let's first get 2025 out of the way. So 2025, as you've seen, revenue increased by 5.4% to EUR 39.6 billion, enabled by disciplined capacity growth of 3.8% of our Passenger Airlines, strong third-party revenue growth at Lufthansa Technik and as well continued strong demand for air cargo. And while costs developed in line with expectations last year, the cost increases continued to weigh on our P&L, such as a 10% increase in fees and charges or also a 40% increase for emission certificates last year. On the positive side, we did benefit from a lower fuel bill in 2025 and that was EUR 514 million lower than the year before. Overall, adjusted EBIT increased by EUR 350 million to EUR 1.96 billion and our adjusted EBIT margin improved to 4.9%. Please note, due to a one-off tax valuation effect, our positive EBIT development did not translate into a higher net income. Adjusted free cash flow amounts to EUR 1.2 billion, and this is a significant improvement, and this significant improvement was driven by the stronger adjusted EBIT, tax reimbursements and a slightly lower net CapEx. Turning now to our Passenger Airlines. The segment surpassed last year's results despite a challenging environment. Adjusted EBIT increased by EUR 41 million, supported by favorable fuel prices, a significantly lower irregularity impact and a positive earnings contribution from IATA. We are especially happy about Lufthansa Airlines adjusted EBIT improvement of around EUR 250 million. And this reflects the positive impact of the turnaround program. And across all our airlines, capacity grew, as mentioned before, 3.8%, with growth being primarily deployed to the North Atlantic and Continental routes, reflecting the strategic importance of both markets. In the second half of the year, we shifted capacity growth towards intercont markets while streamlining cont traffic. Seat load factor was at 83.2%, slightly higher than 2024 and with a clear momentum towards year-end. As anticipated, yields came under pressure, particularly on short haul and parts of long haul. However, I want to highlight that in our important North Atlantic traffic, unit revenue increased in the fourth quarter by 2.1% on a currency-adjusted basis, confirming the resilience of the demand. Moreover, yield weakness was, to a large extent, compensated by strong growth in ancillary revenues, up 15% for the full year as well as significantly lower irregularity related compensation cost. On the cost side, we have improved our performance throughout the year, while ex fuel CASK still increased by 3.6% in the first half of the year. The increase in Q3 was only 0.5% and the Q4 CASK was almost flat to prior year. This impact of our turnaround measures is important given the ongoing substantial cost inflation in fees, charges and personnel costs. As mentioned before, Lufthansa Airlines is of fundamental importance to us. So I'm happy to report progress. In its turnaround program, we achieved measures with a gross earnings impact of more than EUR 500 million, a clear confirmation that the turnaround is gaining traction. Looking ahead, we expect to measure volume to increase to EUR 1.5 billion by the end of 2026 and to EUR 2.5 billion by 2028. As communicated in our -- on our Capital Markets Day, we are targeting a high single-digit adjusted EBIT margin by 2028 to 2030 for Lufthansa Airlines. The key building blocks of this trajectory are clear: The continued renewal of our fleet, productivity improvements and the combined power of many other initiatives of the turnaround program. On fleet, we expect the Allegris share of the Lufthansa Airlines wide-body fleet to reach as much as 50% by the end of the year. This goes hand-in-hand with an improved yield level, we currently see a 12% RASK uplift from Allegris. On productivity, we will shift further 14 aircraft into our more cost-efficient AOCs, Discover Airlines and City Airlines, City Airlines has recently taken up operations out of Frankfurt and will operate 18 aircraft by the end of the year in total. Discover will operate 32 aircraft, including four A350s. Combined with further measures to improve cockpit and cabin staffing, this is expected to increase crew productivity by about 7% in 2026 compared to prior year. On our 700 turnaround initiatives, let me just comment on some of them. One example is ancillary revenues where we expect a further push driven by the prominent placement of additional services as well as the consistent monetization of the Allegris seating options. Our new cont fare structure will lead to a more personalized offer with the aim to increase customers' willingness to pay. And on the cost side, we will increase operational efficiency and hence, achieve a further reduction as well in fuel consumption. All of this improves financial performance. And in 2026, we expect that we can limit the increase of the Lufthansa Airlines ex fuel CASK to a maximum of half the annual rate of inflation. Moreover, it is noteworthy that this unit cost increase is fully driven by premiumization, hence an investment into value creation for both our customers and ultimately, our shareholders. Ladies and gentlemen, structural improvements do not only apply to our mainline, we also focus on digital transformation on a group level. Let me briefly touch on the progress of our One IT program. One IT is a group-wide transformation program and its aim -- its aim is to move toward a completely unified IT backbone, a common data and AI foundation and an integrated operating model under the recently founded legal entity Lufthansa Group .IO. The objective is clear, structurally lower IT costs while unlocking digital business value. And I'm pleased that already in 2025, the launch year of the program, One IT delivered its first tangible financial contribution. We realized more than EUR 50 million of IT cost savings through quick wins such as contract renegotiations, sourcing optimization and application rationalization. In 2026, One IT will focus on the implementation of structural changes followed by scaling on in 2027. The program targets in total about EUR 200 million of sustainable annual cost savings by 2030. This IT transformation will also enable significant additional business, value for example, ancillary revenues, personalized advertising or cost improvements and customer servicing. And this is why One IT is not only a cost program, but a core enabler of value creation across the entire group. Let me now turn to our Logistics segment. Lufthansa Cargo once again delivered a strong performance in 2025, demonstrating that the business is well positioned in the post-pandemic air freight environment. The revenue growth of 4% was driven by a 5% capacity increase as a result of one additional freighter and increased belly capacity. Strong demand was driven by Asian e-commerce, semiconductors, aviation components and pharmaceuticals, all of them high-margin verticals and therewith putting them into the focus of Lufthansa Cargo. Lufthansa Cargo delivered an adjusted EBIT of EUR 324 million, representing a 29% improvement driven by higher volumes and improved load factors more than compensating a decline in yields. On the cost side, Lufthansa Cargo showed a strong performance, ex-fuel unit cost decreased by around 6% and main drivers were here, lower charter expenses, IT cost reductions and improved crew productivity through optimizing network planning. Looking ahead, we expect for Lufthansa Cargo a clear earnings increase in 2026, building on a disciplined execution of its strategy and the strong market position in special cargo and premium products. Turning to our MRO segment. Lufthansa Technik achieved a 12% revenue growth, with total revenue exceeding EUR 8 billion for the first time, driven by a 23% increase in third-party business. While this was an exceptional top line development, adjusted EBIT amounted to EUR 603 million, broadly in line with the previous year. And this result was achieved despite sizable external headwinds. One of those headwinds came from foreign exchange developments, while the weak U.S. dollar had a net positive effect for our airlines, Lufthansa Technik was impacted negatively with a mid-double-digit million euro earnings effect. Lufthansa Technik was also affected by the U.S. tariffs on aluminum and steel impacting the results by roughly EUR 30 million. But please note that this was already significantly lower than originally assumed due to the swift and successful implementation of mitigation measures. These measures included adjustment to the production flows, renegotiations with customers and optimizing customs processes. These steps contributed to an earnings recovery in the fourth quarter and we expect that the negative effects will diminish further in 2026. In parallel, Lufthansa Technik continued to expand its global footprint. New or growing facilities in Portugal, Tulsa, Calgary and Malta will contribute to substantial capacity additions, particularly in the engine segment. And in 2026, we expect earnings at Lufthansa Technik to increase significantly, supported by normalization of tariff impact, continued growth in the engine segment and the benefits of the commercial initiatives already underway. Turning now to cash flow. 2025 was a year of significant improvement for the group, both in terms of cash flow profile and resilience of our balance sheet. Operating cash flow increased to EUR 4 billion, driven by higher earnings as well as a tax repayment from a German tax audit. CapEx includes the final payments for 23 new aircraft, of which 9 were wide-body aircraft. This was partially offset by 19 sale and leaseback transactions and net CapEx stands at EUR 2.5 billion and is therefore slightly below previous year's level and also below our expectation at the end of Q3 due to a delivery shift of 4 wide-body aircraft into the first half of 2026. And adjusted free cash flow reached close to EUR 1.2 billion, which represents a meaningful increase of EUR 350 million. Looking at our balance sheet. The combination of strong operating cash flow and disciplined investment led to a significant strengthening of our liquidity position, and we ended the year with liquidity of around EUR 10.7 billion, above our target corridor of EUR 8 billion to EUR 10 billion. And we expect this liquidity position to return to the target corridor -- into the target corridor by year-end 2026 as we use these available funds for aircraft, invest and payments. Financial net debt increased to EUR 6.4 billion, mainly driven by the capitalization of leases. And when including our net pension position, total net debt remained stable year-over-year. And as our profitability increased, our leverage ratio improved to 1.8x. We continue to be solidly positioned with an investment grade credit rating and ample financial flexibility to support our fleet renewal and growth plans. Now let's talk about fuel prices, which is, of course, on top of everyone's mind right now. So fuel costs developed favorably throughout 2025 and amounted to EUR 7.3 billion in line with guidance. For 2026, our fossil fuel bill estimate is around EUR 7.2 billion, thereof EUR 7 billion for fossil fuel and EUR 0.2 billion for mandatory SAF. All figures as of last week Friday. These numbers represent a tailwind of approximately EUR 100 million versus 2025, predominantly driven by the weaker U.S. dollar. And as you know, our hedging strategy continues to provide protection against volatility while also allowing us to benefit from price declines. And for the Passenger Airlines, we have already hedged around 82% of our fuel needs for the remainder of 2026. Since last Friday, we have, of course, seen a substantial increase in the jet fuel price, resulting from both higher crude oil price as well as higher jet crack. I will comment on this in more detail in a minute when we talk about our full year earnings outlook. So let's go there. And speaking now about our outlook for the current financial year. This is obviously not easy given the events in the Middle East. On the one hand side, I see the strength of our group and the progress we make in executing our strategy in all the dimensions and also in all the dimensions that we can control. On the other hand, I see what's happening around us and this does have an impact as well on our financials. The bottom line impact will depend on which effects are outweighing the others and also on whether those effects will change subject to the duration of the current situation. Being in this situation for only 6 days by now, obviously, does not provide us with sufficient hard data points to draw final conclusions for the rest of the year. But of course, we have data points from the first couple of days, which we were going to talk -- which we are going to talk about in a minute. Let's go through the building blocks of our outlook. We plan to increase capacity by around 4% and here also in a disciplined way. Clear focus will be on intercont routes where we expect to grow in mid- to high single-digit range while cont capacity will be broadly unchanged. I do expect cost inflation to persist but it will be partly offset by our transformation programs and the ongoing fleet modernization. And on this basis, we expect adjusted EBIT for 2026 to be significantly above the 2025 level, consistent with our commitment to delivering sustainable profitability improvements. Now let me put this into perspective of the Middle East crisis, and let me describe to you what we are currently seeing. One slide before, we've shown you a fuel price forecast based on last week's Friday, and that is the way we always presented to you each quarter, including also the fuel sensitivity, the fuel matrix where you can go along the axis and get an idea how things can move. Now since then, fuel prices have increased and taking a short-term perspective, just for the next 2 months, current fuel price levels mean about a 20% to 25% higher fuel cost for March and April compared to the underlying figures reflected in our EUR 7 billion forecast for the full year. However, for March, the impact -- and again, that's normal, for March, the impact will be further limited as about 60% of our physical settlements for fuel are priced at the prior month level. This does give us additional time to also adjust our revenue management approach. Having said that, broadly, in terms of fuel dynamics, we don't believe that fuel price levels remain in the long run where they are right now. Then we also have impacts from flight cancellations. Since 28th of February, we, of course, have stopped flying into the region. These are 10 destinations. And overall, to give you an idea, Middle East traffic would have represented about 3% of our capacity in the first quarter. For comparison in 2025, it was just about 2%. So you can see that the overall impact is somewhat limited. We estimate about a EUR 5 million earnings impact per week from those cancellations based on lost business and cost of care. On the other hand, we are also observing positive earnings effect. And firstly, since last weekend, more people have been flying with the Lufthansa Group Airlines instead of connecting via the Gulf hubs. Since the weekend, additional bookings on our Asia and Africa routes have by far overcompensated the cancellations we've seen on our Middle East routes. Over the past days, revenue intake for departures in March was about 60% higher than last year. Global net revenue intake for the full year during those days, was more than 20% higher than last year, indicating a positive impact in booking intakes also beyond March. We expect this situation to persist as long as the hubs in the Middle East cannot be fully serviced. Secondly, many people are currently changing their travel plans in the short term. And on this topic, we see the possibility that travel patterns might also change for longer. Potentially persisting -- potentially persisting security concerns around the Gulf region might also lead to more traffic within Europe or through European hubs or U.S. destinations. Thirdly, with more than 80% hedge ratio, we are hedged to a higher degree than many others. This provides us with a relative advantage, especially compared to those who are not hedged at all. And fourthly, a large part of the airfreight capacity in the Middle East is currently affected, about around 18% of global capacity is not available at the moment. This means that also cargo streams are shifting. And Lufthansa Cargo has observed an increase in demand over the past few days. Moreover, we've seen rise in cargo yields of 5% worldwide and plus 35% in the Middle East and Asia over the past few days, even a further yield uplift from these markets is conceivable. More longer term, we might also see more shift from seafreight to airfreight when things are time critical. Therefore, for me, the conclusion or the message is kind of clear. We do control what we can control, and we are obviously closely monitoring what's going on in the world right now. And even in the light of the current situation, we are convinced that we can significantly increase our adjusted EBIT in 2026. However, let me also be clear, the range of uncertainty has increased and there was also the range of possible outcomes. Let's now go back to what we control, that's our CapEx. Our CapEx outlook. Net CapEx is expected to amount to around EUR 2.9 billion, reflecting the planned delivery of up to 45 new aircraft. That's the largest single year fleet expansion in our company's history. And adjusted free cash flow is expected to be around EUR 0.9 billion slightly below last year due to the higher investment volume. We expect 2026 overall, to be a year of continued progress for the group on our path towards our midterm targets and our businesses are well positioned and on a clear trajectory towards long-term value creation. And on that note, knowing that, of course, 2026 will be at the center of our discussion, I believe. I'd like to hand back to Carsten for further remarks on the strategic outlook. Carsten Spohr: Yes. Thanks, Till. And just a few words on, indeed, how do we look into the future, of course, based on what Till and I communicated at the Capital Markets Day back in September, where we announced our medium-term financial targets, you are well aware of by now, centering around 8% to 10% adjusted EBIT margins. First, lever of -- the 4 key levers I'd like to address is obviously airline growth in a profitable way, which means for us more long haul than short haul. We actually want to grow the intercont fleet to 200 aircraft while we keep the short-haul fleet more or less flat. The additional required feed will be provided by coordinating our hub traffic in the future, centrally over all 6 hubs, which will give us a higher share of feed passengers to intercont destinations rather than short-haul to short-haul. At the same time, we're, of course, leveraging the One Group approach beyond this example. We do see a 3% margin uplift from fleet and new premium alone but there's also elements of the loyalty ecosystem and the ancillary push, which will pay into our midterm targets. Last but not least, the so-called One IT, where we're harmonizing the IT network, at least across the 6 hubs in many regards, even beyond our hub and Network Airlines is another example of this second lever. Third, airline cost transformation. Operational excellence focus in '25 has provided the stability I quoted was -- mentioned to you before. Now starting in '26, efficiency will be higher on the priority list. And we do believe, including more modern aircraft, including, of course, lessons learned, and finally, enough staffing at the European and especially German hub airports, we will be able to show that we keep our unit cost despite cost inflation flat in '26 as we already did in the fourth and last quarter of last year. Another element of this will be the fact that we grow fastest in those airlines with the best cost competitiveness, thinking about Discover, for example, and Lufthansa City Airlines. Yes, and last but not least, the so-called fourth lever is the additional focus on MRO and cargo. You know our Ambition 2030 program in Cargo, by which we want to achieve EUR 10 billion of revenue with the 10% EBIT margin by the end of the decade. And also in Lufthansa Cargo probably supported by the recent developments in the Gulf, we are looking to claim the top 3 position globally, again, coming out of top 5. Last but not least, defense was already mentioned, and we strongly believe, again, with current affairs probably creating a tailwind here that defense will be a very stable and highly profitable part of Lufthansa Technik to a higher degree. Last but not least, let's talk about a little bit more about maybe the single most important lever and most impactful lever we have, our fleet renewal. You're aware we're taking -- we're in the middle or at the beginning, if you might say, of the largest ever step towards a more modern and productive fleet. We expect 45 new aircraft this year alone, more or less 1 per week, and there is an unheard number of 27 widebodies among them. That will bring us to a new tech quota across the whole group of 1/3 with obviously resulting cost advantages and productivity gains. Also, we see some light at the end of the tunnel of the Pratt & Whitney engine issue. As far as it looks now, we'll be able to bring down the number of grounded aircraft to less than 10, which is 30% less than last year. Coming to an end, getting ready for your questions, you might share my view that the Lufthansa brand is an iconic brand in our industry for many, many years now, celebrating our 100 anniversary today. No doubt, we intend to maintain this in the future. And part of that must be the further improvement of the customer experience and be an example of Starlink, which we are looking to offer to our customers as of Q2, be it new lounges in almost all of our hubs and flagship lounge to be opened soon in JFK, where all of our group airlines or more or less all of our long-range group airlines are serving the airport at least once a day, where overall, the further integration of IATA creating more synergies is a step towards that product improvement for our customers. So overall, again, with all the uncertainties existing, we're looking optimistically into '26, and now -- look forward to your questions and comments. Thank you very much. Operator: [Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank. Jaime Rowbotham: Two questions from me. Firstly, Carsten, I wanted to ask about these puts and takes, pros and cons of the current unfortunate situation. Till did a great job of running through some of them. Interesting to hear bookings to Asia Africa over compensated for cancellations to the Middle East. I just wanted to focus it maybe on the transatlantic, given it's so important for you, your U.S. competitors aren't hedged, so they are likely raising fares and hopefully, you can follow that a bit. At the same time, though, I wonder if fares are going up at just the wrong time in the sense that some people might be nervous to travel at all, which could have a downward impact on demand. Maybe you could just flesh out either what you've seen so far or what you think happens next insofar as that's possible. Second one for Till. Thanks a lot, for clarifying what might happen to fuel for March and April. I just wanted to ask, if possible, about the full year. So on the fuel slide, you tell us you as of last Friday, $71 for Brent, $26 for the crack spread to get to EUR 7.2 billion. Obviously, Brent now $88 and the crack spread about $100 a barrel. So it's costing more to refine than to buy the oil. Hopefully, that won't last. But the forward curves are pointing to a scenario that's not even covered by your sensitivity table where the jet crack part on the x-axis could double or triple versus what you show. You also mentioned in the footnote, the hedging you've got is part on gas oil and part on Brent, so you don't actually have the crack spread hedged. With that in mind, have you had a chance to do any scenario analysis on what a mark-to-market type fuel bill might look like for all of 2026? Till Streichert: I'll go second first and then maybe on the puts and takes, Carsten, if you want to add a little bit. So Jaime, absolutely. I mean, this is top of mind question how this is going to evolve. And you are quite right in terms of hedging. We've got a split and you know that we usually hedge blend with about 35% and gas oil as a proxy for jet crack with about 50%. And it's true that, obviously, jet crack has moved up. You can almost say off the chart of our fuel matrix on the right-hand side. So here, I would just highlight, and again, mathematically, you can calculate all of that, and we have done that. And the impact, obviously, if you would imagine that it stays for the full year is of size. On the other hand side, I also don't believe that this situation will going to stay there for a long time. And you can see also, and I'm sure you've looked at the volumes that have been traded driving ultimately the crack price, the crack spread. It's on very low liquidity. And therefore, there was -- I would also say a bit on the back of what President Trump yesterday evening said to possibly also escort tankers through the Strait of Hormuz. Ultimately, I do believe that this is not going to stay for long at these levels. And of course, leading now into the other side of the equation, it's true that the hedge levels do we have give us a solid upward protection. And of course, this differentiates us versus others that follow a non-hedging policy. And therewith, I do expect that also yields also or in particular, on the North Atlantic have got the potential to go up and increase. Carsten Spohr: Yes, Jaime, Carsten here. I think you already kind of put it in your question. There are pros and cons, and I think it's very difficult right now to quantify them exactly after just a few days. Again, cost of cancellations exist, probably like EUR 5 million per week is our best estimate. But at the same time, as you pointed out, we have a relative advantage on the fuel cost on the one hand. I think there's also historically a certain move of bookings towards highly trusted brands in times of crisis, we are definitely SWISS as the [indiscernible] Switzerland and Lufthansa to a certain degree, we probably benefit from. Then, of course, the question is, is the overall potential softness in travel for us, European carriers overcompensated by the shift of travel from carriers in parts of the world where people don't want to go now towards us. Hard to quantify at this point but not completely probably unexpected that will happen to a certain degree. And as I said before, there will be flexibility in our network as we are now within days putting capacity into China, into South Africa into Southeast Asia, of course, we're happy to also reallocate capacity throughout the whole summer if needed. If, for example, the demand tool from Asia become so strong that the next best route tool from Asia is more profitable then the weakest route on the North Atlantic, we would move the airplane. But I think it's way too early to discuss that now. Till Streichert: Let me add maybe just 1 additional point, if I may, just to give you a bit of a holding line as well on the RASK side. If we would have spoken 10 days ago and talked about RASK expectation for the first quarter, I would have said currency adjusted, so ex-X positive but including FX, slightly negative. Now as we speak today, with the net booking intake that we've seen over the past few days, this has shifted clearly to the positive side. And I expect that the RASK for the first quarter should reach a positive territory, even including the unfavorable FX headwind in comparison to prior year because remember, obviously, the U.S. dollar started to depreciate just in the second quarter last year. Operator: And the next question comes from Stephen Furlong from Davy. Stephen Furlong: Carsten, Till and Marc, congratulations on the results. Carsten, in the prepared remarks, I mean, you talked about the industry being more resilient to crisis than it used to be. Could you just amplify that? And then maybe just talk about the Allegris products and talk again about the kind of rollout of that product. I know there's been a lot of kind of news, comments and reports about some delays and then not delays and what the revenue kicker you're getting from that excellent product? Carsten Spohr: Yes, Stephen, thanks. I think has said this numerous times about the industry being more resilient before the unfortunate events that the Gulf started a few days ago. Because, unfortunately, already before that, we have more military conflict in the world than ever before since 1945. And whereas usually, when there's a conflict somewhere, bookings usually collapse because people are afraid to fly and want to stay home, this hasn't happened, not only not the last days, let's even go beyond that. We have seen, as you well know, record demand in the industry basically since COVID. And what is the background of this. I share the view of some of my American counterparts that for consumers, traveling has been higher prioritized since COVID as before. That's 1 element. We definitely don't have a period of overcapacity due to the shortage of engine and plane productions at the OEM level. And I think last but not least, you see more wealth around the world, not only in the saturated markets but also in other parts of the world, which airlines serve. I think all that combined -- by the way, the last one is why especially the premium classes, as you know, are booming now for many years. So I think all that combined shows that even though the world has not become more stable, our industry has. And now to also the last days might add to this because imagine this would have happened 20 years ago, I think you would see a very different booking environment than what we are seeing since last weekend. Allegris, yes, we had significant delays in certifying the Boeing aircraft with our Allegris seats who have a different manufacturer than the seats in our Airbus wide-bodies are manufactured by. We wanted to split the risk many years ago and also the capacity of none of the seat manufacturers was big enough to provide all of our wide bodies. But now these airplanes are coming in quick time, as I mentioned, 9 are here already. By the end of the year, we have 36, I think, as I said in my opening remarks, we have 28 seats in the 787, of which 25 are now certified as the end of March. And there is now only 3 seats, which will not be able to be sold by the end of March. And we even now decided to pull that 1 week forward giving us additional revenue opportunities by already having the seats open for a flight a few days before the end of the winter schedule. But that's only the 787 topic. And as mentioned also by the end of the year, in the Lufthansa Airline, 50% of our seats will either be Allegris or in case of the 380 aisle access seats. So we're another manufacturer. So this is now in full swing. We mentioned before, we have 12% to 13%, 14% higher yields on these seats than on our regular business class seats. So that's big and also the ancillary revenue increase, which we're expecting for '26 to a high degree, will come from Allegris versus the first time we actually charge for different seat types in business class, so that will also be, I think, tailwind for '26 and beyond. I hope that answers your question. Operator: And the next question comes from Alex Irving from Bernstein. Alexander Irving: I'll ask 2, please, both around technology. First of all, on IT, you signed in the last quarter for a new IT platform to implement across 9 of your group airlines. There's an IATA paper that's been around for a while that talks about a 2% to 3% improvement to RASK platforming like this. Is that the right way to think about the upside for Lufthansa Group? Or is the incremental gain less given your work to date in areas like continuous pricing, for example? Second question is on the distribution side of things, specifically, how are you approaching decision about whether and how to sell in large language models? Are you planning to engage directly through an API or to rely on existing infrastructure GDSs, travel agents and continue to pay commissions? Do you have a view on when you're likely to sell your first trip through an LLM? Till Streichert: Okay. I'll make a start on the first one, and then I'll see how far I get on the large language model based selling. Look, I mean, as you know, quite right, we want to embark on the journey of implementing on the one order path, it will be a long-term journey for the industry and also us but it is important to be amongst those ones that joined the pack at the beginning. And we do believe that there are clear benefits on the IT infrastructure on the one hand side because, I mean, as you know, the P&R standard, e-ticket standard and the miscellaneous data standard gets basically consolidated into a single order that is more efficient and drives back office efficiency on the other hand side, quite right. Once you've got this type of let me say, Amazon order type model, marketing and retailing obviously benefits as well. I am aware that IATA quotes these figures of 2% to 3% RASK benefit. To be honest, I find it quite early to take a view on this. But I do believe that principally, there are benefits also on the revenue side from better retailing. I think particularly for us, what I believe is good. We obviously come with scale when you think of passengers that we've got. And whenever you touch these large-scale transformations, when you get it for done at scale, it does give you normally a greater benefit. Look on the distribution, to be honest here, and large language models, I have to admit I'm not that deep into the status where we are. What I can tell you is that, clearly, we are advancing on many fronts in the digital arena to improve customer servicing, through large language model-based trainings, bots. And I don't know what the digital adoption right now is, but we are making progress on that front. But happy to come back and have a dedicated conversation on this. Operator: And the next question comes from James Hollins from BNB Paribas. James Hollins: So Till, on the turnaround update, maybe I always see a slightly in charge of this, so maybe I'm wrong. But as you see it, where have you outperformed, underperformed so far on the turnaround program? And you may not choose to answer this but if I take the Lufthansa Airline EBIT growth of EUR 250 million, which was a gross benefit of EUR 500 million. Is that 50% net versus gross benefit, a good indicator for the full year '26 EUR 1.5 billion? And then probably for Carsten and I know there's lots going on but I thought I'd better mention the strike you had in Q1. Maybe you could update on the cost of that where we are on some of the open CLAs and whether this current situation tends to lead to a bit of a backtrack from some of the union aggression? Till Streichert: Yes. So I mean turnaround, first, to give you my kind of assessment, I am happy with what we have achieved last year. Again, it's not easy to get such a large-scale program off the ground. And the EUR 500 million gross figure, as you know, has come from several initiatives. We've got EUR 700 million in the entire funnel. Several of them obviously have gained traction and delivered in 2025. Let me say, where were we strong and where maybe things will be moving in the future towards. Point where we were clearly strong and successfully executed was operational stability. You remember that was one of our big topics at the beginning of 2025. Get stability back into the production, into the system. That is good for our customers, was good for our customers. You can see that in NPS, customer satisfaction everywhere. And also in the significant benefits on the so-called IRREG cost charges and foregone revenue that is sizable. And that's a clear proof point but also on many other smaller initiatives. And again, I wouldn't speak about EUR 700 million initiatives if it wouldn't be quite granular. We've made good progress. What's ahead of us is clearly the focus on productivity. And this is why I made it also a point on my chart on my slide. And there, we will continue to move capacity into our lower-cost AOCs, Discover Airlines, City Airlines. You can see the aircraft that we are moving and also starting operations for City Airlines from Frankfurt and there with big focus for 2026 and beyond is productivity. Now to your question, gross versus net. Look, it's hard to say. To isolate it on a program level because we do have, obviously, underlying cost inflation drivers from a salary point of view, from a fees and charges point of view, and therefore, it's a bit of a harder ask to say how this -- how the gross is directly translated into a net. But I do see us on track to get the EUR 1.5 billion in 2026 delivered. Carsten Spohr: Yes. On the strikes, the number you're asking for day of strike like the 1 we just had, we probably estimated to be around [ EUR 50 million. ] You might see that's a lot less than what we had before. Why is that? Well, there's less support this time for the units going on strike, which results in more volunteers to continue operation. So therefore, we don't ground the whole fleet as we were forced to in the past but keep our most profitable routes in the area that's reducing the cost. Looking ahead, we are in constructive talks both with our cabin union, as a matter of fact happening today, and Verdi, our ground staff union and also for the cockpit union, actually, we have now 2 corporate units in Germany but for the 1 which is affected here for Unabhangige cockpit, we have offered even in a moderated fashion to talk about the bigger scheme of things, which right now has not been agreed to yet but the individual pilots very much want to stop the shrinking of the main airline, which becomes more and more obvious, as Till just pointed out with our shift of airplanes. So I'm quite optimistic that eventually, that shrinking on behalf of the pilots should come to an end, which will require us to talk on the bigger scheme of things. So I don't see any strike action like the one we saw in 2012 to 2016 or anything because there, we just now too much what the members want and believe that the answers, of course, can only be a reduction of the cost disadvantage of the main airline to the other AOCs in Lufthansa, whereas a strike itself and even the things they're asking for in the strike, and we are not willing to give in the airline with the lowest profit would increase the distance and the disadvantage on the cost side. So this will not be a long-lasting, I think, exercise. Operator: The next question comes from Harry Gowers from JPMorgan. Harry Gowers: First question, maybe just related to Jamie's question on the fuel hedging. Can you just confirm, do you fully hedge the crack component and that's all included within your comments on the March to April monthly impact? I think you said that gas oil hedging is a proxy for jet crack, and so does that type of hedging basically fully cover the price increases we're seeing in the crack spread market at the moment? That's the first one. And then second one, just on the ex-fuel unit costs. You have this comment around 2026 ex-fuel CASK is expected to be half of inflation for Lufthansa Airlines? Can we extrapolate that for the entirety, I guess, of the kind of new network airline segment? Is there any reason why those other airline businesses won't be reporting a similar cost results? And maybe just related to that, if I can squeeze 1 in, what are you assuming for the union agreements? And staff cost inflation in your overall kind of cost and EBIT guidance for the year? Till Streichert: Okay. Maybe a comment on just union agreements. I'll leave to you, Carsten, and I'll go on the first question -- on the second question first, ex-fuel unit cost. So let me be clear what I said is indeed for Lufthansa Airlines, half of inflation is our target. Now overall, as you will remember, we stayed away from giving a group guidance on CASK overall. So we limited it to a specification just for Lufthansa Airlines. Of course, all of the other airlines, our business units have got CASK saving programs in place but I don't want to give an overall cost guidance for the entire group. Going back to the first question, which is a fuel hedging, once again, we hedged gas oil 50%. So 50% is the element of our hedge. Our hedging composition included 35%. And gas oil as a proxy that is strongly correlated to jet crack but it's true currently, Jet crack is very high. We believe that the spread between jet and gas oil will come back to normal levels. And I think the spread currently is inflated mainly because of the illiquidity in the market. Carsten Spohr: Yes. Harry, if I got your question right, you wonder how union agreements would impact our guidance. So I think it's fair to say they will not impact our guidance. Where we have talks, we kind of know what we are willing to offer and how that would result in financial outputs. Of course, it's in our planning. And in the last strike we had for the pilots on the mainline, we told them that as long as the main line is not reaching its targets in terms of profitability. And that actually is the lowest profitability airline in the group. There is no any financial room for maneuver to pay even higher pension benefits, which are already higher than the ones in the other airlines. So there's also no room for additional costs here. That remains is, of course, the cost of strikes. But at the same time, the more strikes there are, the less airplane will be in that airline. So I think there's almost like a natural hedge if you want to use the term from our fuel environment. So the answer again, to your question is that there is no impact on the guidance to be expected from the current labor conflicts. Operator: And the next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: I have two from me. On the first one, coming back on fuel, apologies. How much of that fuel inflation can be passed on? Obviously, you mentioned your exposure to jet and gas oil crack. But obviously, the U.S. guys are not hard at all. So if fuel goes up by 10% approximately, how much of that can be passed on? Can we assume half of it? The reason why I'm asking is because I'm slightly surprised to see you we're comfortable of providing an EBIT guidance without a lot of visibility in the near term on fuel. And I therefore assume you guys feel comfortable passing that on. So just trying to understand the extent of it. And then the second question is can you provide maybe an update on TAP, what are the latest news here? And how comfortable are you on TAP? Till Streichert: I'll take the first one, just on fuel once again. Two comments I would add in addition to what I already explained. I mean, first of all, ticket prices are made at the market level but we do see already increased yields also on the North Atlantic and the fuel price surcharges are being implemented. Now how much of that exactly I can't tell you but the situation is dynamic, and therefore, I think it is just not prudent to give you a statement on that. I think if in the future, fuel prices remain elevated, clearly, everyone and in particular, those ones that follow a no-hedge strategy or have got less hedge protection will need to pass on fuel prices. And that, in my view, provides an opportunity and allows for equally pass-through from our end of additional fuel cost. We have done first price increases already through the fuel price surcharge and have implemented them. And sorry, and just 1 more thing, Cargo. I wanted to speak about both segments. Cargo obviously works on a pass-through model as well. And there -- there is literally -- it's not on a daily basis but within a week, prices get adjusted for the input cost of fuel. Carsten Spohr: Yes. Actually, there's nothing really new on TAP. As you know, we are in the process because we believe there would be a perfect addition to our multi-hub network, also due to the fact that we are currently the weakest on the Latin American market. The overlaps are less than they would be for others, which probably has an impact on the antitrust approvals to be obtained. At the same time, there are so many open questions about the process and the outcome that it's impossible at this point to answer is creating value for our shareholders or not. If it doesn't create shareholder value, we will not do it. We don't need it. If it ends up to be a win-win of Portugal TAP and us, we will maybe see more progress here. Nothing else to add. Operator: And the next question comes from Muneeba Kayani from Bank of America. Muneeba Kayani: Firstly, Till, if I can just clarify your comments around the impact from the Middle East on kind of near-term March, April. Did you say that the higher bookings demand that you're seeing for Asia, Africa and all is compensating just the cancellation costs? Or is it compensating cancellation costs and the jet fuel higher costs on the unhedged portion? So that's my first question. And then secondly, just going back to the transatlantic and Carsten, in your experience, how long does it take for kind of U.S. airlines to adjust the capacity in such shocks on the oil price, given their lack of hedging? Till Streichert: Mona, let me take the first question, albeit I might not give you a totally conclusive answer on that. But yes, first of all, and let me go on the net booking intake and just to run you through that. And I've really taken the view on kind of what numbers do we see right now. And since last Saturday, our net booking intake has developed strongly, exactly as I said. And when we compare these net bookings which we have received between Saturday and Wednesday, end of day, for the month of March, this figure is about 60% higher than 1 year ago. And my second statement on the inflow side was, if I compare same period, those few days, net bookings for the rest of 2026, this figure is 20% higher than 1 year ago. So clearly, what I said on the negative side, the cost of the cancellations of the Middle East, we have comfortably covered. To your question now, does that cover as well the fuel cost. Look, it really depends on how long the fuel prices remain elevated because I've equally given you a view on March and March as such, while I said, nominally 20%, 25% higher fuel bill as we obviously settle the physical fuel bill with a month's delay, you can actually knock half of it off for a month, okay? So it's not that straightforward to say how all-in looks like but there are puts and takes. And I think we should clearly see both of them, albeit I'm not giving you a net figure right now because I can't. Carsten Spohr: Yes. Muneeba, Carsten, you asked for my experience, and I think the things I experience is twofold. First of all, the speed of reaction is a function of the impact of -- on the traffic. Think about 9/11, it took us all only days to come up with a different schedule when the skies reopened than the schedule we had before because it was so obvious impact was huge. I think this is a different situation here. But none of us knows how long the war will last, how long the impact will last, at which degree but I think it's worth to say that all of us have become much better in reallocating capacity to demand, also due to the lack of aircraft in general. What does that mean? When you have a route which is not performing well anymore, you can more easily find another route to provide profitability and value for your shareholders than in the past where maybe you already had loss-making routes and couldn't find something else because otherwise, we would have done it before. So I think with the profitability where it is also for the international business of the U.S. carriers, we're going to see a very market-focused reaction on both sides of the Atlantic, which fuses our optimism -- fuels our optimism, sorry, for my language. Operator: And the next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask about IATA, we haven't spoken about that beautiful pretty picture on the slide of the planes? How are you thinking about the decision to take majority in general? And then how are you thinking about it in the context of the unsettling events in the Gulf? And then can I just come back to the scale of current bookings? You've given us really precise figures on how bookings have come in for those destinations in the range of the Gulf that have gained. What has happened to booking inflows for short-haul Europe? What has happened to booking inflows on the North Atlantic in that short time period? Till Streichert: So look, first of all IATA, on it, maybe I'll just divert the sac, and just IATA has done a good 2025. Organically, they've reached breakeven on adjusted EBIT, which is positive, which is great. And you can actually back-calculate what also their overall net income was. Our 41% contributed with EUR 90 million. On our side, I do see many benefits of calling and integrate -- calling early and integrating IATA faster. We've made very good progress throughout last year. But as you can imagine, with the call option being open to be decided in June, we will keep our options open, and we continue to assess and then take a decision nearer by the time and will communicate. Secondly, on the different travel on the -- sorry, your second question was on Europe and North Atlantic in terms of sentiment, travel sentiment. We actually have so far not observed worsening of travel sentiment or also bookings in intra-Europe or North Atlantic but of course, it's to be seen. Operator: And the next question comes from Ruairi Cullinane from RBC Capital. Ruairi Cullinane: What have you done to Middle East capacity this summer? And linked to that, should we expect the EUR 5 million per week cost of cancellations to tail off even if the conflict doesn't come to an end soon? And then secondly, are you any less comfortable hedging fuel through Brent and the gas oil and leaving spread to jet fuel unhedged? Could you consider that in the future? Till Streichert: First of all, Middle East, I've given you an idea of the sizing. Last year, it was about 2% of our capacity. In Q1 normally that would have been 3%. Remember, last year, there was also a bit of on and off of flying into the Middle East, and this is why it was 2%, and we had it increased it a little bit. So I think what I've given you now is a EUR 5 million negative impact while we are not flying will rather go down because it does include, of course, a view on the cost of care. We took a view now of also those additional costs that is just on the ones where we actually need to care -- where we need to support, while also passengers guests are staying still need to be repatriated or flown back. If it stays long, we will clearly reallocate capacity. And then even this element of what I called negative impact or lost business from Middle East will obviously go away. And therewith, I would say this is not so much of an impact medium term. In terms of strategy of hedging, look, I think I've described it probably to the fullest extent I can do on this call. And we -- our hedging strategy is clearly designed through options and that's different to swaps where we want to participate, also in the downwards movement and therefore, I'm comfortable with the strategy that we have so far in place. Operator: And the next question then comes from Antonio Duarte from Goodbody. Antonio Duarte: The first one is on ancillaries. So 15% growth year-on-year, clearly doing very well, namely with Allegris rollout. Could you give us some color here where you see these terms of ranges going forward? And my second question is turning to the MRO. As you said, a bit of a margin compression seen in '25, a bit of recovery expected from your defense, et cetera. Would you be comfortable with the full recovery from the margin seen in '24? And any color on that would be great. Till Streichert: Okay. Let me make a start just on ancillaries. We have explained what we've seen on Allegris. And the additional seat options and also ancillary sales overall. If I split that, I do believe that the ancillary sales as such has got substance to continue. But of course, it's hard to be at a double-digit rate going forward, just a law of big numbers at one point in time. Therewith, I would like to go back to the Allegris element within the ancillaries. And here, we clearly see the benefit of selling the different seat options. And the main driver of that is obviously the number of aircraft coming with the Allegris cabin into it, and that has got runway and gives us longevity to continue to grow the ancillary sales category. Carsten Spohr: We always call it the big 3, Antonio, baggage, seating upgrades. And that, I think, will continue to drive ancillaries up as Till explained, with Allegris, of course, a special push. MRO, you know that in '25, MRO was suffering almost -- as the only part of the Lufthansa Group under tariffs, which, as you well know, for airplanes and engines don't apply. These tariffs, as we all know, have been ruled illegal by the Supreme Court. So at least they don't go forward. Probably there will also be reimbursements as we all know. So that will be definitely 1 of the reasons why we believe we can not only get back to '25 -- sorry, '24 margins in MRO, but we will continue to go towards the 10% we have planned for the end of the decade. And I'll leave that defense element out, which as I mentioned before, we'll see, I think, another support for the strategic development of Lufthansa Technik, even though it doesn't necessarily monetize short term. But again, we are committed to our 10% margin in '23. And some of the ramp-up costs we had in for Canada, for Portugal also won't repeat themselves. So overall, my optimism continues. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks. Marc-Dominic Nettesheim: Thank you very much for your questions, for your interest and for the lovely discussion. We are happy to continue this from the Investor Relations side. We wish you a lovely afternoon and talk to you soon. Bye-bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Good evening, and welcome to Universal Music Group's Fourth Quarter and Full Year Earnings Call for the period ended December 31, 2025. My name is Nadia, and I'll be your conference operator today. Your speakers for today's call will be Sir Lucian Grainge, Chairman and CEO of Universal Music Group; Michael Nash, Chief Digital Officer; and Matt Ellis, Chief Financial Officer. They will be joined during Q&A by Boyd Muir, Chief Operating Officer. [Operator Instructions] As a reminder, this call is being recorded. Please also let me remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may vary in a material way. For a discussion of some of the factors that could cause actual results to differ from expected results, please see the Risk Factors section of UMG's 2024 annual report, which is available on the Investor Relations page of UMG's website at universalmusic.com. Management's commentary will also refer to non-IFRS measures on today's call. Reconciliations are available in the press release on the Investor Relations page of UMG's website. Thank you. Sir Lucian, you may begin your conference. Lucian Grainge: Many thanks, and thank you all for joining us on today's call. As you can clearly see from our results, last year was a very good year. Our artists, songwriters and labels once again wrapped up record-breaking successes. We made excellent progress across our strategic initiatives and continued our long uninterrupted streak of strong financial growth. I'm pleased to report that in 2025, both revenue and adjusted EBITDA grew by nearly 9%. I must begin by highlighting the creative excellence and commercial success of our artists and songwriters. Their extraordinary music continues to shape culture across the world. Every year, the IFPI, the Recording Music Industries Global Trade Association, reveals the world's top-selling artists for 2025, 9 out of the top 10 were UMG artists with Taylor Swift at #1. As you let that astonishing fact sink in, let me throw in another one. 2025 was the third year in a row that we have represented 9 out of the top 10 best-selling artists on the planet. The only recording artist whom we did not represent on recorded is Bad Bunny, and he's represented by our Universal Music Publishing division. No other company has ever come even remotely close to UMG's outstanding performance year after year in developing new artists who go on to become global brands. A quick look at the 2025 lists across major platforms reveals our remarkable industry-leading position. This slide highlights just a handful of them. Our extraordinary momentum continues to build with a string of recent #1 albums across genres and geographies from Taylor to Olivia Dean, King & Prince, Mrs. GREEN APPLE, both from Japan, Stray Kids, J. Cole, and I could go on and on. As to the critical acclaim and awards, I'll briefly mention how our artists and songwriters won big at this year's Grammy's. UMG artists and songwriter, Kendrick Lamar was the night's biggest winner with 5 awards, including Record of the Year. Kendrick is now the Grammy's most decorated rap artist of all time with 27 awards. Olivia Dean was named Best New Artist, the fourth time in the past 5 years that a UMG artist has received that honor. That also is an unprecedented achievement. Billie Eilish, Lola Young, Lady Gaga, Jelly Roll, Leon Thomas and UMPG's, Bad Bunny were amongst many other winners. It was also an incredible night at last year's Brit Awards -- sorry, last week's Brit Awards at the weekend, where UMG swept the major categories. Olivia Dean took home 4 awards, including Artist of the Year, Album of the Year, and Song of the Year. Other winners include Sam Fender, Lola Young, Dave and Jacob Alon. The Olivia Dean success is an indication how our U.K. company is developing new artists and once again delivering them to the world across all geographies. The demand for our music continues to grow. The subscriber numbers increase, so does the consumption. Industry data from Luminate shows that on-demand audio streams topped 5.1 trillion last year, an increase of nearly 10%. We unequivocally believe that the growth of the business will continue, hitting the 1 billion subscriber mark in the next few years. Our multipronged strategy to capture this growth, of course, includes our excellence in artist development, along with continued implementation of our Streaming 2.0 initiatives. But we will also make bold moves in 4 key areas of the strategic plan, each of which will create meaningful monetization opportunities, driving growth across an entire interconnected ecosystem, and that word interconnected is very significant. So today, as I want to share with you the progress we're making in those 4 areas: expanding our presence in label and artist services; accelerating our efforts in high potential markets; strengthening our direct-to-consumer and superfan initiatives; and adding to our growing portfolio of responsible AI partnerships. The first critical area is our services to independent labels, entrepreneurs and artists around the world, one of the fastest-growing areas of the business. Those labels operate in a diversity of markets, genres and languages and generate meaningful revenue from artist rosters of varying sizes. As much as they differ, they share a common desire to partner with a company that provides them with the best and widest range of services. In 2021, we established Virgin Music Group to expand our expertise and resources in this fast-growing sector, which will be further accelerated by the recent acquisition of Downtown Music. Matt will go into detail about Downtown's financials later. But for now, I will say that the combination of Virgin Music and Downtown will create a global end-to-end solution designed to meet the evolving needs of independent artists, entrepreneurs and rights holders at every stage of their development. The combined company will offer a broad, more flexible suite of services, ranging from high-touch to self-service platforms, including digital and physical distribution, marketing, business intelligence, neighboring rights, synchronization, royalties as well as publishing rights management. Our last acquisition of this magnitude was in 2011, which, of course, was EMI. At that time, we saw the value that others did not and doubled down on the traditional A&R and catalog business. Today, 15 years later, that acquisition is universally acknowledged as one of the most successful and strategically important in the history of the music industry. I firmly believe that our acquisition of Downtown will be as transformational. It creates a scalable and profitable engine of growth that also elevates UMG's core label, publishing and superfan businesses, enabling us to better cover the entire music industry. It is no small matter that Downtown also expands UMG's global footprint, collectively serving more than 5,000 business clients and more than 4 million creators in 145 countries. That last point leads us to the second critical area of our strategic plan, our growing geographical expansion into high potential markets. UMG's approach is to create a compelling array of business solutions that offer multiple ways for artists, labels and entrepreneurs to engage with us. Always in compliance with our strict investment criteria, we partner with the best of them and then deepen the partnership over time. Here's an example of our strategy in action. In India, Universal Music had operated a multi-label structure for years, already offering artists a compelling choice of brands. Earlier this year, we supplemented that choice by investing in Excel Entertainment. Excel is the leading film and digital content studio in a country where original soundtracks remain at the heart of the fast-growing music market. The deal gave UMG global distribution rights to Excel's future soundtracks, while our Publishing division became Excel's exclusive music publishing partner, and the 2 companies will launch a dedicated Excel Music label. On top of this, through Downtown and Virgin Music Group, we now service approximately 100 clients in the region, including new deals with Punjabi label, Jass Records and South Indian label, Millennium Records. So when you take a step back, you can see how UMG has built multiple points of entry into the Indian market. Each of our business units operate with its own unique creative and commercial expertise, but also has access to UMG's powerful global systems and resources. As a result, our ability to capture growth efficiently is increasing. This is an approach that is working well in many other dynamic, highly populated markets, including China. Moving on to our third key strategic effort. I'm very bullish about superfans, as you all know. Given the enormous demand for great products and exciting experiences, we believe this segment is massively undermonetized. Our own D2C business has grown to 1,600 online stores and generates hundreds of millions of dollars in revenue. This only scratched the surface of our potential. We will further scale our D2C business by stimulating an entire category of third-party superfan platforms, each with its own distinctive approach and model. These will operate alongside the premium tiers being developed by the traditional DSPs as well as what we're creating and how we're creating an ecosystem in which special events, experiences and products will entice superfans in both the virtual and physical worlds. As more common competition develops, more innovation will result. Connectivity to fans will increase and the opportunities to drive monetization will continue to multiply. We recently announced 2 partnerships in this space. The first is with Stationhead, a live music segment platform that connects artists and fans through real-time listening experiences, community interaction and integrated commerce. With over 250 UMG artist events in 2025, Stationhead contributed billions of premium UMG artist streams on subscription platforms across millions of active users. Their week of release listening parties contributed to 11 #1 albums across the entire industry. They've executed very successful fan campaigns for UMG, artists such as Sabrina Carpenter, Billie Eilish, Ariana Grande, KPop Demon Hunters, Nicki Minaj, Olivia Rodrigo and many others. The second partnership is with EVEN, which provides super fans with early access to music, exclusive content and community features. Interscope artist, J. Cole, for example, used EVEN for multiple direct-to-fan campaigns, including the 10th anniversary of Forest Hills Drives and the pre-release strategy for his latest album. Both projects leveraged EVEN's white label solution to reach hundreds of thousands of fans and sell millions of dollars of physical product. The EVEN campaign was a significant factor in The Fall-Off, his new album debuting at #1 in the U.S. We don't need to develop a new platform, but both Stationhead and even integrate directly into UMG's current architecture and its direct-to-consumer architecture, capturing fan data and fostering a deeper relationship between artists and fans. Superfan opportunities are rapidly evolving, and we will be right there at every step of their evolution. This evolution is being supercharged by AI, which leads us to, obviously, the fourth focus of our strategic discussion. Our embrace of responsible AI technologies continues to be very aggressive. We're forging partnerships across a spectrum of artist creation and fan engagement initiatives. And there are 2 separate initiatives. I'm very aware that a large swath of the investment community looks at the intersection of AI and media and sees only some of the risks. I want to be very clear, we fundamentally disagree with that view. We believe AI represents an unprecedented commercial opportunities for UMG and our artists in both the near and the long term. We're working tirelessly to shape the business models and the legal and legislative frameworks that will form the foundation of a responsible AI ecosystem. I encourage people to spend time to really understand the work that's being done and the opportunities that lie ahead. Personally, I've never really been more energized about the possibilities that we are pursuing. And once again, we face another exciting transformation. Here are just a few of the things that I'm excited about. On our last call, we discussed our agreements with Udio and Stability AI. Not long after that, we announced our licensing agreement with Klay Vision. Klay's large music model is trained entirely on licensed music. It will evolve AI experiences for superfans while respecting the rights of artists and songwriters. We're excited about this company's vision and applaud their commitment to ethically -- ethicality in generative AI music. In December, we then revealed we're also collaborating with Splice, the world's most popular music creation platform. Together, we are building a road map for the development of commercial AI tools rooted in creative control and sonic excellence. Last month, we unveiled the first of its kind alliance with NVIDIA, the world leader in AI computing. Our shared ambition is to transform and enrich the music experience for billions of music fans around the world. This collaboration will cover everything from artist tools to music discovery to fan engagement. NVIDIA articulated the relationship perfectly when they said, we're entering into an era where a music catalog can be exploited like an intelligent universe, conversational, contextual and genuinely interactive, and we'll do it the right way, responsibly with safeguards that protect artists work, ensure attribution and respect copyright. How phenomenal. Our work with NVIDIA will be a multiyear partnership and like our other AI initiatives, create significant win-win potential in market-led solutions. Our strategy for these AI deals is informed by a significant amount of consumer research, both our own and third party, we're just not sticking our finger in the wind. Our insights team recently conducted a global study on consumer attitudes towards AI and music. The key takeaway is that consumers want AI driven by human intent or AI as an enhancement of and not as a replacement for human creativity. Plus consumers are asking for transparency with respect to how AI is used in the creation of music. This research underscores our belief that AI isn't just an incremental revenue opportunity. It's going to introduce entirely new formats. The superfan AI experiences I mentioned earlier are just the beginning. We foresee entirely new AI formats that will offer fans greater personalization, hyper-personalization and social expression through artist-centric music experiences. Given the high level of interest in AI from both the creative and investor communities, I've asked Mike Nash, who you know well, our Chief Digital Officer, to present more on this in more detail later on this important topic. So that we can see how excited we are. What I've covered in my remarks today is only a fraction of what we're executing every day at UMG. With an artist roster and a music catalog that is the envy of the industry, we're also the biggest driver of new subscribers to the DSPs. And because we've earned a unique level of credibility and influence working with both established and emerging innovators, we continue to expand our already broad portfolio of revenue streams. Our vision is a stronger, more connected and ever-growing ecosystem that is attracting new entrepreneurs, expanding our full global footprint, accelerating our D2C business creating new products and experiences and leveraging AI to take music to places fans can barely imagine, and in ways in which they can barely imagine. In short, we're designing and building a strong foundation for a profitable and exciting future for our artists and our songwriters for our company, for the industry, and obviously, for our shareholders. We are extremely confident about the path ahead and look forward to a really strong 2026. Now on that basis of excitement and optimism, let me hand it over to Michael, and then we'll hear from Matt. Thank you. Michael Nash: Thank you, Lucian. I'll take a few moments to discuss in more detail how we're advancing the best interest of our artists and their fans with our AI strategy while promoting innovation. I'll do that by addressing 2 topics that are critical to better understanding the risks and benefits of AI for our business. The first topic is the perception of risk of AI revenue dilution and the thoughtful measures we've taken to neutralize any negative impact. The second topic relates to consumer receptivity to responsible AI innovation. First, misunderstandings have resulted from anecdotal press reports that AI-generated content has somehow overtaken the charts. Nothing could be further from the truth. Stories about #1 AI songs have been reported based on digital download charts where 2,500 units of a $0.99 legacy product can manufacture a chart #1. As you can see from the data on this slide, a handful of anecdotes have been completely over-extrapolated. We assembled this top 10 of chart debuting AI acts as identified by Billboard and Luminate. Consumption of this top 10 has been immaterial. The most streamed act didn't break into the top 7,000 globally in 2025, and the #10 act didn't break into the top 92,000. In the aggregate, the most prominent AI content barely registers even in the leading market for this English language repertoire, totaling less than -- excuse me, totaled less than 0.015% of the streams of the top 50,000 artists in the U.S. last year. Some commentators say, "That's right now. What about the future?" We don't have to theorize about the future of AI saturation as it's become a marketplace reality with 60,000 AI tracks being uploaded a day at present. What impact is any streaming of these tracks having on our revenue? Most of this content is AI slop or fraud botter associated with royalty diversion schemes. 85% of AI streams on one representative platform, Deezer, were identified as fraud and then excluded from royalty pool allocation. Apple recently reported that its efforts to address the flood of AI uploads included exclusion of 2 billion fraudulent streams last year. Platforms like Spotify have also outright removed tens of millions of spamming AI tracks from their services. So despite the huge volume of AI uploads, the aggregate organic consumption of AI content by actual consumers is less than 0.5% based on the best available data. That's consumption. What about revenue? It's important to take account -- it's important to take into account all 3 aspects of our deal to protect us from a revenue perspective. In addition to, one, anti-fraud provisions, there's two, demonetization of generic AI slop under UMG artist-centric agreements; and three, anti-AI dilution provisions in numerous UMG agreements we previously announced and discussed. Anti-AI dilution stipulations generally mean that pure AI-generated content, similar to other nonmusic content, is removed from the calculation of share of streams by the DSP for purposes of determining our artist royalties. Therefore, while we remain vigilant in addressing infringing AI services, we're seeing no indication that AI royalty dilution is a material issue for UMG from a revenue perspective. When you take into consideration the significant opportunities to commercialize AI innovation through new products and services that Lucian outlined and the empirical data demonstrating insignificant and comprehensively mitigated risk, thoughtful analysis will conclude that the impact AI will have on our business will be overwhelmingly net positive. The data on this slide makes it very clear that consumers are rejecting AI slop and fakery. What do they want from AI innovation, is applied to their music experience instead. That's the second topic I'll address with another set of data points. As Lucian noted, UMG conducts rigorous consumer research on strategic topics. Related to the highlights he covered, here, you see some key findings that emerged from a survey of 28,000 consumers conducted in 13 countries, representative of the global music marketplace. Use of AI is fast becoming mainstream with 54% of global consumers expressing familiarity. Not surprisingly, the predominant use case is search. And among those users, nearly half report conducting music-based queries such as what to listen to, what merch is available from my favorite artists, what concerts are near me. We see this as an early indication of the promise of AI that it holds for elevating discovery, recommendation and contextualization as AI becomes more integrated into music services. The vast majority of consumers continue to prioritize human artistry. They want clear disclosure in AI labeling and most seek transparency, safeguards and ethicality in AI music development and deployment. Confirming what the consumption data told us on the prior slide, by an almost 7:1 ratio, consumers express disinterest versus interest in so-called AI artists. In fact, over 2/3 of consumers want to be able to block purely AI-generated music entirely. In the U.S., where AI awareness is highest, nearly 3/4 of consumers want to block AI button. With this backdrop of attitudes and preferences, let's focus on music applications. Roughly half of consumers under 45 expressed interest in AI for music, predominantly interest in AI for enhancement of music experience, meaning deeper personalization of the experience and customization of music, restoring, remixing and reinterpreting favorite songs and interactive and co-creative music experiences. These emerge as key triggers of consumer interest and perceived value. The expression of interest translates into some of the most important components we are focused on, with the partners Lucian highlighted, in development of innovative new AI music services. What consumers are rejecting and what they want to embrace will define the business landscape of significant opportunity for UMG moving forward with AI innovation. And with that, I'll turn it over to Matt. Matthew Ellis: Thank you, Michael. 2025 was another excellent year for UMG, both creatively and commercially. Lucian outlined the strong sustained performance of our artists, songwriters and company and how our multipronged strategy will continue to propel our growth. Before I get into the details of our financials, I want to address our proposed U.S. listing. With the uncertainty in the market creating meaningful dislocation in valuations, our Board does not see this as the right time to move ahead with the listing. Should that change, we will update the market. Turning to our results. Once again, in 2025, we achieved healthy growth on both the top and bottom line. As always, we present our results on a constant currency basis. FX movements impacted 2025 revenue growth rates by 3%. And based on currency markets, we expect 2026 to include a 4% to 5% headwind to revenue. For the year, in constant currency, revenue grew 8.7%, which was more than 1 point of acceleration above the previous year's growth rate, and adjusted EBITDA grew 8.6%. This resulted in an adjusted EBITDA margin of 22.5%, in line with the prior year. Cost savings and operating leverage helped us maintain margins for the year despite headwinds from revenue mix and repertoire mix, cost pressures in our merchandising business and incremental overheads from business combinations. 2025 adjusted diluted EPS grew to EUR 1.03, up from EUR 0.96 in 2024. We remain on schedule with our EUR 250 million cost savings program, which began in 2024. We achieved our planned EUR 90 million in cost savings in 2025, including the expected EUR 40 million in savings in the second half of the year. We continue to expect that an incremental EUR 40 million to EUR 50 million in Phase 2 savings will be realized in 2026, with the remaining EUR 35 million to EUR 45 million benefit -- to benefit 2027. Before turning to the results for the quarter, I'd like to mention certain items that impact the comparability of our results versus the prior year. This detail is laid out on the slide you see in front of you as well as in our press release. First, the fourth quarter of 2025 includes a legal resolution contributing revenue of EUR 45 million and EBITDA of EUR 26 million. This is booked in downloads and other digital revenue in Recorded Music. We call out settlements for purposes of comparability. But as a reminder, legal recoveries are common in our business and represent real revenue earned from the copyrights we own. In fact, you may recall the fourth quarter of 2024 included 2 legal settlements. Together, they accounted for EUR 40 million of revenue and EUR 29 million of EBITDA and were booked primarily in Recorded Music licensing with a small amount in Music Publishing. In addition, the fourth quarter of 2024 included catch-up income of EUR 20 million from a DSP partner related to new product rollouts in the second and third quarters of 2024. This was booked in Recorded Music subscription revenue and had associated EBITDA of EUR 12 million. Since its revenue related to activity in the second and third quarters of 2024, it does not impact comparability for the full year results. So with that out of the way, let me turn to the quarterly results, where I will also provide figures adjusted for the items impacting comparability. In the fourth quarter, total revenue grew 10.6% in constant currency. Adjusted EBITDA grew 6.4%, while adjusted EBITDA margin of 22.5% was 70 basis points lower than the prior year quarter. Excluding the items impacting comparability in both years, total revenue grew 11.2% and adjusted EBITDA grew 8.6%. Margin was down 40 basis points to 22.0%, primarily due to headwinds from revenue mix and repertoire mix in Recorded Music and cost pressures in our merchandising business. Now let me turn to the results from each of our business segments. Recorded Music revenue grew a very strong 13.9% for the quarter and 9.3% for the year. Excluding the items impacting comparability, Recorded Music revenue grew 14.4% for the quarter and 9.1% for the year. Recorded Music adjusted EBITDA grew 9.6% for the year. Excluding items impacting comparability, adjusted EBITDA grew 9.7% in 2025 and adjusted EBITDA margin expanded 20 basis points to 25.5%. The benefit of cost savings and operating leverage more than offset margin headwinds from repertoire mix, outsized growth in lower-margin physical sales and incremental overheads from business combinations. The margin pressure from repertoire mix includes strong growth in Virgin Music, which has a different business model and margin structure than our traditional frontline label business. Looking further at Recorded Music revenue, subscription revenue grew 7.7% for the quarter. Excluding the DSP catch-up income in the fourth quarter of 2024, subscription revenue grew 9.6% for the quarter, largely thanks to continued healthy subscriber growth at many global, regional and local DSP partners. 6 of the top 10 markets, including the U.S., saw high single-digit or double-digit subscription revenue growth. The acceleration in subscription growth in the fourth quarter was primarily driven by retail price increases in some smaller markets, which more than offset minor 2024 price increase benefits we have now begun to lap. Subscription revenue grew 8.6% for the year, not very different from the rate of growth seen in 2024, even with a lower contribution from pricing and encouraging result as you look forward to the benefits still to come from our new Streaming 2.0 deals. 2025 growth did include an approximate 1% benefit from various acquisitions. We expect 2026 subscription revenue to benefit from improved wholesale rates in these agreements with the benefits layering in throughout the year. Ad-supported streaming revenue grew 9.3% in the fourth quarter and was up 4.7% for the year. Stripping out some contractual benefits in the quarter, underlying growth was mid-single digits and was driven by slightly better performance of several key platform partners. Physical revenue grew 21.3% in the fourth quarter and 11.4% for the year. The strength in the fourth quarter was largely driven by vinyl sales of Taylor Swift, The Life of a Showgirl, which drove outsized direct-to-consumer growth in the U.S. and Europe. License and other revenue also performed well, up 18.1% in the fourth quarter and 11.0% for the year. Excluding the legal settlements in the prior year, license and other revenue grew 26.8% in the quarter and 13.6% for the year. In addition to underlying licensing growth, the quarter benefited from strong live events and other related income, primarily in Japan, as well as from a compensatory payment as part of a strategic licensing agreement with an AI music platform. Turning now to Music Publishing. Revenue grew 1.4% in the quarter, or 2.8% excluding the prior year settlement referenced earlier. The slower growth in the quarter was due to the timing of collections from certain societies and other sources, which helped results in the fourth quarter of 2024. Underlying growth in the business remains healthy. While the growth rates vary, Music Publishing's reported revenue by quarter in 2025 was much more consistent than 2024. The performance of our publishing business is better viewed on a full year basis. In 2025, Music Publishing revenue grew 9.3%, or 9.8% excluding the prior year settlement. The strong Music Publishing growth for the year was fueled by strength in digital and synchronization revenue, while performance and mechanical revenue also grew. The growth benefited from the inclusion of Chord and a major television studio business win in this year's results, and we have now lapped the inclusion of both of these items. Music Publishing adjusted EBITDA grew 10.0% for the year or 10.5% excluding the items impacting comparability, and adjusted EBITDA margin expanded 20 basis points to 24.3%. Moving to Merchandising. Revenue was flat both in the quarter and for the year as this is a transactional business with release and tour schedule-driven volatility. In the fourth quarter, growth in touring and direct-to-consumer revenue offset lower retail sales. Merchandising adjusted EBITDA for the year declined 61% due to higher manufacturing and distribution costs driven by both product mix and broader cost pressures. We are continuing to take steps to improve the profitability of our merchandising business, including investing in our D2C business and working to reconfigure our manufacturing supply chain. Net profit for 2025 amounted to EUR 1.53 billion compared to EUR 2.09 billion in 2024, resulting in earnings per share of EUR 0.84 compared to EUR 1.14 last year. The decrease in net profit in 2025 was due to a smaller increase in the valuation of investments in listed companies, which increased EUR 283 million in 2025 compared to EUR 1.2 billion in 2024. Net profit included the EUR 227 million in noncash share-based compensation expense for 2025 compared to EUR 329 million in 2024. We expect a similar level of share-based compensation expense for 2026. In addition, net profit reflects restructuring costs of EUR 95 million in 2025 related to our strategic organizational redesign as well as EUR 45 million of costs related to our U.S. listing and certain M&A advisory costs compared to EUR 169 million of restructuring costs in 2024. Adjusted net profit grew 7.0% to EUR 1.91 billion in 2025, resulting in adjusted diluted EPS growth of 7.3% to EUR 1.03 compared to EUR 0.96 in 2024. In line with our commitment to pay a dividend of at least 50% of our net profits as adjusted for certain noncash items, UMG has proposed a final dividend for 2025 of EUR 514 million, or EUR 0.28 per share. If approved at our AGM, this would bring our full year dividend to EUR 0.52 per share, in line with our 2024 dividend. Before I turn to cash flow, I'd like to take a moment to talk about the importance of our long-term minded and financially disciplined reinvestment in our business. With our focus on long-term value creation, we continue to reinvest in the healthy growth we see enduring in our business for years to come. This could take a number of forms. For one, it, of course, includes signing new artists and re-signing, broadening and extending our relationships with existing artists. It includes investing in our infrastructure and technology to maximize opportunities in an evolving landscape, for example, around AI, data and analytics, direct-to-consumer and superfan efforts. It includes the addition of music and publishing catalogs to our best-in-class collection. And it also includes M&A as we strengthen our presence in high-potential music markets and expand our independent label services businesses through Virgin Music Group. I'd like to take a minute to speak about the re-signing of artists and specifically royalty advances. As a reminder, advances are recoupable against artists' future royalties. Cash royalties are paid once an advance is fully recouped. There's a very low level of risk in advances to our most established artists, given that we have a long history of how they have performed, clear visibility of the returns and a unique understanding of where opportunities exist to expand our partnership beyond recorded music or music publishing rights. Further, deals are most often structured to extend until advances are recouped, giving us added protection. The advances are normally recouped not just through the future releases from our artists, but also the catalog of the prior work that audiences continue to engage with. Our spend on advances is a strong reflection of the health of our business. We have an unprecedented roster of the world's best artists, which continues to expand. And we expect continued healthy growth in the monetization of our robust catalog of songs and recordings. In 2025, we proactively extended and expanded deals with some of our biggest recording acts and songwriters as we expect to do in 2026 as well. We view the successful long-term relationships with our superstar artists and songwriters as the truest reflection of the value UMG provides them. In many cases, these artists are not only extending their existing partnership with UMG, but broadening into new areas where they haven't historically worked with us. It's important to recognize that advances in 1 year don't typically relate to revenue in that particular year, and recoupment is not necessarily associated with advances made in the same year. Therefore, it's difficult to draw any meaningful conclusion from looking at net advances in a given year or from advances as a percent of sales. Looking over a longer period allows for a more meaningful analysis, so consider this view of the past 6 years. Between 2019 and 2025, gross advances grew at an 8% CAGR. During the same time frame, UMG's revenue grew by 10%, and adjusted EBITDA improved 14%. In combination with the other areas of investment I mentioned, such as accelerating our investment in Virgin Music and expanding our growth in high-potential markets, we have put in place a EUR 1 billion bridge facility to help fund this investment cycle. With the underlying growth in our EBITDA, our leverage remains unchanged at 0.9x as of December 31, 2025, and we are committed to maintaining our current credit ratings. UMG is the company that is today due to the consistent investment in the future that Sir Lucian and the team have made year after year. We remain financially disciplined and are best positioned to assess and value any music assets in the market. The level of investment in our sector by nontraditional players in recent years shows the conviction that others have about the future of music, and we couldn't agree with them more. Our optimism about the future means that we intend to continue our disciplined investing to ensure that UMG remains the industry leader. Now let me turn to free cash flow. In 2025, our net cash provided by operating activities before income taxes paid was EUR 2.14 billion compared to EUR 2.10 billion in 2024. As I mentioned, 2025 included a step-up in royalty advance payments related to the timing of major artist renewals. Royalty advance payments, net of recoupments, amounted to EUR 402 million in 2025 compared to EUR 186 million last year. Income taxes paid increased to EUR 403 million from EUR 349 million in 2024, and net interest and other financing activities was EUR 90 million compared to EUR 70 million in the prior year. Free cash flow before investing activities amounted to EUR 1.6 billion in 2025, similar to '24. Conversion to free cash flow before investments was 55% of adjusted EBITDA. While this is at the lower end of our historical range, it reflects the variability of the timing of artist advances, which I discussed the importance of a moment ago. This significant cash generation allowed us to continue our long-term investment in the business. We spent EUR 854 million on investments in 2025, including on CapEx, catalogs and other strategic acquisitions, compared to EUR 1.1 billion in 2024. Free cash flow amounted to EUR 702 million compared to EUR 523 million last year, driven by the strong cash generation of the business and lower level of investments year-over-year. To give you a bit more color on our investments, in 2025, we spent EUR 280 million on catalog acquisitions, net of divestments of intangible assets, similar to our net spend of EUR 266 million in 2024. The divestments included catalogs transferred to Chord as well as other intangible sales. We spent EUR 195 million on CapEx and other intangible asset investments, which mostly includes CapEx, like software investments, compared to EUR 183 million in 2024. We expect CapEx to be EUR 100 million to EUR 200 million higher in 2026 due to real estate projects in a number of our key locations. The remainder of our other 2025 investment spending of EUR 379 million focused largely on deals which push forward our strategic initiatives, including deals in Thailand, Vietnam, Indonesia and Japan as well as certain superfan initiatives. We also used EUR 104 million on further funding for Chord. This number will obviously be higher in 2026, with the inclusion of the Downtown and Excel investments, together with activities still to come during the year. Before we move to Q&A, I wanted to take a moment to comment on our recently closed Downtown acquisition. For purposes of comparability, we plan to break out quarterly revenue and EBITDA for Downtown in 2026. To give you a sense of the scale of their business, in 2025, Downtown's unaudited results show revenue of EUR 891 million and EBITDA of EUR 40 million. With the strong 2025 results, we paid a 17x 2025 EBITDA on a pre-synergy basis and expect the post-synergy multiple to be closer to 13x. We're very excited to welcome Downtown to the UMG family and are encouraged about the future for Virgin Music Group. In summary, 2025 was another year of strong financial, strategic and operational performance and provides us with the optimism for the opportunities ahead of us in 2026 and beyond. And with that, Sir Lucian, Boyd Muir, Michael Nash and I will now take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] The first question goes to Omar Mejias of Wells Fargo. Omar Mejias Santiago: Maybe first on subscription growth. You've now delivered subscription growth of 8-plus percent over the past 6 quarters with little to no material benefit from pricing, and now growth is approaching double-digit levels. With Streaming 2.0 agreements kicking in and DSPs implementing price hikes, are there any offsetting items that would prevent subscription growth from further accelerating over the next couple of quarters? Just trying to get a better understanding on some of the puts and takes impacting growth going forward. Matthew Ellis: Thanks, Omar. Let me start with that, and then Michael will add some color commentary as well. So thank you for pointing out the strong growth we've had for 6 quarters now, over 8%, as you say, without really the benefits of Streaming 2.0 benefits kicking in. In terms of any offsetting items, of course, the only thing I'd refer to is, as I said in my prepared remarks, we had a small benefit last year from some of the companies we added. But we expect to see the pricing changes kick in during the course of 2026. You won't see the full effect come in all at once as of January 1. But as you say, we're excited that we've created this level of momentum as we now come into this new period of time. So with that, Michael, I'll let you add. Michael Nash: Let me just add, referencing Capital Markets Day, we provided a framework for thinking about the Streaming 2.0 deals that we were looking to implement. We've now announced 3 of those Streaming 2.0 deals. As Matt said, we're looking for the benefits from the rate rises to start to impact the results. And I would still reference the 8% to 10% CAGR midterm guidance that we gave you for the period from 2023 to 2028. That's the target that we're delivering to. We would be delighted if we had opportunities to accelerate. But at this time, I would just focus on the fact that we established a game plan, we're executing the game plan, and we expect to be able to continue to deliver to the targeted guidance. Operator: The next question goes to James Heaney of Jefferies. James Heaney: Can you just talk about the strength that you saw in streaming revenue in the quarter? How much of that do you think is overall improvements to the ad products at the DSPs versus just general ad market strength? Anything to parse out there would be helpful. Matthew Ellis: Yes. Thank you for the question. As I mentioned in the remarks, we have a diversity of partner services and formats. And every quarter, we see some differences in the comps related to different deal terms and timing of renewals. About half of the growth in 4Q is actually due to a contractual benefit that came through. I think if you look at the low to mid-single-digits underlying growth posted in prior 3 quarters, that gives you probably a better sense of where the -- as we think about that revenue stream going forward there. So certainly enjoyed the jump up there in the fourth quarter, but would expect something more in line with prior quarters going forward. Michael, you can talk a little more about our ongoing efforts in that space. Michael Nash: Yes. Moving forward, we do continuously urge caution in revenue growth expectations here as we have reminded you all on these calls over the last several quarters. But we remain highly focused on driving growth over the midterm. And what we reflect on as we look at market evolution is, there is a secular migration of advertising spend from analog to digital. We see a focus on video and social as being very attractive categories to be recipients of that spend. We believe in working with our partners on better monetization of ad-supported listening, the increased engagement of social video platforms, and we do expect to see sustained growth over the midterm in ad-supported. Operator: The next question goes to Julien Roch of Barclays. Julien Roch: Two questions for Matt, if I may. On catalog acquisition, you did EUR 280 million, which was higher than I thought as my understanding is that Chord Music would do some of the catalog acquisition that you had done directly in the past. So could you give us an indication for catalog acquisition in 2026? I understand it depends on the opportunity, but some indication would be useful. And then you had a whole speech about net content investment in artists, how it comes with positive returns. But you also said that '26 would see an elevated level like 2025. So is the interpretation that the '26 level will be broadly around the EUR 400 million of '25? Is that the right interpretation of what you said? Matthew Ellis: Thank you, Julien. Thank you for the question. So look, '26 advances will depend on when certain artist deals close. But it's really not surprising that in a growing industry where royalties are increasing, that advances would also be increasing. So as I mentioned earlier, since 2019, advances have grown by an 8% CAGR and revenues have grown by 10%. So you can see certainly those things are moving together. And just based off of the -- both the roster of artists that we've had for a while, and you heard from Lucian's comments, the success we've had with new artists again in 2025, as shown at the 2 award shows over the past couple of weeks, that we continue to bring more successful artists into the roster, and that's going to continue to drive advances that we pay out and also recoup again. So we'll wait and see which deals close during the course of the year to see where that goes, but I actually see increases in our advances outstanding as a sign of a healthy growth in the industry going forward. In terms of expectations around catalog acquisitions in 2026, and Boyd, maybe you can jump in on this one as well. Again, it's a little bit of very early in the year here, and we'll see what comes out. We're excited about the progress that Chord has made as they continue to acquire catalogs that we work closely with them. As I mentioned in my remarks, we had not only our investment -- our initial investment in them in 2024. We made an incremental investment last year because they are continuing to find good catalogs to invest in. And we're happy to partner with them and expect to continue to see strong volumes of catalog transactions, and we will be in our fair share or more of those, I'm sure, as the year goes on. Boyd Muir: Julien, I mean, just to add to what Matt said, we've got very clear -- if you look to the priorities that -- the strategic priorities that Lucian ran through, clearly, aligning ourselves in the growth markets to a similar market share position as we have in the more developed markets is incredibly important, particularly as we see the increasing number of subscribers being added into those growth markets. So we've stated that as our objective. One aspect of this is clearly is M&A. It's all local language. The deals are all relatively small. But over the last 3 years, we've acquired 18 businesses in these growth markets, and we're looking at -- we have a pipeline of deals that we're working on at the moment. And just similarly on Chord, I mean, Chord has performed very well, 20 catalog acquisitions and it's basically its first full year as being part of the -- or be associated with Universal Music. And also, what is good is that their ability to attract long-term time horizon investors has been very strong in 2025. So I think we're very positive about where we are with Chord. Operator: The next question goes to Peter Supino of Wolfe Research. Peter Supino: I wanted to ask you a question at the intersection of investment and growth. As your cash investment pace normalizes in the '27 or 2028 time frame as contemplated in your Capital Markets Day, can Universal still maintain a 7% like sales growth rate, which was the view expressed at that time? Or is that a growth rate which includes the normalized benefits of heavy acquisitions like you've made in the last 2 years? Matthew Ellis: Yes. Thank you, Peter. So look, certainly, when we gave Capital Markets Day guidance, we were focused on the view of the business out 5 years at that point in time. I would say, looking at the business today, there is nothing that changes our positive outlook for the business, not just through 2028, but beyond. Certainly, we expect to continue to invest in the business as well, and that will supplement the growth. But there is still significant runway in the core part of streaming and subscription business for both increased subscriber volumes and increase in ARPU. And we don't expect those things to, in aggregate, a flatline 3 years from now. So Michael, I don't know if you want to add anything as we look at that. Michael Nash: I think that everything we've seen with the evolution of the market makes us confident in what we have projected as the performance of the business on an organic basis. So we're not at this point saying that we need to change the allocation of cash to support the objectives that we identified, which we're delivering to. Boyd Muir: And the other thing that I would add, in the guidance that we gave, we did note -- that, that guidance did not include any transformational M&A. And we talked -- Matt and Lucian talked about the acquisition of Downtown, and that clearly is a transformational transaction. Operator: The next question goes to Clay Griffin of MoffettNathanson. Clayton Griffin: Matt, you framed the advance -- the change in advance well, I think. But just maybe just step back and explain or help us think through the competitive dynamics in that space. Are you seeing renewed pressure from PE and some of these JV structures? And how is that impacting your ability to retain top-tier talent? Matthew Ellis: So great question. As I think about it, we see more activity in the catalog space than in the advances space in terms of those what I would refer to as newer entrants to the music business. So that's where we see them show up more. But as I said in my remarks, we're advantaged from the standpoint that our view of the value of any music asset is based off of the largest data set in the industry. So that helps us ensure that we believe we know the right value for each catalog that comes to market and is available. But we do see more of them showing up in processes. We're also involved in, in the catalog space more than the advances space. Boyd Muir: No, you said it well. Operator: The next question goes to Michael Morris of Guggenheim. Michael Morris: I wanted to ask, first, just to go back to the first question and your response about subscription growth in 2026. It sounded like your answer implied that -- or maybe explicitly said that you expect the growth rate to be within the range that you provided at the Investor Day, of 8% to 10%. Is that a fair characterization? Or do you think that this is one of those years where you could exceed that range of growth? And then my second question is about these consumer-facing AI services, if I could. They appear close to rolling out. The majority of the discussion seems to be around newer players like Udio and Klay rather than sort of your established DSP partners. Do you expect the majority of that engagement with AI tools to come from new players? Or do you expect launches from your DSP partners? And do they have the rights to launch products at this point? Matthew Ellis: Yes. Let me start with your first question, Michael. Thank you for both of them. The -- just to be clear, while I provided some factors that will drive subscriber growth this year, and we're certainly excited about having the new deals actually show up in our revenue streams this year, I did not say that our expectation is that subscription growth this year would be in the range that we provided for the full 5-year period of 8% to 10%. So we'll see where it plays out during the year. We're confident that with the continued growth we see and those new price points kicking in, there will be a positive benefit for 2026. Michael, I'll let you... Lucian Grainge: It's Lucian. I'd like to just add there, sorry to interrupt you. The work that we've done over the last 10, 12, 13 years with the DSPs, they feel like our established business partners and of course, that, they are. But you have to remember that 15 years ago, no one had ever heard of them. So the work that we're doing and the work that they're doing, Spotify, Apple, Amazon, YouTube, obviously, what I've seen, I'm extremely encouraged by. And we will be working with them. We are working with them alongside new players. We talked about NVIDIA. I'm not able to talk about the array of other conversations that we're having with companies and platforms which are equally as innovative and exciting and well funded. They're investing many, many billions in infrastructure as we all know. And whenever there's a new technology, a new format comes out of it. So we've got an encouraging environment where we're working to keep every single format that we have going, growing and improving in terms of what the technology and the products can provide at the same time is -- and I've said this before, we want to be and are the hostess with the mostest. We want to be every single dinner party that there is around town, and that's what we continue to do. These formats and these businesses are not mutually exclusive. We are working with them all. And it comes back to why we're as excited about what the products are, about the opportunities for artists. I've seen them. They're incredibly compelling. In the same way that I saw ad-funded streaming and I saw that the dream from ad-funded streaming was going to be into premium subscription. And we are right -- we've seen this. I've done it. We've managed these transformations. If you really want to go down memory lane, I've gone through from LP vinyl into the CD then into the digital downloads. I like what's going on. I like what I see, and we're attacking it, and we're excited by it. Operator: The final question goes to Silvia Cuneo of Deutsche Bank. Silvia Cuneo: I wanted to ask about Downtown Music. Since the completion of the acquisition, could you please elaborate on the first strategic priorities for the business and the main revenue drivers for 2026? Any color on the recent trends will be helpful. And then secondly, regarding your AI partnerships, particularly with Udio, can you comment about what is expected as a contribution of the Udio licensing to your 2026 financials, perhaps at a high level, and from when? And if you could comment about the potential AI licensing opportunities pipeline in 2026. Lucian Grainge: I'd like to just comment before I hand it over to the team on some of the specifics on high-level strategy with regard to Downtown. In the same way that I spoke just a few moments ago about sort of parallel businesses and parallel activities, I see exactly the same with Downtown. You can see our performance year in, year out. For the last 3 years, we've had 9 out of the top 10 best-selling artists in the world. So that's the top of the market. But we are very aware and we can all see that the rest of the market is also growing. So Downtown gives us an opportunity to grow our artists and label services, and we've got a 2-step, twin approach to everything that's going on within the marketplace. So in the same way that we talk about Mrs. GREEN APPLE or King & Prince in Japan or BTS out of Korea, we are also looking at and talking about tuck-in investments and bringing in entrepreneurs and providing label services throughout the rest of the world through the Downtown-Virgin strategy. You have to remember, Virgin is, I suppose, the brand name. It was Virgin that acquired Downtown. And we also have another company in there, which is a white label business called Ingrooves. So we've actually got 3 interfacing businesses at various stages of the artist entrepreneur label services business and function, which is growing. And I'm excited about what we're doing, and I'm excited that we're able to close Downtown, and that's one of the reasons why we did it. We're covering every single blade of grass in terms of region, content, culture, genre, format, technology, and that's how we're doing it. Michael Nash: With respect to the second question regarding the planned launches of some of the announced new services and the pipeline, I think that we've said publicly in the announcement of some of these services that they have plans for launching this year. To be more specific about that, obviously, that would be a conversation with the individual services, but we're working to support the launches of the partnerships that we've entered into. In terms of giving you any guidance with revenue contribution, that's not something that we typically do in any category or would be doing with respect to the launch of new services. But in terms of the pipeline, I would direct you back to Lucian's call to action note in October of 2025 in which he talked about a dozen different partnerships potentially being in the pipeline. And we've obviously delivered on the number of those new deals since then. But you can rest assured that we're speaking with every single relevant party, whether that's a new entrant or that's an established platform, about the potential to harness AI innovation in developing their services. So we're very focused in delivering on that pipeline. With respect to scope of opportunity, one point that I would make is, we've talked about super premium, and our research suggesting that 20% of the current subscriber base is the target for a significantly improved offer, they'd be willing to pay double the current subscription price for. What's happened over the last year is that AI innovation has kind of overtaken the conversation around technology innovation with all the service providers and with respect to the evolution of music, we're going to see AI being a significant component of what will become the super-premium tiers of 2026 and beyond. So that gives you some sense of scope of opportunity. But then as Lucian mentioned, AI is not just an incremental revenue opportunity. AI is an introduction of a new set of formats. This is a paradigmatic change in the landscape with respect to innovation and the evolution of music. So we believe that this is something that, over time, implemented in a number of different ways, including things like agent AI, could potentially lead to significant opportunity for customer value realization at the end of this decade and into the next. Operator: Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: Ladies and gentlemen, hello, and welcome to the Bnode Fourth Quarter 2025 Analyst Conference Call. On today's call, we have Mr. Chris Peeters, CEO; and Mr. Philippe Dartienne, CFO. Please note, this call is being recorded. [Operator Instructions] I will now hand over to your host, Mr. Chris Peeters, CEO, to begin today's conference. Please go ahead, sir. Chris Peeters: Thank you, and good morning, ladies and gentlemen. Welcome to all of you, and thank you for joining us. Today, I will be presenting our fourth quarter and full year 2025 results as CEO of Bnode. With me, I have Philippe Dartienne, our CFO; as well as Antoine Lebecq from Investor Relations. We posted the materials on our website this morning. We will walk you through the presentation, and we'll then take your questions. As always, two questions each, would ensure everyone gets the chance to be addressed in the upcoming hour. Let's get to the highlights of the full year results, and Philippe will then walk you through our fourth quarter '25 results. On Page 3, you can see that Bnode, as we are now called, and I will come back to this in a few minutes, delivered results at the upper end of the EUR 150 million to EUR 180 million EBIT, guidance range that we set at the same time last year and progressively derisked quarter-after-quarter. Despite pressure on top line development, we delivered an EBIT of EUR 179.7 million, while at the same time, remaining fully committed to the transformation of our business. At bpost as anticipated, top line decreased by around EUR 90 million. Mail and Press revenues declined by approximately EUR 100 million, reflecting both the accelerating structural volume erosion and the base effect as 2024 still included 6 months of the Press concession. On the Parcel side, revenue increased slightly by around EUR 10 million as our volume growth was limited to 2%, notably impacted by the strikes actions we faced during the year. In response to these challenges, we progressed on important cost measures, particularly through operational reorganizations and a reduction of around 4% in FTEs. The full impact of these actions were mainly visible in the last 2 quarters of the year. EBIT came in at EUR 67 million, down 50% year-on-year. The decline was primarily concentrated in the first half, reflecting the scope impact of the Press concession, while performance roughly stabilized in the second half of the year. At Paxon, top line growth was primarily driven by the continued expansion of our European activities and even more significantly by the consolidation of Staci. This positive momentum was, however, largely offset by a 21% revenue decline at North America. As announced last year, Radial faced the departure of several major clients. Since then, we have been actively addressing this through a progressive reshaping of the customer portfolio towards the midsized segment. At the same time, we maintained a strong focus on productivity with Radial, once again, delivering substantial cost savings. Supported by the contribution from Staci, EBIT increased slightly by EUR 7 million year-on-year, reaching just under EUR 59 million. At Landmark Global, our U.S. business was as expected, impacted by tariff measures. Nevertheless, top line posted slight growth overall. This was supported by sustained activity in Canada and most importantly strong momentum in Asian volumes across all key destinations, including, of course, Belgium, which is particularly accretive from an EBIT standpoint. Combined with continued productivity gains, notably true or Transport Center of Excellence, this enabled us to increase EBIT to EUR 85 million. Let me make one final remark on our financial highlights. As you can see, on a reported basis, the group recorded a net loss of EUR 39 million, in line with the dividend policy reaffirmed at our Capital Markets Day in June. And with no change to that framework, the Board of Directors will recommend to the general meeting in May, not to distribute a dividend this year. This reported net loss is primarily explained by one-off costs recognized at Radial North America, Philippe will elaborate on this in a moment. But before handing over, I would like to briefly reflect on our key strategic priorities in 2025 and how they continue to shape our transformation journey. In 2025, our transformation gathered significant momentum across Bnode, delivering tangible results and reaffirming the strength of our strategic direction. We restructured and strengthened the Bnode Executive Committee with a new CEO for Paxon North America and Paxon Europe as well as the people's management committee, including Group CEO and four members of the Group Executive Committee to accelerate strategy execution and better address emerging challenges. We simplified the group brand architecture, moving from 31 brands to a clear 4-brand structure, bringing consistency and focus fully aligned with the group strategic repositioning. At bpost, we made the operating model shift accelerated the transformation of our Belgian operating model across multiple tracks, including bulk rounds, now fully operational in all sorting centers, centralized preparation of Mail rounds and the reorganization of 138 distribution offices to adapt the cost base to new volumes, among others, due to lower Press volumes. We also developed Out-of-Home at scale, expanded the locker network at record pace, reaching 2,500 bbox installations driving a 50% growth in locker volume in 2025. We also successfully launched Night Bbox Delivery, enabling time-critical deliveries before 7:00 a.m. with early phase pilots underway in the omnichannel segment. At the retail network, we strengthened the strategic relevance and commercial contribution of our retail network by expanding multiple partnerships in among others, telco, utilities and banking, while reinforcing our societal inclusion role. For Paxon, we continue to transition to mid-market client portfolio driven by the successful launch of Fast Track offering rapid and seamless integration with existing systems with 22 Fast Track clients onboarded, representing EUR 38 million of in-year revenue. We also successfully integrated Staci into our new Paxon organization. We established an integrated country structure across Staci, Radial Europe and Active Ants, paving the way for accelerated commercial development and we exceeded the initial cost synergies target with the 2026 target already secured. And for Landmark Global, we achieved strong progress in leveraging group-wide capabilities, notably through the introduction of a Transport Center of Excellence, realizing EUR 50 million of group-wide savings in 2025. Staci transport synergies, Last Mile group contracts, et cetera, are included in this. And in terms of market resilience, we demonstrated the ability to navigate an increasingly complex trade environment including rapidly involving trade tariffs, while maintaining operational stability and commercial momentum. I will now hand over to Philippe for the quarterly results, and I will then take the floor to share with you our strategic priorities for 2026 and the financial outlook. Philippe Dartienne: Thank you, Chris, and good morning to all. As you can see on the highlights on Page 5, our group operating income for the fourth quarter came at EUR 1.242 billion, a decrease of EUR 93 million or 7% year-on-year. This performance reflects a combination of factors. As expected, we saw the impact of contract terminations at Radial U.S., which we already flagged earlier this year. This termination materialized through the quarter and drove a 20% revenue decline year-on-year on EUR 82 million, largely offsetting the 4% top line growth at Paxon Europe. In parallel, the 9.2% decline -- 9.2% decline in domestic Mail volume, excluding Press which was only partially compensated by close to 3% Parcel growth volume in Belgium. Note that Parcel volumes were impacted by several national strikes in October and November. In terms of cross-border activities, we also recorded higher Asian inbound volumes, which supported overall Parcel growth. Overall, while our top line remained under pressure, we continue to adapt our cost base effectively, sorry. As a result, group adjusted EBIT reached EUR 83 million, broadly in line with last year. This outcome reflects the positive effect of our reorganization measures and improve peak efficiency at bpost as well as margin actions at Paxon U.S. Before turning to the financial performance of our business units, let me highlight, as shown on Slide 6, that our group reported EBIT stands at EUR 10 million. Beyond the usual PPA adjustment, this mainly reflects the EUR 55 million one-off charges related to the real estate portfolio rationalization and technology stack simplification at Radial U.S., in line with maximize the core initiative presented to you at the Capital Market Day in June. Let's move now to the details of our three segments. I'm on Page 7. With the bpost segment previously Last Mile. We see that the revenue declined by EUR 70 million to EUR 574 million. Domestic Mail recorded around EUR 17 million decline in revenue, of which EUR 11 million stemmed from transactional and advertising mails and EUR 5 million from Press. Excluding Press, Mail volumes contracted by 9.2% in the quarter compared to 8.1% same quarter last year. The decline in Mail volumes had a negative revenue impact of around EUR 21 million and was partially offset only by half, through positive price and mix effect of plus 4.2% or roughly EUR 10 million. As a result, the Domestic Mail revenue were down 4.9% or EUR 11 million year-over-year. Note that on a full year basis, this Mail volume declined by 9.8% at the upper end of our guidance and was mitigated by a price/mix impact of plus 4.3%. Our Parcels revenue increased by EUR 3 million or plus 1.7% year-over-year, driven by volume growth of close to 3% and a slightly negative price/mix effect of 1.2% in the quarter. On the volume side, the reported 9.2% actually correspond to an average daily growth of plus 1.3% and include a shortfall of just under 1% due to national strike that took place in Belgium in October and November. Over the past months, and particularly during the peak, growth was mainly supported by strong performance of marketplaces, which also contribute to our negative price/mix impact of about 1.2%. For the full year, our average daily volume grew by 2.4% despite the negative impact of the fourth quarter strike and more importantly, the bpost strike in February during which a significant share of volume shifted temporarily to competitors. These disruptions resulted in our overall volume shortfall of a bit more than 1% for the year. Excluding this impact, our volume would have landed at the low end of our annual volume guidance. Revenue from our other activities, including Retail, Value Added Services and Personalize Logistics decreased by 3% year-over-year, notably with lower revenue from fine solutions partially offset by higher revenues at DynaGroup. Let's move to the P&L of bpost on Page 8. Including the higher intersegment revenue from inbound cross-border volumes handled in the domestic network, our total operating income was down by 2.3% or EUR 14 million. On the cost side, OpEx and D&A decreased by 2.7% or EUR 16 million, mainly driven by two effects: lower staffing with FTEs and interims down 5%, reflecting improved peak efficiency and lower volumes. The benefit from the ongoing reorganization of our distribution rounds and retail offices implemented over the previous quarters and which ultimately concluded in line with annual plan target despite delays accumulated until June due to strikes. And on the other hand, higher salary cost per FTE up plus 2% following March '25 salary indexation. In contrast with the first half of the year, when EBIT had contracted sharply by almost EUR 64 million year-on-year, mainly due to the end of the Press concession in June '24, we see now that despite the structural Mail decline, Parcel growth and the benefits of our organization are helping to mitigate EBIT erosion. EBIT decline was limited to EUR 3 million in the second half of the year and even showed a slight improvement in this fourth quarter. I would like to highlight that our peak efficiency improved not only versus last year, but for the first time ever also versus the full year run rate. Moving on to Paxon, previously, 3PL, on Page 9. In terms of Paxon revenues, two effects came into play. First one, at Paxon Europe, revenue remained broadly stable year-over-year, while we recorded around 4% growth this quarter across European businesses and geographies, with some activities even achieving high single-digit growth. We also felt the negative impact at Staci Americas, which is reported on the Paxon Europe, where a contract termination led to a significant revenue decline during the quarter. At Paxon North America, revenues decreased by EUR 82 million. At constant exchange rate, this represents a 20% decline, driven by revenue churn from contract termination announced in '24 and '25. Mid-single-digit negative same-store sale and partially offset by the in-year contribution of a bit less than EUR 30 million from new customers of which 60% relating to Radial, Fast-Track clients. As expected, despite seeing positive and encouraging seniors on that front, we continue to feel the impact of the churn announced in '24 and '25. We remain focused on executing our plans and we are confident that the ongoing stretch to core actions presented at the Capital Markets Day, expanding into, as Chris said it, new industries, client size and channel and strengthening our portfolio will deliver the intended benefits. Let's move to the P&L of Paxon on Slide 10. With this total operating income decreased by 14.4% or EUR 82 million, while operating expense and D&A decreased by 13.2% or EUR 69 million. The reduction was primarily in North America, driven by lower variable OpEx in line with revenue evolution at Radial U.S. and sustained variable contribution margin. As a result, adjusted EBIT decreased by EUR 13 million to EUR 33 million in the quarter. This was mainly due to the outgoing top line pressure at Radial U.S. and to some extent, at Staci Americas to temporary productivity issues and an IT incident. Note that Radial U.S. reached another record high margin during the peak season. And on a full year basis, Radial U.S. continued focus on productivity improvement delivered a 2% increase in variable contribution margin, equivalent to our cumulative benefits of EUR 16 million. Looking at our reported EBIT of minus EUR 35 million, this reflects the EUR 55 million one-off charge related to the real estate portfolio rationalization and the technology stack simplification, at Radial U.S. I've mentioned earlier in the call, this is being totally in line with "Maximize the Core" initiative presented at our Capital Markets Day in June. Moving on to Landmark Global, previously Cross-Border, on Page 11. Landmark Europe revenues increased by EUR 4 million or 4% year-over-year. This growth was driven by a solid volume increase from China across all major destinations, notably Belgium fueled by large Chinese platforms and U.S. Other European lanes continue to grow well with the exception of U.K. where adverse market conditions remain. At Landmark North America, we continue to face volume headwinds, while the broader tariff environment is weighing on existing business and delaying new opportunities. However, this was offset by strong domestic volume growth in Canada and a strong peak period resulting at North America level in a high single-digit percentage growth in revenue, equivalent to 0.5% increase or EUR 0.4 million increase in euro, when including the negative FX impact development. Overall, our Landmark Global operating income increased by roughly EUR 7 million or 3.9%. As shown on Page 12, OpEx and D&A increased at the same time by 3.1%, mainly reflecting higher transportation costs, driven by volume growth partially offset by lower rates on the new transport contracts. This links back to the Transport Center of Excellence that we presented at the Capital Markets Day. And from which we are now seeing tangible benefits across our various business units. Adjusted EBIT increased slightly to just under EUR 26 million. And the productivity gains across the board resulted in margin improvement compared to last year. Moving on to the Corporate segment on Page 13. Adjusted EBIT continued to improve as cost control measures on third-party and expand services as well as facility management initiatives helped offset higher payroll costs driven by additional FTEs in the March '25 salary indexation. This quarter also benefited from a one-off favorable impact from operational taxes. And as a result, our adjusted EBIT improved by EUR 7 million to minus EUR 2 million. Let's now move to the cash flow on Slide 14. The net cash inflow from the quarter amounted to EUR 35 million compared with EUR 118 million last year, mainly reflecting the variation in working capital and higher coupons on the bonds. Overall, the main items to highlight are the following: cash flow from operating activities before changing working capital stood at EUR 149 million, a decrease of EUR 11 million versus last year, mainly driven by lower EBITDA and lower corporate tax payment. Change in working capital and provisions amounted to EUR 57 million, the negative EUR 39 million variance year-on-year reflect the termination of the Press concession in June last year as well as some lower suppliers balances. The net cash outflow from investing activities totaled EUR 61 million, driven by CapEx for parcels, lockers and capacity expansion, our domestic fleet and international e-commerce logistics. Note that on a full year basis, CapEx amounted to EUR 147 million, below our initial guidance of EUR 180 million, reflecting disciplined spending behavior. This constitutes the main variation in our free cash flow and the net cash outflow from financing activities amounted to EUR 110 million, mainly reflecting higher lease liabilities payment and higher bond coupons linked to the EUR 1 billion bond issuance in November 2024. Chris, this brings us now to the strategic priorities of '26 and our financial outlook. Chris Peeters: Thank you, Philippe. As we move in 2026, the focus shifts from piloting to scaling. Accelerating what works, executing with discipline and embedding successes structurally. For bpost, that means that the operating model will further shift to accelerate the transition towards a 24/7 logistics company. This includes the structural embedding of efficiencies and flexibilization levers. For example, the dual density rounds or the delayed curve that we will do. At the Out-of-Home, we will further scale, expand the network coverage of 3,400 Bboxes installed and doubling the parcels delivered via lockers. We will continue to pilot and scale promising B2B services in omnichannels and for technicians. And also, we will negotiate an agreement for the Retail network with the Belgian state and entering into force as of January 2027. For Paxon in North America, we will leverage and scale the proven Fast Track solution to deepen our presence in the mid-market segment. And for Europe, we will capitalize on the integrated country structure to accelerate up and cross-selling, improving asset utilization and driving commercial growth. For Landmark Global, we will drive the full utilization of the Transport Center of Excellence, ensuring group-wide efficiencies and boosting profitable growth in a scale-driven market. And for the market, we will leverage our ability to navigate trade complexity to better support clients in managing cross-border complexity and evolving tariff dynamics. These strategic priorities lead me to our outlook for 2026. I'm on Page 16 now. We are engaged in a profound transformation of our group and the strategic shift we have initiated is a multi-year journey. 2026 will be another important step in that transition. At a high level, the continued acceleration of our international logistics activity is expected to be the main driver of EBIT growth at group level. At the same time, in our historical Belgian operation, we will remain focused on mitigating the structural mail decline, while further advancing our operational shift toward a more parcel-centric model. Overall, at group level, we are targeting an adjusted EBIT in the range of EUR 165 million to EUR 195 million for 2026. For Paxon, we expect total operating income to grow in the low to mid-single-digit range in 2026. While in Europe, we anticipate mid- to high single-digit growth, supported by continued commercial momentum and further leveraging of our integrated logistics capabilities. In North America, the ongoing portfolio shift towards the midsize segment, notably through our Fast Track initiatives should offset the impact of customer share. On profitability, we expect an EBIT margin increase from 3.5% in 2025 to between 6% and 8% in 2026. This uplift will be driven by the combined strength of our new regional setup, realization of cost synergies and continued real estate optimization. Then we turn to Landmark Global, where we are targeting a mid-single-digit top line growth for 2026. In Eurasia, momentum remained strong in our commercial activities, particularly driven by Asian volumes, while Postal volumes are expected to remain resilient. In North America, growth should be more moderate. Market overcapacity continues to intensify competition and the uncertainty surrounding tariff measures is creating limited visibility and implied pressures on flows to and from the U.S. across most lanes. In terms of profitability, the evolving business mix with a lower contribution from Postal and a higher share of commercial volumes is likely to weigh on margins leading to an expected EBIT margin in the range of 10% to 12%. Finally, regarding bpost, we anticipate a low single-digit decline in revenue in 2026. This mainly reflects three factors: first, Mail volumes are expected to decline in the mid-teens range, while this will be partly mitigated by a favorable price/mix effect of around 5%, 6%, structural volume erosion remained significant. As you observed in 2025, decline already accelerated, reaching around 10% at the upper end of our 8% to 10% guidance range. In 2026, we will also face the full impact of mandatory B2B e-invoicing in Belgium as well as the loss of certain advertising contracts. Second, on the Parcel side, volumes should grow in the mid- to high single-digit range, primarily driven by large customers. As a result, despite the usual price adjustments, the overall price/mix is expected to remain broadly stable. In addition, as discussed during our Capital Markets Day, we will see the full year revenue impact from the loss of the 679 banking contract which was retendered and transferred to BNP Paribas Fortis as of January 1. From a profitability perspective, this marks another year of revenue contraction, which will inevitably put pressure on margins. That said, we remain fully focused on aligning our cost base notably true, intensified distribution around reorganizations and further productivity gains. Altogether, this should translate into an EBIT margin of around 1% in 2026. We are now ready to take your questions. Again, two questions each, please, so that everyone gets the chance to be addressed during the session. Operator, please open the lines. Operator: [Operator Instructions] The next question comes from Michiel Declercq from KBC Securities. Michiel Declercq: I had some questions on the 3PL or the Paxon business. First on profitability, a bit lower than what you guided for, for the start of the year. I was just wondering, can you give a bit more color on the temporary productivity issues and the IT incident at Staci in the Americas? And maybe quantify this and maybe also looking at the margins of Staci, are we still in the 10% to 12% range there? That would be a bit my first question. Then secondly, would also be on the 3PL Europe, you guide for mid- to high single-digit growth in 2026. Looking at the fourth quarter, it was flat, you had, of course, a customer loss and some headwinds at Staci Americas. But I would expect this also to somewhat continue in 2027. So I'm just wondering where will this step up from a flat growth in the EU in Q4 to mid- to high single digits in '26 come from? Can you -- do you see some reassuring trends there? Or just a bit more color on that, please? Chris Peeters: Do you take the first? Philippe Dartienne: Yes. I'll take the first one. Thank you, Michiel, for the question. Very, very, very interesting question indeed. When it comes to Paxon profitability as a whole, we are impacted by -- mostly impacted by the loss of customers that we faced at -- from Radial, as we mentioned it. Despite the fact that they have been able to maintain the variable contribution margin, even a slight improvement year-over-year. Nevertheless, in absolute value, indeed, it weighed on the EBIT generation. When it comes to Paxon Europe, so the -- what I would say is that we have a profitability at the level of Paxon Europe so mostly from -- resulting from the acquisition of Staci. We always guided in the range of 10% to 12%. And in '25, we nearly reached the bottom end of the range. Why do I say nearly very close to, which is mainly explained by the fact that we had an IT incident in the U.S. that weighted on the profitability. Chris Peeters: And on the second question, so if you look at the Staci growth, you see indeed that there was a bit of a slowdown due to a combination of economic circumstances, mainly in France and the U.K. last year and also probably a focus, which was on the integration and the setup of the new structure. Now we have a team fully dedicated to developing the top line. And what we see there is that we have, especially around cross-sell and up-sell on these clients. And when we talk about cross-sell, it's both geographical, but also in other product ranges. And up-sell where we see that we expand our services within the same service line with those same clients, we see that we have an attractive pipeline on which we feel comfortable that, that growth is a feasible figure. Michiel Declercq: Okay. Clear. Maybe a quick follow-up, if I may. If I then plug in the guidance for the growth in the EU also for Paxon business, is it then fair to assume that growth in the U.S. or in North America, Radial North America will be flat? And if so, can you maybe give a bit more color on the phasing there? Chris Peeters: Yes. Indeed, growth in the U.S. will be flat. It's the effect of the historic client losses that we see to have a full impact. And obviously, if you see, although we see a ramp-up at the Fast Track side. These are substantially smaller clients, meaning that you need a lot of more onboarding to compensate for the loss of a large client. And so that effect of clients that were shared -- was already announced for the non-renewal of contracts that we will have the impact from gets compensated by new mid-market clients, but the one is balancing out the other. Philippe Dartienne: If you allow me to add one element, Chris, also what we are seeing in terms of evolution of same-store sales, so on existing customers, we are still believing that we will be in negative territories in '26 compared to '25. Chris Peeters: Which is again an effect of that historic portfolio of, let's say, older brands that are more in decline than the overall market. Operator: The next question comes from Frank Claassen from Degroof Petercam. Frank Claassen: Two questions, please. First of all, on the transfer of the 679 banking contract, could you help us how much revenue would that roughly be? That's my first question. And then second, on the corporate cost line, you indicate that it will go up some -- or will have the negative EUR 35 million delta in '26. That's quite a step-up. Could you elaborate what kind of investments or costs you're going to make on that corporate cost line? Chris Peeters: So on 679 -- thanks for the question, Frank. We'll -- we don't use to disclose individual contracts, neither the profitability. So we will not do it for the 679. But this being said, you know that the contribution of this contract was solid, very solid. So it's weighing on the profitability. When it comes to corporate, it's -- in fact, we are adding some resources very limited compared to the '25 situation. And those resources are geared towards supporting the transformation initiative. They are hosted at the level of corporate, but they benefit to the integrity of the group. So they are, in fact, also the natural evolution of the cost base, which -- because those corporate costs are mostly people-related costs. And we expect also to have, as we mentioned for BeNe Last Mile, we also expect to have a one step of inflation of 2% and that helps explaining the evolution of the corporate cost. Operator: The next question comes from Henk Slotboom from the IDEA! Henk Slotboom: Chris, Antoine and Philippe. A few questions about the bpost division. I'm a bit surprised about the Parcel growth you indicate for the current year. Last year, it was 2.9%. There was a 0.7% negative impact of the strikes you experienced. Now you're aiming for mid- to high single-digit growth. I assume you must have had a good start of the year. But at the same time, there are some things happening in the Middle East which could spur inflation again and weigh on consumer confidence. How do you look at that, Chris? Chris Peeters: So on the Parcel growth, I think the fact that you see in the terms of growth of last year, main mainly the effect of a little bit lower growth fix has to do with the strike impact of which we have two major events, one in the early part of the year with a quite significant impact. As you know, we had a couple of days of non-operation and a blocking of our sorting center that had quite an important impact in number of parcels. And while we could mitigate last minute to a large extent, the national strike against the government in the end period. Some of our clients took at that moment of time, whether it was late at already the batches to have some of those volumes deviated. And so there, you see two elements where you have some volume leakage as a result of the strike. That being said, if we look at the start of the year, well, as always, at the start of the year is a -- is not the most relevant period. But if we see in terms of client development and contract conversion, we are on a positive flow. And so we expect, in that perspective, a good year. If we look at the impact of what we see in Middle East. I think, there's very little, let's say, direct flow from us from that side with some Postal flows, but they're quite limited. 12 countries are blocked in terms of Postal flow, but that's a financially a very minor impact on our total volume. We don't see today a reduction on the Chinese flows. Obviously, I agree with you. If there is an impact on consumer behavior likely you will see some impact on the overall spend. Still, what we've seen in the last times when that was happening was that there was a further shift towards the products which are available within the e-commerce space. And so that is something where we don't expect that there will be a massive impact on the year. Henk Slotboom: Then on the Mail volume, Chris, we have a shock-wise decrease this year, partly because of the loss of some advertising clients and the introduction of e-invoicing in Belgium, especially the latter impact. Do you think that this will mitigate the decrease in Mail volumes as of 2027 when this has been absorbed? Chris Peeters: I don't understand the question, to be honest. Can you repeat the question? Henk Slotboom: Well, if this year was the introduction of e-invoicing, if I'm correct, in Belgium. So that means that you have a shock-wise decrease in volumes, paper invoices being replaced by electronic invoices. Normally, I assume that will lead to a lower contraction of transaction Mail volumes in the year thereafter, because there's less left. Chris Peeters: Yes. I mean, I can understand what you say. But overall, we don't count on that. I think that you've clearly seen that our strategy is now to move as fast as possible towards a parcel-centric operator, and so we want to become a logistical company. You see that, that Mail decline also if we look at comparable countries that were ahead of the curve have mostly had the Nordic countries are ahead of the curve. The Baltic states are also ahead of the curve in that perspective. You see that, that decline continues to be fairly steep also in the end phase of Mail. If you look at the Denmark case still until the last year, you saw a continued steep decline in the Mail business. We see the same happening in the other Nordic countries, which actually are already at a further progressed decline in Mail that we are. And so in our plans, we don't count on that difference anymore. We actually have -- are preparing ourselves for a continued accelerated decline in Mail. And obviously, what we will do as a consequence of that, start to prepare ourselves for the usual discussion, which will be -- we will have a new user as of the 1st of January '28. And so that preparation of discussion is happening now to ensure that our operating model can follow the reality of the volumes that we have to treat. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions. So I will hand it back to Chris to conclude today's conference. Thank you. Chris Peeters: We would like to thank everybody in the call for having taken the time to be with us and for your interesting questions. Please note that we will release our annual report 2025 on April 2nd. We look forward to staying in touch and Philippe will present you our first quarter results on May 6. Thank you very much and have a great day. Operator: Thanks for participating to the call. You may now disconnect.
Roisin Currie: Good morning, and welcome to those of you in the room. Nice to see a lot of familiar faces, and welcome to those of you who are watching online. So the agenda today will be in the usual format. I will provide an overview of the results we've announced today, along with some key highlights, and then I'll hand over to Richard to take us through the financial performance in more detail, and I'll then take you through our strategic progress and finish with the outlook for the year before I take your questions. So we continue to make progress despite the challenging market conditions, as you can see from the numbers on the slide. As you can see, total sales growth for full year '25 is just under 7%, and that includes 2.4% on a like-for-like growth for company-managed shops and not on the slide, but it's also 4.3% for our franchise shops. Underlying operating profit and underlying PBT are both in line with expectations. With operating cash inflow, 4% -- 4.5% higher than 2024, and we are proposing an ordinary dividend of 69p, in line with the year before. Operating cash generation remains robust and will build further in the coming years, with CapEx also stepping back from its peak in 2025. This provides significant capacity for additional returns to shareholders, which Richard will provide more detail on in a few minutes. So we are outperforming the market. So just to spend a couple of minutes on our performance versus the market. I'm pleased to say that the recent data from Circana to the end of December 2025 shows that we have increased our market share of visits by 0.5 percentage points to 8.6% at a time when the overall market visits have declined by just over 3%. Pressure on income does continue to be the main driver and convenience for the consumer remains the priority with location access and channel flexibility critical. There is some evidence of dietary trends, but that is a relatively small factor. The breadth of appeal we have alongside our value credentials and the continued innovation in the business focused on menu, value and convenience alongside the strength of our vertical integration ensures our resilience when market conditions are challenging, but also remains our formula for our long-term success. So I will now welcome Richard to talk about the financial performance in detail. Richard Hutton: Great. Thank you, Roisin, and good morning, everybody. I'll start with Slide 6, which just gives you the high-level overview of the profit in the business over the last year. So you can see sales up almost 7%. We did have the reduction of 4% in operating profit and 9.4% at the PBT level. And as we highlighted back in January, we've pulled out a small exceptional item, which relates to an understatement of VAT, which we self-identified but goes back a number of years. So in reporting these results, we pulled out the element that relates to prior years so as not to distort the 2025 number. So that gives you an underlying PBT and then the full PBT for the year of GBP 167 million. The income tax charge, we'll show you later, slightly higher than normal, which I'll explain, which gives an impact on diluted earnings per share, which were down 10.7% and we'll get into some of the ratios behind that in just a moment. But first, on Slide 7, we'll dive into the segmental analysis of sales. So we segment our sales into those from company-managed shops and those that are through the business-to-business channel, which is primarily relationships with our franchise partners that get us into locations we couldn't otherwise reach. It also includes grocery channel development in the B2B channel, which obviously has moved on slightly in the last year as we launched with Tesco, a small range with Tesco back in September. But most of the progress here relates to the addition of shops and like-for-like growth through the B2B channel. So underlying each of those, as Roisin has already said, we've got 2.4% like-for-like through the company-managed shop channel and another 4.3% like-for-like growth through franchise system sales. You can see the overall rate of growth in the B2B channel is slightly higher. That partly reflects that like-for-like position. but also the proportion of shops we're opening through franchise relationships is about 1/3 of our net openings. So as a proportion of the base, it's a faster rate of growth in that channel. And if we look on Slide 8 at the relative performance of Greggs, I mean, Machine has already flagged to you that we've taken a significant amount of share in the last year. This tracks one of the benchmarks that we've pulled out to give us a feel for how Greggs has performed versus the overall food to go segment. And the yellow line on this chart is the Barclaycard data that they publish for the eating and drinking out-of-home segment. So that's all retailers who are identified as being -- serving the eating or drinking out of home. And you can see that Greggs' like-for-like performance, the dashed blue line, tracks that quite closely. So our like-for-like performance has been broadly in line with the market. But we've significantly outperformed the market through the growth in our new stores and the addition of extra channels such as grocery. So total sales growth significantly ahead of the market on that measure. Turning to Slide 9. The ratio analysis of the P&L here reflects some of the volume pressure and also the investment in the year, which will benefit us in future years. So if we work our way down, you can see at the gross margin level, a relatively stable position. We saw a more balanced position between cost and price inflation last year and a smaller amount of dilution from the increased participation rate in our app as people take advantage of the discounts available for shopping more frequently with us. In distribution and selling costs, that's where you see the sort of more of the operational gearing in the business. So there's a couple of things there. The volume impact last year has a gearing effect in terms of the fixed costs such as rent on the shop, but also the recovery of wage cost inflation. There's a slight under recovery there because wages were one of the most inflationary elements last year, which I'll come on and show you in a minute. So some dilution there on the ratio. And then we see the opposite effect in admin expenses, where we've controlled the overhead in the business well, and that gets leveraged more heavily as we grow the estate and spread it more thinly. So overall, underlying operating profit down by 1% in margin terms. And then you see an increase in the net finance expense. The primary driver of that is that in 2024, we were holding a lot of cash on deposit, which we've subsequently been deploying into the investment program. We obviously haven't enjoyed the interest coming in on those cash deposits in the current year. And then at the very bottom there, you can see return on capital employed, which is one of the key things that we focus on as a business. The ROCE for 2025 was 16%. That reflects the investment in capital employed as we've deployed cash into the program of capital expenditure that we will update you on in just a second. But obviously, the top line performance as well. Now we've talked in the past about that we believe 20% is a good long-term estimate for what we believe Greggs should be able to deliver. We still believe in that, and I'll describe to you in just a few moments our thoughts on how we progressively get back to that going forward. Turning to Page 10. You've got the usual analysis here of the Greggs cost base, which emphasizes just that people costs and food and packaging are the 2 biggest areas. The good news here is that we expect a much less inflationary year ahead in 2026. We saw 5.6% cost inflation in 2025. We expect that to be close to 3% in the year ahead, which is a real change from the last few years when obviously, inflation has been a real headwind. Food & packaging will be part of that. We expect that to be a very low single-digit figure for the year ahead. And we've got about 4 months of our food and packaging needs covered. Energy is obviously quite a volatile market at the moment. We're pleased to say we've actually got all of our electricity covered for this year, and that is the vast majority of our energy mix. And we've got more than half of it for next year as well. So we're in as good a place as we could probably hope to be given the current environment. The main thing we were exposed on is diesel costs, which is about 1/8 of our overall energy mix. So it's relevant, but not a big factor. People costs are the biggest part of the cost base and were very inflationary last year with a combination of bigger increases in the national living wage and obviously, the national insurance pass-through as well. So we saw just over 8% wage inflation or wage cost inflation last year. We expect that figure to be close to 4% this year, a balance of the pay award, which we've made and also some annualization of that national insurance increase. And there's a phasing impact here as well because we've negotiated to move our annual pay award. The majority of it will bite in April now. It's previously been aligned with the calendar year in January. That helps us to align more with the National Living Wage increase going forward. But it means that we'll have relatively low wage inflation through Q1 of this year. So there is a kind of a balance factor in terms of when cost inflation comes in this year. We think that will help the first half result, and we do expect to see relatively strong profit progress in the first half. We've guided that for the year as a whole, we expect that to be a relatively flat year because we've got the cost of the new Derby site coming in the second half. So there's a bit of trading off there between H1 and H2. And then the final piece on shop occupancy costs, rents are relatively stable as a cost ratio. And there is some benefit from the changes to business rates. So you'll be aware that in the budget, there was a change made to benefit small shops. We believe that, that will benefit Greggs on an annual basis for about GBP 4 million from April, so GBP 3 million to the current financial year. Sticking with costs on Slide 11. We obviously work each year to try and reduce our costs and to offset the cost pressures through our cost reduction initiatives. And we have a good track record in this, and 2025 was the best year ever in that respect. So we took about GBP 13 million out of the business through our cost initiatives in 2025. I thought it was worth just giving you a bit of color on the sort of things that we've been doing. The retail area is obviously where most of our cost is. And in that sense, using sophisticated workforce planning tools is a key element to make sure we deploy hours optimally in our shops to make sure we get the right balance of service and cost. So we've been putting a new plan called in, which has been very effective. We've been using technology to automate non-value-adding tasks and increase the speed of service. And some good examples of that are new tillware. And I hope some of you, if you've been to Greggs recently, will have noticed that the actual experience of paying at the till is actually faster, and I've certainly experienced that with our new tillware and our new payment terminals. Temperature monitoring is a huge task in our shops to make sure that we keep everything food safe, and it's a very manual process currently. So we've got some interesting experiments going on with automated monitoring, which we think will really help the business going forward. In supply, the game there is really taking advantage of the fact that we own our own supply chain to do end-to-end reviews, which make sure we optimize the route through our supply chain all the way from our suppliers through to shops through our distribution and manufacturing operations. And by making sure we get the right packaging and ingredients in the right sizes, they flow through really efficiently, we get a real cost advantage. So we're constantly looking at how we optimize that. We've been in-housing some of our manufacturing where we've had additional capacity come on stream that's allowed us to do that. And looking forward, there'll be more opportunity for automation as the new sites in our distribution chain come online. And the offices have a role to play as well. So in our support teams, technology is starting to help us with automation on desktops, new systems for customer and shop support, which are making the whole process more productive. It's meaning our teams can cope with the growth in the business without adding more resource. And increasingly, AI tools will support that even further going forward. Let's talk about CapEx now on Slide 12. So you can see the peak year for CapEx in Greggs, GBP 287 million that we invested in the business last year. And if you look year-on-year, you'll see that the retail side of that in terms of new shops, shop fitting and equipment was relatively stable. We had a comparable amount of activity in terms of opening shops and refurbishing them. But the big difference was in the supply chain, where we invested GBP 147 million across our operations, including the new sites to create capacity for the future. There was also a step-up in IT, where we're putting in the upgraded SAP system, the S/4HANA version, which is going well, and we got the first elements of those -- that installed in the summer. If I turn to the forward look on Page 13, I think this is the interesting piece. So if you look beyond this year, we've got a substantial decrease in the amount of capital expenditure from this year onwards. So CapEx reduces to around GBP 200 million in the current year and then reduces further, and we've given a range of GBP 150 million to GBP 170 million from '27 onwards. And in looking again at the CapEx program through this phase, we obviously kind of came in under the guidance last year. We've looked hard at the out years as well. We've taken about GBP 20 million, GBP 25 million out of the capital intensity looking forward here. And the interesting thing in the backdrop to this slide is if you look at the gray sort of shadow behind, that's the operating cash generation of the business. And you can see how essentially last year, we were utilizing all of that in terms of the CapEx investment program. But as we go forward, a huge gap emerges, which is effectively the free cash position that will give us discretion. Obviously, that has to fund the ordinary distributions in the business, but we start to see some quite substantial headroom as we go through next year and onwards, particularly. So scope for further returns, as Roisin indicated at the start of this. Page 14 talks about our shop estate expansion and a quick reminder first of the sort of metrics we use to manage our expansion against strong return rates. So we look for a target return rate of 25% cash return on the investment that we put into both our shop and the supply chain that supports it. And we typically achieve that after 2 or 3 years and the shops go on to achieve a mature performance in excess of 30% on an ROI basis. And generally, the growth locations that we're moving into are outperforming the traditional estate. And we talked in the summer a lot about incremental growth and why we were not concerned about cannibalization. And just to reiterate some of the key points that we talked about then. In new catchments where we're landing shops, 53% of our shops last year were in areas where there was no existing Greggs within a mile. So we are pushing into areas where people just don't have access to Greggs. And even in those areas where there was a shop within a mile, the recorded level of sales transfer from the existing state was less than 5%. And we factor that into the shop appraisal to make sure that when we make the decision, we know it's still going to make an incrementally good return for the business. And that was proven again in 2025 with the look-back test on cannibalization. And the other great measure we have is by using the app data. So we can see from the app data that the frequency of visit for Greggs customers increases when you give them access to more shops in new convenient locations. And we ran some data that we showed you in the summer. We've rerun that again at the end of the year. And again, it confirms the incrementality of the visits and the increase in frequency that we see when we become more convenient. I mentioned ROCE earlier, and Slide 15 talks a bit about the levers that we'll be pulling to restore ROCE over the years ahead. Obviously, that estate growth is absolutely key because growing the estate to utilize the capacity that we're creating is one of the most important elements of that. So it's great to see that we're still getting those strong returns and that, that white space exists. We'll be accessing that both through our own estate growth and through the partnerships with franchise partners that give us access to areas we couldn't otherwise get to. We'll be disciplined on capital allocation. And you can see we've trimmed the CapEx a little bit. We'll hold that as tight as possible going forward while still making sure that we maintain and invest in the business. But we're in a position where we've deployed an awful lot into the supply chain, and we've got that capacity there to use. So it will reduce the amount that we need to invest in the years ahead. And as I've described to you, we continue to explore further cost saving and productivity opportunities. The team are enthused by the success and want to drive that even harder as we go forward. And then finally, obviously, there's an element which is driven by the market and performance in that. But also, we have additional income streams that we've been pushing and accessing. You've heard about the Tesco development that we put in place in the autumn of last year. That will be a more material factor in the year ahead, and we've expanded the reach of that into more stores. Roisin will talk to you a little bit about some of the stuff that we've been experimenting with in terms of convenience retailing, where we've been looking at some concepts, which will help us to access smaller locations that can't support a Greggs store with both automated and manual sort of vending solutions. And there are other things in the background that we're not quite ready to talk about that we've been working on, which we believe will also leverage the Greggs brand to drive additional income in the years ahead. So more on that to come. So packaged together, we still are targeting and pushing ourselves to get that return back to where we [indiscernible]. Just finishing off then with balance sheet, tax and dividends. The cash is in a decent position despite the big investment phase we've been through. I mean the cash inflow of GBP 273 million is a real strength of the business at the operating level. The net cash position at the end of the year was GBP 46 million. That was supported by GBP 25 million drawn from the revolving credit facility. So we actually had about GBP 70 million in cash. And we've got liquidity of GBP 146 million with the remaining undrawn element of our RCF. So plenty of room should it be required. And a quick reminder of our capital allocation priorities. Number one, invest to maintain the business well, keep that strong balance sheet, and we target about a 3% of revenue cash position just to deal with the seasonality through the year. an attractive ordinary dividend that's 2x covered by earnings, and you'll see that we've maintained that again this year and then selectively invest where we see attractive returns for growth. And then finally, of course, return any surplus cash to shareholders. And that could be special dividends. It could be buybacks when we get to that point. We're open-minded about that, and we'll make that decision based on what's the best route for that cash at the time. And finally, just the figures to finish off on tax and earnings. The corporation tax rate, I flagged earlier was slightly higher. It's about 1% higher than we would normally expect, and that relates to the allowability of deductions relating to share options. And the fact that the Greggs share price was lower meant that the deduction you get for tax itself on share option exercises was itself lower. So that's a temporary thing. And looking at our forward guidance, we still believe that being about 1% ahead of the headline rate is the right way to model the tax rate for Greggs going forward. So overall, the underlying EPS was 122.8p, and we've declared a final ordinary dividend of 50p, which gives you 69p for the full year, and that's maintained at the same level as in 2024. And as I just indicated, we look for an earnings cover of 2x. And as we get back to that level, the dividend will grow again. So as a quick roll through. I'll hand you over to Roisin to take you through the plan. Roisin Currie: Great. Thanks, Richard. So I'll spend a few minutes, and I will talk about the operational and strategic review for the business. So on the slide behind me, you have just got the Greggs formula for long-term success. So I just want to reflect on the things that have made and continue to make Greggs successful. And these are particularly important when the market is tough because they differentiate us from other brands and they're integral to the strength of the business. So the first factor on the slide is the breadth and choice that we offer our customers, enabling them to shop with us frequently. And this isn't just about product range. It's also about the flexibility we have to operate in so many different locations and channels and be convenient and accessible to customers when they are on the go. Next is our value leadership. And we pride ourselves in this, and we have got a long-term track record of being #1 for value for fresh prepared food and drink, and that hasn't changed. It continues to be a key focus area, and we remain #1. Innovation and rapid evolution is, of course, key because food tastes and drink tastes change over time. We work hard to ensure we stay relevant and constantly innovate to drive profitable sales growth. And we've got a strong track record of this for many years, innovating to meet changing needs, dietary trends with great value options, demonstrating us now being #1 in the out-of-home market for breakfast and #2 for coffee. Our focus on spotting trends and then following them fast with great value price points continues. And finally, our vertical integration drives quality and efficiency that is a genuine competitive advantage versus the market. So let me talk through those areas in some more detail. So we are the fastest-growing brand in food to go. So in terms of market context, the slide in front of you is from Circana data. So it demonstrates the strength of the Greggs brand across all of the key dayparts and missions. And I'm pleased to report we're #1 in breakfast. We're #2 in lunch. We are #3 in snacking, and we are now #4 in dinner and in delivery. So you can see how strong Greggs continues to be in the traditional areas of lunch, breakfast and snacking. But I'm particularly pleased that I can show you is moving up the rankings later in the day and on delivery areas that, as you know, we've been focusing on. As I said earlier, our market share has grown from 8.1% to 8.6%, the fastest growth of any brand in food and the go. And at the bottom, you can see in terms of the segments that we represent in terms of the demographics, when you compare the market share of visits with Greggs share of visits, we are pretty much in line with the market, having broad appeal across all demographic sets is another great strength of the brand. And on to value. Value leadership remains critical for us. We remain market leading with the gap to our food to go competitors widening. You can see that in the chart. So that plots the YouGov data over the past 4 years, and Greggs is the yellow line at the top. fresh prepared food and drink, the hot options we provide and the customization we offer ensures we are differentiated from other value operators such as the supermarkets. We also know that our loyalty scheme and the value deals that we offer continue to deepen the value for customers when they shop at Greggs. And on Slide 22, we're just looking at the estate, and we have shown you this chart before, but it just demonstrates how the business has been evolving over the last decade to reshape and move into the new catchment areas with different customer missions, ensuring we are well positioned to be more convenient for customers on the go. Now if you went back 10 years, then the traditional element of the state, which is the blue -- the blue sort of segment and mainly on high streets, that would have accounted for around 80% of our total shop estate. And as you can see, it is now 50%. In the traditional estate segment, our relocation strategy has been key to our continued success, and we've relocated around 15% of those shops since 2019, making sure that now they are in the best locations. We do treat those relocations as new shops, so they don't appear in terms of the growth in our like-for-like numbers. And in the underrepresented catchments, the new shops that we're opening expand our reach and continue to deliver strong returns. Our target for this year is around 120 net new shops, which is the same as last year. And just to bring to life the underrepresented catchments, so these are areas such as roadsides, retail parks, supermarkets, travel locations, given the estate greater balance and accessing new locations with strong returns. We demonstrated last year, and Richard talked about it earlier in terms of our summer presentation, these new shops do so without affecting sales in the existing estate, so it's incremental growth. The chart on the slide demonstrates the significant expansion opportunity we continue to have. So the blue bars on the slide show our current penetration. And as you can see, with the exception of industrial locations, no other location has yet reached 25% penetration. Our successful expansion strategy continues to target these areas where we currently have that low penetration, most typically remote from our current shops. So again, Richard talked about last year, over half of our shops were opened with no Greggs shop within a mile. The planned openings for this year have a similar profile. And worth saying in terms of the numbers on the right of the chart, the white space work that we've done in terms of viable locations reflects the opportunity for our full-size Greggs shops. But we continue to be agile in terms of our formats. So the format flexibility we have and expanding further will unlock opportunities that our smallest full service operations are simply not able to access. The trial of our first 3 bite-sized shops is early days, but promising. And we have some further trials planned very shortly, which will unlock other opportunities with strong returns. And as Richard says, the innovation doesn't stop there. So we continue to come up with more innovative ways to make sure that we can provide the convenience for our customers to unlock additional customer missions. So we are looking at some unattended retail solutions. unattended retail solutions is the new word for vending. So we have a number of trials that are in the pipeline currently that we will talk to you about as we embark on those trials. But format evolution is complemented by increasing the channels and dayparts that customers can access Greggs through, as you will see on the slide. Richard mentioned it, but we updated last year that we increased our range in Iceland, and we also expanded into Tesco. We started when we talked to you last year with 800 larger Tesco stores. We have just expanded into a further 1,900 Tesco Express stores. Pleasing to say that delivery continues to grow. So it's now at 6.8% of our mix. And we know that these are incremental sales and they deliver a higher basket size. We are now working on some improved technology that will mean we can support this channel better and grow further. And loyalty, I think I said numerous times before, continues to surpass our expectations. So now over 26% of our transactions are scanned through the app, and that allow us to increase our CRM engagement with customers. We've been doing something called Greggs Quest. We rolled that out to all of our customers in November. And really, that's challenges that encourage the customers that rewards their visits and encourage them to come back to us more frequently. Evening, very pleasing to see, still remains our fastest-growing daypart. So it's now at 9.4% of our sales with evening delivery still being a significant growth opportunity. We continue to be really pleased with the steady growth that we're seeing in the evening daypart. We're still growing ahead of the average like-for-like rate, and it's very similar to the long-term growth pattern that we established at breakfast. And at the heart of Greggs is our range. So our menu sits at the heart of Greggs, and we win by delivering on our purpose, making great tasting, freshly prepared food and drink accessible to everyone. This translates to democratization of food on the go. Rapid evolution of value-focused menu options is key to meeting consumers' changing tastes and requirements. As I've shown you earlier, Greggs is a brand with broad appeal. We are representative of all demographics, and we don't over-index significantly in any one segment. Dietary trends have always been a key factor in the evolution of our menu and the breadth of choice that we offer. And we've worked hard over many years to ensure that we have choices available for everyone throughout the day. Our performance continues to be driven predominantly by the broader macroeconomic pressures on consumer spending, but we do monitor developments around weight loss medication closely. Consumers on this medication still seek convenient food on the go, and we're already catering to a number of those dietary trends. So the demand for fiber, higher protein and smaller portions, which forms part of a much wider health trend. We have introduced last year a number of products such as our Ginger and Turmeric shots, our protein shakes, our egg pots, and we've seen strong growth in those high-protein items that we offer. But we continue to evolve the menu. We continue to make sure we keep it fresh, we keep it relevant, and we excite customers with new products and new flavors. Some examples would be the Tanduri Chicken Pizza and the Red Pepper Feta and Spinach Bake. And as you would expect, we have a pipeline of new ideas and innovation to ensure that we continue to evolve the range and provide the new exciting products that our customers want. So not sure of any of you in the room are matcha fans, but we have just introduced to the menu a couple of weeks ago, our Ice Match Latte at very affordable price point of GBP 3. So if you haven't tried it, you should rush out to Greggs and get one. The breadth of choice that we offer and our ability to enter new categories at value prices enables and ensures that we stay relevant, excite our customers with new choices, focus on market trends and support the expansion into the new channels and dayparts that we offer. And then on to our supply chain, which I have spoken about many times, but to support our growth plans, you know that we have invested in further supply chain capacity, primarily the 2 new state-of-the-art national distribution centers, creating overall logistics capacity of up to 2,500 shops. Both sites are on schedule and on budget with Derby on track to open later this year and Kettering in 2027. This approach to capacity expansion benefits from productivity improvements from automation, enabled by the scale of our operation at those sites. By picking upstream, the new sites increase the throughput and capacity of the existing radio distribution centers, which will still continue to serve our shops. I won't spend too much time on technology because Richard has covered a number of these areas, but we do continue to invest in technology to enhance our growth while ensuring the robustness of our process and driving greater efficiency. As Richard just said, we have successfully migrated our finance and procurement processes to the new SAP S/4HANA system from August last year, and we've got further migration in some key areas this year. Richard also talked earlier about the tasks we're automating in our shops to support service and efficiency, which is really important and the CRM capability for our support teams that has AI functionality. So our support teams can now use that to serve both colleagues and customers better and faster. And last point in the slide, our data capability continues to improve, which supports all areas of the business and helps us make better decisions. But we continue to pride ourselves in doing the right thing with significant progress on our commitment to the Greggs pledge, which is our approach to ESG. Our original commitments that we set out took us through to the end of 2025. So we spent a lot of time last year engaging with a broad range of stakeholders to shape the future priorities for 2026 and beyond. Really proud to say we made a significant progress across all the areas of our Greggs pledge. On the slide behind me, you've got a number of highlights. Great progress on reducing our carbon footprint, reducing unsold food waste through our Greggs outlets and making progress in ensuring that our packaging is easily recyclable for our customers. We're retaining the 3 core pillars of our Greggs pledge, stronger healthier communities, a safer planet and a better business still see at the heart, and we're now launching our next 5-year pledge commitments. So finally, looking forward now into 2026, we have a strong pipeline of opportunities to open new Greggs shops in catchments that will deliver strong returns. Great progress has been made in building the supply chain infrastructure for this next phase of growth. In a challenging market, we continue to deliver both like-for-like and total sales growth and make great progress against our strategic plan. Our like-for-like growth for the first 9 weeks has been at 1.6% and total sales have grown by 6.3% with strong cost control supporting profit progression. Our expectations for 2026 are unchanged, and we remain confident in the growth opportunities available to Greggs and our ability to progress them. So on that point, I will just pause and then Richard and I will be happy to take your questions. And we have got a couple of roving mics in the room. And I think Richard is also going to monitor questions from those of you that are online. So thank you, and I will take your questions. Roisin Currie: We have got a couple of roving mics in the room. And I think Richard is also going to monitor questions from those of you that are online. So thank you, and I will take your questions. I'll start from over here. Jonathan Pritchard: Jonathan Pritchard from Peel & Hunt. Two from me for me. Firstly, I think I try to remember whether a call or a meeting. But you talked about clarity on deals and marketing those deals better. Could you just tell me how you progressed on that and whether there's a sort of slight difference between franchise and owned stores in those deals and the communication. And then secondly, on current trading, just a bit on shape really. I was surprised I didn't see the word weather and rain in the statement because clearly, that is something you hate way. Is there any change there since you still running, has it got a bit better? Just any additional comments, please? Roisin Currie: Thanks, Jonathan. I'll let Richard take kind of traded and I'll come back to market. Richard Hutton: Yes. So I think the weather has been bad on bad really, hasn't it? Clearly, as you'll have noticed, particularly in the South of England, it was an incredibly wet January. And -- but we had storms last year, and we had snow last year. So I think we've had sort of bad weather in both elements. I think the key thing to call out in the trading so far is that there is less price inflation in the number. So the underlying volume position is very consistent with what we saw in Q4 running into the first couple of months of this year, but with less pricing. And we hope that, that puts consumers in a better place as we go forward. Roisin Currie: In terms of the deals that are out there and the marketing, I'm just looking to my right absolute with some of the sort of marketing -- what we did last year very successfully is we continue to lean into breakfast. When I talk about market share moving from 8.1% to 8.6% we've taken market share across every single day part. So that is really pleasing. What we did know is that we had a 2-part lunch deal, and we could see that in the marketplace, a common sort of feature of deals was a 3-part meal deal. So we then went back on our big deal, which was the GBP 5 3-part meal deal. We obviously do that through a lot of out-of-home marketing. So that's probably the biggest sort of way we try to reach the consumer. So if you're on the high street, you see a bus shelter somewhere with the point of sale, we will try to have the Greggs message there. The other significant piece of marketing collateral we have is the digital screens in our windows. So again, they are up and down across the U.K., and we will work them hard to make sure that we punch above our way in terms of getting those big deals out there. The new piece for us last year was in our app. So for our customers, we introduced a sort of at home part of sort of an app sort of communication messaging as part of the app. And so now if you're an app customer, you will see the messaging coming up around what is the new products that we're launching. Our most recent one was the matcher, which we know we brought to the market at a value sort of leading GBP 3. But what we've not lost focus on is the 2-part breakfast deal as well because, again, that is a key part of offering value to the customer. So what the marketing team trying to do very successfully is lean into the new deals, but they have an always-on strategy to make sure that what we are known for and what is value, we also get that message out there. In terms of your question around franchise, the deals are the same. So I guess we reach customers, it doesn't matter to a customer, if it's a franchise shop for a company managed shop, they are shopping at Greggs and therefore, we want to make sure that they get the same messaging. The one difference that you have in a franchise shop is price points because obviously, they set their own price points, and we've got some ceilings around that. But again, the team will work for that franchise partner to make sure that the digital screens are used to reach customers with that value offering. And even in a franchise location, we will still be the best value operator by far in that location. Richard Taylor: It's Richard Taylor from Barclays. I've got three questions, please. Firstly is on your 20% ROCE target. Even with fixed capital employed, that would imply profits quite long way ahead of where people are expecting any out years now. I know you're not saying in 2028, but how should we think about the lift there? Is that utilization of supply chain? What other things should we think about? Secondly, how should we think about your pricing this year with a 3% like-for-like cost inflation? I know you moved at the start of the year, you done now, would you expect to move again. And finally, you've historically held a cash buffer, which you still have. But when we look forward, your slide on CapEx, Richard, what do you think about your plans for cash in FY '27 and FY '28 is a buffer that you still would like to hold in those out years as well? Richard Hutton: Yes. That sounds like my tear sheet, doesn't it? It also allows me to address a couple of the points that have come in online actually, which are also about that cash position. So Joseph, if you asked about capital allocation, I think you probably asked the question before I presented on capital allocation. So hopefully, you're happy on that. Simon, you asked about debt on the balance sheet, which I think links to Richard's point. So we had about GBP 25 million of debt on the balance sheet. We've actually repaid that since, but we'll probably draw some more down from the RCF when we pay the dividend in April, May time. So we'll be using the RCF through the next year. I suspect we probably won't need to use it next year onwards. And Simon was asking what's our forward plan in terms of is it structural debt or is it not? It's not. I think, again, the capital allocation policy hopefully explained that, that we're looking for about 3% of sales as our sort of our cash buffer to manage working capital. The RCF is our reserve to enable us to weather any storms and we put in place after the pandemic. And I think it's a super important thing to have in place in case there was something like that again. Pricing, we're in a great place with pricing because we did make the increases. Most of what we need to do for this year, we anticipate is already in place through the moves that we made in January. So we'll see how cost inflation pans out through the middle of the year, but I'm kind of cautiously hopeful we don't have to do much more. But there may need to be some small tweaks. But generally, we're in a decent place already in terms of recovery of cost. And then the broker journey, I think you should see as a longer-term ambition. We obviously had a sort of perhaps a nearer-term plan for that before the experience of last year that set us back a bit having negative volumes last year. We'll have to work a little bit harder on both revenue streams and on cost to get us back to that target. So certainly not thinking about it in terms of 2028. And so I think probably the point at which we reach it is probably beyond the scope of sort of most of your forecast at the moment. But we strongly believe that effectively, it's a tweak to the plan before with a bit more sort of revenue and a bit more sort of action on cost. And we can see the opportunities. Timothy Barrett: Tim Barrett from Deutsche. Two questions, please. also. Firstly, what you say on first half versus second half profit growth is nice and clear. implicit within that, are you assuming a pickup in like-for-likes in the second quarter or the next 12 months in terms of just trying to square the circle really how you get profit growth in the first half of that number. And then a quick one on CapEx. Can you say what's implicit within your new 2027 and 2028 guidance on net new stores, please? Richard Hutton: Yes. Yes. So on that final piece, in terms of net new stores, we're implying that we'll run at broadly the current rate in terms of about 120 net new stores. We're going to hold refits fairly tight this year. So we'll probably only see 50 or 60 refits, about half the number that we did last year, and that's part of the response to the capital intensity at the moment and also a reflection of just the longevity that we've seen in the current refit, which is standing up well. So we'll hold that fairly tight, but expand at a net rate of about 120. I'm going to link into another online question there where Joseph is asking what will the approximate maintenance CapEx be going forward? Typically, we've guided that to be about 5% of turnover. It's probably slightly less than that at the moment because of the investment in supply chain, which will hold us in good stead in the years ahead. So it's probably going to be slightly less than that at a maintenance level and then you layer on that expansion CapEx. The like-for-like question, I think, was about what do we need to strike the right balance in terms of progress in the first half. Yes, we're probably -- I mean, we would be opening, say, 1.6% in the first couple of months was slightly behind where we would have liked to have been. The good news is that the profit conversion has probably been stronger than we'd anticipated, and that's a reflection of both some of the cost margin dynamics that I described but also the fact that we gripped operational costs quite hard in the middle of last year as a response to trading conditions. And we're still carrying that strong position, and it hasn't annualized. So I think with the focus we've got on that in the business in the first half, we should continue to see the benefit, and it gives us a very strong drop-through in terms of the growth that we are seeing. Roisin Currie: I'll just go right if I just needs to hand the makeover, thank you. Unknown Analyst: Thank you. Vince Ryan here from Goodbody. I'll just go right if I just needs to hand the makeover, thank you. Fin Ryan here from Goodbody. Two questions from me, please. Firstly, in terms of the supply chain investments, could you outline what you're factoring in, in that incremental cost from Derby in the second half of the year? And as we sort of roll into 2027, how much incremental cost should come on the P&L from -- as Kettering comes live? And just could you also give us a sense in terms of the phasing of sort of the date when sort of everything is in place versus how long it will actually take to get to full operational capacity in terms of distribution centers? And then secondly, in terms of the retail rollout, I appreciate you've got a lot more Tesco stores coming on stream this year for the frozen product. Any thoughts in terms of how incremental that can be to revenues and profits for '26? And any options to go to bring those products into like Sainsbury's or A or the other retailers? Roisin Currie: I'll let Richard take your question, and I'll take the second part. Richard Hutton: So yes, the Derby cost will be broadly what we guided previously, which we said about a 40 basis point headwind this year. So if you sort of extrapolate that at current turnover levels, you'll see it's high single digits in terms of millions of pounds net impact on this year. That will then roll over and impact the year ahead as well, at which point we'll start to reduce some of the Kettering costs, but we're then starting to see some of the leverage coming through in terms of utilization of those sites. So that gives you kind of a bit of a clue as to what we expect profit progress in the first half to be because we have said we're holding the kind of the broad guidance that we believe it will be a flat outlook for profit this year with that decent underlying progress in the first half then held back by the increase in costs as those come through. Catering looks like it will be around the middle of next year in terms of its timing. So again, that cost annualizes out in the middle of '28. So I guess we get to the end of '28, having kind of taken the 2 big step-ups in cost through that period. And then we're into that leveraging sort of period going forward where addition of new shops comes at very little incremental CapEx. We're just investing in the retail side of it. And obviously, some of that will be franchise partners, which won't involve capital either. So we start to work it much harder from then on. Roisin Currie: In terms of your question on where we go in the sort of grocery channel, I think one thing I would say is -- and we've -- we had the partnership with Iceland Foods since 2011, and we know that we have not yet maxed out that partnership. So as we've seen as we've gone with Tesco, actually, we're doing some other new products with Iceland. So that tells you actually, there's more to go with that original partner. I think we've been very pleased with the progress in Tesco as have they. So what we're now doing is we are in discussions with them around how do we maximize the current partnership that we've got. And if you think about it, with our partnership with Tesco, it's not just the grocery chain that we've got that partnership. We also have Greggs within Tesco currently, and we have a pipeline for other opportunities. So I think just now, it's about maximizing those 2 current partners. In saying that, we are obviously in discussions with others, but our focus for this year will certainly be about maximizing the partnerships that we've got in place, which keeps it simple for us and means we can take the learning around what else we could do in the future. I will just come right behind sorry, I will come over to this side of the room in a minute. So we'll go over the other side of the room after your sales. Gary Martin: It's Gary Martin here from Davy's. Just a couple of questions from me. Just starting off on the cost conversion piece and just dovetailing off of some of the commentary from yourself, Richard. It seems though from Slide 11, it looks as though there's a fairly elaborate plan in place in terms of cost optimization. Would you be able to maybe run us through how much of that is kind of low-hanging fruit or how much of the kind of hard yards are ahead just in terms of how you plan to optimize in the future from a cost base perspective? That's my first question. And then just the second one, just on the market share piece. So I'd just be curious just to get the grips with the base all eating and drinking out of home index that you're using to measure market share growth off of. Does that include some of the retail meal deals, for example? Roisin Currie: I'll let Richard take your cost [indiscernible] and I'll be back [indiscernible]. Richard Hutton: Should I call it low hanging. That's a good question. I don't want to sound easy. I mean people have to work hard on this. I mean it does involve -- if it was too easy, to be honest, it wouldn't count as part of this sort of objective because it's -- it's about structurally changing the way we do things to make it more efficient and to tackle legacy costs that we don't need anymore. And that's important because there are always new costs coming into the business as well. I tend not to talk as much about that. But when we bridge profit year-to-year, there's always something new that you have to do either from a compliance point of view or to make sure that you are secure and embracing the latest technology. So looking at legacy costs and taking this approach that we do is super important. I think there are things that we can see and there are always new ideas. Sometimes they're inspired by things that people achieve and one group sort of like achieves a breakthrough and others then think, oh, okay, we could do that and sort of learn. So sharing within the business, comparing those with other businesses that we have good relationships with to see what they're doing also helping that. So it's quite a big program. And whilst it might not be dramatic in any 1 year, just by working every year at it and sort of keeping that sort of pressure on and celebrating games, however, small, it sort of just encourages people to keep looking and turning over stones that have been turned over before and because the world changes. And if you look back 5 years, you can just see it's a very different place, isn't it? And the things that you thought were important then may not be as important today. So yes, it's hard to sort of -- I wouldn't call it low-hanging though. I would -- otherwise, it would just be what took you so long. You have to work at these games. Roisin Currie: On market share, so the Circana data that we use is stated behavior. So that's asking the consumer where do they eat out of home and food to go. So it will include any of the behavior in the likes of the food to go sections of a Tesco, Sainsbury's, et cetera, is included in the Circana data. So -- and it's asking customers on a regular basis, where have they purchased recently, which is the best sort of metric on market share that we've got. So it will have all the food to go specialists in there and it will have the food to go part of the supermarkets in there as well. Richard Hutton: Just to pass on the mic. I'm going to take an online question, if I may. One from Darren Shirley at Shore Capital. It's traditional at these events that Darren asked me to split out the price inflation and volume aspects of like-for-like and that I refused. But I'm going to shock him today by actually doing it. So Darren says, what's the inflation contribution to the 1.6% like-for-like so far this year. Just under 4% is the answer, Darren. And we had just under 5% last year, so that's the 1% sort of reduction in inflation. So you can see that slightly over 2% was the volume impact year-to-date. Roisin Currie: So we're coming to [indiscernible] then we will come over to the other side. Ross Broadfoot: Ross Broadfoot from RBC. Two on the new shops, please. You said 53% of 2025 shops in areas with no existing shop within a mile. Why is a mile a good benchmark? I'm sure that will differ across the estate. There any color you can give in terms of sort of behavior that you're seeing? And then second, you talked about sales transfer of 5%. What's the profit impact? And how quickly would you expect those shops to recover? Richard Hutton: Yes. It's an arbitrary decision, honest to me. It could have been a kilometer, it could have been a mile, it could have been in 5 miles. But if you think about sort of when you're actually going out for your lunch, would you walk a whole mile? You probably wouldn't, would you because you'd come across something in that. It's a long way. So as a broad measure, and I know there are some other studies that have used that as a broad metric. But it is quite a big -- that's quite a big sort of catchment distance. So we've used that. We actually sort of typically look at sensitivities within more like half a mile in our appraisals to identify shops where we believe there is a risk of cannibalization. But the reality is it depends on the journey the customer is on as well. It's not really -- if you think around here, people are wondering around on foot. That's one thing. If you're on a busy trunk road, then actually a mile might just be a minute of your journey. And therefore, the more relevant thing is actually, are there other options that are accessible from the same road? Or is it taking a transaction from where you're actually going to go at your destination, which we don't always know. So it's complex and none of this is perfect, but really we present this stuff to try and give you some assurance that we do look at it carefully. We do try our very best to avoid the risk of cannibalization. We do this when we're working with partners as well. We have to agree where shops open so that we don't transfer sales between locations. And that will be absolutely true of the new developments that we get into as well, whether that's convenience retailing or other things. Roisin Currie: Just on that point, just to Richard's point, I guess we're trying to give confidence around providing data points and actually, that's why we've come up with one well. Internally, we actually look at catchments and we look at the customer mission. So if you thought about London in particular and you think about Liverpool Street Station, actually, you've got a Greggs in Liverpool Street Station. You've got about 3 others within local proximity. If you're at the mission of you're a commuter, you do not come out of the station to seek out a Gregg. So we need to be accessible when you're there -- but similarly, if you're out about in food, you wouldn't come into a station to seek out a Greggs. So we need to be accessible there. I think the point around convenience and accessibility are still #1 in the food to go market. And that's why we've got the confidence in the amount of white space and the underrepresented catchments ahead of us. On the other question -- the other part of the question, I think, was the profit impact on the sales transfer of the 5% was the other part of your question? Richard Hutton: Yes, without pulling out the appraisal. Typically, we would look at it and say, okay, on the sales transfer, it will be like a 50% drop-through. So that will be the kind of the rate of profit cannibalization that we would then factor into the shop that was losing sales from the new shop. Unknown Analyst: One just on the Greggs apps. I have a number in the past of incrementality and frequency been about presumably that starts to diminish now? And is it still in your eyes accretive given that the tenant product is for free? Richard Hutton: Yes. That's interesting. We were looking at this just recently because we've -- now that we've got sort of data scientists in the business, we've been able to sort of apply a more technical analysis to this. And my team was starting to form the view, my finance team that this was becoming more mature now and essentially, you shouldn't expect to see quite as much incrementality because it's becoming part of the core offer at Greggs really for a regular customer. Interesting, the data scientists went at the app data and looked at it and came up with an even stronger number than the finance team were. So that said, I mean, it's a tough market with low like-for-likes generally at the moment, isn't it? So we do still believe that it underpins frequency of visit, but it's become, I think, more of an essential as part of your mix really is to have something which rewards the customers who are loyal to you. But -- so if it was driving the incrementality the data scientists are saying, then we'd be sort of shooting off the charts, wouldn't we? And the fact that we're not, I suppose, shows just how important it is in terms of securing the loyalty of your existing customer base. Whether it attracts new customers, that's always the heart of it rather than holding on to the customers you have. But I think it's a super important part of our armory. Roisin Currie: I think another piece just to add on the app is last year, we had just under another 2 million downloads in terms of customers downloading the app for the first time. I think the team has done a great job. When we started to launch ice drinks, we saw that really resonating with the sort of 18 to 34 consumer demographic that we offered ice drinks as a free that you got for download in the app. We saw a real spike in that. So I think it's constantly making sure that you try and get those customers that currently aren't on the app on to it, then we can communicate with them. We can send them quest, we can drive frequency of purchase still a really important part in the armory. Unknown Analyst: All right. Great. And then second question, there's quite a lot of quite big moves across the different business divisions. The B2B has seen quite a big step-up in trading profit margin this year. The retail business seems to have seen quite a big step down in the second half, which then is obviously offset by the cost savings that you mentioned earlier. How much of this is -- I'm not regular count, but there's been a change in the value and lease calculations and the CGUs you mentioned. Is there anything to do about going on there that's creating these large swings? Or if you can maybe just aggregate what's exactly going on there? Richard Hutton: No. I mean just like-for-like, the big factor there. Obviously, we had a bit of a reset in the middle of last year when we had the very hot weather. I think we'd expected stronger like-for-likes last year than actually came through. And increasingly, we became aware that this was very much a market-wide factor. So as you've seen, if Greggs has basically got through last year on a 2.5% like-for-like and taken 0.5 percentage point of market share. Gosh, it must be very tough in other places. So I think it's really just a factor of that, Ben. I mean, the overall impact has been consistent across the business. We have been able to start driving some additional sales through channels such as grocery. But broadly, I couldn't pull out anything that's skewing things from half to half, particularly. Roisin Currie: I'll ask you to pass the mike up front. Thank you. And then we probably just probably got time for two more questions. We'll take one left side, and we'll get you Andy. Conroy Gaynor: Conroy Gaynor from Bloomberg Intelligence. So the first one, just looking at your ever-evolving portfolio of new products. Are there any incremental margin mix benefits that we could be thinking about this year and beyond as you roll those out? And the second one, like many companies, as you're going further down this AI data science journey, are there any genuine competitive advantages that you can pick out that you think Greggs would benefit from? For example, is it your scale or ability to leverage the brand? Is it the fact you have a rich history of trading data piece of stats. But how can you leverage that into a competitive advantage. Roisin Currie: So let me take the competitive advantage one and then I'll let Richard talk about margin mix. I think AI and technologies are really interesting one because I don't think that there's a silver bullet. I think you're absolutely right around there will be opportunity for us to leverage our scale. But if we look at some of the work that we're doing with the support teams just now at Greggs House, it's using in technology that's got AI functionality to then actually move to Agent AI, where actually you are trying to automate a lot of processes. So they sort of mundane and routine of which a business of scale has got lots so you would assume actually that will give us a competitive advantage. I think for us, AI is around -- actually, there are going to be many different strands to this that will actually deliver the advantage. From a supply chain perspective, automation especially with Derby catering, that will be significant for us. And that is why that vertical integration does give us a competitive advantage, especially when we have got on automation in those sites. And then I think from a shop perspective, if you think about our labor cost, it's significant because we are a small box shop model. So therefore, you need people to serve. But we are, to Richard's point earlier, we are looking at lots of the ways that our teams have to do task in those shops. And when they do task, it takes away from serving the customer. So you can't serve the queue as quickly if we can automate a lot of those tasks. Actually in our shops, we believe we can get more volume throughput in terms of those customers and serving those queues. And then I think from a data perspective, our app is where, to Richard's earlier point about our data scientists that we've now got on board, our app is where we do need to mine that data and try and understand the behavior. And because we serve 8 million customers each week, there's a lot of data there that we should be able to mine in terms of 1/4 of those transactions are through the app. So I think it will be many faceted, but it will not be a silver bullet, but there's lots of areas that we have to get after. Margin mix? Richard Hutton: Yes. I think over time, what happens with margin mix is that things which are -- some things become commoditized. And therefore, you can't command the same strong margin on a pack of crisp because everybody sells one. And the way we kind of protect and drive margins is actually by the value adding in the shops. So the things that you bake in store, the things that you make in the back of the store, the things that -- the drinks and things that you produce tend to be the higher-margin items because you can't -- you haven't got the same, you can't compete with that in a commoditized way. You have to put the effort in. I think the matcher thing is the latest example of that. It's -- despite our keen price point, it's a very high-margin item still. And it's sort of, I suppose, injecting interest into the ice drinks category more generally, which again is high margin as hot drinks have been. So I think that's the way the business evolves over time as it pushes it into new areas which tend to have attractive margins, accepting that there's behind the scenes, some of the older items become more commoditized. And it just evolves over time, and it's always been that way. So directionally, it's interesting. I think drinks, if you were to show the mix of food and drink and Greggs over time, drinks are a much more significant part of the mix and a lot of the innovation is still coming in those areas. Roisin Currie: So we'll come to Andy, and then I don't know if you want to check there anything online after that. And then I'll need to bring it to a close because I've then got a press call. But Richard will be around indeed for a few minutes afterwards for anything we didn't get to, Andy. Andrew Wade: Just might be my memory failing, which is quite likely. But just looking back at the market share 1 on Slide 8, your like-for-like versus the market. I'm sure when we looked at that to sort of looked at this a year ago or 6 months ago, you were fairly -- your dotted line is consistently outperforming or as it looks like the sort of last 6 months or so, it's a bit pretty much in line with? Is that a narrative that you recognize? Or am I slightly misremembering? Richard Hutton: It may be we were using the takeaway in sort of fast food line time. I can't quite recall, Andy. There's two measures which are relevant. One is the takeaway sector and this is a much broader one. Typically, we've outperformed the takeaway sector more strongly than the overall measure, but we felt, look, the overall sort of eating and drinking out of home is probably the fairest measure of the totality of the market. and a more stable line because the takeaway fast food sector tends to be quite promotionally driven. And you see quite big spikes, which don't really teach you much in terms of your comparative performance. So I'd have to check back, but I suspect that's the answer. Andrew Wade: Okay. Second one then, sort of thinking about your recovery in ROCE, which is effectively, I suppose not going to have a massive change in the capital base, effectively, recovering in EBIT margin. Can you do that if you continue to have negative like-for-like volumes? Richard Hutton: Well, it makes it harder, doesn't it? We -- in our core plan, we assume that the market continues to stay tough for a while yet. We don't assume that it's going to kind of fix itself in a few months. So we've taken a multiyear view, but we also assume that the market will stabilize in time and this sort of like economic pressure that people have been under will get easier. And I think the first signs of that are this easing of inflation. And I genuinely hope that this is the start of an improving cycle in terms of people being under less pressure. In fact, the government have been confident enough to reduce the rate of increase of the living wage, I think, is indicative of that and hopefully gets us to a place where we are in less inflationary times. Andrew Wade: Just on the, I guess, a similar point. So we've now sort of had negative volumes for, I guess, 18 months, maybe a bit more than broadly 18 months. So we've annualized through negative volumes, negative volumes on negative volumes. So is your view that now that effectively the consumer sort of step down but continued deteriorating? Is that how you're viewing it? Richard Hutton: A little for now because we can't see a reason not to carry on with that assumption. And it's prudent to plan on that basis because then you don't overplan your cost base. So we try and plan on a cautious, prudent basis with some sort of cautious optimism that we've maybe been a bit too prudent. Particularly, I think in the coming year, it'll be very interesting to see what happens in June and July when we had very, very hot weather last year. I mean having now it may happen again, of course. And that's the basis we plan on, but hopefully, that might give us a little bit of upside. Roisin Currie: And what I would say is we're doing a lot to try and disrupt that and make sure we find reasons for the consumer to come into us. So actually match is a really good example of that. We've already leaned into ice drinks. Match has another demographic. So then we're leaning into that, but at a value price, and there'll be more on the menu that we'll do this year. So I guess it's how do you continue to bring that excitement, use your app, get the consumer message out there and you can start to try and buck that trend. So there's loads in our armory that we deliver this year. So on that note, I'm probably going to bring us to a close. And thank you for your time today. What I would say is I do need to run a press call to go to, but I am sure Richard and Dave will be around if there's any other questions, but thank you, and thanks to those online.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Cooper Companies Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Kim Duncan, Vice President of Investor Relations and Risk Management. Please go ahead. Kim Duncan: Good afternoon, and welcome to Cooper Companies' First Quarter 2026 Earnings Conference Call. During today's call, we will discuss the results and guidance included in the earnings release and then use the remaining time for questions. Our presenters on today's call are Al White, President and Chief Executive Officer; and Brian Andrews, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements, including statements relating to revenues, EPS, cash flows, interest, FX and tax rates, tariffs and other financial guidance and expectations, strategic and operational initiatives, market conditions and trends, and product launches and demand. Forward-looking statements depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Events that could cause our actual results and future actions of the company to differ materially from those described in forward-looking statements are set forth under the caption Forward-Looking Statements in today's earnings release and are described in our SEC filings, including Cooper's Form 10-K and Form 10-Q filings, all of which are available on our website at coopercos.com. Also, as a reminder, the non-GAAP financial information we will provide on this call is provided as a supplement to our GAAP information. We encourage you to consider our results under GAAP as well as non-GAAP and refer to the reconciliations provided in our earnings release, which is available on the Investor Relations section of our website under quarterly materials. Should you have any additional questions following the call, please e-mail ir@cooperco.com. And now I'll turn the call over to Al for his opening remarks. Albert White: Thank you, Kim, and welcome, everyone. We're pleased to report a strong start to the fiscal year, highlighted by product launches, outstanding profitability and robust cash flow. These results reflect our disciplined execution combined with the significant synergies we're realizing from last year's reorganization. For today's call, I'll begin with an update on the 3 key strategic priorities we outlined in December and then move to Q1 results and guidance. First, we remain focused on delivering consistent market share gains for CooperVision. In calendar 2025, we gained share for an 18th consecutive year, and we enter 2026 with the intention of doing so once again. In our first fiscal quarter, we made meaningful progress with the global rollout of our premium MyDay daily silicone hydrogel portfolio, growing branded sales and executing on private label contracts. Regionally, the Americas and EMEA strengthened and have excellent commercial momentum. Japan weighed on our Asia Pac results, but we're executing on product launches and investing to restore growth in the region. We're also incredibly excited about the early adoption of our MyDay MiSight launches in EMEA and MiSight in Japan. At CooperSurgical, we're encouraged by improving trends in our fertility business and look forward to positive momentum continuing. Second, our commitment to delivering strong earnings and free cash flow through operational excellence was clearly evident this quarter. The organizational changes and IT implementations we completed last year are generating meaningful synergies, providing us with the opportunity to invest in sales and marketing initiatives while still delivering outstanding financial performance. Q1 earnings exceeded the top end of our guidance range, and those earnings translated into a healthy $159 million in free cash flow. Given our strong start to the year, we're raising guidance for both earnings and free cash flow. Third, we continue to maintain a disciplined approach to capital allocation. We've entered a multiyear period of consistent earnings and free cash flow growth, and we're deploying capital to high-return opportunities. This starts with prioritizing internal investments that drive revenue growth, which we did this past quarter by increasing sales and marketing spend at CooperVision and CooperSurgical in support of product launches and key strategic initiatives across both businesses. We also repurchased $92 million in stock during the quarter, reinforcing our commitment to consistent share repurchases as a core part of our long-term strategy to drive shareholder value. And the remainder of our cash was used to reduce debt. Before reviewing the quarterly details, I want to address the strategic review we announced in December. We understand there is strong investor interest in this process. While we're not in a position to provide an update today given where we are in the process, the review is progressing as planned with active engagement from our Board and advisers. We will communicate outcomes if we have something definitive to share or when the process is complete. In the meantime, our Board and management remain highly focused on maximizing long-term shareholder value. This includes driving organic growth by winning new contracts and strengthening customer relationships, delivering strong earnings and cash flow by leveraging our infrastructure and deploying a consistent capital allocation strategy that includes share buybacks and debt paydown. With that, let's move to the Q1 results. Consolidated revenues were $1.024 billion, up 6.2% or up 2.9% organically. CooperVision reported revenue of $695 million, up 7.6% or up 3.3% organically. And CooperSurgical delivered revenue of $329 million, up 3.3% or up 2.2% organically. Operating margins improved meaningfully, and non-GAAP earnings grew 20% to $1.10. For CooperVision, on an organic basis, torics and multifocals grew 6% and spheres grew 1%. Daily silicone hydrogel lenses grew 7%, led by double-digit growth in MyDay, while clariti was up slightly. Biofinity and Avaira grew a combined 3%, and MiSight continued its strong growth, up 23%. Regionally, the Americas grew 6%, led by strength in daily silicone hydrogel lenses; and EMEA grew 4%, strengthening our #1 market position in that region. Asia Pac declined 4% as execution on new product launches was more than offset by softness in Japan, primarily tied to lower-margin older hydrogel products. To accelerate APAC performance, we've upgraded several leadership roles, increased marketing investments and are ramping up our new regional distribution center, which is already enhancing customer service with faster fulfillment. We've also recently launched MyDay toric in Taiwan, MiSight in Japan, MyDay MiSight in Australia and New Zealand, and we're increasing regional availability of MyDay multifocal and MyDay toric expanded range. We also have private label launches underway in multiple markets; and in Japan, we'll be launching the full clariti family later this year with the addition of both the toric and multifocal providing a competitively priced full family silicone hydrogel upgrade path for the large base of hydrogel wearers in that market. While we expect Asia Pac to remain down in Q2 due to declining legacy hydrogel sales, we are confident the region will return to growth in fiscal Q3 given all of our launch activity. Turning to products. Our daily silicone hydrogel portfolio continues to perform well, with MyDay leading the way through expanding customer partnerships, broader availability and ongoing launches. Our premium priced offerings delivered its strongest performance led by MyDay multifocal, Energys and torics all growing over 15%. Particular strength was seen with MyDay multifocal as its rollout continues to gain momentum. Our premium MyDay Energys also posted strong growth driven by its innovative digital boost technology designed to provide maximum comfort in today's heavy digital world. This product will be launched shortly in Europe, and we look forward to the boost that will provide in that region. MyDay toric, which offers the broadest SKU range in the category and is powered by the same leading toric design in our Biofinity toric, continued delivering exceptional growth. We also closed additional MyDay key customer contracts and private label partnerships this past quarter across all 3 regions. For the clariti product family, it grew modestly, led by the ongoing launch of our new multifocal in the Americas. This multifocal has the same next-generation optical design as MyDay, meaning an easy-fit lens with consistent performance across different lighting conditions, distances and patient profiles. So we expect strong performance as we launch across EMEA and APAC later this year. Turning to myopia control. MiSight grew 23% to $28 million. Momentum is building with our latest innovation, MyDay MiSight, launching in EMEA in January to an extremely positive reception, thanks to the combination of proven myopia control efficacy and the all-day comfort of a premium silicone hydrogel lens. We also launched MiSight in Japan in February and are seeing a similar enthusiastic response. Japan is one of the world's most significant vision care market; and with an estimated 77% of elementary school children being myopic, it represents a substantial opportunity for MiSight. We're supporting these launches with our most comprehensive professional engagement programs to date, highlighted by major conference engagement, high-impact regional launch events, extensive KOL education and media initiatives reaching tens of thousands of eye care professionals. These efforts are driving very strong clinician activation rates, reinforcing our confidence that our early momentum will continue as MyDay MiSight expands in EMEA across Asia Pac and into Canada. MiSight remains the only FDA-approved contact lens for myopia control and the first and only lens approved for myopia control in both Japan and China. We're also continuing to invest heavy in myopia control R&D and have several exciting breakthrough innovations underway, which further supports our confidence in MiSight's ability to deliver consistent long-term robust growth. To conclude our CooperVision, let me highlight our performance relative to the market. This is calendar quarter data, so apples-to-apples with our competitors. In calendar Q4, we grew 10% and the market grew 6%. For the full calendar year 2025, this translated into 6% CooperVision growth versus the market at 5%, marking our 18th consecutive year of market share gains. Turning to CooperSurgical. We delivered quarterly revenue of $329 million, up 3% or up 2.2% organically. Fertility revenues were $127 million, up 3% organically. Growth was driven by strong global genomics performance, supported by continued commercial and operational execution across product launches, new clinical wins and expansions within existing accounts. We also saw solid results in consumables led by media, ZyMot, our sperm separation device that helps optimize fertility procedures; and Witness, our automated lab tracking system. These gains were partially offset by softness in the Middle East and lower equipment installations. Importantly, we are now seeing early but clear signs of recovery in the fertility market. As we move through the first quarter, results steadily improved, supported by solid execution on contract wins and new product launches as well as strengthening underlying market trends. This momentum positions us well for continued improvement through the remainder of the year, though developments in the Middle East, where we hold a leading market position, remain a source of uncertainty. For the fertility market overall, the product and services segments that we operate in had delivered strong growth for many years before slowing in late 2024. While several factors contributed to the deceleration, the industry is now recovering, driven by renewed clinic interest in adopting new technologies along with improving cycles in the U.S. and several European countries. Although a rapid rebound is unlikely, we anticipate steady improvement as we annualize last year's pressures and underlying activity normalizes. Moving to office and surgical. Sales were $202 million, up 2% organically. Medical devices grew 6%, driven by strong performance in our surgical OB/GYN portfolio led by our uterine manipulators and related products, and continued momentum in our specialty surgical products, including our innovative single-use lighted, cordless surgical retractors. This was partially offset by softness in some legacy medical devices and Paragard declining 7%, which was expected against a difficult comp tied primarily to last year's launch of the new single-hand inserter. To conclude, I want to recognize and thank our Cooper team for their dedication to operational excellence. Investing in sales and marketing to drive organic growth while maintaining disciplined cost control and continuing to build a streamlined and technologically efficient company is no easy task, so thank you to the entire team. And with that, I'll turn the call over to Brian. Brian Andrews: Thank you, Al, and good afternoon, everyone. Most of my commentary will be on a non-GAAP basis, so please refer to today's earnings release for a reconciliation of GAAP to non-GAAP results. For our first fiscal quarter, consolidated revenue was $1.024 billion, up 6.2% year-over-year and up 2.9% organically. Gross margin was 68.1%, exceeding expectations driven primarily by a lighter mix of low-margin Asia Pac revenue at CooperVision. Excluding the impact of tariffs, gross margin would have been essentially flat. Operating expenses rose only modestly and improved as a percentage of sales, declining from 43.6% to 41.2% year-over-year, reflecting the benefits of the reorganization executed in fiscal Q4 of last year. These efficiencies stem from the structural changes we've made as we transition to a smaller, more efficient organization that leverages technology including AI to automate work and optimize shared services. The impact of these efforts was particularly evident at CooperSurgical, where expenses decreased year-over-year. Operating income increased a healthy 13.9%, resulting in a 26.9% margin. Interest expense was $22.4 million, and the effective tax rate was 15.1%. Non-GAAP EPS grew 20% to $1.10 with roughly 197 million average shares outstanding. Free cash flow was very strong at $159 million with CapEx of $102 million. We deployed this cash by repurchasing 1.1 million shares of stock for $92 million, making the final $50 million payment related to our 2023 Cook acquisition and applying the remaining balance towards reducing net debt to $2.4 billion. Lastly, in February, we addressed our $1.5 billion term loan maturing in December 2026 by amending and extending $950 million for another 5 years to February 2031. The remaining $550 million will be repaid in December 2026 when it matures using our strong free cash flow and ample revolver capacity. Moving to full year fiscal 2026 guidance. Our revenue expectations are essentially unchanged with consolidated revenues of roughly $4.3 billion to $4.35 billion, reflecting organic growth of roughly 4.5% to 5.5%. CooperVision revenue is expected to be in the range of $2.9 billion to $2.93 billion, up 4.5% to 5.5% organically. And CooperSurgical is expected to be in the range of $1.4 billion to $1.41 billion, up 4% to 5% organically. For earnings, we're raising guidance to $4.58 to $4.66, reflecting our Q1 beat and stronger expected operational performance. Regarding tariffs, our estimate of approximately $24 million remains the same for the year. Our expectations on interest expense and tax remain unchanged with interest expense around $85 million and the effective tax rate between 15% and 16%. Turning to cash flow. Our cash conversion rate continues to improve, and we're increasing our fiscal 2026 free cash flow outlook to $600 million to $625 million. For fiscal '26 through 2028, we continue to expect to generate more than $2.2 billion of free cash flow, driven by higher operating profits, improving working capital performance and lower CapEx. From a capital deployment standpoint, our priorities remain unchanged. We're investing in growth and innovation, repurchasing shares and reducing debt. To conclude, I'm proud of the operational excellence we're seeing across the organization. We're optimizing and leveraging prior investments in numerous areas, including IT, distribution, HR and finance; and we're increasingly applying AI-enabled tools to streamline areas such as marketing, planning, forecasting and support functions. Our reorganization efforts are delivering meaningful synergies, and the results are evident. Looking ahead, we have additional opportunities to further optimize the way we work. With our multiyear CapEx cycle winding down, our manufacturing teams are now evaluating ways to capitalize on the next-generation production improvements developed over the past several years. Early planning is underway, and while this work will take time, the results have the potential to be material. In the meantime, we'll continue driving efficiencies by leveraging technology while consistently investing in initiatives to support sustainable organic growth. And with that, I will turn the call over to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Jeff Johnson with Baird. Jeffrey Johnson: I guess the first question, let me just kind of back out and go more higher level. Al, I mean, you reported a 10% calendar 4Q number. I think over the last 3 quarters, you've been about 3%, 3.5% for CVI. So one, can you reconcile that 10% number versus the last few quarters at 3%? What's different in the number you're citing there versus what we see in your CVI organic growth results? And then one follow-up question. Albert White: Sure. I knew we were going to get that one. It's literally just a matter of months and shipment of products. So we had, had a weak November and December of 2024, and we had a really strong January of 2025. So just when you comped against that, the way that the shipments worked, it resulted in a really strong calendar Q4 for us. Jeffrey Johnson: Fair enough. And I guess, again, maybe I'll go even further out, and apologies for the feedback. But you've been talking about kind of getting back to market growth, above market growth at least as you report CVI. How is that plan going so far? Maybe update us on the MyDay -- clariti to MyDay transition. Just in general, it still feels like your results are maybe lagging the market here a little bit relative to some of your peers. So how do you feel like you're doing in kind of getting back up and into above market over the next couple of quarters? Albert White: Great question, Jeff. I'll break that up a couple of different ways. I mean if I look at the Americas, we're doing well. The U.S. had a good quarter. We're gaining a lot of traction. We've got product launches and a lot of activity. The team is doing a fantastic job. So I would say we're in good shape with the Americas. When I look at EMEA, again, in good shape there. We took a step forward this quarter against last one, but we've won a number of contracts there. We have a number of product launches going on. I would say our -- we have better visibility for that market right now to improving sales. So I feel pretty good about the momentum that we have in the Americas and the momentum that we have in EMEA right now associated with MyDay and clariti, frankly. And then I go to Asia Pac as kind of the third one. And the results there, right, have been a little tough for us. And that's the area that we need to get figured out and get back to kind of our old traditional growth rates, and we'll be in fantastic shape. As I mentioned, we're doing a lot of stuff to drive growth in Asia Pac. We did see success kind of in a number of areas where we've had problems. We stabilized when it comes to a lot of the e-commerce stuff that we talked about. We stabilized the China business. We had a changeover of some personnel, a number of leadership positions. So we're in good shape in a number of countries. The one that we kind of have left right now is Japan, and I can target that down to like Japan, older hydrogel products where some of our competitors are taking some share. We have not caved on price or anything along those lines. So I think we're going to continue to have a little bit of pressure in Japan with traditional hydrogels, again, in the next quarter because I think that the region will probably be down because of it. But then all of that success, the stuff that I'm talking about, all those product launches in Asia Pac, the success of executing on those private label contracts, all of that kind of stuff, the transition point on that happens in Q3, and you're going to have Asia Pac growing again. So another one where, I would say, we had a number of points over the last year and just a lot better, a lot clearer visibility right now on where those challenges are and where the successes are going to come from. So I think fiscal Q2 ends up being a step-up certainly from this quarter. And then as I've said all along, we'll be back to rolling in Q3 and Q4. Operator: And from Wells Fargo, our next question comes from the line of Larry Biegelsen. Larry Biegelsen: That was a new pronunciation. Al, we heard your comments about the Middle East and IVF. Maybe you could just level set us on what your exposure is there? And how you're thinking the war might impact your business? And I have one follow-up. Albert White: Sure. Yes, to put some numbers around that, kind of, for us, on a consolidated basis, the Middle East is about 2% of our sales. A lot of it is distributor. And obviously, the Middle East is a very large region, so it won't have that much of an impact on us other than it could impact fertility because there's a decent amount of fertility business. We're #1 in that region. We've good strength there. So it's just a matter of us being able to get products there. I mean women are obviously still going through fertility treatment and so forth there. We have to be able to get product in. So if that situation extends for a period of time, it will be more challenging for us. Even with that, we're still -- we have a lot of good momentum in fertility, and I think we'll still improve quarter-over-quarter. But that's kind of the one question mark. Otherwise, I'd even be more bullish on fertility. Larry Biegelsen: And Brian, the margins were really strong in Q1. Just remind us how we should think about the phasing for the year, how you're thinking about -- I guess the tariffs, you said no change. But in light of the recent Supreme Court ruling, if that stood, would there be upside on tariffs? Brian Andrews: Sure, Larry. I'll start with the second part of your question, at least as it relates to tariffs. We've assumed $24 million in the year. That's what we assumed as of the last guidance. We're going to sit tight. Obviously, we capitalize and release the impact of tariffs 4 months later, so any change to tariff rules or guidelines or whatever takes effect won't impact us until later in the year. But a 10% tariff makes very little impact. It's pretty similar to the $24 million, so I'd assume that. If it goes up to 15%, that could be somewhere upwards of like $4 million. But for now, we're just -- the 10% is what it is, and that's what we factored in the guidance. As it relates to operating margins, yes, I mean, it's the same story that we've been talking about from exiting last quarter. We're getting really durable savings from the synergies and the elimination of fixed costs from the reorganization that we talked about in Q4. We're leveraging prior investment activity, and we're being really disciplined. We're scrutinizing all nonrevenue-generating expenses, particularly the back office, and we're investing in sales and marketing. So the drop-through in operating margins was good in Q1, and I would expect you're going to continue to see stronger operating performance, which is why, frankly, we raised our guidance $0.13 at the bottom end and $0.10 at the midpoint based on stronger operating performance. But I'm not going to get into gating at this moment. Operator: And from Piper Sandler, our next question comes from the line of Jason Bednar. Jason Bednar: Actually want to pick up on the line of question that Jeff had, but as far as the competitive landscape as it stands today and your share position, maybe talk about, Al, new fit activity across the quarter. Just what are you seeing in the data when you look at your performance versus peers, if you can break it down dailies versus monthlies? Albert White: Sure. If I look at new fit activities, it probably hasn't really changed that much. At the end of the day, we're taking wearers, so the fit activity continues to put us in a good position. Now you have a whole lot of other variables that go into it, I would say. But if I narrowed down to just new fit activity, whether it's dailies or FRPs, we are taking wearers in both of those as we did this past quarter. So I feel good about that as kind of continuing to be a good indicator of the future. Jason Bednar: All right. And then as a follow-up, it really seems like industry pricing dynamics have calmed down, at least relative to where we were last year. It sounds like the latest round of increases here the last few months are sticking, it should be good for all the players out there. How are you thinking about future list price increases and managing these discussions with wholesalers and docs? Especially if I think back, we went through multiple increases in the past few years, usually like 2 increases a year, do you think the market can absorb more than 1 price increase a year without negatively affecting demand here going forward? Albert White: Yes, well, I do because of the technology that's coming out. I mean, as an industry, we're launching new products, really innovative products. We have some great ones ourselves. I mean there's nothing more innovative in the contact lens industry today than MyDay MiSight that's launching out there. But the multifocals that we're launching are great products. Energys is a great product. I know some of our competitors have some products out there that they're launching at good price points. So consumers are willing to pay for that high quality, and contact lenses are not particularly expensive at the end of the day. So the positive pricing that you're picking up on, on your comment is true. I'm happy about or I feel positive about pricing in the marketplace right now. The only region I put a little caveat on that is still in Asia Pac. There's definitely markets in Asia Pac where there's some pretty competitive pricing out there. But yes, generally speaking, I'd say pricing is positive right now, and it's appropriate given the technologies that are rolling into the marketplace. Operator: And from Stifel, our next question comes from the line of Jon Block. Jonathan Block: Al, the CVI number, I think I heard you at 3.3% precisely. It was a bit below expectations, even the bottom end of the midpoint. Like you gave that guidance, call it, first or second week in December. So maybe just talk to us -- again, it was slightly below. But what deviated from expectations relative to when you gave it? And it would seem to suggest that maybe January was a little bit weaker than you expect. So can you give us any color on how things trended into February? And yes, sorry for the awful feedback. Albert White: Yes. No, you're right, Jon, because we were looking at Asia Pac being essentially flat for the quarter, kind of similar to what we did in Q4, and that would have meant CooperVision consolidated growth would have been like 4.3%, something like that. And you're right, it was 3.3%. So that delta was very specific and very targeted, if you will, to what happened in Japan on those legacy products. I mean we started seeing it some in December, and then we definitely saw that activity in January. So that's what happened. That's where it picked up. I thought that, frankly, the momentum we have with all the product launches and activity and everything would overcome that. But yes, that was a decent hit for us as we rolled through December and January. You're right. And that's why I said I think Asia Pac will probably be down one more quarter before all the positive energy that we have kind of overwhelms that, if you will. Jonathan Block: Okay. Fair enough. And second one, and I apologize in advance for sort of the boring question. But Brian, when I look at the add backs in the quarter, almost half of the add backs were from -- like a hit from natural causes in litigation, which is just a little uncommon. It didn't seem to be the case in the prior quarter. So any color on what you can give around the add backs if you can elaborate a bit? Brian Andrews: Jon, I think you're talking about just in the other category where we break out -- I think it was $6.7 million was related to other legal-related matters. I mean our stance is not typically to talk about what legal matters are going on. We obviously have insurance for a number of things, but there are some things that we don't have insurance on, where we're defending ourselves or -- we've got some legal-related matters that show up. So it was a little bit higher this quarter, but not too atypical from years past. Operator: From Jefferies, our next question is from Young Li. Young Li: Great. I guess to start, I was wondering if you could talk a little bit about there's an update on sort of how the supply dynamics have impacted your ability to win new contracts in the quarter. Albert White: Supply dynamics? Kim Duncan: Impacted your ability to win. Albert White: For supply, you're probably referencing some of the MyDay capacity. We don't have those issues anymore. So I would say that when it comes to supply constraints, manufacturing or supply constraints or logistic challenges, I am very happy to say those are in the rearview window now. We don't have those challenges anymore, so that's not impacting us. Young Li: Apologies for the sound quality. I don't think you heard the question fully. But I was just wondering if you were able to win more new contracts this quarter just given the improvement in supply. Albert White: I got you. The answer to that is yes. Yes, we did win a number of new contracts. As a matter of fact, we won them in all 3 regions, and they were definitely MyDay related. So we won a bunch kind of last year and as we were exiting last year, but we've continued to expand relationships and partnerships and win additional MyDay business. So yes, we have. Young Li: Okay. Great. Very helpful. And then I guess to follow up, I wanted to get a little bit of color and update on Paragard. It's a high-margin business, although we know about the volume, pricing dynamics. Are there any incremental updates on the competitive front just given the potential for impact on the profitability side? Albert White: I would say no updates. As far as I'm aware of, that licensing agreement that you referenced on the competitive side has not closed, so I don't have any updates or any details on any of that. I think for us, Paragard was minus 7% for the quarter. We're still expecting that to be flat to up a little bit for this fiscal year. And then we'll see how that plays. If that deal actually does happen, and then we'll give some color on their launch plans and so forth. But right now, I don't want to speculate on any of that. Operator: And from Barclays, our next question is coming from the line of Matt Miksic. Matthew Miksic: I hope this is coming through okay. But one question just following up on the market. There was some kind of unusual trajectory during last year in terms of the market dynamics. Based on your best guess and what you saw, I guess, during and exiting Q4 on a calendar basis, do you think that's improving now? Do you think we're stable? Any further color on what the ups and downs were from last year? And then I have one follow-up. Albert White: I think I would say we're at least stable, if not improving a little bit. We did have, as a contact lens industry, a softer year last year, but it's at least stable. The reason I say improving, as I sit here thinking about it on the top of my head, right, is because of pricing that somebody asked about earlier. I'm trying to look at the market and say, hey about 1% is going to come from price, about 1% will come from wearers, and then you'll have all the other stuff, the shift to dailies and so forth that's happening that will drive it. That 1% that's coming from price, I would certainly stand by that, and it could be potentially a little bit better than that. So I do think the market is well positioned for a decent year. That would be like a rebound of what it was years ago, but it's going to be a better year, I think, in 2025 than it was in 2024. Matthew Miksic: Got it. And then just a follow-up on some of the dynamics that are driving growth rate next quarter and the quarter after. You mentioned Japan is down in this quarter, improving by the third fiscal quarter, I think. How should we think about the impact of some of these private label engagements that you announced and mentioned that you were able to close some more? When do those -- or did you notice those coming in this year? Do they just kind of filter in and support sustainable growth? I mean how to think about it because it just seemed like there was quite a number of them that you signed, and I'm just wondering if that's something we're going to notice as we get into the middle and back half of this year. Albert White: Good question. And yes, we are executing on those private label contracts and a number of branded contracts that we won. And you will see those as we progress through the year. They got masked this quarter because of what happened in Japan as I was saying. Otherwise, we would have been kind of 4.3% somewhere, 4.4% somewhere around there. But we are executing and doing well on those contracts. So the way I see it playing out is we continue to execute on those contracts, and we have good visibility on that. That's going to result in a better Q2. But as I've said all along, it's going to be Q3 and Q4 is when all those contracts and those launches really start coming together for us. So I just think that we kind of have 1 more quarter behind us of some of the challenges that we were dealing with, and we have 1 more quarter here in the quarter that we're in, where we have some residual challenges in Asia Pac still putting up a step in the right direction in Q4. But then we get back to kind of the CooperVision of old and the more consistent solid revenue growth rates in Q3 moving forward. Operator: Our next question comes from Bank of America from the line of Travis Steed. Travis Steed: I guess the first question I have is on kind of Q2 revenue, kind of where you want the Street to shake out and kind of the cadence for revenue growth for total company and CooperVision and CooperSurgical. We heard the comments on Japan. I don't know if there's any other dynamics that you'd point to that we should model for Q2. Albert White: Well, I think if I look at it that way, I'd say we'll probably have another good quarter I would expect in the Americas. I would expect EMEA to be a little bit better. than it was this quarter. And Asia Pac is the question mark to me. It will be down a little bit in total. So I would assume that the Q2 results are a little bit better than what we did here. I would look at surgical pretty similar. Fertility should be a little bit better even with some Middle East risk out there. And the rest of that business is coming along fairly well. So I would think CooperSurgical will post a little bit better sequential quarter than what they did in Q1. Travis Steed: On the second question, I wanted to ask on the strategic review. When do you expect that to be complete? What's the goal for the outcome? Anything else you could kind of say on the strategic review would be helpful. Albert White: Sure. There's really not much else I can add on that. I mean we announced that we were doing that kind of formally, if you will, beginning of December, went through the holidays and so forth. And we're very active on it right now with our advisers and the Board and so forth. So I don't want to comment or say anything right now. It probably wouldn't be appropriate to go into any details until we get some concrete information. So I'll hold off on that one but certainly provide updates when we can. Operator: Our next question comes from Mizuho Group from the line of Anthony Petrone. Anthony Petrone: Maybe one on private label and then one on MyDay MiSight. So on private label, I don't know if you can share this, Al and/or Brian, but what was the percent of private label exiting last fiscal year? And with the addition of these new private label contracts, where can that increase to? And is that margin neutral? Is it a margin drag? Or can it be accretive to margins? I have a one quick follow-up on MiSight. Albert White: So our private label was running for quite a while about 1/3 of our revenues. It's a little bit higher than that. We don't break out specific numbers. It's a little bit higher than that, and it's still kind of trending along there. We actually had a pretty good quarter with branded sales, and we're seeing a little bit more success now winning some contracts and business around branded sales. So I wouldn't highlight too much with respect to that one. Margin-wise, we have a tendency to look at things at an operating margin level, and I know the operating margin on those are fairly similar. So from that perspective, it doesn't make too big of a difference. It could make a little difference on gross margins. Those contracts come through. They'll put a little pressure on gross margins probably as we move to the back half of the year. Anthony Petrone: And then on MyDay MiSight Japan, maybe can you size that in terms of the number of target practices you're going after? Like how many sites are you looking to penetrate? And what is the market size and dollar for MiSight in Japan? Albert White: So just to be clear on that one, like the product that got launched in Japan was just MiSight, the regular MiSight because it took us like 3 years to get regulatory approval on that. So MyDay MiSight is in multiple European countries right now. We just launched it in like Australia, New Zealand, South Africa I think, but Japan is the kind of the traditional, if you will, MiSight. As I mentioned on the call, it's like 77% of kids are myopic, so there's still a big opportunity there. It's really hard to gauge the size of that market and to put numbers out associated with it. But I will say we are super aggressive there right now, and I'm crazy happy to say that the product is being received really well. That's an ophthalmology market rather than an optometrist. So you have a marketplace of doctors who look at clinical data and they understand clinical data. And when you have that kind of combination of a lot of myopic kids and professionals who understand clinical data, a product like MiSight is going to do really well there. So I think that -- I talked about 20% to 25% growth from MiSight this year. We did 23%. And I would certainly be comfortable saying 20% to 25% again or higher based on the success that we're seeing early indications on MyDay MiSight and MiSight in Japan. Operator: Our next question comes from the line of BNP Paribas from the line of Navann Ty. Navann Ty Dietschi: One on CooperVision, if you could discuss MiSight, again, solid performance in light of the Stellest entering the market. And my second question is on the CooperSurgical. Your fertility pure-play peer had supportive market comments. So what are you seeing in IVF cycles across the U.S., EMEA and APAC? Albert White: Sure. I'll touch on the first one, which was the Stellest activity here in the U.S. That is going to turn out to be a positive for us. There is a lot more interest in myopia control, pediatric myopia issues, and the education that's coming because of Stellest, and the attention that the optical community is now putting on myopia control is quite a bit more than it was when it was just us pushing it. So there's going to be some push and pull from that because obviously younger kids are going to move into glasses much quicker. But when you look at, especially 11 and 12 year olds who are in sports or any activities or anything else concerned about their looks or whatever, like we're seeing an increasing amount of fit activity when it comes to kids in that 10 to 12 age in the U.S. market. So I think at the end of the day, that's going to be a positive for us long term. And I even think, this year, it's not going to be detrimental to us where I thought that it might be at one point. So I'm happy that product's in the market. I'm happy with what they're doing, and I'm happy with the promotional activity that's out there educating the marketplace. On the fertility side of things, yes, as I mentioned, I think the risk of the downside that was there and kind of that market continuing to trend down, I would take that off the table because we are seeing positives in the fertility industry now. We're seeing improving IVF cycles in the U.S. We're seeing improving IVF cycles in some of the European countries. We're seeing fertility clinics starting to look at upgrades and so forth as new technology comes out, new equipment comes out. So I would say that we're going to continue to see the fertility industry get a little bit better. I don't see like a fast, huge ramp-up or something like that. But I would say the downside has kind of taken off the table, and I would say, stabilization to improvement is what we're seeing right now. Operator: From William Blair, our next question comes from the line of Steven Lichtman. Steven Lichtman: Al, you mentioned reinvestment in myopia control and it sounds like on the R&D side. Can you talk about the opportunities you see to build on the MiSight platform from an innovation perspective? And then I have a quick follow-up on free cash flow. Albert White: Sure. There's some really exciting stuff there. I mean, one is that we need to get a MyDay MiSight toric out into the marketplace. That is one of the products that the optical community really wants. So we're doing a lot of work on that right now. That's a positive. We have kind of like a MiSight 2, if you will, that we're working on to even get better efficacy. We've also got some really cool exciting stuff when you look at like combinations with atropine and so forth that are -- that have the potential to really, really help kids that are not reacting to kind of regular or traditional treatment. So yes, you're right. We're spending a decent amount of money in R&D on MiSight or myopia control in general, and we're going to continue to spend that because this is a great market. I mean we have opportunity to have that product continuing to grow a solid 20% plus for like years and years and years and years. So yes, we're investing in that pretty decently. Steven Lichtman: Great. And Brian, the upside you're seeing on free cash flow this year and the raised guidance, is that coming from higher operating margin, better working capital management, maybe all the above? What's exceeding your initial expectations heading into the fiscal year? Brian Andrews: Yes, thanks for the question. Really, all of the above, we're seeing stronger operating performance, and I touched on that earlier. But we're collecting better. We're building inventory more smartly. I guess, smartly, that's a word. But we're building inventory in a more efficient manner. And FX is helping a little bit, but it's really just a combination of the operating performance and better working capital. Obviously, the lower CapEx helps, too. Operator: Our next question comes from the line of Joanne Wuensch from Citibank. Joanne Wuensch: I was fascinated to hear how my last name was going to get pronounced. A fundamental one and a bigger picture one, please. Foreign exchange, what are you dialing in with all of the shifting U.S. dollar given the macro environment? And then my second question, I'll just put it on right up front. How are you thinking about CSI revenue improving throughout the year? What are the drivers or levers that we can pull on that one or we can see you pull? Albert White: I'll answer the second one, and I'll let Brian answer the first one. So on the CSI side of things, we'll have like Paragard, which is down 7%, will finish the year kind of flat to up a little bit. So I think Q2 will be another year because -- or another quarter because of the comp where it will probably be down a little bit, but then we'll have a good like back half of the year with that product. When I think about like the medical devices, boy, our specialty surgical team is killer. Those guys are -- just do a fantastic job. So I think we'll continue to have strength there. And then as I was mentioning on fertility, just better visibility, more comfort in that, that market is at least stabilized and arguably trending up, is going to put some improving growth rates on that. So I think Q2 is better. I think, frankly, Q3 is better than Q2 for CooperSurgical, so just kind of progressing along with improvement, probably somewhat similar to Vision, where the best quarter will be the Q3, Q4. Brian Andrews: So I'll take the FX question. As we were exiting last week, we were sitting to more favorable relative to last guidance on FX, but obviously, with the Middle East conflict, the dollar strengthened. And so as we thought about and as we set the guidance ranges for this earnings call, we took out the revenue ranges by $6 million of Vision and $1 million of Surgical, reflecting FX. But really, we kept the rates pretty similar to the rates from last earnings call. It's a little bit conservative. So really, we're looking at a headwind -- sorry, a tailwind to revenues of roughly 1% and also a tailwind to EPS of roughly 1%, so very, very similar to the last call. Operator: Our next question comes from JPMorgan from the line of Robbie Marcus. Robert Marcus: Two for me. First, Al, wanted to get your thoughts. First quarter organic growth missed on CVI guide and overall, and it sounds like second quarter will still be maybe a little weaker than original expectations due to Asia Pac. You talked about third and fourth quarter and a lot of the private label driving fourth quarter, and you didn't flow that all through in the original guidance. How are you thinking about sort of the conservatism of the guide now with the slower start to the year? And does the slower start maybe take some of the upside off the table as you left the guidance the same? Albert White: I would characterize that, honestly, the exact same because where we had that softness in Japan that I talked about, I mean, I can pinpoint that softness and talk about what happened there. And we have good, good visibility around what happened and how we're correcting that, but we have more strength in the Americas and more strength in EMEA than I would have said back in December. So I mean, I'd net that out and say, yes, we came in below our range and where we wanted to come in, in fiscal Q1. But I would say that Americas, stronger than when we gave that guidance in December. EMEA's stronger than when we gave that guidance in December. Asia Pac, probably pretty similar to where we gave that guidance because of a net positive of contract execution and product launches and wins offset by kind of the negative of the stuff I talked about. So net-net, I would put the odds of us being able to post a good year and so forth and success in the back half pretty similar to what we had in December. Robert Marcus: Great. I wanted to go back to the question on the Paragard competitor. I realize deal hasn't closed yet and you're not ready to talk about the competitiveness here. But I'm guessing that wasn't included in the guidance. So did you include any competitive threats like that in the guidance for the year? I guess that's the question as we think about it. Albert White: So when we gave initial guidance, I can't remember. I thought I mentioned it on the December call. But when we gave the initial guidance, we assumed a negative impact because of the competitive launch and that it would happen at the end of this year. It's probably more likely that we will not have a negative impact, meaning that was a little conservative. But we'll see. I don't know. I mean, that thing hasn't closed, and we're in March already of our year. So we're working obviously well into our year at this point in time. So we'll see. But to confirm, yes, we had included that in the initial guidance of assuming kind of flat to up just a little bit. Operator: From KeyBanc Capital Markets, our next question is from Brett Fishbin. Brett Fishbin: Hopefully, there's not too much feedback. Just wanted to circle back on the 1Q operating margin performance, which I think you noted in the press release was better than expected and obviously is a top priority this year. I was just hoping you could unpack a little bit in terms of what went better than you thought and why you were able to call the operating margins as exceeding expectations this quarter. Albert White: All the financial details of course. A big part of that was just good solid execution. I mean we did all that work in Q4, and we knew the team was going to do a good job with it and they have. Like organizationally, we've just done a really nice job. I would kind of highlight AI, and I hate to sound like one more person talking about it. But the reality is that our organization has embraced it. And this isn't our organization like all of a sudden right now getting on and training and everyone's going to train on it and so forth. Our organization embraced it last summer. And we started implementing that stuff as we were going through the year, and we're seeing positives come out of that type of work. The technology advancements at Cooper are fantastic. I'm super happy. And we have a lot more to do. This isn't a 1-quarter thing. So we saw some of it certainly in Q4. We're seeing those improvements in Q1, and we're going to continue to see the use of technology and AI advancements be a positive to us on our operating margins as we move through this year. Brian Andrews: I guess not much to add to what Al just said. I mean we talked about, in Q4, we grew OpEx. It was basically flat year-over-year. And then here again in Q1, OpEx was roughly flat year-over-year. So there's a lot that we're doing to drive synergies and efficiencies, leveraging prior investment activity, and we're just really being very disciplined about fixed costs in the back office. And so we want to leverage IT. We're doing that much, much more than ever before, as Al talked about. And this is just great operational execution. Al talked about it and I talked about it in our prepared remarks, and I expect that to continue through the year. Brett Fishbin: Great. And then most of my questions were asked. Maybe I'll just ask one more on some of the new product launches. You mentioned several incremental launches that are really phased throughout this year, including MiSight in Japan, MyDay MiSight in Europe and in Asia, Energys, the toric multifocal. Are there 1 or 2 of these that you would call out as maybe the most exciting to you in terms of like just what they can do for company growth over the next year or 2 as they ramp? Albert White: You could kind of hear my excitement on MyDay in Japan and MyDay MiSight. I mean I still believe that there is a fantastic market out there in pediatric optometry in treating kids' myopia progression. And we've had that product. We got to a little slower start than I would have liked on that, and China has turned out to be pretty small in the grand scheme of things. But the rest of the world is gaining traction and doing well. And MiSight is back, and it is doing well. And with MyDay MiSight and the products that we have and the stuff in R&D and so forth, it's going to continue to do well for a number of years. So I'm really excited about that. On the MyDay side, it's execution. I mean that's what it is. Like I said, we got full product availability last summer. We finally got out there. We're executing a contract win, branded, private label. We're getting product launches done. All that stuff probably takes a little bit longer than you wanted to take, but it's execution, and that's what we're doing right now. Operator: Next question comes from Nephron Research of Chris Pasquale. Christopher Pasquale: And that was excellent pronunciation on that one. You nailed it. I had a couple of questions. One on fertility. You talked about improving cycles in the U.S. and Europe. You didn't mention China, which I think was a big piece of the weakness last year. So what are you seeing in that market? And are you still confident that it can bounce back to where it was historically? Albert White: I highlighted kind of the Americas and Europe, but Asia Pac and China, in particular, is still continuing to be not the greatest market in the world. It's not. I wouldn't say it's getting worse, but it's not. We're not seeing the improvements that we are in other markets around the world. Christopher Pasquale: Okay. And then just on the capital allocation front, your debt leverage ratio is lower now than it's been in a few years. It's going to go down even further when you repay that portion of the term loan. As you think about your priorities and the pace of buybacks, is there a target leverage ratio that you think is appropriate for the business that would dictate kind of how quickly you go? You've still got, I think, close to $1 billion in authorization available. Albert White: Well, share buybacks are a high priority of ours right now given where our stock is trading. So I would envision us to continue to do share buybacks. And depending upon what happens with the stock price over -- after this and the next quarter and so forth, especially with our belief and our visibility in the back half of the year, I think you could see us get quite a bit more aggressive on stock buybacks. Operator: From Redburn, our next question comes from the line of Issie Kirby. Issie Kirby: You made an interesting comment at the end around looking at sort of next-generation manufacturing and production. Obviously appreciate it's early, but would love any more color around that. Do you think this puts you really ahead of your peers in terms of manufacturing capabilities? And then is this factored in, I guess, to the CapEx and free cash flow guidance over the next few years? Albert White: Are just world class. I mean, are best in class. They've been spending a lot of time and energy, especially in CooperVision over the last number of years, expanding facilities, starting new lines up and so forth. To be able to now take a breather and work with our great R&D team to look at next-generation work in deploying that and optimizing our infrastructure and so forth, like there's a lot of exciting stuff that we can do there. It takes time, but there's a lot of exciting stuff that we can do there as our CapEx comes down. And I think I'll turn it to Brian because I think that's all factored in on how he looked at free cash flow. Brian Andrews: Yes, certainly. I mean we have a 3-year, 5-year, 10-year view on things. And so when we gave the free cash flow commentary and we reiterated again today over $2.2 billion, that factors that in. But we've talked about, over the years, as we're building, building, building to support more supply and capacity, it's hard for us to work on continuous improvement in these optimization things. And now we've got a breather, and we can do that. But there's lots of great ideas and lots of opportunities to drive success into the future. Issie Kirby: Right. And then just really quickly, if I may, on SightGlass and the FDA approval. Any updates there? I know it seems to be performing well with Essilor in Asia. So I would just love to hear thoughts on SightGlass. Albert White: Yes. It's performing well in Asia. You're exactly right. We still love that product, and it's doing really well in Asia and a number of other markets around the world. So we love it, and we think it's going to do fantastic long term. No update though on an FDA approval. Operator: Our final question comes from Goldman Sachs from the line of David Roman. David Roman: I'll keep it to one here given where we are in the time of the call. I think in your prepared remarks, you talked about some of the specifics you were seeing on OpEx efficiency, and I think you called out operating expense declines in CSI, which I know we'll see when the Q comes out here. But can you maybe just help us think through how you are reflecting on some of the G&A savings that you're realizing here from the restructuring you announced last year, to what extent you're contemplating reinvesting that and whether that is showing up in the P&L now? And then in a scenario you did go down a path of reinvestment, where would you be looking to deploy those resources? Albert White: I mean we are doing that. We're doing that already. I was talking about how aggressively we're doing that certainly on the MiSight side of things, and we certainly saw that in Q1. That's just putting dollars back into sales and marketing. That's where it's going, so leverage G&A, put dollars into sales and marketing, and we're getting enough savings through all of our work that we're able to do those reinvestments and still put up stronger than -- earnings than people were expecting. So that combination has kind of come together very, very nicely for us. Operator: With no further questions in queue, I will turn the call back over to Al White for closing remarks. Albert White: Great. Thank you, operator, and thank you, everyone, for taking the time on today's call. We look forward to talking to everybody in 3 months and continuing to make progress and having a good call then. So thank you, and have a good night. Operator: Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.
Roisin Currie: Good morning, and welcome to those of you in the room. Nice to see a lot of familiar faces, and welcome to those of you who are watching online. So the agenda today will be in the usual format. I will provide an overview of the results we've announced today, along with some key highlights, and then I'll hand over to Richard to take us through the financial performance in more detail, and I'll then take you through our strategic progress and finish with the outlook for the year before I take your questions. So we continue to make progress despite the challenging market conditions, as you can see from the numbers on the slide. As you can see, total sales growth for full year '25 is just under 7%, and that includes 2.4% on a like-for-like growth for company-managed shops and not on the slide, but it's also 4.3% for our franchise shops. Underlying operating profit and underlying PBT are both in line with expectations. With operating cash inflow, 4% -- 4.5% higher than 2024, and we are proposing an ordinary dividend of 69p, in line with the year before. Operating cash generation remains robust and will build further in the coming years, with CapEx also stepping back from its peak in 2025. This provides significant capacity for additional returns to shareholders, which Richard will provide more detail on in a few minutes. So we are outperforming the market. So just to spend a couple of minutes on our performance versus the market. I'm pleased to say that the recent data from Circana to the end of December 2025 shows that we have increased our market share of visits by 0.5 percentage points to 8.6% at a time when the overall market visits have declined by just over 3%. Pressure on income does continue to be the main driver and convenience for the consumer remains the priority with location access and channel flexibility critical. There is some evidence of dietary trends, but that is a relatively small factor. The breadth of appeal we have alongside our value credentials and the continued innovation in the business focused on menu, value and convenience alongside the strength of our vertical integration ensures our resilience when market conditions are challenging, but also remains our formula for our long-term success. So I will now welcome Richard to talk about the financial performance in detail. Richard Hutton: Great. Thank you, Roisin, and good morning, everybody. I'll start with Slide 6, which just gives you the high-level overview of the profit in the business over the last year. So you can see sales up almost 7%. We did have the reduction of 4% in operating profit and 9.4% at the PBT level. And as we highlighted back in January, we've pulled out a small exceptional item, which relates to an understatement of VAT, which we self-identified but goes back a number of years. So in reporting these results, we pulled out the element that relates to prior years so as not to distort the 2025 number. So that gives you an underlying PBT and then the full PBT for the year of GBP 167 million. The income tax charge, we'll show you later, slightly higher than normal, which I'll explain, which gives an impact on diluted earnings per share, which were down 10.7% and we'll get into some of the ratios behind that in just a moment. But first, on Slide 7, we'll dive into the segmental analysis of sales. So we segment our sales into those from company-managed shops and those that are through the business-to-business channel, which is primarily relationships with our franchise partners that get us into locations we couldn't otherwise reach. It also includes grocery channel development in the B2B channel, which obviously has moved on slightly in the last year as we launched with Tesco, a small range with Tesco back in September. But most of the progress here relates to the addition of shops and like-for-like growth through the B2B channel. So underlying each of those, as Roisin has already said, we've got 2.4% like-for-like through the company-managed shop channel and another 4.3% like-for-like growth through franchise system sales. You can see the overall rate of growth in the B2B channel is slightly higher. That partly reflects that like-for-like position. but also the proportion of shops we're opening through franchise relationships is about 1/3 of our net openings. So as a proportion of the base, it's a faster rate of growth in that channel. And if we look on Slide 8 at the relative performance of Greggs, I mean, Machine has already flagged to you that we've taken a significant amount of share in the last year. This tracks one of the benchmarks that we've pulled out to give us a feel for how Greggs has performed versus the overall food to go segment. And the yellow line on this chart is the Barclaycard data that they publish for the eating and drinking out-of-home segment. So that's all retailers who are identified as being -- serving the eating or drinking out of home. And you can see that Greggs' like-for-like performance, the dashed blue line, tracks that quite closely. So our like-for-like performance has been broadly in line with the market. But we've significantly outperformed the market through the growth in our new stores and the addition of extra channels such as grocery. So total sales growth significantly ahead of the market on that measure. Turning to Slide 9. The ratio analysis of the P&L here reflects some of the volume pressure and also the investment in the year, which will benefit us in future years. So if we work our way down, you can see at the gross margin level, a relatively stable position. We saw a more balanced position between cost and price inflation last year and a smaller amount of dilution from the increased participation rate in our app as people take advantage of the discounts available for shopping more frequently with us. In distribution and selling costs, that's where you see the sort of more of the operational gearing in the business. So there's a couple of things there. The volume impact last year has a gearing effect in terms of the fixed costs such as rent on the shop, but also the recovery of wage cost inflation. There's a slight under recovery there because wages were one of the most inflationary elements last year, which I'll come on and show you in a minute. So some dilution there on the ratio. And then we see the opposite effect in admin expenses, where we've controlled the overhead in the business well, and that gets leveraged more heavily as we grow the estate and spread it more thinly. So overall, underlying operating profit down by 1% in margin terms. And then you see an increase in the net finance expense. The primary driver of that is that in 2024, we were holding a lot of cash on deposit, which we've subsequently been deploying into the investment program. We obviously haven't enjoyed the interest coming in on those cash deposits in the current year. And then at the very bottom there, you can see return on capital employed, which is one of the key things that we focus on as a business. The ROCE for 2025 was 16%. That reflects the investment in capital employed as we've deployed cash into the program of capital expenditure that we will update you on in just a second. But obviously, the top line performance as well. Now we've talked in the past about that we believe 20% is a good long-term estimate for what we believe Greggs should be able to deliver. We still believe in that, and I'll describe to you in just a few moments our thoughts on how we progressively get back to that going forward. Turning to Page 10. You've got the usual analysis here of the Greggs cost base, which emphasizes just that people costs and food and packaging are the 2 biggest areas. The good news here is that we expect a much less inflationary year ahead in 2026. We saw 5.6% cost inflation in 2025. We expect that to be close to 3% in the year ahead, which is a real change from the last few years when obviously, inflation has been a real headwind. Food & packaging will be part of that. We expect that to be a very low single-digit figure for the year ahead. And we've got about 4 months of our food and packaging needs covered. Energy is obviously quite a volatile market at the moment. We're pleased to say we've actually got all of our electricity covered for this year, and that is the vast majority of our energy mix. And we've got more than half of it for next year as well. So we're in as good a place as we could probably hope to be given the current environment. The main thing we were exposed on is diesel costs, which is about 1/8 of our overall energy mix. So it's relevant, but not a big factor. People costs are the biggest part of the cost base and were very inflationary last year with a combination of bigger increases in the national living wage and obviously, the national insurance pass-through as well. So we saw just over 8% wage inflation or wage cost inflation last year. We expect that figure to be close to 4% this year, a balance of the pay award, which we've made and also some annualization of that national insurance increase. And there's a phasing impact here as well because we've negotiated to move our annual pay award. The majority of it will bite in April now. It's previously been aligned with the calendar year in January. That helps us to align more with the National Living Wage increase going forward. But it means that we'll have relatively low wage inflation through Q1 of this year. So there is a kind of a balance factor in terms of when cost inflation comes in this year. We think that will help the first half result, and we do expect to see relatively strong profit progress in the first half. We've guided that for the year as a whole, we expect that to be a relatively flat year because we've got the cost of the new Derby site coming in the second half. So there's a bit of trading off there between H1 and H2. And then the final piece on shop occupancy costs, rents are relatively stable as a cost ratio. And there is some benefit from the changes to business rates. So you'll be aware that in the budget, there was a change made to benefit small shops. We believe that, that will benefit Greggs on an annual basis for about GBP 4 million from April, so GBP 3 million to the current financial year. Sticking with costs on Slide 11. We obviously work each year to try and reduce our costs and to offset the cost pressures through our cost reduction initiatives. And we have a good track record in this, and 2025 was the best year ever in that respect. So we took about GBP 13 million out of the business through our cost initiatives in 2025. I thought it was worth just giving you a bit of color on the sort of things that we've been doing. The retail area is obviously where most of our cost is. And in that sense, using sophisticated workforce planning tools is a key element to make sure we deploy hours optimally in our shops to make sure we get the right balance of service and cost. So we've been putting a new plan called in, which has been very effective. We've been using technology to automate non-value-adding tasks and increase the speed of service. And some good examples of that are new tillware. And I hope some of you, if you've been to Greggs recently, will have noticed that the actual experience of paying at the till is actually faster, and I've certainly experienced that with our new tillware and our new payment terminals. Temperature monitoring is a huge task in our shops to make sure that we keep everything food safe, and it's a very manual process currently. So we've got some interesting experiments going on with automated monitoring, which we think will really help the business going forward. In supply, the game there is really taking advantage of the fact that we own our own supply chain to do end-to-end reviews, which make sure we optimize the route through our supply chain all the way from our suppliers through to shops through our distribution and manufacturing operations. And by making sure we get the right packaging and ingredients in the right sizes, they flow through really efficiently, we get a real cost advantage. So we're constantly looking at how we optimize that. We've been in-housing some of our manufacturing where we've had additional capacity come on stream that's allowed us to do that. And looking forward, there'll be more opportunity for automation as the new sites in our distribution chain come online. And the offices have a role to play as well. So in our support teams, technology is starting to help us with automation on desktops, new systems for customer and shop support, which are making the whole process more productive. It's meaning our teams can cope with the growth in the business without adding more resource. And increasingly, AI tools will support that even further going forward. Let's talk about CapEx now on Slide 12. So you can see the peak year for CapEx in Greggs, GBP 287 million that we invested in the business last year. And if you look year-on-year, you'll see that the retail side of that in terms of new shops, shop fitting and equipment was relatively stable. We had a comparable amount of activity in terms of opening shops and refurbishing them. But the big difference was in the supply chain, where we invested GBP 147 million across our operations, including the new sites to create capacity for the future. There was also a step-up in IT, where we're putting in the upgraded SAP system, the S/4HANA version, which is going well, and we got the first elements of those -- that installed in the summer. If I turn to the forward look on Page 13, I think this is the interesting piece. So if you look beyond this year, we've got a substantial decrease in the amount of capital expenditure from this year onwards. So CapEx reduces to around GBP 200 million in the current year and then reduces further, and we've given a range of GBP 150 million to GBP 170 million from '27 onwards. And in looking again at the CapEx program through this phase, we obviously kind of came in under the guidance last year. We've looked hard at the out years as well. We've taken about GBP 20 million, GBP 25 million out of the capital intensity looking forward here. And the interesting thing in the backdrop to this slide is if you look at the gray sort of shadow behind, that's the operating cash generation of the business. And you can see how essentially last year, we were utilizing all of that in terms of the CapEx investment program. But as we go forward, a huge gap emerges, which is effectively the free cash position that will give us discretion. Obviously, that has to fund the ordinary distributions in the business, but we start to see some quite substantial headroom as we go through next year and onwards, particularly. So scope for further returns, as Roisin indicated at the start of this. Page 14 talks about our shop estate expansion and a quick reminder first of the sort of metrics we use to manage our expansion against strong return rates. So we look for a target return rate of 25% cash return on the investment that we put into both our shop and the supply chain that supports it. And we typically achieve that after 2 or 3 years and the shops go on to achieve a mature performance in excess of 30% on an ROI basis. And generally, the growth locations that we're moving into are outperforming the traditional estate. And we talked in the summer a lot about incremental growth and why we were not concerned about cannibalization. And just to reiterate some of the key points that we talked about then. In new catchments where we're landing shops, 53% of our shops last year were in areas where there was no existing Greggs within a mile. So we are pushing into areas where people just don't have access to Greggs. And even in those areas where there was a shop within a mile, the recorded level of sales transfer from the existing state was less than 5%. And we factor that into the shop appraisal to make sure that when we make the decision, we know it's still going to make an incrementally good return for the business. And that was proven again in 2025 with the look-back test on cannibalization. And the other great measure we have is by using the app data. So we can see from the app data that the frequency of visit for Greggs customers increases when you give them access to more shops in new convenient locations. And we ran some data that we showed you in the summer. We've rerun that again at the end of the year. And again, it confirms the incrementality of the visits and the increase in frequency that we see when we become more convenient. I mentioned ROCE earlier, and Slide 15 talks a bit about the levers that we'll be pulling to restore ROCE over the years ahead. Obviously, that estate growth is absolutely key because growing the estate to utilize the capacity that we're creating is one of the most important elements of that. So it's great to see that we're still getting those strong returns and that, that white space exists. We'll be accessing that both through our own estate growth and through the partnerships with franchise partners that give us access to areas we couldn't otherwise get to. We'll be disciplined on capital allocation. And you can see we've trimmed the CapEx a little bit. We'll hold that as tight as possible going forward while still making sure that we maintain and invest in the business. But we're in a position where we've deployed an awful lot into the supply chain, and we've got that capacity there to use. So it will reduce the amount that we need to invest in the years ahead. And as I've described to you, we continue to explore further cost saving and productivity opportunities. The team are enthused by the success and want to drive that even harder as we go forward. And then finally, obviously, there's an element which is driven by the market and performance in that. But also, we have additional income streams that we've been pushing and accessing. You've heard about the Tesco development that we put in place in the autumn of last year. That will be a more material factor in the year ahead, and we've expanded the reach of that into more stores. Roisin will talk to you a little bit about some of the stuff that we've been experimenting with in terms of convenience retailing, where we've been looking at some concepts, which will help us to access smaller locations that can't support a Greggs store with both automated and manual sort of vending solutions. And there are other things in the background that we're not quite ready to talk about that we've been working on, which we believe will also leverage the Greggs brand to drive additional income in the years ahead. So more on that to come. So packaged together, we still are targeting and pushing ourselves to get that return back to where we [indiscernible]. Just finishing off then with balance sheet, tax and dividends. The cash is in a decent position despite the big investment phase we've been through. I mean the cash inflow of GBP 273 million is a real strength of the business at the operating level. The net cash position at the end of the year was GBP 46 million. That was supported by GBP 25 million drawn from the revolving credit facility. So we actually had about GBP 70 million in cash. And we've got liquidity of GBP 146 million with the remaining undrawn element of our RCF. So plenty of room should it be required. And a quick reminder of our capital allocation priorities. Number one, invest to maintain the business well, keep that strong balance sheet, and we target about a 3% of revenue cash position just to deal with the seasonality through the year. an attractive ordinary dividend that's 2x covered by earnings, and you'll see that we've maintained that again this year and then selectively invest where we see attractive returns for growth. And then finally, of course, return any surplus cash to shareholders. And that could be special dividends. It could be buybacks when we get to that point. We're open-minded about that, and we'll make that decision based on what's the best route for that cash at the time. And finally, just the figures to finish off on tax and earnings. The corporation tax rate, I flagged earlier was slightly higher. It's about 1% higher than we would normally expect, and that relates to the allowability of deductions relating to share options. And the fact that the Greggs share price was lower meant that the deduction you get for tax itself on share option exercises was itself lower. So that's a temporary thing. And looking at our forward guidance, we still believe that being about 1% ahead of the headline rate is the right way to model the tax rate for Greggs going forward. So overall, the underlying EPS was 122.8p, and we've declared a final ordinary dividend of 50p, which gives you 69p for the full year, and that's maintained at the same level as in 2024. And as I just indicated, we look for an earnings cover of 2x. And as we get back to that level, the dividend will grow again. So as a quick roll through. I'll hand you over to Roisin to take you through the plan. Roisin Currie: Great. Thanks, Richard. So I'll spend a few minutes, and I will talk about the operational and strategic review for the business. So on the slide behind me, you have just got the Greggs formula for long-term success. So I just want to reflect on the things that have made and continue to make Greggs successful. And these are particularly important when the market is tough because they differentiate us from other brands and they're integral to the strength of the business. So the first factor on the slide is the breadth and choice that we offer our customers, enabling them to shop with us frequently. And this isn't just about product range. It's also about the flexibility we have to operate in so many different locations and channels and be convenient and accessible to customers when they are on the go. Next is our value leadership. And we pride ourselves in this, and we have got a long-term track record of being #1 for value for fresh prepared food and drink, and that hasn't changed. It continues to be a key focus area, and we remain #1. Innovation and rapid evolution is, of course, key because food tastes and drink tastes change over time. We work hard to ensure we stay relevant and constantly innovate to drive profitable sales growth. And we've got a strong track record of this for many years, innovating to meet changing needs, dietary trends with great value options, demonstrating us now being #1 in the out-of-home market for breakfast and #2 for coffee. Our focus on spotting trends and then following them fast with great value price points continues. And finally, our vertical integration drives quality and efficiency that is a genuine competitive advantage versus the market. So let me talk through those areas in some more detail. So we are the fastest-growing brand in food to go. So in terms of market context, the slide in front of you is from Circana data. So it demonstrates the strength of the Greggs brand across all of the key dayparts and missions. And I'm pleased to report we're #1 in breakfast. We're #2 in lunch. We are #3 in snacking, and we are now #4 in dinner and in delivery. So you can see how strong Greggs continues to be in the traditional areas of lunch, breakfast and snacking. But I'm particularly pleased that I can show you is moving up the rankings later in the day and on delivery areas that, as you know, we've been focusing on. As I said earlier, our market share has grown from 8.1% to 8.6%, the fastest growth of any brand in food and the go. And at the bottom, you can see in terms of the segments that we represent in terms of the demographics, when you compare the market share of visits with Greggs share of visits, we are pretty much in line with the market, having broad appeal across all demographic sets is another great strength of the brand. And on to value. Value leadership remains critical for us. We remain market leading with the gap to our food to go competitors widening. You can see that in the chart. So that plots the YouGov data over the past 4 years, and Greggs is the yellow line at the top. fresh prepared food and drink, the hot options we provide and the customization we offer ensures we are differentiated from other value operators such as the supermarkets. We also know that our loyalty scheme and the value deals that we offer continue to deepen the value for customers when they shop at Greggs. And on Slide 22, we're just looking at the estate, and we have shown you this chart before, but it just demonstrates how the business has been evolving over the last decade to reshape and move into the new catchment areas with different customer missions, ensuring we are well positioned to be more convenient for customers on the go. Now if you went back 10 years, then the traditional element of the state, which is the blue -- the blue sort of segment and mainly on high streets, that would have accounted for around 80% of our total shop estate. And as you can see, it is now 50%. In the traditional estate segment, our relocation strategy has been key to our continued success, and we've relocated around 15% of those shops since 2019, making sure that now they are in the best locations. We do treat those relocations as new shops, so they don't appear in terms of the growth in our like-for-like numbers. And in the underrepresented catchments, the new shops that we're opening expand our reach and continue to deliver strong returns. Our target for this year is around 120 net new shops, which is the same as last year. And just to bring to life the underrepresented catchments, so these are areas such as roadsides, retail parks, supermarkets, travel locations, given the estate greater balance and accessing new locations with strong returns. We demonstrated last year, and Richard talked about it earlier in terms of our summer presentation, these new shops do so without affecting sales in the existing estate, so it's incremental growth. The chart on the slide demonstrates the significant expansion opportunity we continue to have. So the blue bars on the slide show our current penetration. And as you can see, with the exception of industrial locations, no other location has yet reached 25% penetration. Our successful expansion strategy continues to target these areas where we currently have that low penetration, most typically remote from our current shops. So again, Richard talked about last year, over half of our shops were opened with no Greggs shop within a mile. The planned openings for this year have a similar profile. And worth saying in terms of the numbers on the right of the chart, the white space work that we've done in terms of viable locations reflects the opportunity for our full-size Greggs shops. But we continue to be agile in terms of our formats. So the format flexibility we have and expanding further will unlock opportunities that our smallest full service operations are simply not able to access. The trial of our first 3 bite-sized shops is early days, but promising. And we have some further trials planned very shortly, which will unlock other opportunities with strong returns. And as Richard says, the innovation doesn't stop there. So we continue to come up with more innovative ways to make sure that we can provide the convenience for our customers to unlock additional customer missions. So we are looking at some unattended retail solutions. unattended retail solutions is the new word for vending. So we have a number of trials that are in the pipeline currently that we will talk to you about as we embark on those trials. But format evolution is complemented by increasing the channels and dayparts that customers can access Greggs through, as you will see on the slide. Richard mentioned it, but we updated last year that we increased our range in Iceland, and we also expanded into Tesco. We started when we talked to you last year with 800 larger Tesco stores. We have just expanded into a further 1,900 Tesco Express stores. Pleasing to say that delivery continues to grow. So it's now at 6.8% of our mix. And we know that these are incremental sales and they deliver a higher basket size. We are now working on some improved technology that will mean we can support this channel better and grow further. And loyalty, I think I said numerous times before, continues to surpass our expectations. So now over 26% of our transactions are scanned through the app, and that allow us to increase our CRM engagement with customers. We've been doing something called Greggs Quest. We rolled that out to all of our customers in November. And really, that's challenges that encourage the customers that rewards their visits and encourage them to come back to us more frequently. Evening, very pleasing to see, still remains our fastest-growing daypart. So it's now at 9.4% of our sales with evening delivery still being a significant growth opportunity. We continue to be really pleased with the steady growth that we're seeing in the evening daypart. We're still growing ahead of the average like-for-like rate, and it's very similar to the long-term growth pattern that we established at breakfast. And at the heart of Greggs is our range. So our menu sits at the heart of Greggs, and we win by delivering on our purpose, making great tasting, freshly prepared food and drink accessible to everyone. This translates to democratization of food on the go. Rapid evolution of value-focused menu options is key to meeting consumers' changing tastes and requirements. As I've shown you earlier, Greggs is a brand with broad appeal. We are representative of all demographics, and we don't over-index significantly in any one segment. Dietary trends have always been a key factor in the evolution of our menu and the breadth of choice that we offer. And we've worked hard over many years to ensure that we have choices available for everyone throughout the day. Our performance continues to be driven predominantly by the broader macroeconomic pressures on consumer spending, but we do monitor developments around weight loss medication closely. Consumers on this medication still seek convenient food on the go, and we're already catering to a number of those dietary trends. So the demand for fiber, higher protein and smaller portions, which forms part of a much wider health trend. We have introduced last year a number of products such as our Ginger and Turmeric shots, our protein shakes, our egg pots, and we've seen strong growth in those high-protein items that we offer. But we continue to evolve the menu. We continue to make sure we keep it fresh, we keep it relevant, and we excite customers with new products and new flavors. Some examples would be the Tanduri Chicken Pizza and the Red Pepper Feta and Spinach Bake. And as you would expect, we have a pipeline of new ideas and innovation to ensure that we continue to evolve the range and provide the new exciting products that our customers want. So not sure of any of you in the room are matcha fans, but we have just introduced to the menu a couple of weeks ago, our Ice Match Latte at very affordable price point of GBP 3. So if you haven't tried it, you should rush out to Greggs and get one. The breadth of choice that we offer and our ability to enter new categories at value prices enables and ensures that we stay relevant, excite our customers with new choices, focus on market trends and support the expansion into the new channels and dayparts that we offer. And then on to our supply chain, which I have spoken about many times, but to support our growth plans, you know that we have invested in further supply chain capacity, primarily the 2 new state-of-the-art national distribution centers, creating overall logistics capacity of up to 2,500 shops. Both sites are on schedule and on budget with Derby on track to open later this year and Kettering in 2027. This approach to capacity expansion benefits from productivity improvements from automation, enabled by the scale of our operation at those sites. By picking upstream, the new sites increase the throughput and capacity of the existing radio distribution centers, which will still continue to serve our shops. I won't spend too much time on technology because Richard has covered a number of these areas, but we do continue to invest in technology to enhance our growth while ensuring the robustness of our process and driving greater efficiency. As Richard just said, we have successfully migrated our finance and procurement processes to the new SAP S/4HANA system from August last year, and we've got further migration in some key areas this year. Richard also talked earlier about the tasks we're automating in our shops to support service and efficiency, which is really important and the CRM capability for our support teams that has AI functionality. So our support teams can now use that to serve both colleagues and customers better and faster. And last point in the slide, our data capability continues to improve, which supports all areas of the business and helps us make better decisions. But we continue to pride ourselves in doing the right thing with significant progress on our commitment to the Greggs pledge, which is our approach to ESG. Our original commitments that we set out took us through to the end of 2025. So we spent a lot of time last year engaging with a broad range of stakeholders to shape the future priorities for 2026 and beyond. Really proud to say we made a significant progress across all the areas of our Greggs pledge. On the slide behind me, you've got a number of highlights. Great progress on reducing our carbon footprint, reducing unsold food waste through our Greggs outlets and making progress in ensuring that our packaging is easily recyclable for our customers. We're retaining the 3 core pillars of our Greggs pledge, stronger healthier communities, a safer planet and a better business still see at the heart, and we're now launching our next 5-year pledge commitments. So finally, looking forward now into 2026, we have a strong pipeline of opportunities to open new Greggs shops in catchments that will deliver strong returns. Great progress has been made in building the supply chain infrastructure for this next phase of growth. In a challenging market, we continue to deliver both like-for-like and total sales growth and make great progress against our strategic plan. Our like-for-like growth for the first 9 weeks has been at 1.6% and total sales have grown by 6.3% with strong cost control supporting profit progression. Our expectations for 2026 are unchanged, and we remain confident in the growth opportunities available to Greggs and our ability to progress them. So on that point, I will just pause and then Richard and I will be happy to take your questions. And we have got a couple of roving mics in the room. And I think Richard is also going to monitor questions from those of you that are online. So thank you, and I will take your questions. Roisin Currie: We have got a couple of roving mics in the room. And I think Richard is also going to monitor questions from those of you that are online. So thank you, and I will take your questions. I'll start from over here. Jonathan Pritchard: Jonathan Pritchard from Peel & Hunt. Two from me for me. Firstly, I think I try to remember whether a call or a meeting. But you talked about clarity on deals and marketing those deals better. Could you just tell me how you progressed on that and whether there's a sort of slight difference between franchise and owned stores in those deals and the communication. And then secondly, on current trading, just a bit on shape really. I was surprised I didn't see the word weather and rain in the statement because clearly, that is something you hate way. Is there any change there since you still running, has it got a bit better? Just any additional comments, please? Roisin Currie: Thanks, Jonathan. I'll let Richard take kind of traded and I'll come back to market. Richard Hutton: Yes. So I think the weather has been bad on bad really, hasn't it? Clearly, as you'll have noticed, particularly in the South of England, it was an incredibly wet January. And -- but we had storms last year, and we had snow last year. So I think we've had sort of bad weather in both elements. I think the key thing to call out in the trading so far is that there is less price inflation in the number. So the underlying volume position is very consistent with what we saw in Q4 running into the first couple of months of this year, but with less pricing. And we hope that, that puts consumers in a better place as we go forward. Roisin Currie: In terms of the deals that are out there and the marketing, I'm just looking to my right absolute with some of the sort of marketing -- what we did last year very successfully is we continue to lean into breakfast. When I talk about market share moving from 8.1% to 8.6% we've taken market share across every single day part. So that is really pleasing. What we did know is that we had a 2-part lunch deal, and we could see that in the marketplace, a common sort of feature of deals was a 3-part meal deal. So we then went back on our big deal, which was the GBP 5 3-part meal deal. We obviously do that through a lot of out-of-home marketing. So that's probably the biggest sort of way we try to reach the consumer. So if you're on the high street, you see a bus shelter somewhere with the point of sale, we will try to have the Greggs message there. The other significant piece of marketing collateral we have is the digital screens in our windows. So again, they are up and down across the U.K., and we will work them hard to make sure that we punch above our way in terms of getting those big deals out there. The new piece for us last year was in our app. So for our customers, we introduced a sort of at home part of sort of an app sort of communication messaging as part of the app. And so now if you're an app customer, you will see the messaging coming up around what is the new products that we're launching. Our most recent one was the matcher, which we know we brought to the market at a value sort of leading GBP 3. But what we've not lost focus on is the 2-part breakfast deal as well because, again, that is a key part of offering value to the customer. So what the marketing team trying to do very successfully is lean into the new deals, but they have an always-on strategy to make sure that what we are known for and what is value, we also get that message out there. In terms of your question around franchise, the deals are the same. So I guess we reach customers, it doesn't matter to a customer, if it's a franchise shop for a company managed shop, they are shopping at Greggs and therefore, we want to make sure that they get the same messaging. The one difference that you have in a franchise shop is price points because obviously, they set their own price points, and we've got some ceilings around that. But again, the team will work for that franchise partner to make sure that the digital screens are used to reach customers with that value offering. And even in a franchise location, we will still be the best value operator by far in that location. Richard Taylor: It's Richard Taylor from Barclays. I've got three questions, please. Firstly is on your 20% ROCE target. Even with fixed capital employed, that would imply profits quite long way ahead of where people are expecting any out years now. I know you're not saying in 2028, but how should we think about the lift there? Is that utilization of supply chain? What other things should we think about? Secondly, how should we think about your pricing this year with a 3% like-for-like cost inflation? I know you moved at the start of the year, you done now, would you expect to move again. And finally, you've historically held a cash buffer, which you still have. But when we look forward, your slide on CapEx, Richard, what do you think about your plans for cash in FY '27 and FY '28 is a buffer that you still would like to hold in those out years as well? Richard Hutton: Yes. That sounds like my tear sheet, doesn't it? It also allows me to address a couple of the points that have come in online actually, which are also about that cash position. So Joseph, if you asked about capital allocation, I think you probably asked the question before I presented on capital allocation. So hopefully, you're happy on that. Simon, you asked about debt on the balance sheet, which I think links to Richard's point. So we had about GBP 25 million of debt on the balance sheet. We've actually repaid that since, but we'll probably draw some more down from the RCF when we pay the dividend in April, May time. So we'll be using the RCF through the next year. I suspect we probably won't need to use it next year onwards. And Simon was asking what's our forward plan in terms of is it structural debt or is it not? It's not. I think, again, the capital allocation policy hopefully explained that, that we're looking for about 3% of sales as our sort of our cash buffer to manage working capital. The RCF is our reserve to enable us to weather any storms and we put in place after the pandemic. And I think it's a super important thing to have in place in case there was something like that again. Pricing, we're in a great place with pricing because we did make the increases. Most of what we need to do for this year, we anticipate is already in place through the moves that we made in January. So we'll see how cost inflation pans out through the middle of the year, but I'm kind of cautiously hopeful we don't have to do much more. But there may need to be some small tweaks. But generally, we're in a decent place already in terms of recovery of cost. And then the broker journey, I think you should see as a longer-term ambition. We obviously had a sort of perhaps a nearer-term plan for that before the experience of last year that set us back a bit having negative volumes last year. We'll have to work a little bit harder on both revenue streams and on cost to get us back to that target. So certainly not thinking about it in terms of 2028. And so I think probably the point at which we reach it is probably beyond the scope of sort of most of your forecast at the moment. But we strongly believe that effectively, it's a tweak to the plan before with a bit more sort of revenue and a bit more sort of action on cost. And we can see the opportunities. Timothy Barrett: Tim Barrett from Deutsche. Two questions, please. also. Firstly, what you say on first half versus second half profit growth is nice and clear. implicit within that, are you assuming a pickup in like-for-likes in the second quarter or the next 12 months in terms of just trying to square the circle really how you get profit growth in the first half of that number. And then a quick one on CapEx. Can you say what's implicit within your new 2027 and 2028 guidance on net new stores, please? Richard Hutton: Yes. Yes. So on that final piece, in terms of net new stores, we're implying that we'll run at broadly the current rate in terms of about 120 net new stores. We're going to hold refits fairly tight this year. So we'll probably only see 50 or 60 refits, about half the number that we did last year, and that's part of the response to the capital intensity at the moment and also a reflection of just the longevity that we've seen in the current refit, which is standing up well. So we'll hold that fairly tight, but expand at a net rate of about 120. I'm going to link into another online question there where Joseph is asking what will the approximate maintenance CapEx be going forward? Typically, we've guided that to be about 5% of turnover. It's probably slightly less than that at the moment because of the investment in supply chain, which will hold us in good stead in the years ahead. So it's probably going to be slightly less than that at a maintenance level and then you layer on that expansion CapEx. The like-for-like question, I think, was about what do we need to strike the right balance in terms of progress in the first half. Yes, we're probably -- I mean, we would be opening, say, 1.6% in the first couple of months was slightly behind where we would have liked to have been. The good news is that the profit conversion has probably been stronger than we'd anticipated, and that's a reflection of both some of the cost margin dynamics that I described but also the fact that we gripped operational costs quite hard in the middle of last year as a response to trading conditions. And we're still carrying that strong position, and it hasn't annualized. So I think with the focus we've got on that in the business in the first half, we should continue to see the benefit, and it gives us a very strong drop-through in terms of the growth that we are seeing. Roisin Currie: I'll just go right if I just needs to hand the makeover, thank you. Unknown Analyst: Thank you. Vince Ryan here from Goodbody. I'll just go right if I just needs to hand the makeover, thank you. Fin Ryan here from Goodbody. Two questions from me, please. Firstly, in terms of the supply chain investments, could you outline what you're factoring in, in that incremental cost from Derby in the second half of the year? And as we sort of roll into 2027, how much incremental cost should come on the P&L from -- as Kettering comes live? And just could you also give us a sense in terms of the phasing of sort of the date when sort of everything is in place versus how long it will actually take to get to full operational capacity in terms of distribution centers? And then secondly, in terms of the retail rollout, I appreciate you've got a lot more Tesco stores coming on stream this year for the frozen product. Any thoughts in terms of how incremental that can be to revenues and profits for '26? And any options to go to bring those products into like Sainsbury's or A or the other retailers? Roisin Currie: I'll let Richard take your question, and I'll take the second part. Richard Hutton: So yes, the Derby cost will be broadly what we guided previously, which we said about a 40 basis point headwind this year. So if you sort of extrapolate that at current turnover levels, you'll see it's high single digits in terms of millions of pounds net impact on this year. That will then roll over and impact the year ahead as well, at which point we'll start to reduce some of the Kettering costs, but we're then starting to see some of the leverage coming through in terms of utilization of those sites. So that gives you kind of a bit of a clue as to what we expect profit progress in the first half to be because we have said we're holding the kind of the broad guidance that we believe it will be a flat outlook for profit this year with that decent underlying progress in the first half then held back by the increase in costs as those come through. Catering looks like it will be around the middle of next year in terms of its timing. So again, that cost annualizes out in the middle of '28. So I guess we get to the end of '28, having kind of taken the 2 big step-ups in cost through that period. And then we're into that leveraging sort of period going forward where addition of new shops comes at very little incremental CapEx. We're just investing in the retail side of it. And obviously, some of that will be franchise partners, which won't involve capital either. So we start to work it much harder from then on. Roisin Currie: In terms of your question on where we go in the sort of grocery channel, I think one thing I would say is -- and we've -- we had the partnership with Iceland Foods since 2011, and we know that we have not yet maxed out that partnership. So as we've seen as we've gone with Tesco, actually, we're doing some other new products with Iceland. So that tells you actually, there's more to go with that original partner. I think we've been very pleased with the progress in Tesco as have they. So what we're now doing is we are in discussions with them around how do we maximize the current partnership that we've got. And if you think about it, with our partnership with Tesco, it's not just the grocery chain that we've got that partnership. We also have Greggs within Tesco currently, and we have a pipeline for other opportunities. So I think just now, it's about maximizing those 2 current partners. In saying that, we are obviously in discussions with others, but our focus for this year will certainly be about maximizing the partnerships that we've got in place, which keeps it simple for us and means we can take the learning around what else we could do in the future. I will just come right behind sorry, I will come over to this side of the room in a minute. So we'll go over the other side of the room after your sales. Gary Martin: It's Gary Martin here from Davy's. Just a couple of questions from me. Just starting off on the cost conversion piece and just dovetailing off of some of the commentary from yourself, Richard. It seems though from Slide 11, it looks as though there's a fairly elaborate plan in place in terms of cost optimization. Would you be able to maybe run us through how much of that is kind of low-hanging fruit or how much of the kind of hard yards are ahead just in terms of how you plan to optimize in the future from a cost base perspective? That's my first question. And then just the second one, just on the market share piece. So I'd just be curious just to get the grips with the base all eating and drinking out of home index that you're using to measure market share growth off of. Does that include some of the retail meal deals, for example? Roisin Currie: I'll let Richard take your cost [indiscernible] and I'll be back [indiscernible]. Richard Hutton: Should I call it low hanging. That's a good question. I don't want to sound easy. I mean people have to work hard on this. I mean it does involve -- if it was too easy, to be honest, it wouldn't count as part of this sort of objective because it's -- it's about structurally changing the way we do things to make it more efficient and to tackle legacy costs that we don't need anymore. And that's important because there are always new costs coming into the business as well. I tend not to talk as much about that. But when we bridge profit year-to-year, there's always something new that you have to do either from a compliance point of view or to make sure that you are secure and embracing the latest technology. So looking at legacy costs and taking this approach that we do is super important. I think there are things that we can see and there are always new ideas. Sometimes they're inspired by things that people achieve and one group sort of like achieves a breakthrough and others then think, oh, okay, we could do that and sort of learn. So sharing within the business, comparing those with other businesses that we have good relationships with to see what they're doing also helping that. So it's quite a big program. And whilst it might not be dramatic in any 1 year, just by working every year at it and sort of keeping that sort of pressure on and celebrating games, however, small, it sort of just encourages people to keep looking and turning over stones that have been turned over before and because the world changes. And if you look back 5 years, you can just see it's a very different place, isn't it? And the things that you thought were important then may not be as important today. So yes, it's hard to sort of -- I wouldn't call it low-hanging though. I would -- otherwise, it would just be what took you so long. You have to work at these games. Roisin Currie: On market share, so the Circana data that we use is stated behavior. So that's asking the consumer where do they eat out of home and food to go. So it will include any of the behavior in the likes of the food to go sections of a Tesco, Sainsbury's, et cetera, is included in the Circana data. So -- and it's asking customers on a regular basis, where have they purchased recently, which is the best sort of metric on market share that we've got. So it will have all the food to go specialists in there and it will have the food to go part of the supermarkets in there as well. Richard Hutton: Just to pass on the mic. I'm going to take an online question, if I may. One from Darren Shirley at Shore Capital. It's traditional at these events that Darren asked me to split out the price inflation and volume aspects of like-for-like and that I refused. But I'm going to shock him today by actually doing it. So Darren says, what's the inflation contribution to the 1.6% like-for-like so far this year. Just under 4% is the answer, Darren. And we had just under 5% last year, so that's the 1% sort of reduction in inflation. So you can see that slightly over 2% was the volume impact year-to-date. Roisin Currie: So we're coming to [indiscernible] then we will come over to the other side. Ross Broadfoot: Ross Broadfoot from RBC. Two on the new shops, please. You said 53% of 2025 shops in areas with no existing shop within a mile. Why is a mile a good benchmark? I'm sure that will differ across the estate. There any color you can give in terms of sort of behavior that you're seeing? And then second, you talked about sales transfer of 5%. What's the profit impact? And how quickly would you expect those shops to recover? Richard Hutton: Yes. It's an arbitrary decision, honest to me. It could have been a kilometer, it could have been a mile, it could have been in 5 miles. But if you think about sort of when you're actually going out for your lunch, would you walk a whole mile? You probably wouldn't, would you because you'd come across something in that. It's a long way. So as a broad measure, and I know there are some other studies that have used that as a broad metric. But it is quite a big -- that's quite a big sort of catchment distance. So we've used that. We actually sort of typically look at sensitivities within more like half a mile in our appraisals to identify shops where we believe there is a risk of cannibalization. But the reality is it depends on the journey the customer is on as well. It's not really -- if you think around here, people are wondering around on foot. That's one thing. If you're on a busy trunk road, then actually a mile might just be a minute of your journey. And therefore, the more relevant thing is actually, are there other options that are accessible from the same road? Or is it taking a transaction from where you're actually going to go at your destination, which we don't always know. So it's complex and none of this is perfect, but really we present this stuff to try and give you some assurance that we do look at it carefully. We do try our very best to avoid the risk of cannibalization. We do this when we're working with partners as well. We have to agree where shops open so that we don't transfer sales between locations. And that will be absolutely true of the new developments that we get into as well, whether that's convenience retailing or other things. Roisin Currie: Just on that point, just to Richard's point, I guess we're trying to give confidence around providing data points and actually, that's why we've come up with one well. Internally, we actually look at catchments and we look at the customer mission. So if you thought about London in particular and you think about Liverpool Street Station, actually, you've got a Greggs in Liverpool Street Station. You've got about 3 others within local proximity. If you're at the mission of you're a commuter, you do not come out of the station to seek out a Gregg. So we need to be accessible when you're there -- but similarly, if you're out about in food, you wouldn't come into a station to seek out a Greggs. So we need to be accessible there. I think the point around convenience and accessibility are still #1 in the food to go market. And that's why we've got the confidence in the amount of white space and the underrepresented catchments ahead of us. On the other question -- the other part of the question, I think, was the profit impact on the sales transfer of the 5% was the other part of your question? Richard Hutton: Yes, without pulling out the appraisal. Typically, we would look at it and say, okay, on the sales transfer, it will be like a 50% drop-through. So that will be the kind of the rate of profit cannibalization that we would then factor into the shop that was losing sales from the new shop. Unknown Analyst: One just on the Greggs apps. I have a number in the past of incrementality and frequency been about presumably that starts to diminish now? And is it still in your eyes accretive given that the tenant product is for free? Richard Hutton: Yes. That's interesting. We were looking at this just recently because we've -- now that we've got sort of data scientists in the business, we've been able to sort of apply a more technical analysis to this. And my team was starting to form the view, my finance team that this was becoming more mature now and essentially, you shouldn't expect to see quite as much incrementality because it's becoming part of the core offer at Greggs really for a regular customer. Interesting, the data scientists went at the app data and looked at it and came up with an even stronger number than the finance team were. So that said, I mean, it's a tough market with low like-for-likes generally at the moment, isn't it? So we do still believe that it underpins frequency of visit, but it's become, I think, more of an essential as part of your mix really is to have something which rewards the customers who are loyal to you. But -- so if it was driving the incrementality the data scientists are saying, then we'd be sort of shooting off the charts, wouldn't we? And the fact that we're not, I suppose, shows just how important it is in terms of securing the loyalty of your existing customer base. Whether it attracts new customers, that's always the heart of it rather than holding on to the customers you have. But I think it's a super important part of our armory. Roisin Currie: I think another piece just to add on the app is last year, we had just under another 2 million downloads in terms of customers downloading the app for the first time. I think the team has done a great job. When we started to launch ice drinks, we saw that really resonating with the sort of 18 to 34 consumer demographic that we offered ice drinks as a free that you got for download in the app. We saw a real spike in that. So I think it's constantly making sure that you try and get those customers that currently aren't on the app on to it, then we can communicate with them. We can send them quest, we can drive frequency of purchase still a really important part in the armory. Unknown Analyst: All right. Great. And then second question, there's quite a lot of quite big moves across the different business divisions. The B2B has seen quite a big step-up in trading profit margin this year. The retail business seems to have seen quite a big step down in the second half, which then is obviously offset by the cost savings that you mentioned earlier. How much of this is -- I'm not regular count, but there's been a change in the value and lease calculations and the CGUs you mentioned. Is there anything to do about going on there that's creating these large swings? Or if you can maybe just aggregate what's exactly going on there? Richard Hutton: No. I mean just like-for-like, the big factor there. Obviously, we had a bit of a reset in the middle of last year when we had the very hot weather. I think we'd expected stronger like-for-likes last year than actually came through. And increasingly, we became aware that this was very much a market-wide factor. So as you've seen, if Greggs has basically got through last year on a 2.5% like-for-like and taken 0.5 percentage point of market share. Gosh, it must be very tough in other places. So I think it's really just a factor of that, Ben. I mean, the overall impact has been consistent across the business. We have been able to start driving some additional sales through channels such as grocery. But broadly, I couldn't pull out anything that's skewing things from half to half, particularly. Roisin Currie: I'll ask you to pass the mike up front. Thank you. And then we probably just probably got time for two more questions. We'll take one left side, and we'll get you Andy. Conroy Gaynor: Conroy Gaynor from Bloomberg Intelligence. So the first one, just looking at your ever-evolving portfolio of new products. Are there any incremental margin mix benefits that we could be thinking about this year and beyond as you roll those out? And the second one, like many companies, as you're going further down this AI data science journey, are there any genuine competitive advantages that you can pick out that you think Greggs would benefit from? For example, is it your scale or ability to leverage the brand? Is it the fact you have a rich history of trading data piece of stats. But how can you leverage that into a competitive advantage. Roisin Currie: So let me take the competitive advantage one and then I'll let Richard talk about margin mix. I think AI and technologies are really interesting one because I don't think that there's a silver bullet. I think you're absolutely right around there will be opportunity for us to leverage our scale. But if we look at some of the work that we're doing with the support teams just now at Greggs House, it's using in technology that's got AI functionality to then actually move to Agent AI, where actually you are trying to automate a lot of processes. So they sort of mundane and routine of which a business of scale has got lots so you would assume actually that will give us a competitive advantage. I think for us, AI is around -- actually, there are going to be many different strands to this that will actually deliver the advantage. From a supply chain perspective, automation especially with Derby catering, that will be significant for us. And that is why that vertical integration does give us a competitive advantage, especially when we have got on automation in those sites. And then I think from a shop perspective, if you think about our labor cost, it's significant because we are a small box shop model. So therefore, you need people to serve. But we are, to Richard's point earlier, we are looking at lots of the ways that our teams have to do task in those shops. And when they do task, it takes away from serving the customer. So you can't serve the queue as quickly if we can automate a lot of those tasks. Actually in our shops, we believe we can get more volume throughput in terms of those customers and serving those queues. And then I think from a data perspective, our app is where, to Richard's earlier point about our data scientists that we've now got on board, our app is where we do need to mine that data and try and understand the behavior. And because we serve 8 million customers each week, there's a lot of data there that we should be able to mine in terms of 1/4 of those transactions are through the app. So I think it will be many faceted, but it will not be a silver bullet, but there's lots of areas that we have to get after. Margin mix? Richard Hutton: Yes. I think over time, what happens with margin mix is that things which are -- some things become commoditized. And therefore, you can't command the same strong margin on a pack of crisp because everybody sells one. And the way we kind of protect and drive margins is actually by the value adding in the shops. So the things that you bake in store, the things that you make in the back of the store, the things that -- the drinks and things that you produce tend to be the higher-margin items because you can't -- you haven't got the same, you can't compete with that in a commoditized way. You have to put the effort in. I think the matcher thing is the latest example of that. It's -- despite our keen price point, it's a very high-margin item still. And it's sort of, I suppose, injecting interest into the ice drinks category more generally, which again is high margin as hot drinks have been. So I think that's the way the business evolves over time as it pushes it into new areas which tend to have attractive margins, accepting that there's behind the scenes, some of the older items become more commoditized. And it just evolves over time, and it's always been that way. So directionally, it's interesting. I think drinks, if you were to show the mix of food and drink and Greggs over time, drinks are a much more significant part of the mix and a lot of the innovation is still coming in those areas. Roisin Currie: So we'll come to Andy, and then I don't know if you want to check there anything online after that. And then I'll need to bring it to a close because I've then got a press call. But Richard will be around indeed for a few minutes afterwards for anything we didn't get to, Andy. Andrew Wade: Just might be my memory failing, which is quite likely. But just looking back at the market share 1 on Slide 8, your like-for-like versus the market. I'm sure when we looked at that to sort of looked at this a year ago or 6 months ago, you were fairly -- your dotted line is consistently outperforming or as it looks like the sort of last 6 months or so, it's a bit pretty much in line with? Is that a narrative that you recognize? Or am I slightly misremembering? Richard Hutton: It may be we were using the takeaway in sort of fast food line time. I can't quite recall, Andy. There's two measures which are relevant. One is the takeaway sector and this is a much broader one. Typically, we've outperformed the takeaway sector more strongly than the overall measure, but we felt, look, the overall sort of eating and drinking out of home is probably the fairest measure of the totality of the market. and a more stable line because the takeaway fast food sector tends to be quite promotionally driven. And you see quite big spikes, which don't really teach you much in terms of your comparative performance. So I'd have to check back, but I suspect that's the answer. Andrew Wade: Okay. Second one then, sort of thinking about your recovery in ROCE, which is effectively, I suppose not going to have a massive change in the capital base, effectively, recovering in EBIT margin. Can you do that if you continue to have negative like-for-like volumes? Richard Hutton: Well, it makes it harder, doesn't it? We -- in our core plan, we assume that the market continues to stay tough for a while yet. We don't assume that it's going to kind of fix itself in a few months. So we've taken a multiyear view, but we also assume that the market will stabilize in time and this sort of like economic pressure that people have been under will get easier. And I think the first signs of that are this easing of inflation. And I genuinely hope that this is the start of an improving cycle in terms of people being under less pressure. In fact, the government have been confident enough to reduce the rate of increase of the living wage, I think, is indicative of that and hopefully gets us to a place where we are in less inflationary times. Andrew Wade: Just on the, I guess, a similar point. So we've now sort of had negative volumes for, I guess, 18 months, maybe a bit more than broadly 18 months. So we've annualized through negative volumes, negative volumes on negative volumes. So is your view that now that effectively the consumer sort of step down but continued deteriorating? Is that how you're viewing it? Richard Hutton: A little for now because we can't see a reason not to carry on with that assumption. And it's prudent to plan on that basis because then you don't overplan your cost base. So we try and plan on a cautious, prudent basis with some sort of cautious optimism that we've maybe been a bit too prudent. Particularly, I think in the coming year, it'll be very interesting to see what happens in June and July when we had very, very hot weather last year. I mean having now it may happen again, of course. And that's the basis we plan on, but hopefully, that might give us a little bit of upside. Roisin Currie: And what I would say is we're doing a lot to try and disrupt that and make sure we find reasons for the consumer to come into us. So actually match is a really good example of that. We've already leaned into ice drinks. Match has another demographic. So then we're leaning into that, but at a value price, and there'll be more on the menu that we'll do this year. So I guess it's how do you continue to bring that excitement, use your app, get the consumer message out there and you can start to try and buck that trend. So there's loads in our armory that we deliver this year. So on that note, I'm probably going to bring us to a close. And thank you for your time today. What I would say is I do need to run a press call to go to, but I am sure Richard and Dave will be around if there's any other questions, but thank you, and thanks to those online.
Arthur Johnson: Good morning, everybody. I appreciate you taking the time to be here today as we talk about our results for 2025. And I want to thank everybody also online that will be tuning in to listen and watch this. The timing today is very, very interesting. And I thought before I got into the presentation, I'd just make a few comments and updates on what's going on. Our -- we have people in Saudi Arabia. We have people in Dubai, where they're all safe right now. We've been checking on them on a regular basis. I think that trying to predict what's going to happen with that situation in the next couple of weeks is kind of a crazy guess right now. Nobody knows. We don't know. But it is one that definitely has the world focused on energy. And I think if there's one takeaway as we start this out for Hunting's -- what we did in '25 and what the future holds for us, I think it highlights again the importance of energy security and the fact that when you look at our clients' reserve life as far as people like Shell saying 6 years in a row, the reserve life has declined. I think it only points to a long-term bright outlook for the oilfield service industry and for Hunting in particular. So as we start this presentation, I always want to reach out and thank the team at Hunting. There's a tremendous amount of talent within our organization and a great team that delivers these results. And I'm just very privileged to work with this group of people every day. So I want to thank them first and foremost, for all of their support and what they do. Operational highlights. 2025 was a great year for us. I don't think you're going to see a whole lot of changes from what we kind of preannounced back in January. We had a lot of highlights for the year, a lot of hard work done and a lot of good execution took place. The 2 acquisitions we were able to add into the group with Flexible Engineering Solutions and also the Organic Oil Recovery position us well to continue to diversify our client base and to be more global in all that we need to do from a revenue point of view. We executed a good bit of the KOC orders. Those are done. Fortunately, I don't have any boats full of pipe waiting to get through the Strait of Hormuz right now. So that's part of the good story that that's done. We opened up a new facility in Dubai. It was kind of the cornerstone for the move out of Europe, where we had to close 2 facilities in the Netherlands. Further restructuring, obviously going on in our European business, but we're excited about the opportunities to be closer to the customer and have a better cost basis in Dubai. We were able to finally dispose of our interest in Rival Downhole. So we're now totally out of the downhole drilling tools side of the business. wish our ex-employees and joint venture partners great success in that, but it was a good way to generate cash to be put to other acquisitions that made more sense for us for the long term. We continue to focus, as I mentioned, on our efficiencies. We've announced today an additional $15 million cost savings plan. There's a lot of moving pieces to that, everything from more efficiency on the shop floor to organizational changes, shared service issues that we're going to address, and that will play out over the next 12 to 18 months or so. Capital allocation has been a different story for us in the last year or so with the share buybacks. We've announced a couple of them, obviously. We are about done with the $60 million first 2 tranches, and we've announced today our intention is to do another $40 million to be completed by March of '28. I don't want anybody reading into this, and I've talked to some people earlier. We still intend to be very acquisitive and focusing on M&A. So I don't want anybody to take a signal that, oh, we can't find anything to do with our money. We just feel that with our outlook for profitability and the cash generation that we have the potential to do, we want to make sure we're giving returns back to our shareholders. Financial highlights. The key one was the EBITDA number of $135.7 million. The rest of the things, oil price-wise and that that you all know, share buyback that I already talked about. Sales order book down from last year, but it's really a more normalized level. And I always like to highlight that really doesn't include much at all for Titan because of the short-cycle nature of the Titan business. We anticipate that sales order book number accelerating substantially through and into Q2. The scorecard for our 2030 strategy, a lot of boxes ticked. I think of all of them, when we talked about the cash flow generation. The 2, I think, maybe most important to me or to highlight was the fact that we continue to move our EBITDA margins higher. We're still striving to get to that 15% number. Hopefully, maybe that will happen this year. But I mean, our plans are that we've got the products and we've got the geographic reach to continue to grow and go after high-margin business. Cash generation was a real big deal for us in the past year. I'd like to highlight that we generated the $63 million in cash, but that's after also doing all the acquisitions, increasing the dividend and doing the share buyback. So the company, to me, financially, we're in a very, very healthy place and a good place to be to in order to fund our growth going forward. This chart here just shows you some of the stats on where we're at with our EBITDA growth for the year. OCTG, to me, it's probably industry-leading EBITDA margins for what we do in that area of the business, very strong performance, some of the strongest margins in the company's history in OCTG, thanks to the effort of our teams in North America and in Southeast Asia. Subsea business going in the right direction. It was a business where we had some good results in the year. Some of those segments of business like our coupling business at our Stafford location are really just accelerating now as it's a follow-up to the subsea tree awards and then how we receive the orders for those components going forward. Advanced Manufacturing, it was really a 2-part story for the year. Some good results in Dearborn, great traction on the non-oil and gas side. The electronics business has lagged, and I'll talk a little bit about that in more detail later. And then one of the happiest parts of the story for Hunting in 2025 has really been the improvement on the Titan business. So the number isn't at our 15% range. But when I look at our results there compared to our peers, especially over the last half year plus, we've definitely done better from an earnings and margin point of view, and I think that, that will continue. The acquisition update, Flexible Engineered Solutions, our integration plans have all come together well. There's been no hiccups, no hurdles. We didn't find anything unfortunate. So everything we thought we had is there. Opportunities are very large part of the big second quarter upside we're anticipating has to do with Brazil and Guyana. The picture you see there is one of the Guyana FPSOs with the DBSCs attached to them. It's one of those developments with Exxon where titanium stress joints were not going to be used. But as I talked about when we made this acquisition, we wanted to be able to play on every FPSO opportunity out there as we see that a growing market. And this is a case where the DBSCs are being purchased and used to help that installation on that FPSO. Organic oil recovery. We're getting a lot of good traction on that right now. Everybody or a lot of people have seen the announcement from our client Buccaneer, for their East Texas operation that they had. Considering the hundreds of thousands of conventional wells in North America, that to us was a really great sales point with what they talked about, the water cut being reduced and the production doubling. We anticipate that as a good start for our North American business. And if you all remember, before we made the acquisition, we did not have the rights in the Western Hemisphere. So we're excited about that. We've got trials going on right now in Brazil. And one big one we've got in Angola with a major oil company down there. So I think there's really good upside with OOR. The OCTG business talks there about some of our progress there. TEC-LOCK, Travis Kelley, who leads that business for us in Houston and his team have done a great job. We continue to gain market share on that. And it kind of aligns with our story we have with Titan right now in North America. As clients have more challenging wells, and I think the last number that I heard was 40% of all shale wells in the U.S. right now are 3 miles long or longer. And in the case of some of our clients even doing these U-shaped wells, failure is just not an option when you're 2 miles from the wellhead or further. So the TEC-LOCK product line is trusted for its performance and its integrity downhole, and that has driven a lot of that growth there. Plus again, it's also the fact that we highlight our virtual mill concept. So whether it's in North America, whether it's in the Middle East, whether it's in West Africa, -- we're not tied to one steel supply, which gives our clients a lot of flexibility. The accessory business was very strong last year, driven by a lot of work in South America and a bit of a resurgence on recompletions and workovers in the Gulf of America. We see the upside there being very, very bright. We've also picked up more of the subsea work for -- not for our own product line, but doing work for people like FMC and OneSubsea, which has helped that business out as well. Our joint venture in India is performing as planned, delivering good contribution of earnings. The outlook continues to be bright. The shop is busy. India, if anything, and talk about energy security, they're the ones that need to build up their own domestic source of hydrocarbons, hydrocarbon production, and we're well placed in that operation there to see that grow. And then there's just a note about KOC there. Right now, just everybody has asked me 100 times, KOC tenders have been delayed. And so right now, our anticipation is that those will go out in the next week or so, but that could change tomorrow. But if that happens, the award dates would probably not be until April. Fortunately, for our plan this year, we don't have much in the guidance planned for KOC because even if we had the orders today, you have to make the steel, it's 6 months to do that, you have to thread it, the shipping and the like so. That was not planned on being a big part of this year's business. Non-oil and gas, there you see it broken down by different product segments. Again, Dearborn has really been the star on the non-oil and gas side with space, nuclear, power gen. We're seeing -- there's some new jet engine business that we're doing first articles on and working on now. We're not going to tell you the client yet, but I see a big upside to that. And as I've mentioned earlier, it's been kind of a reinvention of the capacities at that facility in Maine, where it was very focused on oil and gas product lines. Now the focus is on non-oil and gas, primarily, again, aerospace and defense, and we want to make sure we have the kit and the tools in place to capture that business. Electronics is a bit of a different story, mainly because while we've worked hard to diversify the product -- client base there, we're still very, very reliant on oil and gas. We have had an uptick in the medical side. We have captured a couple of new clients on the defense side, but it still is more focused towards oil and gas. And with rig counts down, especially in North America, the CapEx purchases that our client -- our big OEM customers would make has just been lagging. We announced also today $5 million cost savings plan. That has many, many moving pieces to it. It's some sensitive when it talks about people and things like that. So I'm not going to have a lot of detail about that to pass on to you today. But I think the key message is it's an ongoing process. I highlight up there that in the past year, for example, we generated some meaningful cost savings from our lean manufacturing focus. We've been doing that for 17 years now. I started that program a long time ago, and my favorite line is that I remember as a salesman sitting in a drilling engineer's office, and I never had any one of them ever tell me they drilled a well fast enough and they were done. So that's kind of the same with our manufacturing operations. It can always be better, and we get bright minds in there. We start looking at things like AI and the likes. So we're going to continue to focus on making sure we do things quicker, faster and better. Balance sheet efficiency, good numbers there. Bruce and the team have done a super job there. Inventory turns are much better than they have been over the last couple of years, free cash flow, nice generation. And well, especially today, share price is up. So way to go, team. I mean, I'd like to see that reaction today. Dividends, as we said, continuing to grow as well. And let's see. Precision Engineering. Talking about product lines right now, again, a little bit more detail. OCTG, I talked a bit about. We see, again, strong market opportunities throughout North America due to the complexity of what's going on there. We have not seen much of a rig count response yet on natural gas. We think that could be a very nice driver in the second half of the year. But right now, the business is performing very well, and there's the statistics for that. Subsea, I guess I talked about that a bit earlier. The key is really the awards that we anticipate receiving in Q2. So that's an area where the tender activity right now is very, very high. Our total order -- total inquiry base right now is over $1 billion. A big part of that is on the subsea side, both with the FES, the EnPro product line as well as the titanium stress joint business. We're seeing more decommissioning opportunities in the North Sea that's going to benefit the EnPro product line. But all in all, I think things are all going in the right direction. It's a substantial business we have now with our ability to bundle a lot of these products to people. I think it's going to make our ability to enhance sales even greater. We have a new office opening up in Kuala Lumpur this year to have more exposure in the Asian market. So all speed -- full speed ahead for our Subsea business. And then the Titan business, which, again, Adam Dice and the team have done an amazing job. I was just out in Tampa about 1.5 weeks ago with the team out there. We've made great improvements on efficiencies. I saw some new laser equipment out there that we're using for gun manufacturing performing extremely well. But the key is it's coming down to a point where I would say that 2 years ago, it was a lot of 3 bids in a buy by clients in the North American marketplace. We're seeing -- I'll say the pricing pressures are still there, but to a lesser extent because clients are realizing they just can't have failures downhole with these shale wells becoming longer and longer and the fact that you need dependability and you need dependability in supply. And that's where our distribution centers are a nice part of what our sales offering is to our client base. But I'm very happy with the turnaround and improvement in earnings that we've seen at Titan. International activity remains strong, and we think the international business will continue to grow. And I'm a big believer that the most common sedimentary rocks in the world are shale and they're all over the place. And again, with energy security being an important factor, we're already seeing talks about places like Algeria, in Libya, in Turkey, in Australia as potential growing markets for unconventionals, and we want to and will be a big part of that whenever it happens. Again, advanced manufacturing, I've already talked a good bit about that. Order book is there. I'm not going to go through all the numbers right now. Interestingly, the nuclear business, which if you went 20 years ago back, that was a big part of the Dearborn business is now starting to come back. And again, we're a company that is known with our reputation as being a high provider of products, small business now that has great upside, and we continue to work the power gen and the aerospace and defense business as well. On electronics, it's again trying to get that diversification. But sooner or later, with these wells, with the drilling intensity going on, there needs to be a CapEx cycle that will increase purchase of drilling tools, such as -- excuse me, such as MWD equipment and the like. And when that happens, it will benefit our electronics business as well. And then just some other manufacturing talks about some of the few areas. The key is we're moving OOR into the subsea business with the numbers starting in January. We had a good year with our trenchless business. And we also -- we talk about what we've done in Dubai, which part of that manufacturing is based on our well testing equipment that we manufacture, which now we're closer to the client and closer to where the applications are going to be. And with that, I'm turning it over to Bruce. Bruce Ferguson: Thanks, Jim. Good morning, everyone. Delighted to present a strong set of results this morning. Jim has covered a number of these key points, but just to wrap up on the numbers, they're fairly similar to what we presented back in January, okay, -- good set of solid numbers despite that challenging market conditions as well. We've got EBITDA up 7% to 13%. So that's the focus on the higher-margin product lines like a subsea, like OCTG. The restructure of EMEA is coming through as well. We'll get the full benefit coming through '27 of those savings. Titan recovery is helping those margins going from 0% up to 7% for Titan. So that's feeding through to that recovery as well. We want to get that to 15%, and that's a key target. Oil and gas, we still want to do a measured diversification. in terms of moving into businesses that are non-oil and gas, but we can still hit the right margins. So that's up 10%. You can see that growth. EPS up 9%. We're not seeing the full benefit of the share buyback yet coming through EPS. We'll see that more in '27. It's good to see that's up 9% to $0.341. Jim talked about the order book. It's normalized in the sense that KOC is no longer in there, near $358. Quarter 2 is going to be a big quarter for us. We've got a big tender pipeline of north of $1 billion. So a lot of that is coming through Subsea, OCTG, the new FES acquisition has got a really strong tender pipeline. So we're looking for a big conversion in quarter 2 into orders, and we'll see that order book increase by the end of quarter 2. Return on capital up to 10% in double figures. We're almost at 11%. I mean that's a key target for us. We want to get that to 15%. That's probably -- we're probably 18 months 24 months away from that. But again, it's focusing on that higher return businesses and diluting the capital employed on the balance sheet where we can as well, exiting product lines that are not getting there. Dividend growth, alongside the share buyback, we want to get that dividend back to -- increase that to shareholders as well. We've got 13% per annum from 2025 onwards to the end of the decade. Part of the reason we can do that is our working capital efficiency. We're seeing that now back in 2020, that was over 70% working capital to sales. We're now at 33%. So that's given us more cash to play with, and that's going back to shareholders in the form of buybacks and dividends as well. And we also took the opportunity to extend the RCF, the $200 million RCF by 12 months out to 2029, gives us that good option for further optionality there as well. One of the key features and really promising performance has been OCTG in '25 and '24. And that is over 46% of our sales is OCTG. And that's really from 3 pillars. It's coming from our development of our virtual mill, and that allows us to bid for the huge tenders we're seeing in the Middle East and elsewhere. We're seeing some really good performance in U.S. land and TEC-LOCK with the longer laterals. We're also getting good performance coming from India as well and some good packages coming through from completion accessories. It's a real success story on OCTG. And it's that pivot into that offshore international visit business that's allowed us to do that. In terms of our P&L, just picking off some of the key highlights there. There's our turnover, which is flat year-on-year it just over $1 billion. Good to see that our gross profit, EBITDA and operating profit margins have improved by 1 point each, again, reflecting that push to take costs out to focus on the higher-margin businesses as well. We've got our profit after tax of $58, gives an EPS of $0.34.1, and we've got that total dividend declared of $0.13 for the year, again, showing that increase. A little bit more detail about our product lines and operating segments. You see the good in terms of the external metric of 15% OCTG, Subsea well over the 15%, good to see. Perforating Systems is a recovery story. That was at 0% last year, now up to 6%. We think we can get that up to double digits for the end of '26, those cost efficiencies come through international business picking up as well. Advanced manufacturing, that's some electronics division has been softer with less CapEx coming through. It's been at 9%. Again, there's restructuring going on there to address the electronics division. Other manufacturing, that's basically 0. That's been caught up in the real storm of all the restructuring, the well intervention, the well testing business in EMEA. So all that equipment has been getting moved from Aberdeen down, into Dubai. We've got closure of 4 facilities. So we're seeing a much better improvement coming through in '26. If you look at the segments, you've got Titan there coming down the way the verticals at 6% margin. North America, very good performance at 19%. Subsea at 17%. EMEA has been the big struggle, that's had everything. A weak market, all the restructuring going on, all the disruption coming through there as well. We will get the benefit of that full year of $11 million cost savings coming through 2026, and that will see an improvement going through there. Balance sheet is strong. We've got net assets of $900 million. Not much movement there in terms of our depreciation and CapEx more or less cancel each other out, a bit more in terms of $80 million onto the goodwill and other intangibles, that's the FES and OOR acquisitions going on there. And still despite -- we talked about all the returns to shareholders, and we'll talk about that in a little bit more detail, we're still sitting with cash of $63 million as well. A little bit of the working capital revenue, a key metric for us as well, keeping that below the 35% mark. And that is key for us when we look at cash flow, and that helps us to keep that cash balance on the balance sheet. In terms of working capital improvements, you can see from 2020, that's when we we're at 75% of working capital, of set to revenue. We've now got that down to 33%. If you look at our inventory balance for the year, a lot of good work being done there. We've reduced that inventory balance by $65 million over the year. Good to see there. We've been smart in terms of we did exit since 2020, a number of our higher capital businesses like OCTG and Aberdeen, also OCTG in Canada as well. Smart use of working capital instruments to finance our KOC orders. That's helped with the discount letter of credits and advance payments to the mills as well. So that has allowed us to at least a lot more cash, and that's allowed us to make the shareholder returns. And again, this shows where that cash is coming from and how we've used that over the last period. We've got that at the end of 2024, we had $104 million of cash on the balance sheet. We added $135 million of EBITDA for the year. We have controlled our -- we had inflow from working capital. That gave us as we go through those -- the year to $201 million of cash. This is where we've used it, $73 million in net disposals, $33 million of share buyback, that equates to about 7.2 million of shares we bought back, dividend payments of $19 million and treasury shares, employment share scheme of $18 million, okay? And we're still left with $63 million on the balance sheet. So that's a really pleasing position to be in. In terms of order book, there's a little bit more color around $358 million. That has -- that is 20% lower than we were at the end of December '24. That does reflect the fact we've completed through KOC. We do see that being replenished through Subsea through OCTG awards, hopefully, some OOR awards coming through there as well. And we'll have a figure approaching with the $500 million we get to quarter 3. But that tender pipeline is strong. It's over $1 billion. It's good to see that coming through. That does tie into what we're seeing in -- especially in the subsea space and the big awards coming out for OCTG as well. So in terms of guidance, I think in terms of the phasing for the year, we're definitely looking at a back-end loaded year in terms of the big awards coming through quarter 2 and then that recognition being more into the second half of '26. And that's how we modeled and budgeted the year. So that's consistent with that. Obviously, a lot of uncertainty out there just now, but there's nothing that we're going to change at the moment. This stays totally the same as what we announced back in January. EBITDA growth of between $145 million and $155 million, that EBITDA margin improving between 13% and 14%. Effective tax rate, depending on deferred tax assets, jurisdictions should be between 25% and 28%. CapEx a little bit higher than what we saw this year, we're around the $30 million mark for '25. I think that's going up to $40 million, $50 million. We're doing a little bit more automation work, some robotics, replacement of CapEx, a bit more capacity into our Chinese facility as well to allow us to thread for the KOC and likes. And we're still confident we can achieve that 50% free cash flow conversion as well. Okay. With that, Jim, I'll hand back to you. Arthur Johnson: Thanks, Bruce. Anyhow, we're laying out here where we're at '25, '26 targets. Those are some of the areas that we're focused on. I'll get into some more detail here in a little bit. But highlights, again, we always consider ourselves a technology company. So we continue to focus on developing new products, whether it's in premium connections, subsea applications, well intervention, Titan, it's pretty much nonstop. It goes part into the lean philosophy we've had on operations, and it has to do with making sure that we're relevant in the market for the days ahead. OCTG, Bruce and I have already talked a good bit about that. We're well placed for that cycle that we're in right now. We see it as being one that's going to continue to grow, especially in the international markets year-over-year. I've talked already a little bit about non-oil and gas and the subsea bundling that we have, our opportunities there. Just a topic on new technology. Subsea, I'll point you to the one on the bottom, the stack FAM. You've heard us talk about our FAM application before that fits and works with the subsea tree to allow a variable operations performed on a standard subsea tree. The stack FAM, the whole goal of it is really to accelerate tieback opportunities in brownfield sites. So if you look at even places like the U.K. where nobody apparently wants to drill anymore, you've still got areas where you can tie back to infrastructure that's there. And this is an opportunity with this new product line to perhaps grow business there as well as a lot of more mature areas like the Gulf of America, for example. OCTG, the WEDGE-LOCK product line, we continue to look at new applications, but it's also new diameters of pipe, new grades of material, things like that, that we're constantly testing at our testing facility in Houston as well as using some third-party facilities in Texas. The well intervention business is one where we've tried to get smarter tools, some smart tools. Our Opti-TEK Tubing Cutter is almost CNC in precision as far as what it can do in cutting product for cutting tubing, downhole. Opti-TEK Data Stem again, it's a smart tool for more advanced downhole measurements on slick line applications. And then the Opti-TEK valves are really more of a lean manufacturing effort to try to make things more lightweight to reduce the floor space at the well site, and that's what that is right there. Perforating systems, again, our ballistic release tools, our gyro tools, those are things that we actually rent. Some of the new developments we've put in there is for our benefit from a cost point of view for refurbishment and the like, but they're also -- they also have the technology that customers are asking for today. Titan growth, I mentioned earlier, you see the numbers there that we've shown the growth and anticipated growth, but there's a lot more of a market potential out there than even the Saudi Arabia and Argentina. I mean I'm excited about the opportunities in Australia. You've seen people like Liberty make moves into Australia. They have a huge resource down there for unconventionals, Mexico, unconventionals, Algeria and Libya, big unconventional markets. And the thing with the opportunities and even in the U.S., we talk international here, -- but domestically, today, the average well in big parts of the Permian is actually producing about 20% less oil per foot of completion than what it was doing 3 years ago. So as the sweet spots get used up, the Tier 1 acreage becomes less and less part of the portfolio, the operators are going to have to just drill more. They're going to have to drill longer wells, drill more to hold production at levels that are going to maintain their profitability and tighten and our premium connection business will be a key part of that deliverable part. OCTG, there's lots of nice colored parts there of where we do business at. It's an international business. We have the technology and the virtual mill concept that allows us to compete on an even playing field with our much, much bigger competitors out there. The customers trust Hunting and trust the value we bring to the table and the dependability that we have with our broad suite of connections and our excellent manufacturing capabilities in places like Houma, Louisiana and Houston, Texas and in Singapore to provide the completion accessories to put all this stuff together for an operator downhole. Non-oil and gas, we've identified more areas. I talked a bit earlier about nuclear. I've talked about some new things going on, on the jet engine side, some customers other than Pratt & Whitney that we're talking to right now. The power gen to me is a big, big growth story. We're actually getting overflow work from our big power gen customer that we're actually putting also in one of our facilities in Houston now. We see that as growing as data centers become more demanding on where they're going to get their electricity from. A lot of it is going to have to be from natural gas-fired generation that will supply, hopefully, components for the turbine shafts as well as that's going to be a driver for the tighten in the premium connection business. And then with the addition of FES, we now do have more opportunities in the offshore wind market as the FES team has a long track record of supplying connectors for some of that. And while it's probably not a huge growth area in the U.S. right now, there's still a lot of progress being made in European markets for offshore floating wind and the like. Subsea bundling, just a slide here. We're now -- I look back to 2018 when we had OneSubsea business. Now we've got a multiple grouping of product lines that gives us the ability to have huge geographic reach. But the key is to go in at a customer and be more relevant. And the more things you can put in front of them as far as we can do this, the more opportunities you're going to have from a tender basis and I think a success basis to also win business. So we're excited about what we've done so far. I mean if you look at, for example, our titanium stress joint business was 0 when we bought this. It was one of those cases where we knew we were on to something when we bought it. If you looked at the numbers at that time, it's like, why did you do this? Well, it became the anchor of what has built the subsea business. So it's a great -- there's great opportunities for us and having people like ExxonMobil being a star client of ours is a good housekeeping seal of approval like we would say in the States for the things that we do in the subsea marketplace. So in summary, we had a very, very good year. We're going to continue to focus on our capital allocation plans, which are going to benefit shareholders. We're maintaining our guidance. Again, I started the whole meeting off talking about where I see this business going. And I'd like to say we're not here. I'm not focused on what's going on in the next 3 months. I'm looking at where we're going to be in the next 3 years, 5 years, where is the growth of the business. That's why we're doing the things that we are, why we're investing in our people. We're investing in the CapEx. We're adding new product lines because I truly believe as you look at the, again, reserve life of our clients. I mean, other than Saudi Aramco, most of them are down, down, down every year. And the world is not going to use less hydrocarbons over the next decade. It's going to be more. Natural gas, people are worried about oil prices. I think the recent events in the Middle East, they're forgetting about gutter shutting down their LNG trains and not being able to ship LNG. And that's going to be affecting markets globally, but it also brings that energy security picture back in play more. And I just think that we're a company that's essential to the world prospering as far as a contributor to the oilfield service industry. So with that, that's kind of where we're at. I hope you've enjoyed the presentation and had a lot of detail. I'm excited about the year ahead, and I'm excited that I get to work with a great bunch of people that make it happen. So we'll open it up to questions. Okay. No, I'm just kidding. Go ahead. Alex Smith: Alex Smith from Berenberg. Just good to touch on the subsea business, potentially exciting year for growth. You mentioned Q2, potentially some big tenders. Any kind of color you can give on where those tenders are, location? And then just on the bundling, do you have like a dedicated sales team that are now going to go in and start selling that bundled product? And is that the kind of key driver for growth for that pipeline? And lastly, just on M&A, still a big part of the business kind of strategy, subsea in particular. What does the competitive market look like? Any other color? Arthur Johnson: Okay. I'll try to remember the answer all this. So on the sales side, yes, we have dedicated teams working on that. We've integrated the sales process. At FES, they really they were -- it was owned by 2 gentlemen. It was a reputation that they sold the product on, really not a very sales-focused organization. They didn't have to be. And so now with the bundling, like I mentioned, we relocated demand from Houston to KL to be working with our Singapore team because a lot of the shipbuilding FPSO construction is done in Asia. So it's good to be there integrating with those offices for opportunities. So yes, we are doing that bundling. The first question was, again, repeat that one. Alex Smith: Just on where the... Arthur Johnson: Where it's at? All the places you would expect. There's a heavy load of tenders in Brazil right now, but it's in the Gulf of America, it's in West Africa, it's in Suriname, it's in Guyana. It's all those places that are wet that you would think about. And then as far as -- the last question was. Alex Smith: M&A. Arthur Johnson: M&A. So M&A is one that you can never predict. I'd like to say our heart was broken a couple of times over the last couple of years because one thing that Hunting does well is go into due diligence very strongly. So we don't want to -- we want to make sure we know what we know. And in cases in the past, we had too specific where once we started getting into due diligence, we had to drop pencils and say time out because of certain things we found out. So we will always be very prudent on how we approach that. It also has to fit our strategy. We don't want to get into things that are not tangential to what we do as a company. For example, I'm not going to go and buy a company that makes windows and doors tomorrow, right, or something like -- I mean, it's going to have to fit technology and what we want to do. The market out there right now, it's -- I don't think it's really any different than it's been a year or 2 ago. I think that will this make a pause in opportunities? Perhaps. But we are screening things on a steady basis, and it's just finding -- it's kind of like getting married. You got to find the right partner and make sure the union is going to work. And we're focused on growing our business through M&A and haven't let up on that. Toby Thorrington: Toby Thorrington from Equity Development. I have 3. I think -- so first of all, North American division appeared to have a very good second half of last year as far as I can see, perhaps a bit more insight into why that was the case and your expectations for '26, expecting year-on-year improvement in North America? Arthur Johnson: Yes. I think if you look -- I think it's been as long as I've been in this job. I think every year, things have always been back-end loaded, at least through Q3. What we saw this year, and it matches the dialogue you've probably heard from Halliburton and people like that, we did not have the budget exhaustion issues, and we did not have too many weather issues as far as the holiday issues post mid-November. So that was a big positive for Titan for our connection business, we could get orders out for threading. Rigs were still running and putting pipe in the ground. So I think it was just the fact that it was a pretty good year from a, a number of factors, whether it's weather budgets and the like. I think that, again, the year 4, we're expecting better things and continued growth in North America in '26 through a number of different product lines. Toby Thorrington: That leads into the second question. Guidance for FY '26 EBITDA margin is 13% to 14%. Can I test your sort of confidence in that figure given that OCTG looks like it's going to have a weaker year this year? Arthur Johnson: Yes. I don't know -- well, it will maybe from a top line number, but from a margin -- it has nothing to do with pricing. It's not a margin perspective there. So margins, if anything, I think, will enhance because we're seeing more premium applications even on the shale plays. We're anticipating an improvement in the Gulf of America. And if you look at the margin profile for OCTG, that's really the best margin products or the offshore stuff, right, not the land. But with the benefit that we did have a very successful Gulf lease that the Trump administration put through, that won't really probably pay into holes in the ground until '27, but that foundation is there, we think, driving it forward. So yes, it's going to be an area -- we're not cutting prices. We see areas where we can improve our margins. Part of that's in the $15 million of cost savings. Part of it's in the lean initiatives that we've had. But the market is pretty steady as far as pricing goes. Not a lot of pressures. Toby Thorrington: I'm hearing very confident in group 13% to 14% EBITDA... Arthur Johnson: Yes, I am. And I think overall for the group, one of the big drivers is going to be the Subsea business. We've had a lag in our Stafford business the last year or 2, as I mentioned. You saw subsea tree awards took a big fall in '25. They're coming back now. We're starting to get those orders in. And as I mentioned, the backlog at our Stafford business is double what it was this time a year ago. So those are all -- again, it hits efficiencies, hits throughput in the facilities. I think Titan is going to again overperform based on even where we're at today, and that's going to be a plus for the company's overall margin as well. Toby Thorrington: Okay. That leads into the third question, subsea related. FES, if I saw the notes correctly, the contribution in the year was about $10 million revenue a small loss, I think. Pre-acquisition, the run rate -- revenue run rate of that business was near to $40 million, I think. So that probably requires a bit more... Arthur Johnson: No. I mean, I think it's, again, it's a lumpy business. It's where we could reduce revenue recognition in '25, getting them all into our proper accounting systems and the like. But the business -- the opportunities are still there. I mean that's where a big chunk of the pipeline that we see in '26 is sitting in FES. And so I think it will never be a straight line in that business just because of the project nature of it, but we haven't changed our optimism or our thoughts on that business one bit. Toby Thorrington: Okay. Could you quantify the FES contribution to the order book at the year-end? Do you have that number? Arthur Johnson: Do you know what it was, Bruce, off the top of your head? Bruce Ferguson: I don't have that, actually. It's a big chunk of the pipeline. Alex Brooks: Alex Brooks at Canaccord. I'm actually going to ask some sort of return on capital and balance sheet-related questions, if you don't mind. Yes, it's Bruce. So firstly, of the $15 million new cost savings program announced today, does that include some balance sheet work as well? Bruce Ferguson: That could be part of that, yes, our own facilities, et cetera. So there could be an element of that coming off balance sheet, yes. Alex Brooks: At year-end, obviously, you had a significant reduction in payables, even though it was overall good working capital performance. Is that kind of roughly where you normalized at? Or sort of what's the -- was there anything exceptional in that year-end position? Bruce Ferguson: That was the reversal of the KOC. So that was a big -- we use the bank acceptance bonds to defer payment to the Chinese mills. So once that is paid off, that is a more it's a more normalized position. But it will flow with the big orders as they come through in the timing of the orders down the line, Alex. Alex Brooks: And in terms of pushing return on capital up towards 15%, if we just take the guidance, you'll achieve a little bit more this year than you did last year because -- but is there scope for capital employed improvement as well as... Bruce Ferguson: Well, we're always looking at that similar to what we did back in the 4, 5 years ago with some of the low-return product lines facilities, OCG in Aberdeen, OCG in Canada, that the benefit of less capital that came off the balance sheet, improved the operating profit as well. So all I can say is we're always looking at some of the product lines that aren't hit the mark. They're always under constant review, what we can do there on both sides, capital employed and getting that operating profit up as well. Alex Brooks: And then just finally, because I'm looking at the slide in front of me, I've got nearly $200 million of dividends and over a similar period, a little bit more than $100 million of share buyback if it stays at the same rate. Is that something which you think is a reasonable split of return to shareholders, somewhere in the sort of 50-50, 40-60 range? Bruce Ferguson: Yes, I think it's a good balance. It's something for everyone from that side in terms of buybacks. That's something we think is working. We're still confident in terms of -- we still believe we're undervalued even though we're above net asset value. I think there's still value to be had in there. And yes, that constant return, that 13% increase in share -- the dividends as well. So I think it's a good balanced return, and that's probably where we're going to be at over the rest of the decade, yes. Alex Brooks: And then I've got one final question, which is one of the things that really shines out to me from the presentation is how much of the business is new. So, is it possible to quantify because the chemical industry does this as they kind of talk about X percent of revenue is products introduced in the last 5 years. Do you think you'd have a number for that? Arthur Johnson: Not standing right here now, but we can get that for you. I mean it is fair, true. I mean, I was thinking this morning coming into here. We're now working on what, year 152 of Hunting, and it's been in a company that has constantly evolved to the times, right? And I think what we've done in the last 5 years even has been that evolution, becoming more of a subsea company, adding things and taking on some risk. I mean, OOR, there were times when Bruce and I were like, is this going to work? We know it is. And that's why we spent the money to get control of it. But it's looking at the -- again, it's like the old Wayne Gretzky thing, right? Skate to where the puck is going, not where it's at today. And that's what we're trying to do when we look at our business -- and yes, I'm very, very pleased with how the team has put. I mean there was no TEC-LOCK a few years ago. There was a small subsea business, no OOR. We were stuck with pipe all over the place that was really bad return on capital employed. So I think we've evolved like Hunting's tradition has shown that they do. Mick Pickup: It's Mick from Barclays. A couple of questions, if I may. Can I just go back to that tender pipeline you talked for a big Q2. You said it's subsea and OCTG. Obviously, subsea, your positions are pretty strong with OCTG, there's some big 800-pound gorillas in the world. So could you just split that between subsea and OCTG, just so we get an idea of confidence on that? Arthur Johnson: And what the split is? I mean, right now, I would say the split is over $100 million on just the Dearborn side on future business going forward. And then the bulk of it is split. I would say there's a couple of hundred million that we know of that I can remember off the top of my head in the subsea side and then the bulk of it is OCTG. So we're seeing some OCTG tenders in places like Turkmenistan. We're seeing more in Indonesia is actually a growing market right now. We had some nice business in already the start of this year in that market. So it's all over the place, Nick. But I mean those are the 3 areas where the main drivers are. I mean the FES -- talk about the FES pipeline alone is nine-figure pipeline. Mick Pickup: Okay. And then kind of be greedy. Obviously, you've highlighted a lot of new places you've gone to. If I look at the OCTG world, one of the big players did a big pull out in its results on geothermal, saying that's the next big thing, and you were the first to talk about that at your Capital Markets Day a few years ago. So what you're seeing of that? And every major bank, I'm sure at the moment has got some junior wanting to become the space analyst given IPOs coming down the route. Obviously, you've got exposure there. So can you talk about what you're seeing in that? Arthur Johnson: So in the geothermal side, most of what we've seen activity-wise has actually been in the international market. So it's been -- Philippines was a good market for us and Indonesia. We haven't seen a lot in the U.S. because the geothermal -- typically, where we played with things like titanium tubulars or very high chrome areas. If it's a commodity L80-grade material going into some of this geothermal stuff, I think Vallourec's done some of that business, captured some of that, but it's not just hasn't been an area for growth for us in North America. On the aerospace side, we're really excited about that. And it's almost part of following up on the last question. We've almost had to reinvent Dearborn because it was so focused equipment-wise and asset-wise on the oilfield side of the business. And it's a business that started years ago in defense and aviation, then went in the oilfield, and now it's going back to more aerospace. So we're excited about the rocket business. Actually, Blue Origin is a bigger customer for us than is SpaceX, while we do business with both. But we see some really good things happening there. One of the other small parts of our story is our investment in Cumberland, the third -- the 3D printing company. That company is in the black now. They're seeing growth. One of their big customers, we're making -- I say we because we own 1/3 of the company. One of their big customers is Firefly, which is the ones that another space company that put -- I think they put a product on the moon. And so we see growth in a couple of areas on that, that I think is going to benefit us in the years ahead. Is there anything online? Any questions from online? Bruce Ferguson: So the webcast questions have been answered in this Q&A. I'll pass back to you for some closing remarks. Arthur Johnson: Okay. Well, I just want to thank you all for your time and for being here and your support. Again, I want to thank all of our -- I want to thank our customers out there, all of our employees for what they do, our investors for being with us for the ride. Again, I've talked about we want -- we don't want renters. I mean we really want investors that see our vision and what we're trying to do for the long term to drive value into this company. So on for a good '26. Thanks again. I think we're done.