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Operator: Thank you for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the Fourth Quarter 2025 financial results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, Founder and CEO; Mr. George Saroglou, President and Chief Operating Officer; and Mr. Harrys Kosmatos, Co-CFO of the company. [Operator Instructions]. I must advise that this conference is being recorded today. And now I'll pass the floor to Mr. Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation Limited. Please go ahead, sir. Nicolas Bornozis: Thank you very much, and good morning to all of our participants. I am Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the 12 months and fourth quarter ended December 31, 2025. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail at ten@capitallink.com, and we will have a copy for you e-mailed right away. . Now please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation slides on the company's website. Now please note that the slides of the webcast presentation will be available and archived on the website of the company after the conference call. Also, please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slide on your own. Now at this time, I would like to read the safe harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. And at this moment, I would like to pass the floor to Mr. Arapoglou, the Chairman of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir. Efstratios-Georgios Arapoglou: Thank you, Nicolas. Good morning, good afternoon to everyone. Thanks for joining our call today. I have really nothing to add on the brilliant financial performance and the usual quality operating performance for TEN. Just 4 points from me worth noting. All of our 19 new buildings under construction, including the 2 recent VLCCs and the LNG are already in the money. The second point is that we sold the 10-year-old VLCC generating $82 million of free cash to be added to the $300 million already existing cash cushion that we traditionally keep. The third point is that the locked-in contracted future revenue has now gone over the $4 billion mark, excluding profit shares. And lastly, which is very important, 22 of our vessels are taking full advantage of the high rates in the spot markets through profit share as we speak. So all the above, I believe, guarantee a continued strong performance going forward. And with this, I give the floor to Nikolas Tsakos. Nikolas Tsakos: Thank you, Chairman. Good morning, good afternoon to everybody here from Athens -- from peaceful Athens, Greece. We just reported a very strong year, a year that has been a milestone period for TEN, a year in which we concluded significant strategic transactions for the future growth of the company and in very specific segments as the shuttle tanker and the dual fleet segment. The last quarter of 2025 has been a very strong quarter, and that was before the geopolitical events that started early in January, with the changes and the opening up of Venezuela, one of the largest traditional exporters of sweet crude to the west that has been lagging behind due to political reasons. The opening of Venezuela to the mainstream fleet like ours, we were the first vessel under a several charter to transport the first, let's call it, legal export to the United States after the change of the political environment there. And soon after that, of course, we have the issues in the Red Sea and the Gulf of Aden that have made it even further -- have even further strengthened spot rates to levels that at least our generation has never seen before. And I think these are the highest levels ever recorded in recent times. In this environment, TEN has been able to conclude very successfully 2025 and is taking advantage of the very strong rates that we are facing since the beginning of the year. In the meantime, we were able to disinvest some of our older tankers, putting aside in excess of $100 million to our cash reserves and reducing significantly our debt. And we were, I would say, lucky enough with a very good timely orders of our VLCCs at what today look -- our 3 VLCCs at what look today to be at very, very significant discount to today's market and also recently to our LNG orders. We maintain our moat of modernizing our fleet according to our clients' requests. We are looking to -- we have already a significant dividend policy. Our last dividend was in the later part of February and we're looking forward as we're following day-to-day, and I think we have -- we are following the developments, the geopolitical developments in the Middle East in order to, first of all, to secure the safety of our seafarers, the crew and the cargoes on board and take advantage of this very strong market environment. So all in all, I would say, as far as the market is concerned, good news. Good news, perhaps not for the right reasons because none of us -- I think nobody in the world is happy to have good news under war circumstances, but we have to run a tight and safe ship and this is what we have been doing. And with that, I will ask George, if you -- Mr. Saroglou, our President, to give us a more detailed analysis of what happened in 2025 and we'll be happy to answer your questions later. George Saroglou: Thank you, Nikolas. We are pleased to report today on another profitable quarter and year. Before reflecting on the company's performance of last year, a few words for the current events unfolding in the Middle East and the Arabian Gulf. Shipping faces another geopolitical event in the Arabian Gulf and the Strait of Hormuz. The Strait of Hormuz sits on one of the world's busiest shipping routes, acting as a gateway to the oil and gas fields, refineries and terminals of the Arabian Gulf. 1/5 of the world's oil and liquefied natural gas passes through this narrow strait. It's a vital shipping lane for dry bulk commodities as well. Spot rates across all tanker vessel classes have spiked at levels far above the already strong rates in existence prior to the start of operation, Epic Fury. Substitute barrels from the U.S.A., Venezuela, Brazil, Guyana and West Africa are expected to benefit tanker rates and ton-mile demand. When the conflict started last Saturday, we had 3 vessels under time charter approaching the Arabian Gulf. We monitor 24/7 and follow the advice and updates of maritime security centers, flag, state, P&I and insurance underwriters. In coordination with our charterers, we assess the risk associated with any potential assets through this high-risk area. None of our vessels have entered for now this area, and they are kept outside the Strait of Hormuz. Charterers consider diverting some or all of them to other loading areas outside of the Arabian Gulf. Our foremost concern remains the safety and well-being of our seafarers on board these vessels and all those vessels that are in proximity and the structural integrity of our assets. Even without the latest geopolitical events, tanker markets have remained healthy during the course of last year. Energy majors continue to approach our company for time charter business. Since the start of the fourth quarter of 2025, we concluded 20 new time charter fixtures and extensions of existing time charters. Today, we have a backlog of approximately over $4 billion as minimum fleet contracted revenue. We have 33 years history as a public company. We have started with 4 vessels in 1993, and we have turned every crisis the world and shipping have faced through the years into a growth opportunity. If we move to Slide #4, we see that today, we have managed to have TEN as one of the largest energy transported in the world with a very young, diversified, versatile pro forma fleet of 83 vessels. In Slide 4, we list the pro forma fleet of all conventional tankers, both crude and product carriers. The red color shows the vessels that trade in the spot market, and we have 9 as we speak, 2 more from our last call and our new buildings under construction. With light blue, we have the vessels that are on time charter with profit sharing, 13 vessels, and with dark blue, the vessels that are on fixed rate time charters, 42 vessels. In the next slide, we leased the pro forma diversified fleet, which consists of our 3 LNG vessels, including the new order we announced today and our 16 vessel shuttle tanker fleet. We are one of the largest shuttle tanker operators in the world with a very young and technologically advanced fleet after the tender we won last year in Brazil to build 9 shuttle tankers in South Korea. We have 6 shuttle tankers in full operations after taking delivery of both Athens 04 and Paris 24 last year, which commenced long time charters to an energy major. If we combine the 2 slides and account only for the current operating fleet of 64 vessels, 22 vessels or 34% of the operating fleet has market exposure spot and time charter with profit sharing, while 55 vessels or 86% of the fleet is in secured revenue contracts, time charters and time charters with profit sharing. The next slide lists our clients with whom we do repeat business through the years, thanks to our industrial model. ExxonMobil is the largest revenue client. Equinor, Shell, Chevron, TotalEnergies and BP follow. We believe that over the years, we have become the carrier of choice to energy majors, thanks to the fleet that we have built, the operational and safety record, the disciplined financial approach, the strong balance sheet and good financial performance. The left side of Slide 7 presents the all-in breakeven costs for the various vessel types we operate in the company. Our operating model is simple. We try to have our time charter vessels generate revenue to cover the company's cash expenses that is paying for vessel operating and finance expenses for overheads, chartering costs and commissions and we let the revenue from the spot and profit-sharing trading vessels to make contributions to the profitability of the company. Thanks to the profit-sharing elements, for every $1,000 per day increase in spot rates, we have a positive $0.11 impact on the annual earnings per share based on the number of TEN vessels that currently have exposure to spot rates, 22 vessels. We have a solid balance sheet with strong cash reserves. The fair market value of the operating fleet exceeds today $4 billion against $1.9 billion debt and net debt to cap of around 47%. Fleet renewal and investing in eco-friendly greener vessel has been key to our operating model. Since January 1, 2023, we have further upgraded the quality of the fleet by divesting from our first-generation conventional tankers, replacing them with more energy-efficient new buildings and modern secondhand tankers, including dual fuel vessels. In summary, we sold 18 vessels with an average age of 17 years and capacity of 1.7 million deadweight ton and replaced them with 34 contracted and modern acquired vessels with an average age of 0.5 years and 4.7 million deadweight capacity. We continue to transition our fleet to greener and dual fuel vessels. We are currently one of the largest owners of dual-fuel, LNG-powered Aframax tankers with 6 vessels in the water. Global oil demand continues to grow year after year. OPEC+ accelerated their voluntary production cuts, wars, economic sanctions, sanctions lifted tankers and geopolitical events positively affect the tanker market and freight rates while the tanker order book remains at healthy levels as a big part of the global tanker fleet is over 20 years and will need to be replaced gradually. And with that, I will pass the floor to Harrys Kosmatos, who will walk us through the financial performance for the fourth quarter and last year. Efstratios-Georgios Arapoglou: Thank you, George. Harrys? Harrys Kosmatos: Thank you, George. So let's start with a review of the year 2025. So with 2025 starting on the whim with an avalanche of global tariffs and tit-for-tat actions by China on U.S. proposed port fees, measures that were subsequently revised or suspended, all in the backdrop of ever-growing geopolitical turmoil, the tanker markets remained elevated and oil majors increased their long-term cargo requirements. To this effect, TEN through to its tried and tested operating model of seeking long-term cover provided the vessels required for its blue-chip clientele to meet its needs. This operational tweak, however, did not hinder the fleet from taking advantage of the equally strong but more erratic spot market as it had a good complement of vessels benefiting from trading spot. In particular, with the fleet in the water averaging 62 vessels identical to 2024, days under secure revenue employment, that is vessels on time charters and time charters with profit sharing provisions increased by 12.6%, while days on spot declined by 33%. Of interest, during 2025, days on profit sharing contracts alone increased by 12.4% from 2024, highlighting TEN's commitment to adding another layer of employment to benefit from the very lucrative spot market. Today, 1/3 of our fleet, that is 22 vessels, 9 on pure spot and 13 on profit sharing contracts are directly impacted by the historical strong spot market. As a result of this employment shift, during 2025, TEN generated close to $800 million in gross revenues and $252 million in operating income, which incorporated $12.5 million of capital gains from the sale of 4 older vessels. Capital gains during the equivalent 2024 12 months were up $49 million from the sale of 5 vessels. In line with the above employment pattern and fewer vessels on dry dock compared to 2024, 10 in '25 from 15 last year in '24, fleet utilization increased to 96.6% from 92.5% in 2024. The time charter equivalent rate the fleet attained during 2025 was a healthy $32,130, similar to 2024 levels. Reflecting the reduction of the fleet's spot exposure mentioned above, voyage expenses declined from $153 million in 2024 to $122 million in 2025, a saving of $30 million. A saving of $4.4 million was also incurred by a reduction in charter hire expenses whilst vessel operating expenses increased by just under $13 million from the year prior to settle at $211 million. The introduction of larger and more specialized vessels in the fleet like Suezmax and shuttle tankers in place of Handysize and Aframax vessels that were sold contributed to that increase. As a result, operating expenses ship seat per day for 2025 average a competitive $9,990, about 1/3 of the time charter equivalent rate mentioned above. Depreciation and amortization came in at $170 million for 2025 from $160 million reflecting the introduction of 4 newbuilding vessels. General and administrative expenses in 2025 were at $42 million from $45 million in 2024, to a large extent, the result of the amortization of stock compensation awarded in July 2024 and scheduled to fully vest by July 2026. A decline was also experienced in our cost of interest as a result of lower interest rates, which despite $174 million increase in the company's debt obligations from 2024 due to new loans for TEN's newbuilding program came in at $98 million compared to $112 million in 2024, another saving of $14 million. Interest income came in at $10.5 million which was another meaningful contribution. At the end of 2025 with just 62 vessels on average in the water and 20 vessels -- and a 20-vessel newbuilding program, TEN's total debt obligations were at $1.9 billion with net debt to cap -- while net debt-to-cap stood at a comfortable 46.7%. TEN's loan-to-value at the end of 2025 was a conservative 48%. As a result of all the above, the company during 2025 generated a healthy net income of $161 million or $4.45 in earnings per share. Adjusted EBITDA for the year came in at $416 million, while cash at hand as at the end of December 2025 stood at $298 million. After having paid $148 million in scheduled principal payments, $190 million in yard predelivery installments and capitalized costs and $27 million in preferred share coupons. And now let's go over the quarter 4 summary results. The fourth quarter of 2025 experienced similar fleet employment patterns, which had fleet utilization reaching 97.7% from 93.3% during the 2024 fourth quarter. During the 2025 fourth quarter, 2 vessels underwent scheduled dry dockings compared to 4 in the 2024 fourth quarter, which naturally contributed to this improvement. With an identical number of vessels in the water with the 2024 fourth quarter, albeit of greater deadweight, the fleet generated $222 million of gross revenues and $81 million in operating income which similarly to the 2024 fourth quarter did not have any gains or losses from vessel sales. The result in time charter equivalent per ship per day, reflecting the ever-increasing strength in rates was at $36,300, 21% higher than the 2024 fourth quarter level. Voyage expenses during this year's fourth quarter were lower compared to last year's fourth quarter, experiencing a $7.6 million drop to settle at $26.8 million. Operating expenses, on the other hand, increased to $56 million from $51 million in the fourth quarter of '24 due to some extent by operating larger vessels. The result in operating expenses per ship per day for the fourth quarter of 2025 came in at $10,558. Again, 1/3 of the fleet average TCE and still competitive, thanks to the efficient and proactive management performed by TEN's technical managers. Depreciation and amortization were a little higher from the 2024 fourth quarter at $44.4 million. General and administrative expenses were at $6.2 million lower from last year's third quarter at $9.2 million. Interest came in at -- interest costs came in at $25 million, similar to the 2024 fourth quarter, while interest income contributed about $3 million to the bottom line. As a result of all the above, TEN during the fourth quarter of 2025 reported $58 million of net income or $1.70 in earnings per share, a 200% increase from the 2024 fourth quarter. The adjusted EBITDA during the fourth quarter of 2025 settled at $128 million, $42 million here from the 2024 fourth quarter number. And with that, I'll pass it back to Nikolas. Thank you. Nikolas Tsakos: Thank you, Harrys, for having so many positive numbers. I will allow you to make long presentations as long as the numbers are positive because -- well, as we said, the fourth quarter was only the beginning of the end, I would say, of a very fruitful year for 2025, a year that we have been able to establish a renewal -- a significant renewal of the fleet. We have been able to take and absorb the new acquisitions of the Viken fleet, which we did earlier fully in the company. And we were able to have an increase of our utilization to close to 98%, which I think this is really something that we want to congratulate also the operation department of Tsakos Shipping and Trading for keeping the ships -- the propellers earning almost 100% of the day. And this figure includes dry dockings and special surveys. So it's really, I think, the highest utilization in the company's history. And the beginning of '26, we had, I would say, surprises mainly on the geopolitical front. We have the change and the lifting of sanctions from Venezuela, which has allowed companies like ourselves to be able to participate even more in that -- in those trades. And of course, recently, the events in the Persian Gulf which have created spot rates or have led to spot rates and prices of oil that we have not seen for a generation. The company is very well prepared to navigate such a tremulous environment. And as Mr. Saroglou showed us in our earlier slide, I think the company comes stronger out of every crisis. I think most of you listening are too young to remember most of the crisis that we have been -- that we have gone through in the last -- 7 crisis in the last 30-odd years, but the company has been able to build and build further. And I think this graph is very evident that the Harrys, next time don't forget you have 12.5% growth that we usually have to show that the company has been growing year after year regardless of difficult markets. Another important factor we have increased the dividend. We paid the last part of our dividend in February and we're looking to reward shareholders accordingly as we move forward. A lot of question marks. We're actually focusing on the safety of our seafarers, as Mr. Saroglou said and also protecting our assets and the cargoes in our assets. We are going through situations that we have not seen in a generation. But we are well prepared to be able to take advantage of that. And with that, I would like to open the floor and also to thank the Chairman for his good words earlier to any questions. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Climent Molins with Value Investor's Edge. Climent Molins: I wanted to start by asking about the 2 LNG carrier orders you announced today. Could you talk a bit about whether you're already in discussions for long-term charter employment. And if so, what duration are you targeting? Nikolas Tsakos: Yes. I mean, there is -- as I said, the LNG segment is a segment that we have been participating from a very early stage back in 2007. However, I think for good reasons, we have never overextended ourselves in investing in that segment. We always want to participate in new ships and new technologies, and that's what we have done. And with these ships, it's too early to charter long term, but there is a lot of appetite going forward. So I think this is more as a long-term investment for this growing segment of the business rather than something that we have done with a charter in mind. Climent Molins: All right. Makes sense. I also wanted to ask about the [indiscernible]. Could you talk about how the index-linked portion is calculated? Is it benefiting from the surge in spot rates we've seen in recent days? Nikolas Tsakos: The [indiscernible] on a profit sharing arrangement based on trading routes of the Far East, end of Transatlantic. So of course, it's participating in this situation and the current employment ends in about 8 months. And of course, there is a significant appetite for such a [ prong ] ship going forward. Climent Molins: That's helpful. As I understand it, you very recently fixed 2 MR2 new builds that were delivered earlier this year. Are they employed at fixed rates or at variable hire? And if it's the former, at what rate are they employed? Nikolas Tsakos: We cannot tell you all the secrets. You have to call Mr. Kosmatos. When you see him in New York, you can ask Mr. Kosmatos. He's only allowed to write this in a piece of paper and secretly hand it to you under the table. But they are -- I would say, they are fixed rates, and they're very, very accretive in the mid- to high 20s. That's all I can say. And I think these are the highest that those ships have been fixed -- these type of ships have been fixed in the recent months or at least this is what our chartering department tells us. Climent Molins: Makes sense. Harrys, we definitely need to catch up soon. Harrys Kosmatos: Looking forward to it, gentleman. Climent Molins: Yes. I also have a question on the shuttle tanker newbuilds. We've seen some of your peers getting very good financing terms and support from the Korean export agency. Is this something we should kind of expect on your shuttle tanker orders as well? Nikolas Tsakos: Of course. Of course, I mean, we are one of the biggest supporters of South Korean yards and all the -- we try to keep all -- we are currently to the Herculean task of our newbuilding department. We had site offices in all the major South Korean yards. So we have a very big site office in Samsung as big in Hanwha, the ex Daewoo, and of course, a big one in Hyundai, which we never stopped having versus perhaps if you recall, we just took delivery of our last vessel there in October. So we keep on maintaining very hands-on site offices in this -- in all of them. And of course, we get the appreciation from the Korean banking system. And I think our team has concluded one of the largest syndications for the finance of those vessels at very, very competitive terms. Climent Molins: That's good to hear. And final question from me. Big picture, 2026 has started very strongly for you and both earnings and free cash flow are set to rise very significantly. Could you talk a bit about how you think about your capital allocation priorities? How do you plan to balance deleveraging fleet renewal and increase shareholder returns going forward? Nikolas Tsakos: Well, I think, as we said, our -- we make sure that we are securing the well-being of the company long term. And as we speak, I think as we see today, [indiscernible] accounted, I think that by the end of the first and second quarter, we might be in excess of $0.5 billion in liquidity, which means that our priority is the reward of our shareholders, which we are the largest ones as the management. And then, of course, we would be allocating our newbuilding program is almost fully financed, as I said, with the recent syndication. So rewarding our shareholders, reducing debt significantly. And we might be looking at next year, April next year to actually repurchasing some of our very, very usual preferreds. Operator: Our next question comes from the line of Poe Fratt with Alliance Global Partners. Charles Fratt: Yes. I was trying to isolate the impact of the profit sharing agreements that you had in the spot market exposure on the increase in voyage revenue in the fourth quarter versus the third quarter. Can you quantify the impact of the increase in the TCE rate. What was the exposure to the spot market versus the contribution from profit sharing? Harrys Kosmatos: Well, we did see a lot of profit sharing coming in later -- well, throughout '25, and we are beginning to see recently. And actually, a number of our vessels have been rechartered on higher elevated floor rates to what they were previously. Just to give you an idea, over and above the fixed rate that I mentioned earlier in the fourth quarter of '25, we got an additional $27 million from the profit sharing income that came in. So obviously, we did have some benefit. It seems that the numbers will -- I mean they look that we are moving in the right direction and perhaps to recall the similar amounts of additional income going forward. So again, $27 million over and above the flow rate on those profit sharing vessels in the fourth quarter. Nikolas Tsakos: Yes. That's a significant amount. I mean, this is almost like 50% of the profitability of the fourth quarter. So it's not -- it's -- the profit arrangements have huge contribution being $27 million on $58 million of profit. Charles Fratt: Yes, that's exactly what I was looking for. And so there were some -- there was a positive increase on some of rechartering or recontracting the time charters that you had. And when you look at the first quarter and looking maybe at the first half of the year, my sense is that rates started to move in the fourth quarter, but the really significant move is more in the February time frame. And obviously, it's a little early just because of what's going on in the Middle East. But is there an additional step-up that we should see in the first quarter in profit sharing? Nikolas Tsakos: Yes. I mean, the way things are today, I think the profit sharing has gone off the chart because of -- and as Harrys said, I mean, for example, we had the categories of ships that we would profit share for anything above $20,000 a day. And the next fixture was anything about $35,000 a day. So you understand that we made sure that we pushed the fixed part of the profit sharing as high as possible for as long as possible and then the profit sharing goes. So yes, I think the first quarter, it's going to be another step up from where we left the fourth quarter. Harrys Kosmatos: And I think of interest, Poe, is that from the 13 vessels that we currently have on profit sharing, 7 are Suezmaxes and 2 are VLs. Nikolas Tsakos: Yes. So they're actually the big boys of profit sharing. Charles Fratt: Yes. I was going to say and that's where you're seeing the meaningful increases. Maybe it will still [ flip ] down to the smaller sizes, but at this point in time, your exposure to the larger segments is -- or larger sectors is really good. When you look at the decision to sell the [ B ], what -- how did you -- was this an inquiry from somebody as far as trying to -- there's been a big acquirer out there, was there an inquiry that came in that led you to hit the bid? Or was this part of your strategic fleet renewal? And then if you could talk about what other potential assets are on the block that we could see sold in 2026, that would be helpful. Nikolas Tsakos: Yes. I mean there's always -- it takes 2 to tango. So it was not that we were out. I mean, our philosophy has always been that we're looking to sell any vessel which is between 10 and 15 years old. As you very well know, there have been people who have been buying these assets at prices that make a huge sense. I think we were, I would call it, lucky enough in November to order 3 VLs of Hanwha at prices of today. And just to put it in perspective, the newbuilding, so we show -- we ordered those ships. I think it has been reported at $128 million. And we sold the 10-year-old ship, which if you equate, it's a newbuilding price, it's in excess of $170 million. So it doesn't -- it's always good to take advantage of these possibilities. And the good thing is that we are going to be using the ship up to almost the middle of the year since we're taking advantage right now in a huge way of the big market -- of the spot market. And we're going to be selling here and delivering here back to the new owners sometime in June, end of May, June. So in a sense, we were able to have our [indiscernible] for the first 6 months. Charles Fratt: Yes, that was a pretty timely rollover as far as just the [ issues ] went open in the, I guess, December time frame. Just go back to, if you wouldn't mind, the chartering strategy, profit sharings kicked in, you see a step-up in the first quarter, probably the second quarter too. Where do you get more aggressive in trying to lock in the higher rates? Nikolas Tsakos: We are always -- I mean, we have set an evident step-up in all categories of the vessels. And as long as we are able to have the profit sharing arrangement, which is something that very few others do, we should keep it that way. You've seen on Slide #7 on Page 7, you see our breakevens, which I think are very, very competitive. I mean, we have an all-in breakeven for VLs up to $28,000. Today, they're averaging above $100,000, including the profit sharing. So there's a little profit to make there. Suezmax is breakeven of everything at $25,000. I think we're closer to $80,000. Aframax is $21,000 -- well, Aframax and LR2s, if you put them together, about $22,500. Again, we're in the $70,000s and $80,000s there. our Panamaxes, which are our oldest segment in the $18,000 and I think that's where we got the $30,000-plus profit share arrangements. So those are in the money. Our Handysizes are down to $10,000, which means there are actually operating expenses and some interest since they're very, very well amortized. The LNGs -- and our shuttle tankers are also very much into the money at $34,000 time charter. So when we can make sure that we get covering our minimum significantly, then we do the profit share. I think Page #7 portrays, Mr. George, what Mr. -- our President has put up on the board. Charles Fratt: Yes, that's helpful. And if I may, one more question. Obviously, the turmoil in the Middle East just had an impact on rates. But the other side of the question is, right now, and I know you don't have any tankers in Hormuz way. But what are you expecting on the insurance expense side? And then also how much exposure do you have to higher fuel costs as we look at the rest of 2026? Nikolas Tsakos: This is actually a very good point. I think we have had in the last week a 500% increase on insurance on war risk insurance. I think from what we used to do it at $0.15 per deadweight ton, we're up to close to $1 now or $0.75 to a $1. So that's a huge increase. It's 500%. Of course, all this is paid directly by the charter. So it does not really influence -- it's not -- it's a pass-through cost for us. But it shows how the market rates this risk. As far as our fuel costs, I mean, we have -- first of all, we have close to 25% of our existing requirements covered, George, for the next couple of years at very competitive rates. But also being mainly on a time charter basis, all the fuel cost surges or not affects our clients. So we do not have that. I mean we have a huge fleet, but being on time charter, the risk of the surge or drop of the bunker costs are taken up by the charters in a very big way. Charles Fratt: Great. And I'm sorry, if I may squeeze one last one in. What's your dry docking schedule for the rest of the year? Harrys Kosmatos: Okay. We are starting quite live for the first quarter. We only have 2 vessels, 2 Suezmaxes for Q1. We have 5 vessels in the second quarter, 7 vessels in the third quarter and 3 vessels in the fourth quarter. Nikolas Tsakos: Hopefully, we will be able to see you in New York next week. Operator: And we have reached the end of the question-and-answer session. Now I'd like to turn the floor back to CEO, Mr. Nikolas Tsakos for closing remarks. Nikolas Tsakos: Well, thank you for participating and listening in to our 2025 end of the year results. It has been a productive year. Your support has been appreciated. We have seen significant, I think, close to 60% increase of share price in the last year, which shows the trust that the public markets are putting on TEN. And hopefully, this is only the beginning. We have seen, again, a very steady trading and a very positive trading of our preferreds. The company would maintain its distribution policy of keeping shareholders -- of rewarding shareholders. We are going through a period of uncertainty in the world. And what we try to do with them is to take as much of this uncertainty possibly out through our chartering policy, which is always to the most blue-chip end users out there. And with that, we want again to thank you. Wish you a good weekend. And hopefully, we'll see you in New York next week. Thank you. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Fourth Quarter 2025 Operating and Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead. Farooq Hamed: Thank you, operator. Good morning, and welcome to Ero Copper's Fourth Quarter and Full Year 2025 Earnings Call. Our operating and financial results were released yesterday afternoon and are available on our website along with our financial statements and MD&A for the 3 and 12 months ended December 31, 2025. Our corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and the potential impact on our business, please refer to our most recent annual information form available on our website as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in U.S. dollars. With that, I'll now turn the call over to Makko DeFilippo. Makko Defilippo: Thank you, Farooq, and thank you to everyone joining us this morning. As we pre-released our 2025 production results and 2026 guidance in early February, I'd like to take a step back here and explain why we believe Ero is extremely well positioned in the current market environment. Last week, as many of you would have seen, we released our maiden preliminary economic analysis on the Furnas project. This was an important milestone for the company and one of our key objectives this year. Over the past 18 months, our exploration and engineering work, combined with extensive historical technical programs completed by Vale on the project since the early 2000s, has enabled the design of an integrated open pit and underground mine expected to produce a total of more than 1.2 million tonnes of copper, 2 million ounces of gold and 9 million ounces of silver over an initial 24-year mine life. Highlighting the quality of Furnas and reinforcing why it is a cornerstone asset in our long-term growth strategy. Over the first 15 years of operation, Furnas is expected to produce approximately 70,000 tonnes of copper, 111,000 ounces of gold and more than 500,000 ounces of silver annually at first quartile C1 cash costs of approximately $0.24 per pound of copper produced. At long-term consensus metal prices, the PEA delivers an after-tax NPV of approximately $2 billion and an IRR of more than 27% on $1.3 billion of initial capital. Taken together, these metrics uniquely position Furnas from a capital intensity perspective relative to comparable projects while delivering strong economic outcomes across a wide range of commodity prices. Said differently, we see an exceptional project that is both financeable and buildable. As strong as it is, the PEA is just a starting point for us, and we are focused on maintaining momentum this year. In 2026, we plan to complete an additional 50,000 meters of exploration drilling, targeting extensions of high-grade mineralization around planned underground infrastructure. We will also continue pursuing opportunities we see to further strengthen economics, which include the addition of a magnetite recovery circuit to produce a high-grade magnetite concentrate as well as a gravity pre-concentration stage to enhance gold recoveries. Both initiatives offer potential to further increase byproduct revenue, and we are encouraged by the initial results we are seeing. Getting back to what differentiates Ero, we have clearly outlined a great long-term growth project in Furnas, and we are thrilled to be advancing it towards a construction decision over the coming years. Perhaps most importantly, the capital required to advance Furnas to that point is expected to remain relatively modest as we continue to advance technical studies, drilling and permitting work streams. At the same time, capital spending across our existing operations is projected to decline as we transition out of a multiyear investment phase that included the construction of Tucuma and major investments at Caraiba over the past several years. These investments are either complete or in the case of our new shaft project at Caraiba, are past peak capital spend. As a result, Ero is exiting a major investment cycle with an exceptional long-term growth asset, increasing cash generation capacity, declining consolidated capital requirements and three operating mines with the right mix of metals at exactly the right time in the commodity price cycle. When I look across the broader sector, many companies, including most of our peers, are jumping into major project builds within the next year. We like this dynamic. Switching gears slightly. I do want to touch on our 2025 results and '26 guidance. And I would start by recognizing the resilience and dedication of our teams that work through a number of challenges to deliver meaningful improvements across the business as the year progressed. These efforts resulted in sequential quarters of improving operational performance, the unlocking of a major new additional value driver for our business at Xavantina. Starting with Caraiba, Q4 represented our strongest operating quarter of the year. Mill throughput reached nearly 1.2 million tonnes, up 18% compared to Q3 and an all-time record for the operation. This drove copper production 15% higher quarter-on-quarter and contributed to C1 cash costs of $2.27 per pound. At Tucuma, copper production increased more than 22% quarter-on-quarter, representing another record for the operation. Higher process grades helped offset an extended period of unplanned downtime in December, driven by a pull forward of Q1 maintenance for an early mill liner replacement. This pull forward was due to an OEM wear part quality issue that impacted multiple operations in the region, including ours. C1 cash costs in Q4 were $1.75 per pound, which I would note approximately $0.10 of this was attributable to expensing the unamortized portion of the liners. Turning to Xavantina. Production increased 53% quarter-on-quarter, driven by higher grades and improved throughput as we began to see the benefits of our efforts transition the mine to mechanized mining. In addition, our gold concentrate program resulted in an incremental 15,000 ounces of gold in Q4. As a result, total gold from Xavantina, including mine production and concentrate shipments was nearly 20,000 ounces in the quarter and over 50,000 ounces for the full year. Behind these numbers, what makes 2025 one of our best on record, in my opinion, is that our operational teams delivered these results while achieving one of our best years ever in terms of consolidated safety performance. Whatever might be said about 2025, nothing matters to me more than this metric. As I look ahead to 2026, our guidance assumes the operational performance gains we achieved in the fourth quarter are effectively sustained through the year. While we continue to work on opportunities to further improve performance across the business, especially in the second half of this year at Tucuma, these are not reflected in our guidance. At Tucuma, we are well advanced on adding additional tailings filtration equipment this year to unlock additional throughput capacity for this operation. We have equipment being manufactured right now. And if all goes according to plan, we would expect this to benefit the operation in the fourth quarter. As I mentioned, the potential benefits here as well as the associated capital investment have not been reflected in our 2026 guidance. This was a deliberate decision for three reasons: First, guiding to steady state was important for us this year. Second, there is a lot of daylight between now and the fourth quarter. And perhaps most important, in the current metal price environment, we expect the payback on this investment to be 1 to 2 quarters. So while it is a very important objective, and we expect to complete it this year, it will not change our strategy or capital allocation decisions in 2026. At Xavantina, we are investing in our ventilation circuit, mine development and equipment to increase mine capacity and output. This is a low-hanging long-term value driver inherent to our business when we look at the available milling capacity we have there. Last but not least, at Caraiba, we are advancing the new shaft project for the Pilar mine and are pursuing several operational improvement initiatives that we hope to discuss later this year. To touch briefly on cadence for 2026, we are guiding consolidated copper production of between 67,500 to 77,500 tonnes. This reflects year-over-year growth driven primarily by higher sustained plant throughput at Caraiba and Tucuma, partially offset by lower planned grades. Copper production is expected to be weighted towards the second half of the year due to mine sequencing and a modest increase in throughput throughout the year. At Xavantina in 2026, we are guiding mine production of 40,000 to 50,000 ounces. We expect Q1 to be the softest production quarter of the year. This cadence reflects mine sequencing as well as a tie-in of a major ventilation upgrade during the quarter, including the completion of the new [indiscernible] surface. Production is expected to be weighted towards the second half of the year as a result. Gold concentrate sales are expected to continue throughout the year, but we expect that to be relatively modest in Q1 due to the rainy season. For some additional context there, you'd be hard-pressed to find a more simple operation in our portfolio. There are only three steps. We remove the material from stockpile, we then spread it out in the sun to dry, then transport the material for shipment. As you can likely imagine, step two in that process is far less productive during the rainy season. With that, I will turn the call over to Wayne, who will walk through our financial results in more detail. Wayne Drier: Thank you, Makko. Our fourth quarter financial results were driven by record copper concentrate sales, a 59% increase in gold dore sales, the commencement of gold concentrate sales and stronger copper and gold prices during the period. All of these factors drove quarterly revenue to a record $320 million or $143 million higher compared to the third quarter. Consolidated C1 copper cash cost per pound were approximately 1.5% higher quarter-on-quarter with the increase predominantly coming from Tucuma, where we experienced higher transportation, demurrage and port costs in the quarter related to the COP30 activities in Para State. This had an impact of approximately $0.10 per pound on our Tucuma C1 costs, which were also impacted by the accelerated amortization of the mill liner Makko referenced earlier. Gold C1 cash cost per ounce declined by approximately 29% from the third quarter. As a result, the company delivered stronger operating margins, with adjusted EBITDA growing to $186.7 million in the fourth quarter and $409.7 million for the full year. Adjusted net income attributable to owners of the company was $108.4 million for the quarter and $220.4 million for the year or $1.04 and $2.12 per share, respectively. Our liquidity position at quarter end stood at $150.4 million, including $105.4 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility. We continue to deleverage our balance sheet with net debt declining to approximately $502 million at year-end from $545 million at the end of the third quarter. Combined with significantly higher 12-month trailing EBITDA, this resulted in a material improvement in our net debt leverage ratio, which decreased to 1.2x at the end of Q4 from 1.9x in Q3 and 2.6x at the end of 2024. With copper and gold production expected to grow in 2026 as well as the additional cash flow from Xavantina's gold concentrate sales, we intend for debt reduction and return to shareholders to be key elements of our midterm capital allocation strategy. At December 31, we had $155 million drawn on our revolver, which we intend to pay down fully in 2026. We would like to maintain a strong cash position on the balance sheet and target a net debt-to-EBITDA ratio below 1x ahead of commencing a return of capital program. I'll now pass the call back to Makko for some closing remarks. Makko Defilippo: Thank you, Wayne. Before we move into the Q&A session, let me recap the 3 key elements of Ero's value proposition. First, over the past decade, Ero has consistently unlocked value that wasn't fully recognized often through work supported by strong partners. Clear examples include our gold concentrate program and our broader partnership with Royal Gold at Xavantina and more recently, the advancement of the Furnas project with our partner, Valley Base Metals. Second, we've taken a disciplined countercyclical approach to capital allocation, investing in building projects during periods when development activity across the sector was limited. That strategy has positioned Ero favorably relative to our peer group that are now preparing to enter major capital investment phases. Third, Furnas represents a high-quality, long-life asset being advanced with a top-tier partner and we view it as a compelling cornerstone for Ero's long-term growth. With that, I will now turn the call back to the operator to open the line for questions. Operator: [Operator Instructions] First question comes from Orest Wowkodaw with Scotiabank. Orest Wowkodaw: Question around the gold concentrate stockpiles at Xavantina. You haven't issued any guidance for what those volumes could be this year. But with the 15,000 ounces you sold in the fourth quarter, is that a good guide for shipments in periods or quarters where there's no rainy season? Makko Defilippo: Yes. Thank you for the question, Orest. Obviously, a bit of a tricky situation. Obviously, we came out with initial resource on the 20% of the volume that we were able to sample. So it's difficult for us, as you can imagine, to give exact guidance. But we certainly expect strong volumes and shipment. I would point to what we achieved in Q4. That was at the tail end of the rainy season. So if you -- just for context, the rainy season in Mato Grosso typically starts in November and goes through March, April, depending on the year. And so part of those sales did occur when the rainy season was started. We're obviously advancing several initiatives on site to increase volumes from there. And as I said on the outset of the call, Q1 is the heart of the rainy season. This has been an exceptionally rainy year in Brazil, as you are probably aware, from some of the news flow and flooding that's happened throughout the country. And therefore, we expect very, very modest sales in Q1 and then ramp up pretty aggressively Q2, Q3. Orest Wowkodaw: And in terms of the stockpile itself, have you seen anything that may suggest that the grade for the other 80% of the stockpile would be materially different than what you have sampled? Makko Defilippo: Difficult to say Orest, but nothing -- obviously, as we go into the future, we don't have samples there, but to date, nothing that suggests otherwise. Operator: The next question comes from Emerson Vieira with Goldman Sachs. Emerson Vieira: I would like to understand a little bit more on Tucuma Q3 press issue. So can you provide us an update here? Have you guys already ordered the mobile filter that is expected to increase the future availability? And any update on time could be very helpful. Also, how long should be the maintenance in the first quarter in order to advance with the new aligners replacement? And just a third one on Tucuma, can you please reconcile the production guidance for 2026? I mean, what are you guys expecting in terms of grades and throughput ramp-up throughout the year? Those are my questions. Makko Defilippo: Thank you. Quite a bit to unpack there. So if I missed something, I apologize, just ask it again, but thanks for the questions. So first, on the filter press capacity, yes, that equipment has been ordered. It's being manufactured. As I said in the prepared remarks, that is a very important objective of ours. But given the -- given what we've outlined, it's not included in our guidance, first and foremost, we expect the payback on that investment to be very fast in this environment. And we expect it to be operational in Q4 as both the quantum of the investment there as well as the current prevailing copper price that investment and completion of that project has very little influence on how we think about our business for 2026. As I said, it was not included in our guidance. So that's first and foremost on that point. The second part of your question was related to the maintenance that happened related to the mill lining. So to be clear, there, we expected that maintenance to occur in Q1. We had to pull that into Q4, so it's already been completed effectively for the year. That was approximately a 10-day period of downtime that happened in Q4 and impacted our Q4 results. Emerson Vieira: All right. So no more maintenance, downtown... for... Makko Defilippo: We have planned downtime every month. So that is still part of our team, but we have no extended period of downtime that we're planning in Q1 of this year. Emerson Vieira: All right. And just the last one on the reconciliation on grade and throughput comparing to the guidance, please? Makko Defilippo: Yes. Great question. Thank you. So when we obviously came out -- had a strong result last year in terms of grade, we do expect grades to come down. We are currently looking at -- throughout our guidance, just below 3 million tonnes of processed throughput. And I would say somewhere between 1.3% and 1.4% copper for the full year. Operator: The next question comes from Guilherme Rosito with Bank of America. Guilherme Rosito: So I have two. The first is on Tucuma. I wanted to dive a bit deeper into the C1 cash cost guidance. I just wanted to understand how we could explain the cost increase throughout the year versus what we were in 4Q. I appreciate that there is lower grade and not including the feed. So with the feed there could be a change to guidance. But I'm just trying to understand as you have more fixed cost dilution as you increase processing and also the [ CRCs ] are higher than what you guys are currently doing at Caraiba. So I'm just trying to understand all these moving parts and what's driving costs higher this year? And second on Xavantina, I just wanted to explore a bit if you could talk about the benefits from the mechanization investments you guys did last year. How should we expect that to translate into the results this year? And what do you guys expect in terms of grades throughout the year? How this should fluctuate, what sort of volatility we should see throughout the year? So that's it. Makko Defilippo: Thank you for the questions. So yes, starting with Tucuma, a really, really good question there. Main drivers for guidance, as you mentioned, is grade. So obviously, we're coming off of a year of significantly higher grades that has a direct influence on our Q1 -- our C1 costs. We also are putting in additional maintenance efforts there to stabilize the operations. Those are, I would refer to those additional costs as nonstructural. On the TC/RC and shipment side, we've been getting some questions about differences from Caraiba to Tucuma. I would point to two major influencing factors there. Number one, the grade of the concentrate is lower. So therefore, there's more costs associated on a per pound copper basis, number one. Number two, we have quite a bit further to transport that material. And so when you take those two together, we do see higher TC/RCs. We're seeing a market now in the TC/RC across our business that looks favorable relative to where we expected it to be for the budget. That said, those are mostly longer-term contracts that we have in place. So we are not getting the full benefit of the benchmark pricing. And then more fundamentally, as you'll probably appreciate better than most people, we are seeing a very strong BRL headwind across our business. That's true across all of our operations, and that's been reflected in our guidance. So I would say big moving factors there on Tucuma cost drivers would be the grade that we're mining, the additional maintenance costs that we're incurring. Again, we expect -- we do expect to see a benefit in Q4 from those costs. The TC/RCs and shipment related costs in part because the grade of concentrate is lower than Caraiba. Your second question on the benefits of mechanization really points to two things. As you've heard me talk about on a number of calls here over the year, reducing exposure of our workforce is one of the top benefits of that investment, and it was one of the key driving factors in making that investment. So getting our workforce away from the work phase to the maximum extent possible. So that's number one. Number two, if you just take a step back and I hope you have the opportunity to show you what the team has been doing at Xavantina later this year. But that mill only operates between 15 and 20 days per month, and that's a function of the asset being mine constrained. So as we look ahead to the future and notwithstanding the cadence of production that we just talked about this year, given the tie-in of the ventilation circuit improvements that we're making, we expect over time here to be able to better match mine output with mill capacity, again, not reflected in our long-term guidance, but it's one of the key low-hanging value drivers that we see in our business. And Gelson and the team here are working diligently, and we hope to be in a position to talk about what that might look like later in the year. Operator: Your next question comes from Fahad Tariq with Jefferies. Fahad Tariq: There was a comment made earlier on the call about potential capital return once the net debt to EBITDA gets to the targeted levels below 1x. Maybe just any additional color on that, what form that would be in timing, et cetera? Makko Defilippo: Yes, I'll jump in and Wayne can piggyback if I missed anything or has anything to add. I would say really, there's 3 steps here that we see as being critically important to driving that decision and timing. First and foremost, as Wayne mentioned, we want to see our net debt leverage ratio below 1x. As you can see from our Q4 results, we're -- given where we were in Q3 to Q4, we're rapidly approaching that metric. Obviously, the world is a volatile place. So we'll see what happens over the next few quarters, but we're pretty close to that metric at 1.2x right now. Secondly, as we mentioned, we want to pay down our revolver. So as at year-end, we had $155 million drawn. That's just a logical place to pay down our debt. And again, we are cognizant that paying down debt, including our revolver is a de facto return to shareholders. So that's an important component of that strategy. And number three, we're having a lot of discussions with our top shareholders about what that might look like and timing. I would say stay tuned. Let's get through steps 1 and 2 before we get too excited about step 3. Fahad Tariq: Sounds good. And then maybe on Furnas, the idea of you're entering a period where some of your peers are getting into a build cycle and Furnas is, I guess, much longer dated. Any opportunity to -- or any appetite to try to accelerate that? Or is that even possible given like what the stage is at right now and the terms of the earning agreement and what needs to be done? Makko Defilippo: Yes. We're very excited about Furnas as you probably heard in our prepared remarks and saw in our webcast materials. The reality is it's a few years out. We like that positioning. We need to do work to advance through a prefeasibility study execute on some of those value drivers that we see as low-hanging fruit to increase the value of the project, increased byproduct revenue. And then we still need to do advance several permitting work streams. The reality, I think, is we do have the appetite to advance that project as fast as possible. I would say that we're already doing that. And we still expect modest capital spend over the next the next few years as a result of the acceleration there. Operator: Next question comes from Stefan Ioannou with ATB Cormark. Stefan Ioannou: Just kind of curious, back on the gold concentrate sales. I think originally, it was suggested that you might -- we're anticipating selling down the entire stockpile over, say, 12 to 18 months. Just given our better understanding of the rainy season and whatnot now, is that a sort of a number we should think it was probably going to be stretched out over a bit more time? Makko Defilippo: Yes. Look, let's see, right that 12 to 18 months we talked about that time later in November. If you put out -- if you look at what we talked about in our guidance came out this year, we said through mid-2027 those time lines are kind of give or take a month, are pretty well aligned from our perspective. Stefan Ioannou: Okay. Okay. So still mid-20 27-ish. Okay. And just maybe switching gears, just on the -- you mentioned an exploration spend of $30 million to $40 million. Is that really the lion's share at Furnas or is there any other sort of notable projects we should be thinking about from an exploration point of view this year? Makko Defilippo: It is a great question. Yes, the lion's share of that is at Furnas. I would say that we're still advancing some opportunities throughout the portfolio, both at Tucuma and at Tucuma, Xavantina, and Caraiba at various stages of development. Again, I think the best guidance I can give you at this point is that we're excited about what we're doing there. We expect to give an update at our Investor Day later in the year. Operator: The next question comes from Craig Hutchison with TD Cowen. Craig Hutchison: I was just wondering if the heavy rainfalls, will that have any impacts on concentrate shipments or timing of shipments from Tucuma as well? Or is it just isolated to Xavantina? Makko Defilippo: Yes, great question. We plan for cadence across our operations for a normal amount of operational disruption. I would say that what we've seen to date at our other operations is in line with what we expected and built into our budget and guidance for the year. So we're not seeing anything out of the ordinary in terms of operational disruption. There is operational disruption across all our operations due to the rating season. That's been reflected in our guidance and how we think about cadence for the full year. Craig Hutchison: Okay. Great. And then just TC/RCs in terms of your C1 cash costs, are you able to provide what you're assuming for TCRs for the year? Makko Defilippo: Those are based on long-term contracts that are commercially sensitive, but I would say the -- what we've heard in the market is well below zero. We're not reflecting that at either of our operations. And as I said, they're long-term contracts that are commercially sensitive. Still very low in a historical context. As I mentioned, when I think about what are the big headwinds and tailwinds for our business, at Caraiba, we have a big tailwind from byproduct gold prices. That was probably pretty clear. And if you look at how that byproduct line item has tracked over the last several years, but we're seeing headwinds on seaborne shipping freight given what's happening in the world today. And then also on the BRL, which has been a big -- I think last year, the BRL was in the top -- was one of the top performing currencies against the U.S. dollar. And so that's a bit of a headwind. So definitely some gives and takes. We feel pretty happy with where our guidance is at this point in time, given some of the gives and takes that we're seeing there. But obviously, we'll keep everyone updated if we see things moving significantly one way or another. Operator: Next question comes from Anita Soni with CIBC World Markets. Anita Soni: I just wanted to follow up a little bit on Furnas. I was wondering in terms of -- I wanted to tie in the exploration drilling that you've done with the PEA. Can you just talk about how much of the drilling that you've done, how much was included in this PEA? And is there still like some that was outlined that didn't get included? Makko Defilippo: Yes. Perfect. Thank you for asking the question. You're absolutely right. The PEA, we started drilling at the tail end of 2024. The PEA includes 28,000 meters of drilling of the 50,000 meters that we drilled last year and we expect to complete another 50,000 meters this year. So if you're looking for -- there's several stages under the earn-in agreement, we'll have effectively -- we expect to complete all phases of drilling, all drilling requirements by the end of 2026. And as I mentioned, that PEA only includes 28,000 meters of drilling. Our objectives with the drill program that we completed in the second half of last year and the first part of this year are twofold. Number one, as we move to pre-feasibility study, we need to convert that inferred mineralization that's included in the PEA into measured and indicated resources that we can include it in the mine plan. And then number two, we -- as you can see in the production profile, really years 16 through '24, we see a drop-off, and that's related to the -- really to the extent of drilling we've been able to do. So we've targeted as part of our drill program some key step-outs around some of the planned underground infrastructure that if successful, we expect to improve the production profile later in the mine life. Obviously, we still need to do the drilling and the mine planning to support what I just said there. So -- but we're looking forward to advancing that work stream and getting it included into the pre-feasibility study. Anita Soni: Yes. That was the second question. Just wanting to drill a little bit into the inferred category. How -- what kind of drill density do you have now? And what do you need to get it into for the M&I? Makko Defilippo: Well, I don't have that right off the top of my head. We can circle back on that one. What I can tell you is that about 60% of the material that we have, including the PEA is inferred. I will follow up with you just after this call on drill spacing. Obviously, that will be outlined in the technical report that will be filed here shortly. I just don't have that information right at my fingertips. Anita Soni: That's fine. If you're going to file the technical report, that was my third question when you're going to file that because I'd like to get into the weeds on that. And then I would also then want to figure out some of the dilution questions as well because I noticed your M&I and inferred does not have any dilution at all [indiscernible]. But that's it for my question. Makko Defilippo: Yes. Just to clarify there, it's an important point on dilution. You're correct. The resource statement doesn't include dilution. The mine plan has been fully diluted and you'll see that reflected around the assumptions that are outlined in the technical report. Operator: The next question comes from Dalton Baretto with Canaccord Genuity. Dalton Baretto: I just want to follow up on some of that Furnas drilling there, but from a different perspective. Makko, you talked about all the drilling that was done last year that was not included in a lot of the drilling this year. My understanding was that sort of the high-grade cores of the deposit, they extend down deeper and possibly deeper than Vale had anticipated. And I'm just trying to understand how much of your drilling is chasing that higher-grade material and whether we could see some sort of a grade bump on the next resource update. Makko Defilippo: Good questions. Look, I think the way that I would think about this is the project as it stands today is -- it stands on its own 2 feet, right? We're working on some additional value drivers to smooth up the production profile to further enhance the economics. But as you see from the numbers, it absolutely stands on its own 2 feet. We -- if you look at the last drill hole that we drilled as part of the PEA, I'm going to quote some numbers here, so take this with a little bit of grain salt, but it was about around 150 meters at 0.8% copper 0.5 gram gold more or less. And that was the last hole that we drilled that was included in the PEA of that 28,000-meter program. That intercept was 600 meters below surface. We clearly see opportunity to extend the deposit, both to depth and laterally along strike. We expect to include those in future studies. And as I said, we'll be advancing those drill programs here. In terms of grade bump, look, we still need to do the infill drilling that will be included in the pre-feasibility study. So there are several stages of technical studies to go here. I would say the work that not only we did but also the very, very strong technical work that Vale has done over the years to build an incredible foundation that we were able to build on, I think, really speaks to the quality of the project. And we work with our technical team regularly. We have an excellent relationship, and we're really moving this forward together to create the best value possible. And when I think about what we've done collectively to drive not only production substantially underground, but also the mine calls for about 30% of its tailings -- expected tailings production to go back underground as paste backfill. We've really worked jointly to reduce the environmental footprint and hopefully set ourselves up for an excellent fast-track project. Dalton Baretto: Makko. And then can you remind me, is there some sort of a mechanism in your agreement with Vale that gives you the option to buy the piece that you currently won't earn into? Makko Defilippo: No. We're very happy to be pursuing this project in partnership with Vale Base Metals. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead. Makko Defilippo: Yes. Thank you, everyone, for joining us today. Obviously, we're always available for follow-up questions. I appreciate the robust discussion on the Q&A side as usual. I think one last bit of housekeeping here shortly on our website, for those of you who are interested, we will be hosting a Capital Markets Day in mid-September. That will be physically in person in Sao Paulo and obviously, virtually. And as I said, that information will be on our website shortly. Thank you all very much. Have a great weekend. Thank you. Bye-bye. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Badger Infrastructure Solutions Fourth Quarter 2025 Results Call. [Operator Instructions] As a reminder, this event is being recorded today, March 6, 2026, and will be made available on the Investors section of Badger's website. I would now like to turn the call over to Anne Plaster, Director of Investor Relations. Anne Plaster: Good morning, everyone, and welcome to our fourth quarter 2025 earnings call. Joining me on the call this morning are Badger's President and CEO, Rob Blackadar; and our CFO, Rob Dawson. Badger's 2025 fourth quarter earnings release, MD&A and financial statements were released after market close yesterday and are available on the Investor Relations section of Badger's website and on SEDAR+. We are required to note that some of the statements today may contain forward-looking information. In fact, all statements made today, which are not statements of historical facts are considered to be forward-looking statements. We make these forward-looking statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them as actual results may differ materially from those expressed or implied. For more information about material assumptions, risks and uncertainties that may be relevant to such forward-looking statements, please refer to Badger's 2025 MD&A along with the 2025 AIF. I will now turn the call over to Rob Blackadar. Robert Blackadar: Thank you, Anne. Good morning, everyone, and thank you for joining our 2025 fourth quarter and full year earnings call. As we always do here at Badger, we'd like to start off with a brief safety moment. We launched our Make Safety Personal campaign again this year in the first quarter. This will be the third consecutive year we've leveraged this program, and we continue to see our safety results improving across the entire organization. This campaign embodies the team's personal commitment to continuous safety improvement. Badger believes having a safe workplace is critical to our people and to our success, and we remain committed to building on this momentum. Over the past 5 years, Badger has doubled the size of the company entirely through organic growth. We launched a strong, successful and well-performing commercial strategy anchored by an industry-leading national accounts program. We are beginning to fully leverage our internal manufacturing facility in Red Deer, Alberta, which is producing world-class hydrovacs and has been able to flex up to support our current strong customer demand. Our sales and management leaders across the entire organization continue to deliver one of the most efficient, safest and most reliable hydrovac service offerings in the market today. This has allowed Badger to continue to expand our competitive moat across North America. We look forward to continuing this growth journey for the next 5 years and beyond. Now on to our 2025 results. Our record top line revenue of over $830 million grew by 12% year-over-year, reflecting the strength in Badger's core end markets and customer demand. We were able to fulfill this demand through increased utilization and continued year-over-year growth in our fleet. We continue to see this trend into 2026. Adjusted EBITDA outpaced revenue growth, up 13% year-over-year. These results highlight Badger's strong operating efficiencies and the optimization of our overhead support functions. Our adjusted EBITDA margin increased to 23.8% compared to 23.6% in 2024. We achieved RPT or revenue per truck per month of $41,672 in 2025, up 5% compared to last year, largely due to improvements in our fleet utilization. Badger ended the year with 1,723 hydrovacs, growing the fleet by 5% overall in 2025. The Red Deer manufacturing plant manufactured 210 hydrovacs. We refurbished 35 hydrovacs, and we retired 130 units during the year at the high end of our revised build and retirement guidance. As we look ahead into 2026, we see extraordinary demand and opportunities across almost all of our end markets. To capture this demand, we plan to build between 270 and 310 new hydrovac units, a record build rate for Badger manufacturing. Our fleet plan also includes refurbishing between 30 to 50 hydrovacs and retiring between 130 to 150 units. This plan allows us to grow our fleet in 2026 by 7% to 10% net of retirements and spend between $198 million to $230 million in capital. Included in this capital range are investments of $15 million to $25 million with the launch of 2 additional service lines that are intended to complement our existing hydrovac businesses. While the revenue and adjusted EBITDA contributions from these initiatives are not expected to be material in 2026, we believe these additional service lines will support Badger's long-range strategic growth plans into the future. I'll now turn the call over to Rob Dawson to discuss our Q4 financial results in more detail. Robert Dawson: Thanks, Rob. As you saw in our fourth quarter release, the team delivered a solid performance with record revenue and strong operational performance. Fourth quarter revenue grew 14% compared to 2024, driven by continued fleet investments to capitalize on strong demand across our U.S. operations. Our adjusted EBITDA improved to $44.9 million, an increase of 2% over the prior year, while adjusted EBITDA margin was 21.5%. As we have discussed, with the ramp-up in our growth rate in the second half of 2025, we are making investments to position Badger for sustained long-term growth in both our scale and our profitability. These investments include new additional branches to further capture market growth and densify our position in core markets. We are also adding certain operational and commercial leadership positions to ensure capacity for continued growth and scale. The initial launch of our Operational Excellence program expected to drive efficiencies across all of our field locations and the accelerated hiring and training of operators to meet our increased truck build rate. Again, these investments will build capacity for longer-term scale and profitability, but have initially impacted near-term margins. We have continued to invest in systems and processes to ensure that our functional support and general and administration spending grow scalably at a lower rate than our revenue. We are seeing the sustained value of these investments. G&A expenses were $10.9 million or 5% of revenue in the fourth quarter of 2025, 100 basis points lower than the prior year at $11.3 million or 6% of revenue. And finally, our adjusted earnings per share was $11.6 million in the quarter compared to $12.7 million in the prior year. Turning to the balance sheet. We continue to maintain a disciplined approach to capital management, preserving financial strength while supporting strategic investments. Our compliance leverage ended the year at 1.3x debt to EBITDA in the bottom half of our 1.0 to 2.0 targeted range. Looking ahead to 2026, our intention is to continue returning capital to our shareholders through both the NCIB and through dividends. We do expect to remain within our 1.0 to 2.0x total debt to compliance EBITDA target range throughout 2026. With this ample balance sheet capacity, we have plenty of flexibility to continue investing in our organic growth strategy to support initial investments in new service lines and to continue to return capital to shareholders. To that end, we were pleased to announce that the Board of Directors has approved a 4% increase to the quarterly cash dividend. This will be effective for the first quarter of 2026 with payments to be made on or about April 15, 2026, to all shareholders of record at the close of business on the last day of the quarter. In total, during 2025, we returned $31 million to our shareholders, $18 million in dividends and $13 million towards the repurchase of 492,800 common shares for an average price of CAD 37.78. Before concluding, I can provide a brief update on the current tariff environment. Badger's manufactured units remain compliant with the Canada-United States-Mexico Agreement or CUSMA. And in 2025, we did not incur any direct tariffs on our units delivered to the United States. In the fourth quarter, heavy-duty truck tariffs were announced by the U.S. administration and subsequent guidance was released in early 2026. This indicates that a 25% tariff will be payable on non-U.S. content for trucks and components crossing from Canada to the United States. If we assume a 25% tariff on the non-U.S. content of our units, Badger's tariff exposure could be in the range of an additional $18 million to $30 million for 2026. We are considering a number of alternatives and options that can mitigate the impact of these tariffs on Badger's manufacturing costs. As the long-term impacts of this tariff environment continue to evolve, we will be prepared to respond accordingly. I will now turn things back over to Rob Blackadar for some final comments. Rob? Robert Blackadar: Thanks, Rob. So before we open it up for questions, I would like to share a few last thoughts regarding our outlook. Looking ahead to 2026, we expect a continuation of the strong growth in our end markets and customer demand we experienced in the second half of 2025. Badger's industry-leading footprint, well-established commercial and pricing strategies and plans for continued investments to expand our branch network in key strategic markets leave the company well positioned to support our customers' growing needs. While we are pleased with our full year 2025 guidance -- I'm sorry, 2025 performance, we believe Badger is set up for even more success in 2026. Our branch market coverage continues to be the best by far in the industry and growing. We are able to support our customers across 44 states and 6 Canadian provinces. We have the largest fleet of hydrovacs in North America with one of the youngest fleets in the industry. Badger's dedicated national accounts program is an industry-first and industry-leading customer service offering to serve North America's largest contractors, public utilities and infrastructure customers. Our vertical integration in which we manufacture our own trucks provides substantial cost and fleet flexibility advantages. Additionally, our unrivaled fleet and workforce fungibility allows Badger to support customers at every level within local, regional and national markets. All of these capabilities position Badger to capitalize on various strategic key industries, including power generation, transmission and distribution resiliency improvements, water-related infrastructure projects, reshoring of manufacturing plants back in the United States, various transportation projects and also data center projects, just to name a few. These projects are incremental to the ongoing maintenance and renewal of aged infrastructure in many of our more mature markets. Overall, we believe the long-term fundamentals of our business remain strong, supported by favorable tailwinds and sustained infrastructure and construction investments across our major markets for the years to come. So with those comments, let's turn it back to the operator for questions. Operator? Operator: [Operator Instructions] Our first question is from Yuri Lynk from Canaccord Genuity. Yuri Lynk: Robert, just looking for some additional clarity on the CapEx spend. I mean the $170 million to $200 million, I understand that there's about $20 million in there for the new service lines. Even if I take that out, it kind of implies the cost per truck much higher than what you experienced in 2025. So is there anything else in there? Like what explains the elevated capital spend in there, if it's not the truck builds? Robert Blackadar: Rob, do you want to grab it and then I'll pick up after you. Robert Dawson: Yes. That sounds good, Rob. Yuri, a good question. We spent $125 million on CapEx in 2025. And we've given guidance of pre-tariff of $170 million to $200 million. And so we roughly increased our spending outlook by about $50 million. And as you mentioned, $20 million of that, the midpoint of the range we provided is investing in new service lines. And then the other $30 million is simply an increase in our truck build rate. Recall that while at the plant truck cost is in that $415 to $420 per unit, if you factor in transportation and delivery, licensing and probably most materially FET, the landed cost of a truck into our operations is $450,000 per unit. And that cost is not expected to change appreciably over the next year. So $30 million for new trucks and $20 million for strategic initiatives and the rest of the spending is largely in line with where we have been. What are those amounts? We do spend a little bit on ancillary equipment every year. Think about the trucks that can support our operations like combo trucks, rock swingers, dump trucks, those sorts of things. We are continuing to invest in IT and process improvements in that $5 million to $10 million range each year. And then we do make modest investments in our manufacturing plant each year as well. So largely in line with our current trends with the 2 big items as the uptick. Yuri Lynk: Okay. I understand that the tariff situation is fluid. But the build rate guidance is at the high end, kind of pushing up against the -- I think it's 350 units per annum of capacity at Red Deer, the top end is 310. So when do we start thinking about a potential U.S. manufacturing footprint? Robert Blackadar: Yes. So I'll grab that one, Yuri. We have always had the concept of as the company continues to grow and scale, at some point, we would need a second facility, a second manufacturing facility. And we've had that in our long-range planning for a pretty good while since I've been here at the company. As we started to scale the business, we're starting to realize that we need to be accelerating that decision-making. And so even at our most recent Board meeting, we just recently wrapped up, that discussion of let's start looking into what it would look like, the timing and how we would start to move toward that second facility, we're actually underway with getting some of that information and pulling that together. We do have a lot of additional reasons other than just scaling. It allows us to have redundancy from a risk standpoint. So instead of having all of our manufacturing only in one facility, obviously, if we have a secondary facility, we would probably do a manufacturing plant in the United States. I don't think that would be a surprise for anyone. And if we were to do that manufacturing plant in the United States, it would probably give us a little bit more efficiency because of the amount of volume we do in the U.S. as well as a secondary benefit would be probably even more relief from a tariff standpoint. And so there's a lot of benefits for us to get going after a second manufacturing strategy. It's something that we're going to be working closely with our Board of Directors on. And at the right time, we're going to -- we'll have some movement on that. And obviously, once that is more solidified, we'll be happy to report that out. Operator: Our next question comes from Ian Gillies from Stifel. Ian Gillies: As you think about 2026 and growing the fleet on average by 8.5% this year, do you think there's enough other items, i.e., pricing and utilization that could perhaps get revenue growth above the, call it, long-term average of 12% to 14% this year? Robert Blackadar: We believe that the markets -- and I shared this at a recent investor conference that Rob and I were at in January, but we believe the markets are so strong, Ian, that there is potential for upside to our plan and to what we're looking at in 2026. I've been in the construction equipment rental space and the exact same end markets that Badger services has been the business I've been in for -- over 32, 33 years. And I've never seen the end markets be as strong as they are right now and the runway ahead of us for the next 3 to 4 years, maybe even longer than that. We don't normally start to prognosticate beyond about the 4-year mark because it just gets so much more opaque and gray out there. But for the next 3 to 4 years, very, very robust end markets and the amount of projects coming at us would really lend us to believe that we should have a pretty solid 2026 and beyond. Ian Gillies: Understood. And maybe as you went through your work to think about this capital investment, putting more trucks in the field, new service lines, et cetera. Can you maybe talk about how you think it impacts where you could potentially end up in the future in the EBITDA margin guidance range or business plan range of 25% to 30%. I know that depends on cycles and how good a different year is, but maybe articulating how this helps put you in that range and whereabouts would, I think, be useful. Robert Blackadar: Yes. I'll start with that, and then I'll let Rob kind of add his thoughts on that. So certainly, as we continue to scale up the business, we believe that -- and the market demand is out there, we believe that on the incremental revenue and the growth revenue, we should start to see more and more profitability, I think in terms of flow-through and operating margin. The -- one of the catalysts that we see as an opportunity is we've kept our overhead and our G&A and everything at very reasonable levels. And for a little bit there, we were actually probably somewhat high a few years ago, and we got a lot more efficient in those areas of the business. And since we've been layering on growth, we haven't had to add a lot. Rob even mentioned that in his commentary. And so we should start to see some incremental dollars start to flow through. Right now, we're in this a bit of just a very short transitionary phase where we've loaded in some short-term overhead to hire up additional operators. But we believe when all those operators are fully trained, and remember, we're a 90- to 100-day onboarding process that you'll start to see us moving back into our more traditional kind of range that we're aiming for. In addition to all of that, the Operational Excellence program that the business is underway with, and we launched it company-wide in January 2 months ago, very excited about what that's already showing from some pilots at the end of last year and what that's going to start to bear fruit on. So that alongside of the business growth and us keeping our cost under control is what's going to really propel us into the range. And then, Rob, if you want to add anything to that. Robert Dawson: I think the final leg of that stool is the data platform that we set up and have matured over the last year. So we have a very timely and robust data set available to us. And in the coming year to 2 years and going forward, we are starting to leverage that data set not only for more timely and better targeted decision-making, but also bringing in the power of some of these large language models to help us to get to broad-based decisions in a more intuitive and quick way. So automation and data performance, I think, is going to be the third leg of driving our margin forward. Ian Gillies: That's helpful. And if I could just maybe sneak in one last one. Are you seeing anything in any of your key markets in the U.S. on the supply and demand side, whether it be from competitors or other types of excavation that are negatively impacting margins in any way, shape or form? Or is this purely just we're investing in the business and it's going to turn at a later date? Robert Blackadar: Yes. So we're not seeing anything material. I mean, certainly, there's inflationary cost and not in any particular market, but just in general across all markets that everyone is burdened by. So obviously, you have your labor, your wages, cost of fuel, even though we did implement a fuel recovery fee post-COVID. And as fuel fluctuates, it becomes less of an issue here at Badger. But I do believe some competitors have some headwinds with that who don't have that floating fuel recovery fee -- fee recovery. The -- but there's nothing in particular that I see either Badger having some disadvantage on our margins or competitors having an advantage or disadvantage as well. I think we're all in the same markets. And right now, with what's in front of us, for Badger, if we were not to invest and continue to scale up, we would run the potential to start not growing and keeping our market share and growing our market share. And we're just determined to be and remain #1 and just have long-term long tail of growth and performance. And so that's my thoughts on that. And Rob, if you want to add anything to that? Robert Dawson: I don't have anything to add to that comment, Rob. I mean we are seeing -- I'd say inflation in construction industry is ahead of the CPI number. But as Rob mentioned, we've got already existing things to be very flexible. We don't have to spend a lot of time to get at systems that we already have in place to capture things like price, fuel recovery and those sorts of things. So we've been quite adaptable to the environment that we're in, and we'll continue to be. Operator: Our next question is from Tim James of TD Cowen. Tim James: My first question, just looking at the fleet plan for 2026, the manufacturing is going up fairly significantly. And at the same time, the retirements are going up fairly significantly. Is there anything that's going on that causes that mix? I mean the fleet growth, again, in that 7% to 10% range. But I'm just wondering in terms of sort of useful life or the economics of newer units versus older ones. Can you talk about any shifts there just given the increases in both sides of the fleet growth equation? Robert Blackadar: Yes. There's nothing really material changing as far as is the fleet aging differently? Are we seeing more engine failures or any problems? We're not. In fact, I would suggest that what Rob was talking about on the previous answer in reference to data and leveraging systems and processes and a little bit of AI, but leveraging that with our fleet management tools, we're actually seeing solid efficiency there. What's happening, though, Tim, is we are scaling the business. And if you think about it, when I joined the business in July of '21, we had roughly 1,200-plus hydrovacs. And today, we just announced we ended the year at 1,725 (sic) [ 1,723 ]. And we're continuing to scale and grow. And as you can imagine, as we grow, we are going to continue to grow our build rate and you're also going to have a certain level of retirements that are commensurate with that. We are continuing to age our fleet the exact same. We're not trying to accelerate retirements nor are we trying to delay them. We're running the company in the same manner as we have. Probably the biggest nuance though, is the refurbishment. If you think about the refurbishments, it's just something we introduced a couple of years ago, and we've seen good benefit to that. And we're going to continue on that process as well. So that's the kind of a clear answer, but we're not changing our fleet management model. Tim James: Okay. My second question, I'm just wondering if you could take a minute and sort of review the specific kind of ground level initiatives that are involved in the Operational Excellence program. Robert Blackadar: Yes, sure. So what we have done, and this is where some of the investments and the -- when we say investments, like we put some overhead into the business, but it's very similar to Operational Excellence programs I've seen at different companies I've worked at in the past. And we go in and we evaluate every aspect of a branch in our location. So if you think about it, Tim, we have 140 locations. And historically, they've been somewhat operated like independent businesses. There were no consistent constant processes and flows across the branches, et cetera. And what we're starting to realize is there's a lot of efficiency to be had just in how we operate. So for example, just a couple of easy examples, but we have a whole list of these we can go through with you after the call or at any time. But for example, how we dispatch our trucks. Not every branch dispatches the same way and having a common dispatch system. And so we believe there's operational efficiency of 15% to 20% to get even more efficient in how our trucks are routed and the projects they go on and starting to stack and load jobs, which will drive a lot of labor efficiency and utilization. And if you think about the lift on that, that's massive amounts across 1,700-plus trucks. Second thing, second example that may be helpful is even as basic as how we fuel our trucks. So running Class 8 trucks, we run a tremendous amount of diesel that goes through. But some of our branches will actually do their fueling in the morning. Some of our branches will do their fueling in the evening. Some of the branches have on-site fueling. Some of the branches use truck stops or et cetera. And what we've realized is there is a much more efficient way for us to start fueling all of our trucks across the entire organization. And by doing it in a more efficient, consistent way, we can actually start to leverage our fuel spends and start to control our programs to where all the fueling is happening the same way, and it drives a lot of efficiency because if someone is fueling a truck at the end of the day, sometimes there will be in an overtime situation, and we're paying someone 1.5 to 2x their wage to sit there and fuel a truck. And as you know, our trucks take several couple of hundred gallons of diesel each truck. So it takes time to get the fuel in the truck. If there's a way for us to avoid having to pay overtime, you start to drive efficiency. That's just one little glimpse along with dispatch, along with the branch flow, along with how we get our drivers out in the morning and what's the most efficient way, that's being standardized across the entire organization. And as Rob and I have shared, we believe once we have about a year -- a full year of that rollout happening across the organization, we're going to start seeing it becoming more material in our margins and move us from the lower end of our range to more toward the middle part of our range of 25% to 30% adjusted EBITDA. All that, though, takes people, and that's the investment. So it takes people to actually go and roll this out at every single branch. It takes a team to coach and teach our local branches how to do it and then make sure it sticks and it's consistent and then following up. So that's the investment we're making now, but we think it will have great returns longer term. So hopefully, that gives you a little bit of a peek behind the kimono there. Operator: Our next question is from Krista Friesen from CIBC. Krista Friesen: Maybe just to dig into that last question a little bit more. Is there anything that we should be thinking about in terms of the cadence of your spending over the next several quarters here? And will it be kind of linear over the quarters? Or how should we think about that? Robert Blackadar: Yes. So I'll start, and I'll let Rob pick up where I leave off. So as far as from a perspective of branch expansion, we're going to continue to expand in key strategic markets. It's something we've been talking about the last few years, and it's starting to accelerate where if we have a branch that is in a larger metro area, think in terms of top 12 MSAs in the United States. The -- we believe that by having more than just one single location in a very dense but broad geography, we can start to grow our market share. We've realized a few years ago that some of our competitors are just out of reach of where Badger services. And so by us adding a second, third, sometimes even a fourth location, we can start to capture and not lose share, but we can actually grow our share and our profitability in those markets. And so we'll continue with that. We're actually slated to have about half a dozen branch expansions in 2026. Regarding us ramping up our operator hiring, which we started much heavier and earlier than we normally would in Q4, and it's continued a little bit into Q1, we just see the amount of demand, Krista, that was happening in the marketplace and much earlier. There really wasn't a lot of seasonality. That's why you saw the revenue pop like it did in Q4. But we realized if we don't have the operators and in place trained halfway through toward the end of Q1, we have the risk of missing out on some of the market and the opportunity to grow. And so that's why we front-loaded some of the operator hiring. That's not going to continue in that fashion. So that's something that really was a phenomenon for Q4 and a little bit into Q1 here because we'll have normal operator kind of an employee base rather than this front-loading of a lot of operator hiring. And then the last part is on the Operational Excellence, which I just laid out. We're going to -- the cost that we put into the business, that is going to -- it's about an 18- to 24-month process. And then that cost will start to just be normalized as part of the business. Operational Excellence will go on somewhat in perpetuity because there's always opportunities to improve your efficiency, but you don't need as much overhead cost as far as the rollout. At that point, it becomes more of a what are some new efficiencies we can start to drive across the whole organization. So you don't need as many people to roll it out. So that will start to sunset after that 12-, 18-month period. So that's kind of our perspective on some of the overhead investments we've made. And Rob, if you want to add anything to that? Robert Dawson: Krista, it's Rob here. I think really the only lumpiness in our capital is when we're ordering third-party equipment. And depending on lead times and the delivery dates of those is when we would pay for those items. So for instance, we mentioned hiring some ancillary -- buying some ancillary equipment as well as equipping some of the new service lines that we mentioned in this quarter's release. There will be some lumpiness to that. But overall, everything else is a steady drip on our capital spend. So the vast majority of this is going to be pretty stable. Krista Friesen: Okay. Great. And then maybe just to follow on that. Should we assume relative stability in the RPT? I mean, taking into account normal seasonality, just wondering if you think there will be certain quarters of maybe a mismatch between your heightened truck build and then opening these new branches and deploying those trucks. Robert Blackadar: Yes. I don't really see our RPT moving materially because of our fleet growth. Because what we're finding, Krista, is as we've started to ramp up the fleet builds, the RPT has been able to hold in steady. We've been very fortunate that there's enough demand in the market that our onboarding of new trucks into a market or into a branch, they go to work very, very quickly now and start producing revenue very quickly. So I just don't see that as being some big headwind Rob has shared a few times at investor conferences, et cetera, that utilization, while we've made a lot of improvements across the organization, we continue to see some utilization opportunities, and that's exciting, and that will continue to keep RPT strong. And if you want to add anything to that, Rob? Robert Dawson: I think this is overall consolidated, Rob's comments are very true. We don't see significant changes in our RPT over the next while as we're scaling to grow. In each of the individual markets, when you open a new branch, obviously, RPT is going to dilute out a little bit as that branch starts from 0 and gets up to a same-store sales kind of concept to utilization. But over the entire network and fleet, those impacts will be a lot more diluted out and more difficult to see. Operator: We have another question from Frederic Bastien from Raymond James. Frederic Bastien: I was wondering if you could provide more information on the expansion that you're contemplating into adjacent service lines, please? Robert Blackadar: Sure. So we -- every year, the company does a strategic -- or strategy session rather, with our Board of Directors and the leadership team, and we go off for 1 day to 1.5 days, and we will evaluate kind of our long-range plan for the company and how we view where the company can grow and expand and look for new opportunities to just drive improvement across the organization for the long term. And as part of that process, we are always evaluating our core business, and we're always evaluating additional businesses and service lines that may be complementary to Badger and our core business. And one of the things that's come up in the last few years and our customers are asking for it is us to start doing more work inside the fence or behind the fence at various industrial type plants. And so one of our strategic initiatives that we're underway with is industrial services, industrial cleaning services. And we did a somewhat of a soft quiet launch later in the back half of 2025 this last year, and we ended the year with 4 locations doing industrial services that are dedicated we found we're very pleased with early results. But as we said in our -- I think it's in our press release and the script, it's not material at this time. And so because of that, we're not really reporting or promoting the heck out of it, but we felt that we should disclose that some of the CapEx spend that we're spending in that to get that business ramped up. It's extremely complementary to our current business. It also provides us some a little bit of offset to our seasonality because a lot of the industrial work will be happening when some of our hydrovac work starts to slow down in the winter time. So it's pretty exciting that way. The other service line we're looking to get launched in 2026 here is the concept of trench safety is how we're branding it, but it truly is trench shoring and road plate. And it is to service because a lot of our customers are calling us after we dig the hole, they're calling us and saying, do you guys rent or could you provide trench shoring. So think in terms of a trench box, et cetera. it's a very accretive service line that we can offer. We're not looking to go compete head-to-head against a large trench shoring company or anything like that. We believe it's a value add to our existing customers. And so we're going to be launching a few branches with that, and that's what the CapEx is involved with. But more to come on that as well. They're just very, very early on in the launches of those 2 additional business lines, but we believe our customers, it makes Badger a lot more sticky and by us having those service lines available. Operator: Thank you so much. We certainly appreciate all your questions. I will go ahead and turn it back to Rob. Robert Blackadar: Thank you, operator. So on behalf of all of us here at Badger, we want to thank our customers, employees, shareholders and suppliers for your ongoing support that drives all of Badger's success. Operator, you may now end the call. Operator: Thank you. This concludes today's event. Thank you for your time and participation today.
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.
Cary Savas: Good afternoon, everyone. Welcome to Grid Dynamics Fourth Quarter 2025 Earnings Conference Call. I'm Cary Savas, Director of Branding and Communications. [Operator Instructions] Joining us on the call today are CEO, Leonard Livschitz; CFO, Anil Doradla; CTO, Eugene Steinberg, COO, Yury Gryzlov; and SVP, Head of Americas, Vasily Sizov. Following the prepared remarks, we will open the call to your questions. Please note that today's conference call is being recorded. Before we begin, I would like to remind everyone that today's discussion will contain forward-looking statements. This includes our business and financial outlook and the answers to some of your questions. Such statements are subject to the risks and uncertainty as described in the company's earnings release and other filings with the SEC. During this call, we will discuss certain non-GAAP measures of our performance. GAAP to non-GAAP financial reconciliations and supplemental financial information are provided in the earnings press release and the 8-K filed with the SEC. You can find all the information I just described in the Investor Relations section of our website. I'll now turn the call over to Leonard, our CEO. Leonard Livschitz: Thank you, Cary. Good afternoon, everyone, and thank you for joining us today. I'm delighted to share that Grid Dynamics closed 2025 with another landmark performance. In the fourth quarter, we beat Wall Street expectations on both revenue and EBITDA delivering record revenue of $106.2 million and a strong $13.7 million in non-GAAP EBITDA. Remarkably, we finished the full year with a record revenue of $411.8 million, which is 17.5% growth year-over-year. 2025 non-GAAP EBITDA was $53.8 million. In Q4, our top 3 customers included two global technology companies and the largest payment technology company. All of them are leaders in the AI space. Our performance is a result of our AI expertise, the strength of our accelerators and keen domain knowledge. In Q4, our AI revenue grew 9% over Q3 and now represents 25% of our overall revenue. For the full 2025, our AI revenue reached over $90 million, representing 30% year-over-year growth. In 2026, we anticipate continued AI revenue growth. There are three key factors driving our bullish outlook on AI. First, AI coding agents and automation, significant enterprises build versus buy calculus that were built at a lower cost. The shift aligns with Grid Dynamics core strengths in building solutions for Fortune 1000 companies, leveraging specialized talent and intellectual property. Second, our efforts with GAIN are resulting in a richer blend of outcome and output-based engagements. Crucially, these new engagements enable us to decouple pricing from effort. We have successfully deployed software platforms across multiple industry verticals. Our AI engagements now strategically combine the strength of our human capital with the value of our platform assets. The market reception for these software platforms has been strong, with customer demonstrating a clear willingness to pay. This positions us well to grow recurring revenue, deepen customer retention and extend the duration of our engagements. Grid Dynamics engagement structure will contribute to our 2026 margin expansion. Third, the speed of AI transformation is not uniform across industry verticals. While we continue to generate revenue from the retail and CPG verticals, we prioritize investments in the area of technology, financial services and manufacturing, where we see significant opportunities for customized auditable product-grade agentic AI platform. Let me talk about Grid Dynamics vertical strengths. Enterprise are learning that deploying AI at scale requires deep domain expertise. We cannot build an effective Agentic system for a production floor without understanding manufacturer. You cannot build one for a global permit network without understanding the compliance architecture. Such expertise is what we have been building vertical by vertical for nearly 2 decades. Now we're codifying it into platforms. Our Merchandising Experience Platform, MXP, brings our expertise to marketplaces and digital commerce. XTDB, our bitemporal Data Platform helps financial clients, specifically in capital markets with auditability and other compliance challenges. Platforms unlock IP-driven outcome-based engagements, and that's how Grid Dynamics moves from billing for effort to billing for value. Now let's talk about partnerships. Our partner influence revenue reached a significant milestone in 2025, exceeding 19% of our total revenue. So significant growth underscores our mission to keep Grid Dynamics at the forefront of modern enterprise infrastructure. We have strengthened our relationship with all hyperscalers through targeted investments in Agentic platform capabilities, earning specialized badges and building new joint solutions. Notably, in December, we signed a strategic collaboration agreement with AWS for data foundations in AI. Our premier partnership enables Grid Dynamics to receive funding from AWS to support AI enterprise initiatives. Our collaboration with NVIDIA on Omniverse based solutions is enabling us to deliver high fidelity industrial-grade digital twins that are essential for our physical AI expansion. In the fourth quarter, our vertical execution is best illustrated by several notable projects. Fintech transformation. We partner with a global financial leader to launch a proprietary generative AI agent supporting more than 10,000 financial advisers. This interactive experience replaces static policies with personalized guidance as is projected to increase productivity by about 20%. TMT Analytics. For a global technology enterprise, we modernized a legacy mobility application into a scalable analytics platform providing centralized visibility into global travel activity and spend. The platform has materially improved usability, increased feature velocity and reduced stakeholder coordination overhead. Dispute management. We developed a comprehensive dispute management solution for a leading financial services firm. By integrating Generative AI, the platform streamlines charge-back challenges, increasing win rate and reducing operational overhead. Financial governance. At a leading U.S.-based global bank, we're building a global agent runtime and AI orchestration platform, enabling business-focused agent to automate complex workforce starting with successful automation in internal compliance. We also deployed the AI-driven executive insight capabilities that provide leadership with consolidated global operational summaries. With that, let me turn the call over to Eugene Steinberg, our CTO, who will talk about our AI capabilities, how we are upskilling our engineering workforce and how we're using it to improve our internal operations. Eugene? Eugene Steinberg: Thank you, Leonard. Good afternoon, everyone. We are actively executing across three horizons. AI first engineering, Agentic Enterprise and Physical AI. In Q4, we shipped across all three, and these foundations position our AI business for 2026. Horizon 1, AI first engineering. Horizon 1 is the core of our current business. The engineering work that source the majority of our clients today. We are accelerating productivity across the organization through AI first native tooling and investing decisively in the continuous upskilling of our engineers. Enterprises are no longer debating the merits of adopting AI for software development. But rather how to do it without losing control of quality, security and institutional knowledge. It is in this context that we launched Rosetta, our AI native software development framework. Rosetta is part of our GAIN initiative and provides a governance layer for AI coding agents. Rosetta automates contract setup, enforces consistent workflows and manage his engineering knowledge at both the engineering and organization level. It operates within the client's own security perimeter and works across all major coding platforms. Developers get consistent project aware agent behavior from day 1. Engineering colleagues get centralized governance and visibility across the entire agent footprint. With Rosetta clients benefit from decades of institutional expertise seamlessly embedded in the way engineering workflows. We have several engagements underway and a scaling gain as the standard delivery backbone across all engagements in 2026. Grid Dynamics separations is client 0 for our AI solutions. Cerebra, our internally developed Agentic platform launched in Q3. It is built on Google AI stack, Gemini enterprise, ADK and A2A. Within Grid Dynamics, Cerebra is being used by our sales recruitment and knowledge management organizations, automating proposal development, technical prescreening and research at scale. Clients adopt faster than the platform has already been stress tested in production. As AI revenues ramp, we expect this model to drive both revenue growth and margin expansion. Horizon 2, Agentic Enterprise. Horizon 2 is where we are expanding and investing by leveraging our engineering debt to enterprise transformation at scale. The Agentic era is reshaping the economics of software delivery. AI native development tools are allowing the overall cost of building and deploying software, placing pressure on systems integration and configuration programs. At the same time, client expectations are rising. Programs previously too expensive or too slow to justify are becoming feasible. Enterprises are thinking bigger and moving faster taken on significantly larger mandates. That means moving away from SI-heavy engagements and toward a regional in-house engineering. That rotation plays directly to our strength. In the past decade, enterprises have increasingly became dependent on system integration, assembling Software-as-a-Service ecosystems, configuring cloud services, and stitching together vendors products. In the Agentic era, this changes fundamentally. Production deployments require bespoke engineering. Purpose-built agent workflows the main specific data and knowledge layers, distributed system and platform engineering. Grid Dynamics is well known for its engineering capabilities and proprietary IP at leading global enterprises. The agentic era rewards builders, and that is where we have invested. Our go-to-market runs two tracks. For Tier 1 enterprise clients, we architect and co-develop custom verticalized AI platforms built around the specific architecture, governance and compliance requirements. For Tier 2 mid-market clients, we integrate hyperscaler platforms with Grid Dynamics verticalized components on top, optimizing time to value and overall cost. Both tracks are expanding. We have also established a partnership with Temporal through the JumpStart program. This initiative positions us as a technology consultants for Temporal's customers. embedded in crucial architectural decisions from the outset. This partnership has generated multiple new engagements across financial services, enterprise software and industrial sectors. The proof points are concrete. A notable example is our work with one of the world's largest payment networks, where we are leading a broad Agentic AI program. We have developed a recurring service across 17 applications, a universal enterprise assistant with agent to agent communication and centralized governance and evaluation. Our efforts have led to an approximate 40% reduction in build time and 60% reduction in ongoing maintenance efforts. This platform deployed across 30,000 employees. The impact has been measurable. Specialized groups are seeing up to 15% productivity improvement, driven by faster information access and reduced manual research. As a leading global CPG company, we developed over 20 enterprise-ready AI agents through a unified agent factory platform. This delivered 15% productivity improvement across enterprise users. These deployments confirm a pattern we see consistently. Once AI capabilities move fully in production, clients realize approximately 15% productivity gains, tangible operating leverage at enterprise scale. We are leveraging our deep domain expertise to build vertical AI platforms, co-defining patterns in the structured productized offerings. Our initial solutions have real traction and are generating revenue with enterprise clients. MXP, our merchandising and product discovery platform illustrates its progression most clearly. It began as search engineering expertise, evolved into reusable accelerator. And in 2025, gross intel license revenue with a growing customer base across North America, Europe and Latin America. Its deployment for a leading European luxury retailer delivered a 7% total revenue uplift, and a 50% reduction in merchandising workload, while handling a 25% year-over-year surge in peak holiday traffic without disruption. XTDB is our platform designed for the financial industry, a bitemporal database built specifically for regulated financial environments. As financial institutions deploy AI agents, the regulators require full point and time reconstruction of any decision. Banks deploying agents for trade processing, compliance or investigations, need systems that can capture precise information related to trading activities. XTDB addresses that with full auditability across both business time and system time. The platform has been adopted in several global banks and in Q4, we shipped a significant new version extending its capabilities for multi-entity data mesh environments. It is this kind of deep infrastructure IP that differentiates our financial services practice from generic AI Consulting. Our engineers no longer arrive as individual contributors. The if backed by codified IP, Rosetta, MXP, XTDB and documented patterns from dozens of deployments. The client gets immediate expert deployment, not a learning curve. Horizon 3, Physical AI. Horizon 3 is our forward-looking investment in Physical AI, bringing the same AI engineering depth they apply in software to industrial and manufacturing environment. Our flagship platform here is Incarna, a software platform that supports the robotics industry. Incarna dramatically compresses with time required to program robots for complex manufacturing tasks, enabling robots to handle high variability physically demanding work that conventional automation cannot address. In partnership with Smart Ray, a leader in industrial 3D vision sensors we developed and deployed the Incarna AI model for robotic weld inspection. Weld inspection is demanding. Commodity requirements are stringent and variability in materials and geometry makes rule-based automation unreliable. The result, high inspection consistency, improved quality assurance and scalable automation in environments where precision is nonnegotiable. As a Fortune 10 manufacturer, we automated the conversion of CAD files to CNC machine instructions, a workflow that previously took 5 days now completes in hours, greater than 90% cycle time reduction, validated in production. We will have more to share as this program scale. As we look ahead, we will build on our foundations. We are rapidly and deliberately scaling towards a multi-industry AI-led business transformation. GAIN and Rosetta codify our engineering judgment, so its scales beyond individual engineers. MXP shows that our IP can generate revenue as software, not just as a service. XTDB gives us a technically differentiated entry into finance. Incarna, opens doors in manufacturing. And our Agentic practice is shifting from the bespoke delivery to structured vertical offerings where our accelerators compress time to value and our contracts increasingly capture outcomes. We are moving from labor scale growth to IP scale growth, and that transition defines our 2026 execution. With that, let me turn over to Anil. Anil Doradla: Thanks, Eugene. Good afternoon, everyone. We recorded fourth quarter revenues of $106.2 million, slightly above the midpoint of our guidance range of $105 million to $107 million. This represents a sequential growth rate of 1.9% and a year-over-year growth rate of 5.9%. There were 30 bps and 22 bps of FX headwinds on a sequential and year-over-year basis, respectively. Non-GAAP EBITDA was $13.7 million or 12.9% of revenue and was at the higher end of our $13 million to $14 million guidance range. In the fourth quarter, there was a negative impact from FX fluctuations on a year-over-year basis. We are exposed to a currency basket across Europe, Latin America and India. While we utilize both natural hedges and an active hedging program, the net year-over-year impact on our EBITDA was a headwind of approximately $1.5 million. On a sequential basis, there was a tailwind of approximately $160,000 to our EBITDA as the dollar strengthened relative to the British pound and euro. Looking at performance of our verticals. Retail remained our largest vertical, contributing 28.7% of total revenues in the fourth quarter of 2025. While revenues in this vertical increased by 5.3% on a sequential basis, there was a decline of 6.9% on a year-over-year basis. The sequential increase was broad-based across our retail customer base. TMT, our second largest vertical accounted for 28.3% of total revenues for the quarter. The vertical delivered strong results with growth of 5.3% on a sequential basis and a 27.5% increase on a year-over-year basis. The strong year-over-year growth was primarily driven by our top 2 technology customers. The finance vertical accounted for 22.9% of total revenues in the quarter, growing 5% on a year-over-year basis. This growth was primarily driven by increased demand from our large fintech customer and large banks. Turning to the remaining verticals. CPG and manufacturing represented 10.2% of our fourth quarter revenues. This vertical remains stable in absolute dollars sequentially but declined 4.3% on a year-over-year basis. The year-over-year decline was largely due to a decline at some of our automotive customers. And this was partially offset by our CPG customers. The other vertical contributed 7.3% of fourth quarter revenues. This remained flat on a dollar basis relative to the third quarter and grew by 8.4% on a year-over-year basis. The year-over-year growth was primarily from our meal kit client. And finally, health care and pharma contributed to 2.6% of our fourth quarter revenues. We ended the fourth quarter with a total headcount of 4,961 slightly down from 4,971 employees in the third quarter of 2025 and that from 4,730 in the fourth quarter of 2024. Although our total headcount was down on a sequential basis, our billable headcount increased meaningfully. We continue to rationalize our overall headcount as we align our skill sets and geographic mix. At the end of the fourth quarter of 2025, our total U.S. headcount was 357 or 7.2% of the company's total headcount versus 7.4% in the year ago quarter. Our non-U.S. headcount located in Europe, Americas and India was 4,604 or 92.8%. In the fourth quarter, revenues from our top 5 and top 10 customers were 39.7% and 58.5%, respectively, versus 35.6% and 55.8% in the same period a year ago, respectively. Moving to the income statement. Our GAAP gross profit during the quarter was $36.1 million or 34% compared to $34.7 million or 33.3% in the third quarter of 2025 and $37 million or 36.9% in the year ago quarter. On a non-GAAP basis, our gross profit was $36.6 million or 34.5% compared to $35.2 million or 33.8% in the third quarter of 2025 and $37.6 million or 37.5% in the year-ago quarter. On a year-over-year basis, the decline in gross margin was from a combination of FX headwinds and greater mix of U.K.-based headcount from our acquisition of JUXT. Non-GAAP EBITDA during the fourth quarter that excluded interest income expense, provision for income taxes, depreciation and amortization, stock-based compensation, restructuring, expenses related to geographic reorganization and transaction and other related costs was $13.7 million or 12.9% of revenues versus $12.7 million or 12.2% of revenues in the third quarter of 2025 and was down from $15.6 million or 15.6% in the year ago quarter. The sequential increase in EBITDA margin was from a combination of higher gross margins and FX tailwinds. On a year-over-year basis, the decline in EBITDA margins was largely due to a combination of lower gross margins and FX headwinds. Our GAAP net income in the fourth quarter was $0.3 million or breakeven per share based on a diluted share count of 86.4 million shares compared to the third quarter net income of $1.2 million or $0.01 per share based on a diluted share count of 85.8 million and net income of $4.5 million or $0.05 per share based on 83.8 million diluted shares in the year ago quarter. On a non-GAAP basis, in the fourth quarter, our non-GAAP net income was $8.7 million or $0.10 per share based on 86.4 million diluted shares compared to the third quarter non-GAAP net income of $8.2 million or $0.09 per share based on 85.8 million diluted shares and $10.3 million or $0.12 per share based on 83.8 million diluted shares in the year ago quarter. On December 31, 2025, our cash and cash equivalents totaled $341.1 million, up from $338.6 million on September 30, 2025. M&A continues to take priority in our capital allocation strategy. We're committed to augmenting our organic business with acquisitions that strategically enhanced our capabilities, geographic presence and industry verticals. Coming to the first quarter guidance, we expect revenues to be in the range of $103 million to $104 million. We expect our first quarter non-GAAP EBITDA to be in the range of $12 million to $13 million. For the first quarter of 2026, we expect our basic share count to be in the range of 85 million to 86 million and our diluted share count to be in the range of 87 million to 88 million. For the full year 2026, we are bullish in our outlook. We expect revenues to be in the range of $435 million to $465 million. That concludes my prepared remarks. We're now ready to take questions. Cary Savas: [Operator Instructions] The first question comes from Maggie Nolan of William Blair. Margaret Nolan: So you've had impressive growth in AI revenue and you're above $90 million for 2025. So I'm wondering if projects are moving into production at scale and then what is the nature of these projects? And how is the demand among customers? Leonard Livschitz: Thank you, Maggie. Thank you for kind words. Look, we extensively discussed in various forms what AI represents to Grid Dynamics and what is the opportunity for us going forward. Fundamentally, what makes a big difference for Grid Dynamics for 2026 on is that we're not only moving from the small development project to full scale implementation, but also we introduced our platforms, which has been noted during this particular time. And that kind of scales the confidence with the clients to give us more of the solutions where we represent our engineers combined with their own tools as a new way to building the solution faster and more affordable for the clients. Perhaps some words from Eugene. Eugene Steinberg: Yes. It's a great question. And there are two main zones, which are most exciting for me. One is AI-powered customer experience. The reason behind that is that this is the zone where the impact from source personalization, Agentic commerce is very obvious and memorable by our clients. And this is where clients see ROIs in weeks, not in months or years. And that allows us to expand those accounts very, very quickly based on this successes which we see in this domain. Second is enterprise AI platforms, not as visible as front end work or AI-powered customer experiences. But this is a foundational layer, which helps our companies to organize their data, build AI agent factories on top of this data and then go into developing business agents on top of those platforms. And what we see in our projects is as those platforms mature and go to production clients start to scale very, very quickly building AI agents, and we are helping them to develop the AI agents. And we are going from 1 to 10 to 20 of those specific customer facing, which will collect agents very, very quickly. So this expands our work and allows us to move very, very quickly. Margaret Nolan: Great. And then anything else you would comment on as you move into 2026, kind of how you expect the trend to evolve any way that you can maybe tie that back to the numbers or maybe some of your margin expansion goals you've mentioned. Leonard Livschitz: Yes. So we bombarded you, Maggie, with a bunch of names during this press release, right? So we were talking about merchandise experienced platform, we were talking about bitemporal database, we're talking about Incarna robotics AI platform, subsequent growth of the Rosetta, it's automation within GAIN model, the platform against Cerebra, which picks up our internal process, bringing Grid Dynamics as a client 0 for implementations. What is it all about? Those are not just buzzwords. It's just a way to understand for our clients that there may be a little bit more scarcity in the market of clarity what to do. But when you work with Grid Dynamics, we represent basically three key functions. First, we are domain consultants. So we understand what the customer problems are, and we are tailoring the solutions with that as a important contribution for Grid Dynamics as a mix between Grid Dynamics trained engineers, the standard tools and platform from the market and customized tools, which will bring based on our platform and development. The combination of three leads to a few things. First of all, it's a shorter time to implementation for our clients. And second, it moves away from our traditional talent material offering where we're putting together contribution based on the planned outcomes, which ultimately leads not only for them to gain momentum and have a better financial return but a high value add for the margin expansion for Grid Dynamics. Those are three elements. Cary Savas: The next question comes from Bryan Bergin of TD Cowen. Bryan Bergin: The first one I'll just get a high level. So just with everything that's going on in the market, services, software-based pressure, the whole kind of SaaS apocalypse fears that are out there. I want to kind of sanity check it with you first. Based on what you're seeing in your client conversations and what they're doing in contracting, what's your perspective as it relates to enterprises increasing their custom build preference versus buy the platform solutions. And if your clients are demonstrating a rising preference for custom builds, what are like the implications for your dynamics? Leonard Livschitz: Very good. So I will start, and then I'll have Vasily to give you a few examples because there's nothing better than to show what exactly happened. So from the high-level perspective, obviously, we recognize that there is a very strong expectation that the cost of implementation will go down. Then people start throwing some comments. There is a decline of SaaS software companies or offerings. There is a decline of IT services needs because everything is going to magically appear. Well, all these statements are not false. I mean there are more and more tools available in the market. But what's the custom part is, is that creation of the tools and solutions, having our internal platforms makes Grid Dynamics much more efficient to really customize solutions for the individual clients and tests. And the reason we're doing this because it's very nice from the high-level perspective to look at these all wonderful models, but it's experimentation going to production is quite pricy. And many of the clients are hesitant to throw a lot of money without a clear outcome. And that's where Grid Dynamics comes in with the combination of people, processes and tools. And that's how we believe that even though there is an overall look that overreaching look that there are potential some decline of the needs, the company will agree dynamic needs is actually growing, and I'll have Vasily to bring some examples. Vasily Sizov: Sure. Thank you for the question, Bryan. You are right on point, we definitely see increased demand of our custom-built software. And if in the past, the customers were looking into improvements or enhancing their core platforms, core applications right now, given the overall kind of cost of development is getting reduced by utilizing AI native environment and SDLC. Companies like Grid Dynamics definitely benefit from this trend by getting involved into implementations and rebuilding of the typically SaaS, I would say, applications as a custom built and more custom-tailored solutions for end customers, things like HR systems or travel dashboards and et cetera, which were traditionally outside the investment areas for the companies -- for the clients. Bryan Bergin: Okay. Okay. That's helpful. And then a follow-up. I'll kind of -- I want to dig in on the growth outlook for the year and unpack it a bit. Anil, you made a comment, you're bullish in your outlook. Just to clarify that comment, are you assuming anything meaningfully changes in the underlying demand backdrop to hit any of these targets? And help us just kind of bridge the 1Q performance here. Is there a billed day dynamics or anything seasonal in the first quarter as you think about that first quarter implied growth rate relative to what you're talking about for the year? Anil Doradla: Yes, Bryan. Q1 is a very simple story here. It's the seasonality and also in our time and materials business, T&M, there was fewer working days relative to Q4. So that's -- it's very simple. Now you're absolutely right. We are positive on how we're looking at the full year. There are two components of it. One is that some of the recent trends in our pipeline growth. Second thing is all the gentlemen that have spoken about on our AI trends, right? I'll let them build up on that. But where we are today, how we look at the year we feel more positive. And the final thing is that if you look at the range I provided, it's a little wider, right, relative to last year, we made it a little wider because we understand that during the course of the year, there's some positives, there's not so positive. So we kept it a healthy range. Leonard Livschitz: So let me be more specific, right? So I think Anil answered a very simple question about Q1, and it's a very substantial reduction of the working days. So it's not something like normally happens traditionally here. But there is a bullish outlook for very simple reason. The pace of adoption of AI solutions and AI applications by Grid Dynamics customers, clearly outpaces the decline of maybe a little bit more hedged retail business. It happens simultaneously and this is no secret because if you look at the rate of growth of our client verticals, you can see to notable changes. It's a tack and more important, the financial vertical, which goes specifically into the fintech and capital markets, which is quite new and growing for us. So when we look at the total equation, the rate of growth and AI-related businesses. The contribution from our partnerships. Our improved performance in terms of the new type of agreements, fixed bids, performance base, other elements. And on the back side, some of the depreciation of more of traditional paged business, we've been there for years, we came up with bullish but conservative approach. And what's the conservative part of that? I think it's very important to understand. We've learned a little bit our lesson from 2025, right? I mean we actually believe we're going to be better than midpoint. But what it means for us? It means for us that in addition to all the facts, we need to understand the revenue dollars which are coming with the customers. And as the business grows, as you know very well, we also deploy our engineering talent across the globe, follow-the-sun strategy. And different regions have different price points and different elements of the business. So as we continue to scale our business, we want to make sure that early on, especially when we're introducing this a little bit variability of Q1, we do not get you guys question, are we safe or not? We are very safe. Cary Savas: The next question comes from Puneet Jain of JPMorgan. Puneet Jain: So given like the recent news flow around Entropic Claude, are you seeing like any changes in your client behavior, increased urgency among your clients to embrace AI? And second, I know like you talked about the GAIN framework. I know it's built on proprietary as well as third-party tools. So to -- like all these developments like the evolution of AI ecosystem. Does that raise the bar on what GAIN can do for your clients in terms of productivity savings? Leonard Livschitz: Very good. Let's start with, again, Vasily as the last time to give a little bit more of the multilayer approach. And then from the technology perspective, I think Eugene can comment as well. So, Vasily, please. Vasily Sizov: Yes. Maybe let me start with GAIN framework. So as you know, we announced it in the middle of 2025. And during the 6 months of 2025, we were rapidly developing this framework and running pilot implementations with our customers. As you heard in the prepared remarks, we implemented a series of software assets, which became now the part of this platform, which we are offering to our customers. So I would say in 2026, we see this will be the year of rapid adoption of the GAIN platform across our customers. And in fact, it became the de facto standard approach, which we use for the outcome and output-based engagements. Essentially decoupling billable headcount from the revenue growth. So we definitely see performance improvements. We transfer some of that to our customers, and some of that contributes to our improved profitability. Leonard Livschitz: Eugene? Eugene Steinberg: Yes. And when it comes to the actual improvements which we are seeing from Agentic coding systems and Claude and of course Entropic kind of others, of course, many of our customers are embracing it, and we are bringing those capabilities with them together with Rosetta, which is a layer on top of if. They are not competing with those Agentic Assistance on the foundation layer, but we are making them better, stronger and embed our own institutional knowledge in those systems with every engagement. And of course, impact of that very much depends on the actual nature of the project. So if you are going into greenfield POC kind of solution, your gains are immense, like 10, 15x compared to traditional ways because you are creating in an unconstrained environment doing whatever you want. If you are working in a brownfield project with still well-defined goals, technology modernization and migration, you still have a very strong improvement because the agents are tools. They are doing things much faster for you. And you see maybe 2, 3x improvements in the performance of the teams. However, when you are coming to the engagement and environments where the majority of the complexity is in the communication or orchestration. This has been -- it's much more challenging to realize the improvements from pure coding and creation of artifact. So it all varies very much depending on the portfolio of your solutions. Yury Gryzlov: Just quickly to add to what Eugene and Vasily mentioned, I think it's very important. We mentioned several times in our prepared remarks as well. I think this transition from T&M based approach to outcome-based and output based. That's -- it's very important to emphasize because this is definitely real. We see that a lot. It happened during the 2025 in transition to 2026. And we see that this year, we will see much more of those -- many more of those engagements going forward. And that's why, as Vasily and Eugene mentioned, our GAIN framework together with verticalized solutions and the platforms that we are leveraging that will be very, very important this year. Puneet Jain: Okay. Got it. And let me ask like follow-up to Bryan's question on the rest of the year beyond Q1. So based on our math, like it seems like the full year guidance at its midpoint implies like 5%, 5.5% sequential growth beyond Q1. So can you disaggregate that? Like what drives that growth like in terms of like whether it's like you talked about like earlier like the pipeline, billing days and all that. Can you talk about like what drives that 5%, 5.5% sequential growth beyond Q1 to get to the midpoint of full year numbers? Leonard Livschitz: Puneet, make a few comments and, of course, we'll have Anil to back it up with the numbers. As I mentioned to Bryan, we do very seriously to make sure that we are reasonable but conservative in our forecasting. Okay. The pipeline is very robust. And the pipeline which we have right now, not only robust, but it shows a great opportunity with AI-related products and projects across multiple verticals and multiple clients. There is always a seasonality, right? So Q2 is better than Q1, and Q3 is better Q2 and then Q4 may have some additional flows like what happens in Q4 last year and all the stuff. But we kind of disaggregate the seasonality and behavior from adoption of AI. And we look at our pipeline as it stands today. So there is a very little assumption, Puneet, that there is going to be some enormous number of white swans or some Hail Mary or something extraordinarily great happens during the course of the year. Obviously, not everything on our books today, but majority is and we have a very nice number of our own tools, accelerators and platforms, which are going to continue to roll out during the year. So to summarize it, we are not hoping for the numbers. We have a strong pipeline to AI-related projects, particularly in the technology and fintech space. There is a growth in manufacturing, which is cutting quite robustly as well. And we see that adoption, as again, Bryan asked before, of the custom-developed solution on a combination of the deployed engineers and train program and our internal tooling brings us much higher acceleration. So the same people, the same trade capacity of the people can have several terms on the execution during the year. That's kind of the high level, but very clear understanding what does that pipeline mean? But maybe Anil will back it up with some numbers. Anil Doradla: Yes. Look, I think the key thing is what Leonard said, right, we look at the revenues from a bottoms-up and a top down. And what we have as we go from '25 to '26 transition is this AI factor. And when we looked at that AI revenue kind of bottoms up, top down and look at the trajectory, I wish I could give a number, but it's a very healthy number as we go into '26. That is our foundation for our modeling in '26. Now when you look at the variations we said, right, we have this wider variation this year. We understand in the course of the year, things can happen. So as you go from the high end to the low end, we bake in some level of conservativeness with some of our clients, especially on the larger side, depending upon how we look at the business today. But again, this is top-down, bottoms-up with some conservativeness, but in '26, the fundamental difference is that we've got this AI trajectory and look at -- as Leonard pointed out, look at the fastest-growing segments, TMT and financial verticals. That's the key. Leonard Livschitz: So just again, to put another number, Puneet, because I think it's important. I'll give you a little bit of a prequel, right? So mathematically, it does look a little bit aggressive. But realistically, it's a very unusual quarter to report, right? It's the year-end. So we are in March. So you can suspect that we're probably know numbers in Q1 a little bit better than typically when we present our earnings data a few -- 2, 3 weeks earlier. So what happened is we see a healthy March. And the impact of this seasonality and less of the working days kind of behind us. So the rate of growth, which you see is based on the lower performance of the first, let's say, 2 months of the quarter. As I was joking, would be lovely to have a Q2 4 months then you can throw all these stuff in the first 2 months of the year, but really, really healthy quarter. So the rate of growth from March on is more, I would say, traditional, which makes us more comfortable with providing the guidance like we are. Cary Savas: The next questions come from Mayank Tandon of Needham. Mayank Tandon: Great. Anil, you gave guidance on EBITDA for the first quarter, but not for the full year. So I just wanted to check with you, should we expect the same sort of pattern as you mentioned on revenue growth in terms of margin expansion? And do you have any sort of framework on how to think about what the levers are for margins going forward? Anil Doradla: Yes. Thanks for that question, Mayank. So as you know, last quarter, we talked about margin expansion in 2026, right? Q4 to Q4, we talked about 300 bps. Within the company, there's several efforts right from internal productivity, right from geographic optimization, where we're working very diligently on our margin expansion. And that's largely driven by the change of our workforce over the last 3, 4 years, which you all know about. Along with that, we have investments too. Eugene is talking -- Eugene is doing some amazing work in a number of platforms he's rolling out on AI. So it's the balance between the two. So if you look at our trajectory, margin expansion, margin continuation is what we are modeling. As the revenue picks up, obviously, you have a little bit more positive leverage there on the EBITDA margins. But the cadence at which these things will play out, you will see in the course of the year, I just don't want to give that level of specificity at this point. But the trajectory should be moving upwards and in line with what we had promised last quarter. Leonard Livschitz: And of course, it's not constant currency situation. So you may want to comment. Anil Doradla: So the other important thing everyone should understand is that in '25 versus '24, there was a big headwind on FX. So if I look at the cost and revenue on a net basis, that was close to $8 million overall for me, year-to-year. If I look at the last day of '24 and compare it with what happened on '25. So we're working through that. That's another thing that we're working through. Leonard Livschitz: So to summarize it, I gave you guidance, direction of 3% improvement plus. It still stays. I hope we can do better than that. There's a lot of activities happening. But we're not going to pull the plug and show artificially some numbers related to less investment into Agentic AI or the Physical Robotics AI. These elements are vital for our business, but operational efficiency, the contract efficiency, which we discussed with AI and also distributing workforce more efficiently around the globe. All the three elements. But the driver is fundamentally AI efficiency. That's really the #1 of 3. And I think, Yury wanted to... Yury Gryzlov: Yes, I just wanted to comment on the same -- pretty much along the same lines as I mentioned, right, about fixed-price engagements, right, and outcome-based engagements. That's obviously come typically, with a higher margin. So that's why it's also -- it's part of this program as well. And this year, again, it will be quite substantial. Mayank Tandon: Got it. And then just very quickly, I wanted to ask about your comments around M&A, Anil. You mentioned that obviously, you have a really good balance sheet and you have the work just to go out and do acquisitions. Are you finding that with the recent market volatility, multiples have come down? Are expectations a little bit more realistic on some of the potential targets that you might have had in mind? Anil Doradla: Yes. Somehow the private companies, they received the memo a little later than the public companies. So the memo they finally got, but it took a little time. We are having a good pipeline. Look, we've said that, but I think the number of exclusivities that we have today is as high as it's ever been. It's not done until it's done. When it comes to valuation, things have come in, they're better than what it was 6 months or 10 months ago. But it's still back and forth. Again, Mayank, the most important thing, strategic focus, strategic fit to what we're doing, especially in the AI world that we're entering. That's our bar standards are very high, and we're just not going to buy because we have to buy. We're going to do it if it's strategically fitting. Leonard Livschitz: Yes. I think what Anil didn't tell you it is very obvious we're not buying revenue. This is very, very clear. The relationship we got into the exclusivity with several of the targets, they are very specific in their fashion to address two things. One is the technology components, which we need to add. And the second one is the knowledge of the verticals we would like to be strong with that. So it's not about one size fits all. It's not about just going -- swallowing a big company and report a great number, because usually, it doesn't happen like this. But it's a very specific technology plus verticals. And it seems as the message you mentioned coming from somebody who tells them, okay, now has attained their expectations, I think we're going to be in a better shape because last year, it wasn't satisfactory. Cary Savas: The next question comes from Logan Schuh of Jefferies. Logan Schuh: My question revolves around your discussion of kind of moving from labor scaled IP to -- or labor scaled growth to IP scaled growth and kind of the shift from time and materials to outcome based. I'm just wondering what kind of implications that have on your plans for hiring in 2026 and beyond? And then also, where do you think the business model evolves to over the longer term? I mean we have some competitors going all in on kind of subscription-based Agentic delivery, some different competitors saying, no, we don't see it fundamentally changing. I was just wondering where you guys kind of landed on that spectrum? Leonard Livschitz: Okay. So Logan, I will just say a couple of words, but I think this is a good question for a round table. It's almost like I feel like as a fire chat, not the earnings call because there are a lot of elements, which is a very loaded question because you're right, we're kind of the last of the group to kind of present our earnings results and you have -- you're full from everyone telling you something. So it will not be very difficult to tell you what we think. So look, the model has changed already. There is no way back and people who will consistently say that, A, nothing changed, or we're going to continue to build the large size of team and more people you have as merrier, will probably face some challenges, especially on the large size. Now I've been saying that for a long time, and it actually works for Grid Dynamics benefit. We're not only a technology-driven company and an innovation-driven company, we're a nimble company. Our size is fairly optimized. Obviously, there is a place for growth. But we're not having any managed services. We're not having some very low-end contracts. And some contracts which were not as progressive or technology contribution, migration all this fashion, they are falling off. And that's why you see this kind of changing of the orders in both ways. But where we see our model, and I hope Vasily will give you again a few examples, is that it's going to be a combination. So it's not the perishable goods of quality engineering. It's a combination of capabilities, trained people and the solutions we have in advance of customer needs, understanding their marketability. We continue to play our role with the partnerships. We understand deeply several key areas, and it can be expert in everything. You try to be expert in everything then you have a very kind of a shallow knowledge and you're going to struggle because you have to fill them all. The bots need to be a bit concentrated even though diversified. So where I see it's kind of a -- it's a middle ground. One thing which I give you, again, as my input may be a little bit different from others, but it kind of resonates with our clients very well. The definition of the senior engineer has changed. So traditionally, the word senior engineer means the person with many years of experience, they do less here. But today, the definition of the senior engineer means relevancy of the technology competence and a foundational acumen around their own DNA being the moderate age of AI technology. So the age limit changes, but what really changes is the depth of the knowledge of people. So the focus of Grid Dynamics will continue to be supporting the intelligence of internship programs. Grid Dynamics University Training, Grid Labs Training, combination that these fellows also contribute to building our tools, so then they can become much more productive with the clients. So summarizing my part is that somewhere in the middle ground, we're bringing the new era of the senior engineering the talent, combined with a tooling and a modern world of solving customer problems faster, more efficient and combining three elements: people, industry tools and our own platforms. And with that, Vasily, maybe you'll add some comments. Vasily Sizov: Yes, just a few comments. Imagine if the customer has a project, let's say, which is provided as a bid for fixed price. And you come and bid for that, let's say, with the pricing 25% to 35% lower than otherwise it would be delivered with a traditional workforce in the T&M manner, let's say, we're like just regular fixed price for the regular engineers. But actually, you have the productivity of 35% to 45% higher. So that's the clear path for improvement of the profitability, but how do you do that? You implement certain SDLC new processes on how you develop the software. You deploy a special team, which is very well trained, you introduce certain artifacts and assets, which would understand or would fit their vertical we are working in, also understand the coding policies, all the existing code base, et cetera, which would help developers to work to deliver higher productivity. And that's essentially like on the high-level GAIN model and what the path Grid Dynamics is going with. Essentially verticalized solution, high-performance teams, very well-educated engineers on the modern technology and delivering outcome and output based engagement. Logan Schuh: Great. That was very clear. And then I wanted to ask about the partnerships. I know they're -- 19% of revenues were partner influenced. I just wanted to kind of get a sense of how those partnerships have evolved over time, maybe how you see them evolving in the future? Leonard Livschitz: Okay. So the person who is responsible for partnerships, we will bring him in next time, it's a Rahul Bindlish and he will say we're looking okay. Who is going to say on our partnerships, right? Thank you for asking this question last because it's actually a very wide part of our growth. When a few years ago, we started talking about one partnership. We're basically exploring what it means to read the next. And starting with Google, it was great. I mean we have a great experience. We have a great partnership. We have a great positioning of understanding of the modern tools, collaboration. We have matured significantly ever since. So when we talk about the influence revenue, we're talking about our positioning where we not only contribute to the value of the clients which utilize solutions from our clients and solutions talk about cloud solutions or their modern, large language models or other features. But the elements associated how we are adding our layers, our technology know-how, our technology platforms on the top of their offering, which helps them to penetrate customers faster and helps us to understand earlier what their growth is going to be. Saying that, we also started to contribute more efficiently to their own developments, on their own products, which is very critical because that's how it drives our business, not only having our partners our vehicle for growth within industry, but is the growing clients themselves. So from there, we pretty much cover all the hyperscalers. And that's great because it means the customer has a value with Grid Dynamics to get a bespoke solution for the best fit for everyone. And this is good because ultimately, not every offering fits all, and we are very comfortable to be really good friends with the clients and fair partners with our major hyperscalers. On the top of it, we're adding more meaningful partnerships and perhaps Eugene can make one of the notable ones because I think it usually gives us a little bit more advantage to fill the gaps on the fast-growing AI implementation where the big guys allow a bit more flexibility for some specialized programs to step in. And since it's going to be probably the last time I speak where Eugene will wrap it up for you, I just want to say one thing which is important, I think, for everyone. It's going to be a good year. We believe in Grid Dynamics. We are having a strong and growing team and I really count on you guys believe in us as we do it ourselves. So thank you with that, and Eugene, please wrap it up. Eugene Steinberg: Yes. Thank you, and this is a great question. And indeed, we -- as Leonard said, we are helping many of our partners to build the value-add components and penetrate new customers and new industries. One notable example is, for example, our partnership with Temporal, which is our workflow management system at its core, very robust, very scalable and very powerful. And we apply this system at scale while building enterprise agentic AI platforms, which opened quite a lot of interesting opportunities for Temporal to grow into this sector, and we help them to go into major accounts together. And now we enjoy -- it's a good partnership as well. Cary Savas: Thank you, Logan. Ladies and gentlemen, this concludes the Q&A session for today. I will now pass it over to Leonard for closing comments. Leonard Livschitz: This quarter, we demonstrated that AI first transformation is delivering real measurable value. We continue to upskill our talent and embed AI driven efficiencies through platforms. By running our AI first operational models, we are proving the same value proposition we advocate for our clients. We entered the next phase of our journey with a clear road map, a future approved workforce and a steadfast commitment to deliver long-term value for our shareholders. Thank you, and we look forward to updating you on our continuous progress.
Operator: Good morning, and welcome, everyone, to Granite Ridge Resources, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now turn the call over to James Masters, Vice President, Investor Relations. James Masters: Thank you, operator. Good morning, everyone. We appreciate your interest in Granite Ridge Resources, Inc. We will begin our call with comments from Tyler Parkinson, our President and Chief Executive Officer, who will review the quarter’s results and company strategy along with an overview of 2026 financial and operating guidance, and introduce our newly announced Chief Financial Officer, Kyle Kettler. He will then turn the call over to Kyle to review our financial results in greater detail. Tyler will then return to provide closing comments before we open the call for questions. Today’s conference call contains certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied. We ask that you review the cautionary statement in our earnings release. Granite Ridge Resources, Inc. disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on these statements. These and other risks are described in yesterday’s press release and our filings with the Securities and Exchange Commission. This call also includes references to certain non-GAAP financial measures. Information reconciling these measures to the most directly comparable GAAP measures is available in our earnings release on our website. Finally, this call is being recorded, and a replay will be available on our website following today’s call. With that, I will turn the call over to Tyler. Tyler Parkinson: Thank you, James, and good morning, everyone. We are proud to report results for our third full year as a public company. While much has changed since the company went public in 2022, our commitment to pursuing the highest risk-adjusted rate of return projects and creating durable shareholder value remains the same. It is that commitment that drove our evolution from a traditional nonoperated company pursuing a diversified investment strategy to a capital allocator focused on the Permian Basin, backing proven management teams to acquire and develop high-quality assets, a strategy shift that is the driving force behind our results. For the fourth quarter and full year 2025, average daily production increased 27% year over year to 35,100 barrels of oil equivalent per day. Total production for the year increased similarly to 32,000 barrels of oil equivalent per day. Adjusted EBITDAX for the quarter was approximately $70,000,000 and $315,000,000 for the full year. Capital expenditures for the fourth quarter were $127,500,000, split approximately half to development and half to inventory acquisitions. Our full year capital expenditures were $401,000,000. Finally, we maintained our quarterly dividend of $0.11 per share, which continues to demonstrate our commitment to return meaningful capital to shareholders. Since going public, we have significantly increased production while maintaining a conservative balance sheet. That capital-efficient growth is a result of consistently hitting our underwriting targets and increasing our capital allocation to operator projects thanks to a structural opportunity we identified in the market. Over the past decade, private capital retreated from the natural resources sector in a major way, fundamentally changing the landscape for energy development. Private equity fundraising declined dramatically, and the remaining capital focused on fewer teams chasing larger opportunities. This left a scarcity of capital and competition in the unit-by-unit operated segment. At the same time, proven operating teams who had built and sold successful companies increasingly lacked access to aligned capital partners. Granite Ridge Resources, Inc. recognized the opportunity and stepped into the gap by developing our operative partnership model. We first partnered with Admiral Permian Resources, a Midland-based operator with multiple successful exits and deep ties in the community. Central to our strategy was that the Delaware Basin, containing some of the highest quality shale resource in the world, is now controlled by a small number of large asset managers overseeing vast overlapping land positions. These land positions come with a variety of complications like lease expirations, fragmented working interest, and inventory management issues that can turn into high-return drilling opportunities for the right partner. Granite Ridge Resources, Inc., through Admiral, has become that partner. Over the past three years, we have executed over 50 transactions in the Permian Basin and have grown net production to nearly 10,000 BOE per day. Granite Ridge Resources, Inc. and Admiral have become preferred counterparties, and inventory additions continue to outpace our two-rig development program. We have also signed up three additional operator partners, each pursuing a different strategy in the Permian. We have been deliberate about limiting public disclosure of these partners to preserve their competitive positioning. Each team has successfully built and exited private equity-backed companies in the Permian and have significant personal capital invested alongside us, creating meaningful alignment. We look forward to sharing their progress and demonstrating the scalability of the operator partnership strategy. These partnerships greatly expanded our proprietary deal flow, which was already a competitive strength. Last year, we reviewed nearly 700 opportunities with a capture rate of just 15%. In 2025, we invested $122,000,000 across 107 transactions, securing approximately 20,500 net acres and 331 gross, or 77.2 net, locations, almost exclusively split between two buckets: nonoperated in the Utica Shale and operated partnerships in the Permian. Because we focus on short-cycle opportunities underwritten at strip pricing, our entry costs remain notably low relative to large-format transaction comps. In the Permian, our average acquisition cost per net location was just $1,400,000, far below recent public market transactions. This is a through-cycle strategy. We target 25% full-cycle returns at strip pricing, compound production and cash flow growth, and protect downside through disciplined leverage. Since our first operator partnership investment with At Home, we have fundamentally transformed our business from passive non-op to controlled capital with scale, growing production and high-quality near-term inventory, the results of which are becoming clear in our financials and outlook. Granite Ridge Resources, Inc. came public with cash on the balance sheet and no debt, but subscale. In the years since, we deliberately used leverage to achieve sufficient scale to support our next evolution: sustainable free cash flow. We are getting close. We see 2026 as a year of transition. Production growth is moderating, and development capital expenditures are aligning more closely with expected cash flow. At current strip prices, we expect to achieve free cash flow from operations in 2027. The midpoints of guidance for production and capital for this year are as follows. We expect annual production to average 35,000 barrels of oil equivalent per day, representing a 9% increase over 2025, and we expect our exit in 2026 to be essentially flat or modestly up from exit in 2025. We forecast oil volumes to be approximately 51% of total production. Development capital expenditures are projected at $315,000,000, with an additional $20,000,000 to $30,000,000 for acquisitions that we currently have in the pipeline. Approximately 90% of the capital invested in 2026 will be focused on operated projects. To summarize, we will spend roughly 15% less than last year to achieve production growth of approximately 9%. At current strip pricing, we anticipate a modest outspend in 2026. One of our expressed goals for the business is to generate alpha through the expansion of cash flow above maintenance capital. We currently estimate maintenance capital of approximately $250,000,000, which provides room for disciplined growth above that level. We have built our business for capital-efficient growth and free cash flow visibility at $60 oil. In response to the geopolitical shocks of the past week, we have added oil hedges and will continue to closely monitor the market. Recent events aside, we have been encouraged by the market resilience shown to date and remain bullish on the medium-term outlook. Should prices fall below $60 per barrel for a sustained period, we retain flexibility with our partners to adjust the development schedule and moderate capital deployment. Finally, let me expand on two recent announcements. Alongside Diamondback Energy, we partnered with Conduit Power to support the development of 200 megawatts of natural gas-fired power generation scheduled to come online fully in 2027. This transaction will effectively provide a synthetic hedge to our Permian gas realizations and is expected to enhance value by approximately $1 to $2 per Mcf on our gas exposed to this contract. We think similar opportunities may exist to further improve our gas realizations, and we will be diligent in pursuing them. Second, we recently announced the appointment of Kyle Kettler as our Chief Financial Officer after a six-month search. We went through a thoughtful, diligent process to find the right person that can help guide us through this next season of growth. Our business has matured, and the challenges and opportunities are much different than they were a few years ago. We were looking for an oil and gas professional with tremendous experience in capital markets, but also someone with creativity, a track record of creating value, somebody that could be a thought partner as we grow the business. We could not be happier that Kyle decided to join us. He brings significant capital markets expertise, an extensive network, and a keen strategic perspective that will be critical as we transition towards sustainable free cash flow, the next phase of Granite Ridge Resources, Inc.’s development. I am thrilled to welcome him to the team in his first earnings conference call. Kyle? Kyle Kettler: Thank you, Tyler, and good morning, everyone. It is my pleasure to join my first Granite Ridge Resources, Inc. earnings call, and I look forward to spending time with our analysts and investors in the months ahead. Granite Ridge Resources, Inc. is building something truly different, allocating capital and creating value from a platform that is unique in public and private E&P. I am excited to be here. Tyler covered the strategic highlights and 2026 outlook, so I will focus on the fourth quarter and full year financial results and our capital position. For the fourth quarter, oil and natural gas sales totaled $105,500,000. Revenue was essentially flat compared to the prior-year quarter because of commodity pricing; however, production grew an impressive 27% year over year. In the fourth quarter, our average realized oil price was $55.49 per barrel, compared to $65.53 per barrel in the same period last year. Natural gas averaged $1.81 per Mcf in the quarter, or 48% of Henry Hub. These weak realizations, particularly in the Permian Basin, had a meaningful impact on revenue and, by extension, EBITDAX and operating cash flow. As a result, adjusted EBITDAX for the quarter was $69,500,000, and operating cash flow totaled $64,500,000. For the full year, oil and natural gas sales totaled $450,300,000, with production increasing 28% year over year to 31,984 barrels equivalent per day. Full year adjusted EBITDAX was $315,000,000, and operating cash flow was $296,400,000. The takeaway is straightforward. Our asset base is scaling, oil remains roughly half of the mix, and volume growth is industry leading. Pricing, especially in the Permian Basin, was a swing factor in fourth quarter revenue and cash flow. That dynamic reinforces the importance of initiatives like the Conduit Power transaction Tyler mentioned, which we expect will help improve Permian gas realizations over time. On the cost side, lease operating expense in the fourth quarter was $7.72 per barrel equivalent. That is higher than last year, driven primarily by our increasing focus on the Permian Basin. Service costs, primarily saltwater disposal, increased, a dynamic that is structural in the basin. For the full year, LOE averaged $7.27 per barrel equivalent. Our 2026 guidance for LOE is $6.75 to $7.75 per barrel equivalent. Production and ad valorem taxes ran just under 6% of revenue in the quarter, and G&A was $8,000,000, including $1,400,000 of noncash stock compensation. On a full-year basis, cash G&A was what we expected. Annual guidance for these metrics is the same as last year: production taxes of 6% to 7% of revenue and cash G&A of $25,000,000 to $27,000,000. Turning to capital. This is where the strategic shift Tyler described really starts to show up in the numbers. We invested $127,500,000 in the fourth quarter, roughly half into development and half into acquisitions. For the full year, total capital was $401,000,000, including $279,000,000 of drilling and completion capital and $122,000,000 of property acquisitions. That acquisition capital was not large-format M&A. It was nimble, repetitive, unit-by-unit inventory capture, high-graded, and underwritten at strip. Our acquisition strategy gives us control over timing and capital intensity. We are not locking in multiyear development programs irrespective of commodity price. Operationally, we placed 67 gross wells online during the quarter and 322 gross wells for the year. That activity underpins the 28% annual production growth we delivered in 2025. Now onto the balance sheet. We exited the year with $350,000,000 outstanding on the 2029 senior notes and $50,000,000 drawn on the revolver. Liquidity totaled $339,500,000 at year end. Net debt to adjusted EBITDAX was 1.2 times, inside of our long-term range. Looking ahead to 2026, we are deliberately shifting gears. The plan is to grow production while reducing capital spending. 2026 production is expected to average 34,000 to 36,000 barrels equivalent per day, with oil just under half the mix. Development capital is projected at $300,000,000 to $330,000,000, and total capital is $320,000,000 to $360,000,000, including acquisitions. The key point is this: growth is moderating, capital intensity is coming down, and development spending is aligning much more closely with expected cash flow. That transition from scale-building to cash flow durability is the financial inflection point for the company. And through the transition, we are maintaining our $0.11 per share quarterly dividend. So, stepping back, the last three years have been about scaling the platform and capturing inventory, while 2026 is about capital efficiency and balance sheet discipline, positioning Granite Ridge Resources, Inc. to generate sustainable free cash flow. With that, I will turn it back to you, Tyler. Tyler Parkinson: Thanks, Kyle. Let me close with a few high-level points. First, 2025 was a transformational year for Granite Ridge Resources, Inc. We scaled the operator partnership model, expanded our controlled inventory in the Permian, and grew production 28% year over year. We leaned into an opportunity set that is structurally advantaged and difficult to replicate. Second, we are now shifting from outsized growth to durability. Our 2026 plan reflects a moderation in growth, tighter alignment of development capital with cash flow, and a clear path towards sustainable free cash flow generation in 2027. Third, our competitive advantage is our structure and business development engine. By underwriting unit by unit at strip pricing, partnering with proven operators, and maintaining capital flexibility, we consistently hit our investing underwriting targets, which has resulted in significant growth in production and asset value. Finally, we remain committed to balanced shareholder returns. The dividend remains a core component of our framework. As we cross into free cash flow, we will have increasing optionality around capital allocation. We appreciate the continued support of our shareholders, partners, and employees and look forward to the year ahead. Operator, we are ready to take questions. Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Phillips Johnston with Capital One. Your line is open. Please proceed with your question. Phillips Johnston: Hey, thanks for the time. First, a question for Kyle. Your fourth quarter realized oil and gas prices as a percentage of NYMEX were a little bit lower than usual in the fourth quarter, especially on the gas side. I think in your comments, you alluded to weak Waha prices as the driver on the gas side, so that makes sense and is not surprising. But is there anything to call out on the oil side? And as a follow-up, what should we be thinking about for our models in 2026 in terms of both oil and gas differentials? Kyle Kettler: Yes, thanks. Yes, the fourth quarter was weak on natural gas realization, and that was driven by Waha pricing. We have a substantial portion of natural gas coming from the Permian Basin, and that Waha basis widened out during the quarter on us. Going forward, we have modeled that. You can see the strip. We are utilizing that as a way to predict what Waha prices will be over the next year, and those prices are pretty low early in the year, and they tighten up a little bit towards the back end of the year, and then 2027 going forward. The strip is much better but still negative around a dollar or so. On the oil side of the equation, there is not anything particularly that sticks out. There is a bit of a negative difference between realized and benchmark prices, but we have that in our model going forward as well. Phillips Johnston: Okay. Sounds good. And then could you maybe give us a sense of how many net wells are planned for 2026 relative to the 38 that you brought online last year? And would you expect any significant change in the mix for this year? I think last year’s mix was close to 85% in the Permian, with most of the balance in Appalachia, Haynesville, and the DJ. I just wanted to get some color there. Kyle Kettler: You bet. So last year was 38 net wells turned online. Towards the end of the year, it got a little gassier with some Haynesville wells coming on. We see 2026 being about 29 net wells coming online, and the relative mix of gas and oil should tilt back towards oil as the year goes on with more Permian Basin activity. Tyler Parkinson: Yes, Phillips, on that point, on the oil point, if you look at oil production growth from 2025 to 2026, we see 12% growth there, so a little more oil growth from 2025 to 2026 versus gas. Phillips Johnston: Yes, and that, I guess, implies your oil mix ticks back up to 51% from 49% in Q4 here. Alright. Great. Thanks. Operator: Your next question comes from the line of Derek Whitfield with TPH&Co. Your line is open. Please proceed with your question. Derek Whitfield: Good morning, and congrats on the acquisition success you had in 2025. I wanted to start on slide 14. As you think about the business’ transition to sustainable free cash flow in 2027, are you outlining that this morning as a business objective for 2027 based on your desire to lower leverage, or is it based on your current view of the opportunities ahead of you? I am not trying to pin you down as we live in a dynamic environment, just trying to understand the driver and how firm the message is. Tyler Parkinson: It is not an opportunity set driver. It is a leverage driver. We have been very consistent about wanting to run the business to about one to one and a quarter leverage just to execute the base business plan. We have said that we would go north of that for something more strategic, but to operate the base business plan, think of that as one and a quarter. We have planned this year and next year in a more than $60 oil environment. That is the lens we are looking through when we are thinking about 2027 free cash flow. Obviously, with higher prices, there is going to be some additional capacity that we could take in 2026 and 2027 to continue to prosecute additional capture or additional development drilling and still be able to deliver some free cash flow. Derek Whitfield: Great. And as my follow-up, I wanted to focus on your operated partnerships. We appreciate what you are highlighting with Admiral in today’s presentation, but could you offer some color on general activity and inventory levels across your other operated partnerships? Tyler Parkinson: I would love to fill in some blanks there. We have spoken publicly about our first two. Admiral had the benefit of getting a head start on our other three partners, so they are the most secure and steady state of the four partners. I think the Admiral story is pretty clear to everyone in the public domain. They are focused on Delaware Basin, unit-by-unit inventory capture from some of the larger asset managers in the basin. That story has been successful. We are running a couple of rigs there. We are adding inventory faster than the development base there, so we hope to be able to replicate this same evolution with the other three partners. Partner two is actually PetroLegacy. We have mentioned that before, former EnCap-backed. That team is focused on the northern Midland Basin Dean play. They have captured a position there in the Dean play. We will probably get started on some selective development of that position this year. That market has gotten extremely competitive, as everyone knows, so I am not sure how much additional running room we will have there. The PetroLegacy team is looking at some other opportunities in the basin and also potentially outside of the basin. We hope to have some drilling results from them this year. Our third team, we have not disclosed who that is, but I can tell you what they are doing. They are another successful team that has exited private equity. They are focused on some of the emerging plays in the Permian Basin—think Woodford, Barnett. Those transactions will probably look a little more blocky from an acreage perspective—larger chunks of acreage. They will come with some appraisal to figure out what exactly we have, but if that is successful, that will add a lot of medium-term inventory for us and start to fill in some of the development drilling in 2028 and beyond. Team four is our newest team. They are also a Midland-based team, an exit from private equity. They look a lot like the Admiral team, mainly focused on Midland Basin opportunities. I think they will be sourcing opportunity from the larger asset managers out there on a unit-by-unit basis. We are about six months into that one, so that is very new, but they have already started to capture inventory. Typically, it takes us maybe 12 to 18 months to get enough inventory to have about 18 months to two years of inventory in front of the team in order for us to justify picking up a rig. I probably would not expect a whole lot of development activity from that team this year, but as we move into 2027, I think we will see them start to fill in some development. Operator: Your next question comes from the line of Jerry Giroux with Stephens. Your line is open. Please proceed with your question. Jerry Giroux: Good morning, and thanks for taking my question. My first question is in regards to the move to generating free cash flow in 2027. First, continuing at the same growth rate you have been doing the last couple of years, how did you decide to generate free cash flow versus growing? And the second part is, I know it is early, but if this free cash flow will be returned to shareholders, and if so, in what form are you thinking? Or will this just be cash that goes on the balance sheet for maybe a good opportunity? Tyler Parkinson: It is probably to be determined on the second part. We have a lot of options there, and when we get there, we will see what the best option is at that time. On the first part, we want to transition the business into something that is more durable and long term. We think we have done a good job of gaining some scale over the past handful of years, maturing the business and the strategy. We still see a ton of opportunity in front of us from an inventory capture standpoint, but being able to show some free cash flow and keep our leverage around our target, which is still very conservative at one and a quarter times, will still give us a lot of opportunity to pursue additional inventory capture if we wanted to accelerate some. Kyle Kettler: I would just add, the growth rates were pretty significant over the last couple of years, and it will still be high single digits going into next year. So it will still be pretty good growth. A lot of the capital spending is through operated partnerships, and that is based on a development plan we have coordinated with them. That puts us in this modeling position where we think we can see into 2026 and 2027 and turn into free cash flow in the 2027 time period. Jerry Giroux: That is perfect. Thanks for the color. And then one more question about slide nine. Could you give a little more color on that slide? You talked about Granite Ridge Resources, Inc. retains 92% of the ten-year projected cash flows, then also that the Hamburglar wells or pads achieved the hurdle reversion. Could you give a few more details on this case study? Kyle Kettler: You bet. What we did here was just to give you an example of the economics between us and our operated partners. We had some questions from investors over time on this one. The thrust of it is to show that while we do have some reversions in the reserve database, they are effectively not very punitive at all. They are relatively very small on a multiple-of-capital basis, and that is really what we are trying to achieve with this end-of-slide. Jerry Giroux: That is perfect. Thank you. Operator: Your next question comes from the line of Noah Hungness with Bank of America. Your line is open. Please proceed with your question. Noah Hungness: Morning. For my first question, I was hoping you could touch on the opportunity set and the competitiveness you are seeing to add inventory. In 2025, you were able to add locations well below what we saw from going market price. How do you see those dynamics today? Tyler Parkinson: Good question. That opportunity still exists for us. Our operator teams are still executing on transactions that look exactly like that. We have roughly $25,000,000 of acquisition capital expenditures scheduled right now. That is basically what we have captured or have line of sight to now. If we wanted to continue to add inventory and increase that budget, that opportunity is still available to us. As I said in the remarks, that has been a very good opportunity for us over the past couple of years, and we see the operated partnership inventory captures having a number of years out in front of us. As far as the rest of deal flow, we have seen still very strong deal flow. I think we had a record last year on deal flow that we screened, and that is continuing. The distributed wellbore market is still very strong. We do not participate in that market very much. Returns there are not something that we would underwrite to, but that is a very strong market. The larger marketed packages are still out there with lots of divestiture targets from a lot of the consolidation. Again, we do not participate in that market either. Lastly, on some of the smaller marketed processes for non-op, we are seeing probably the least amount of deal flow and trending down. That has been a little bit weak, but that is not an area that we typically source opportunity from. Finally, in the Appalachia Utica Shale Basin, we are still seeing a ton of opportunity there. That is a traditional non-op play for us. We have been very successful over the past year and a half leasing there. We added probably another couple thousand net acres in the Utica play in Q4, and we are continuing to see lots of opportunity there. Noah Hungness: That is helpful color. And then for my second question, Tyler, could you talk about how we can think about the oil cadence through 2026? And then what does exit-to-exit production growth look like for oil? Tyler Parkinson: Sure. Exit-to-exit oil production growth is 12%. That is Q4 2025 to Q4 2026. Oil growth over the year will be down a little bit in the first half—low single-digit decline in Q1 and Q2—and then increasing in the second half. From Q4 to Q4, we expect 12% growth. Operator: There are no further questions at this time. That concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the African Rainbow Minerals Interim Results for the 6 months ended 31 December 2025. [Operator Instructions] Please note that this event is being recorded. I will now hand the conference over to Thabang Thlaku. Please go ahead. Thabang Thlaku: Thank you very much. Good afternoon, everyone. So we're all together in the room here. We've got the entire management team. We've got Phillip Tobias, Tsung Shang, Mike Schmidt, Jacques van der Bijl, Thando Mkatshana, La Berger and Johan Jansen. So the entire management team is here to answer all your calls. We're not going to do an introduction. We're going to go straight into Q&A. So we'll just give them some time to take Q&A. Operator: [Operator Instructions] Our first question comes from Ntebogang Segone of Investec. Ntebogang Segone: Perfect. I think my question is quickly on Thando or to Thando in relation to the ARM Coal. I mean I see domestic sales were down 15% year-on-year at GGV and then PCB also was down 3%. And then I also see also on the revised guidance, particularly around those local sales volumes going forward, they've been revised downwards. Could you please just provide some guidance on the contracts and downward revision of that coal business and how we should then be looking at it, particularly on the local sales side? And then in relation to Modikwa, I just wanted to understand, so I saw that like -- so tonnes more were up 5% year-on-year, but the PGM concentrate did go down by 3% due to that plant recovery. How does the recoveries outlook profile with open pit combined look like for Modikwa? And if you could maybe speak more around that 4% unit cost reduction at Modikwa and how we should also look at it going forward? I'll leave it there for now. Thando Mkatshana: With regard to the domestic sales, the main supplies to Eskom. As you probably know, the burn rate in terms of Eskom and power generated from their side has been reducing. So we are having that impacting our domestic sales. The positive thing out of that, obviously and tying it up with an improved performance from TFR is that some of the coal we do divert into the export market prices. So in terms of our contract with Eskom, we have contracted for GGB, it's about 2.5 million tonnes at 100% for the full year of sales. But yes, it all depend on whether they are responsible for the entire logistics as well in terms of getting transport and picking it up. But from time to time, when they don't use or take that coal and derivatives into the export market. I hope that kind of answers your question. Ntebogang Segone: Yes. And the water accumulation there in the coal business there with Mundra, how will that impact production going forward? Thando Mkatshana: Yes, that's a simple -- maybe a bit of quick background is that, that used to be an old underground mine where we're mining now. So we are mining those eras through an open cast method, and we had better accumulation of coal. We have -- that has been, I would say, in the once-off matter. We have since revised the pit layout and we've added additional pumping capacity. Having said so though, across all our business, I think the range that we have been experiencing in the last 2 years has been somehow more than the normal range. So those have impact from time to time. But in the main challenge of the water accumulation has been addressed for now. Unknown Executive: Will you take the Modikwa question. Unknown Executive: Certainly. I must state that the open cost is not the preferred source of ore for Modikwa. We're putting that through the concentrator while we are building up the reserves underground in the UG2. The 6E grades for the underground UG2 is 4.76 grams per tonne. While for the open cast, it's higher, it's anything between 5.2 grams a tonne and 6.5 grams a tonne. The challenge, however, sits with the recovery. Typical recovery for normal underground UG2 is sitting at about 84.5%, 85% while the open cast closer to surface, highly oxidized can be sitting between 50%, 54%. The benefit of the open cast is that it's a much lower cost operation. UG2 cost per 6E ounce comes in underground ZAR 20,200 per 6E ounce, while the open cast comes in at ZAR 16,000. So although you lose some ounces, you're seeing the benefit in terms of the cost. We're going deeper with the open cast. So as you are proceeding deeper, the ore becomes less oxidized and your recovery goes up. So we are confident in the outlook for the open cast as a temporary gap filler Modikwa. Thank you. Operator: [Operator Instructions] And we do have the next person in the queue, which is Tim Clark of SBG Securities. J. Clark: All right. I've got a few questions. I'll sort of roll through them slowly. Let's start with -- the finished stock that you've agreed to sell the 1.2 million tonnes. Can you give us an idea, please, of just the sort of time frame over which you'll sell that, what the offtake is, what the contract is? Unknown Executive: Yes. So the contract has been concluded for 1.2 million tonnes over a 12-month period, which started in February. So the intention is to offtake 100,000 tonnes per month for 12 months. J. Clark: That's very helpful. Let's talk about just how we should think about Nkomati going forward just in terms of spend. You've got this chrome plant, which is going to give some kind of revenue credit. How should we think about it? Just -- I mean, you've got the liability outstanding. Can you give us like some kind of sense or guidance just for our models for the next, I don't know, 2, 3 years of what we should model in terms of -- how we should think about Nkomati in terms of the plant and then offsetting and the spend on rehab, please? Unknown Executive: Thank you for that. I will also ask Tsu to help in terms of the rest of the rehab. But to an extent, this, as you pointed out, this revenue subsidizes the cost of care and maintenance, which as we have indicated in the past, I think we're going to be generating between ZAR 20 million and ZAR 25 million of revenue that will come and subsidize that cost. And yes, so I'm not sure if I've answered. On the rehab side, did you ask on the rehab in terms of margin, we are currently not really undertaking major rehab because we are completing this feasibility study in terms of looking at optionality going forward. As we have indicated, we have quite advanced on that. And I think it is very encouraging and we're confident that when we take it to the Board, it will get approval and we'll make an announcement in due course. So there's no really major rehab that's happened. Same for the water treatment plant, which we have indicated in the past. J. Clark: Okay. So that feasibility study, is that another version of a nickel -- is the feasibility study just to open up another nickel mine effectively a new Nkomati in some different form? Sorry, I don't know much about it. Unknown Executive: Yes. That's what it will entail really recommissioning the mine and bring it back to life. But obviously, in a much more, let me say, a remodel maybe a smaller scale than previously. That's what we are looking at. But yes, we'll be able to share the details in terms of the actual volumes and so on after we've finalized that study and taken further report. But I think that gives a good indication. And in line with that, obviously, also with the very encouraging chrome prices, we are looking at a potential a bigger chrome production than what we are currently doing. Unknown Executive: And on the rehab liability, Tim. So that rehab liability. Unknown Executive: Sorry, just giving more color on the rehab liability. Tsundzukani T. Mhlanga: Yes. Thanks, Tim. Just to let you know, so that we have as at 31 December from Nkomati just over ZAR 2 billion, so it's ZAR 2,011 million or ZAR 2.0 billion. But then just remember that we did receive the ZAR 325 million from Norilsk, which was their contribution as part of the transaction towards the rehab water -- water rehab. Thabang Thlaku: Sorry, it's Thabang. I just -- I want to ask additional questions on your behalf, so we can just clarify some things. So current monthly production of chrome, where are they now and what are we planning to... Unknown Executive: Around 8,500 tonnes per month that we are achieving. But we will peak at about 11,000 tonnes per month of chrome concentrate. Thabang Thlaku: At steady state? Unknown Executive: With the current project. The bigger at the stage we're still finalizing a few items related to the vent recovery process, and that will complicate those volumes, but they are much higher than the current project. Thabang Thlaku: When do you expect to get to 11,000 tonnes per month? Unknown Executive: 11,000 tonnes per month in the month of April. Thabang Thlaku: In April? Unknown Executive: Yes. Thabang Thlaku: And what kind of profit margins are we seeing with the chrome production at Nkomati more or less? Unknown Executive: That plant, it cost us about ZAR 10 million, so I just want to check. It cost us just under ZAR 10 million per month to produce that -- ZAR 20 million to ZAR 25 million. So it's between ZAR 15 million and ZAR 10 million dependent obviously on the chrome price. Unknown Executive: Yes. I think maybe just to come in, overall, just correct me if I understood well. I think in the next 12 months, we should be able to make at least a profit of ZAR 100 million with this 500,000 tonnes as the EBITDA would be positive? Thabang Thlaku: It's revenue or profit? Unknown Executive: Yes. It varies between as I said. Thabang Thlaku: And then just to add -- with regards to the broader Nkomati question, I think it's too early for us to give too much information. As you can imagine, with the geopolitical changes that have been happening, there are some offtakers who've been looking for nickel supply out of Indonesia because of their relationship with China. As a result, Nkomati has become a little bit more attractive to other nickel producers. But it's still early stages. We're doing the study, and we're only sort of going to go for board approval later in the year. And once we do have the details, we'll come back and guide the market accordingly. J. Clark: I'll ask one last question, please. Just on Two Rivers, I was just reading your commentary about being impacted by sympathetic geological structures. I never heard of those before. Can you just chat to how long it's going to take before your productivity improves as the geology improves? Just how long -- you sort of spoke about it improving over time now that you're getting past the docs, maybe you can just give us some timing. Johan Jansen: This is Johan Jansen. What we encountered was a fault parallel to the advancing phases. So about 18 months ago, we started intersecting the fault. We've done redevelopment, went through the fault. We've established the faces on the other side of the fault, which was quite an effort. And at this stage, we are busy bringing the supporting infrastructure up to date the conveyor belts, moving them back to within 60, 80 meters from the face. We've already seen an improvement in the productivity, and we will continue to see that over the next quarter. And by the start of the next financial year, we will be back on 320,000 tonnes per month. Unknown Executive: I think, Tim, that's what I said that -- Tim, that's what I said, our forecast for F '27 will be an improved output because we'll be moving towards strength out of these geological features. Operator: [Operator Instructions] Our next question comes from Thobela of Nedbank. Thobela Bixa: I did get cut off a few times here. Please forgive me if I do ask questions that have been asked already. Earlier on during the webcast, you talked about the value in use model when I asked a question about the realized pricing on the manganese. Could you just expand some more what is meant by value in use model for ARM? And how does that potentially improve your realized pricing? And it did seem as though -- and it did seem as though she wasn't just talking about just sort of the manganese operation, but this perhaps could be applied in other divisions. Can I just get clarity on that as well? So that's my first question. And then I'll ask my second question later. Unknown Executive: Thobela, I would like to expand on that. So what is value in use, you take your specific and you are correct, we need -- for manganese at Black Rock as well as iron ore at Khumani and it is tested in various applications. So where it would be used in different smelters and for what purpose in the smelters. And you develop a model to determine the intrinsic value of your ore type to the customer buying it. And through having that value, you can maximize the economic value you get back in your pricing. And to just further explain it, obviously, in a smelter, they don't only use your specific type of ore. They would use different suppliers type of ore, which has got different grades and contaminants. And we know Black Rock as well as Khumani has got a very high-grade reserves. And we are doing this work in specific to ensure that we get the netback per product on maximizing economic value. So it would mean that we would receive above an index price realization for premiums for our specific product based on our product's value. Thobela Bixa: Okay. No, that's clear. Go ahead, Thabang. Thabang Thlaku: Your answer also applies to iron ore question. Okay, Thobela, go to your next question. Thobela Bixa: Yes. Maybe just a follow-up on that is, would that then maybe mean that your sales volumes perhaps because you may -- I mean, would your sales volume remain the same in terms of how you are forecasting currently? Or would this value in use kind of affect your sales potentially given perhaps you may have to change your products back there? Unknown Executive: No, it would not have any impact on your volumes. The only impact that it would have is on your revenue line. Intent is to see if we can get better prices due to the specific ore type, and we can engage on that. So no, volumes will remain the same, both for Black Rock and Khumani, which is currently in the 5-year plan. Thobela Bixa: Okay. And then my second question is around the domestic sales in the iron ore division. I think my question, I guess, is you've talked about having signed a new contract to sell for domestic sales. Where would those -- given that Beeshoek was the one that you used to supply to your domestic markets. So I'm guessing Khumani will be now the one supplying into that. And is that -- I mean my understanding was that your export sales, you derived better revenue there versus perhaps on the domestic side. Could you just clarify as to why perhaps go via this route. Unknown Executive: So for clarity, the contract on Beeshoek was signed with AMSA, and it was for 1.2 million tonnes. We're sitting with a stockpile of 1.48 million tonnes. The only reason why we signed a contract with AMSA and it is not at a brilliant rate, it's ZAR 800 per tonne, where our previous rand per tonne on Beeshoek was ZAR 1,221. So you can imagine it's 25% lower than our previous base price. That's the best option we could get to get some value for the stocks currently lying at Beeshoek. The intent is never to supply the domestic market from Khumani, no. Khumani is an export mine. And our revenue receiving from exports is much better. So yes, the domestic market will definitely not be supplied by Khumani. This is an isolated matter in specific pertaining to Beeshoek being on planned maintenance, and we're having that 1.48 million tonnes of stockpile. Unknown Executive: And maybe just to comment to, I mean, just a bit of background. You remember that at some stage, we said we don't have a long-term contract with our sole customer, but we were still busy in negotiation with them. And then the last basically delivery of all was done in July, during which period we were still negotiating. And that was at the back of the November '24 when they announced the potential shutdown of the long steel business. So that being announced in November, they were still taking some products for us. And with us being in the mining, obviously, you have to be producing, delivering stockpile so that we can really deliver whatever quantities that are required. So we -- at the back of hope that we're going to enter into an agreement, we still carried on mining and we only need to do the line on the sand out end of October, we said we cannot carry on. At that time, we've already accumulated 1.486 million tonnes. So we just have to basically sell this and clean up everything at... Thobela Bixa: Okay. No, that's helpful. I have my one last question on Two Rivers. I think if I recall well, in terms of your ramp-up profile of prior to the Merensky project being put on care and maintenance. It was quite significant just in terms of what was anticipated then? And then if I look at the current ramp-up profile with the Merensky project being sort of pulled back again into production, this one, this ramp-up profile seems a bit softer. Could you just explain what's the thinking now versus before you put that particular project on care and maintenance. Unknown Executive: Thobela, on the Merensky project, like we communicated earlier today, we started the decline development in October last year, a limited development whilst we're just finishing the feasibility study to recommence with the project. And we plan to complete all of that work as well as the review work and third-party work by May this year, and then we'll take it to the partners for approval with the planned restart date of the 1st of July. The current -- we have redone the whole life of mine model and optimize the mining cuts, et cetera, we get the best value out of the project. And extracting the resource at the maximum grade. And with this latest ramp-up schedule, the schedule that we've done, we ramp up to 200,000 tonnes per month over a 3-year period. So from July 3 years we have steady state production. We are benefiting now obviously from the fact that we've already got 3 levels developed and we are proceeding down towards Level 4, of which 2 are already equipped. So we do have quite a big head start compared to the original feasibility study. Unknown Executive: Thobela, Tsu just actually made me aware. When you're looking at our PGM forecast, the Merensky numbers are not there. So you can't compare this to the numbers that we gave you in 2024 because we're still to include that once we go through the government -- yes. Once the governance process is done, then we'll update the Merensky guidelines. Thobela Bixa: I'm actually looking at the year before that, 2023, where at the time, the Merensky project was due to come in online. And then if I look at your ramp-up profile then, I have it right in front of me. I think from '23 to -- let's say, well, from '24 to '25, you're going to move from 313 cores to 485 cores or kilo ounces. So that's that big jump versus perhaps, I guess, the current softer profile. Thabang Thlaku: Yes. But that's because those numbers did include the Merensky estimate and these don't... Unknown Executive: I can add I think we haven't disclosed in the we haven't disclosed in the current numbers the Merensky ramp-up, like Thabang and Tsu rightly say that we still believe that governance process. However, I can share that the work that we've done with the mining schedule, that ramp-up is over a 3-year period. So I think it's substantially still in line with what we've guided before. Thobela Bixa: Okay. So -- Go ahead. Unknown Executive: Just to help you -- just to clarify, I mean, remember what Doug said, where we stopped in August '24 we were already at Level 3, and this is going to be a 5-level operation, delivering 25,000 tonnes per half level. So we need to develop to Level 4 and to Level 5. And that is basically going to take us about 2 years to do that. Then the third year that Jacques is referring to is when we ramp up to steady state, so which is basically from the beginning, it will be a total of 3 years to get to steady state. Thobela Bixa: Okay. Because my -- I guess my understanding was that the bringing back of the Merensky project would take a lot less time than what I'm hearing now. I guess that's where the misunderstanding would have been. Unknown Executive: I can maybe also just add too that obviously, with the concentrated plant finished, we could sequence now and see exactly when is the optimal that with a combination of building stockpile upfront maybe for the first 6 months or a year and then only starting that. So it doesn't mean that it's a 3-year ramp-up, you're only going to start seeing ounces -- do incremental additional ounces from Merensky in 3 years' time. You could, as quick as within about 12 months, you start to see additional ounces coming from Merensky. Operator: We have a follow-up question from Ntebogang of Investec. Ntebogang Segone: Just a quick one on the Two Rivers production currently, yes, there were like some geological challenges faced in 1H. I just want to quickly confirm as to going forward, is the 3.09 head grades that was reported for 1H sustainable going forward? Or if you could maybe guide us more on how you see that head grade improving as then the geological issues improve? And then in relation to the Two Rivers Merensky project, I mean my understanding is that there's around ZAR 2.6 billion of working capital that needs to be put for it to then be able to get back online. With the current planning, I don't know if it's fair for me to ask if you could maybe provide just some form of color in terms of how you're going to be spending that ZAR 2.6 billion over the next 2 years, if it is then what is approved. And then I think my second last question or my last question is mainly around project priority. I just want to have some like a greater clarity around your growth projects. I mean you've got Nkomati, you've got Bokoni, you've got Two Rivers Merensky project. Are you able to -- or even other M&A and then there's also Surge also as well as part of your growth projects, right? Are you able to explicitly rank those growth projects in order of capital priority for us? Yes, I'll leave it there. Unknown Executive: Yes. Do you want to comment on the grade? Unknown Executive: Yes. If I can go first on the grade, please. Thank you for the question. The grade of 3 mining is a fair outlook of what we could expect going forward. We've moved into an area with split reef. So the grades will no longer be as high as it has been in the initial phases of the project. But the monitoring of the quality of the mining is excellent, and I expect to see the grade remaining where it is. Unknown Executive: Thank you very much. And then in terms of the project, yes, you are correct. I mean we've got the trade-off studies that is currently underway in Nkomati. We are now recovering chrome from the 500,000 tonnes stockpile that you mentioned, and there's another study as well on the chrome side that is taking place, a study basically to restart nickel. So that is basically Nkomati complex. And you come to Two Rivers, obviously, the project there that still needs to be concluded is the Merensky. And as Jacques says, also, we're basically at the tail end of completing that study. The numbers will be put on the table to see what are the returns, confirm the capital that is required, confirm everything and basically the contributions that, that project is going to bring to the Two Rivers mine. And then we also mentioned that we already completed the DFS at Bokoni. We're doing the independent review, third-party review. We do the value engineering, firm up the numbers. And these 3 will have to be ranked in the order of priority and an investment decision will be made at the right time in terms of how we stagger them. The Surge where we are, we will most probably say one can say maybe the best guess is come end of June, we should really have the outcome of the pre-feasibility study, whereafter that will really transition to a definitive feasibility study with some regulatory approval process. We see that process being concluded most probably the best case towards 2029. And then if everything else work well, that mine should really go into execution around 2030. So if you look at the project staggering, the Surge is still about -- last year, we used to say 5 years. It's about 4 years now from execution unless things are really expedited in terms of the approval in cost. We've also seen the response from the Canadian government as far as expediting some of these critical mineral projects. Unknown Executive: If I may also just add with regards to the capital. Maybe just in reference with Khumani, alluded to the volumes that we are looking at the potential open pit mining is less than what we did before. And also the fact that the mine was a producing mine was placed on care and maintenance, the ramp-up capital that we would require to put that mine back into operation is not as substantial as completely building greenfields mine. So it's certainly, I think, a lot more affordable. And depending on how the economics stack up because it's an open pit, it ramps up production very quickly. It should become potentially cash positive generator in a much shorter period of time compared to Bokoni project, where there's a new concentrator plant that needs to be built and substantial underground development. And with regards to Merensky, I think the biggest amount of money that would have to be spent is on the mining, specifically building working capital and stockpile to consistently be able to feed the mill. And both Two Rivers substantially stronger balance sheet, the forecast is that Two Rivers would be able to fund the full capital required to complete and ramp up Merensky from the strength of its own balance sheet and from its cash flow generation without requiring additional funds from the 2 partners. And that then really just leads to current that we would have to see and we're busy with finalizing that work. What we've also said is we are looking at a much smaller study and 120,000 tonnes and we believe this is the right size, which strikes the right balance between capital required as well as sufficient volumes to ensure sustainability and cash competitiveness from a unit cash cost point of view. And we would be able to provide further guidance on that cash flow required to support that project during the next results issue. Thabang Thlaku: Ntebogang, is your question answered? Ntebogang Segone: The ranking part is the one that's not answered. Thabang Thlaku: Yes. Yes, that's the sense that I got, Ntebogang. We're sort of giving you detail on what we're doing at the projects, but we're not ranking them. But if I had to summarize what I think Phillip and Jacques are trying to say is that if you look at the current project pipeline, quite a few of these projects are actually still in steady state. And until they're completed and we've got Board approval, it's very difficult for us to say we're going to prioritize project A over project B, right? So that's number one. And I think Jacques was also just trying to illustrate to you that some of the projects are actually going to be able to self-fund because they'll be generating some cash themselves. And some bigger projects like Bokoni and Surge, only once we've got the information in front of us, will we be able to make a decision going forward. Because remember, your capital allocation model is continuously evolving. And it would be very premature for us to say we're prioritizing this now in 2, 3 years' time once the studies are done and we've got board approvals, the world has changed. So yes, so we can't give you an explicit project ranking right now, specifically because a lot of these are still in study phase and don't have work. Unknown Executive: And as just said earlier on, most probably when we come to the next reporting cycle, we will be having detailed outcome and the decision would have been made. We'll be able to update the market in terms of where we are. Unknown Executive: If I may also just add, as part of this analysis, we're obviously doing very detailed cash flow schedules for all of these projects. And then we also look at it on a portfolio view, where we look at from an ARM's point of view, what is the forecast cash flow coming in from the operations, what would be the cash required to finance each one of these projects as well as our other commitments with regards to returning money back to the shareholders in the form of dividends that we are committed to. So we're making a very prudent decision in terms of which project will start first. And also maybe we don't do all of them at the same time just because from an affordability point of view that we do stagger in. And then maybe just one last point. There's absolutely no decision made at this time. We are still busy with the study book, and we will review the results as well as the cash flow requirements on a portfolio view very carefully before a recommendation or decision is made. Ntebogang Segone: Maybe to finish off, which is -- my question is mainly around balance sheet, right? So your balance sheet has strengthened to now currently with net cash of around ZAR 8.4 billion. And then I'm also then taking into account of the Harmony hedge collar. So one can possibly consider that I'm not an accountant, but like a lazy balance sheet. So I'm trying to understand with the excess cash that you guys have on my view, what is management thinking around using that cash for future growth? So that's what I'm trying to understand in your projects, the ranking and also the prioritization in terms of capital allocation. I don't know if I'm making sense. Unknown Executive: Thanks for that question. No. So I might have a different view from yourself in terms of it being a lazy balance sheet, but be that as it may, that's okay. So I think -- so I mean, you're quite right. Our balance sheet has strengthened from June where we are now, sitting still in a relatively strong net cash position. But the question you're asking, that was actually quite valid and quite -- one that we actually deliberate amongst ourselves with and specifically knowing that we've got these projects, we've got this project pipeline. We have ammunition in terms of raising additional funds through using Harmony collar and end -- but at the same time, still looking at the projects that are in the pipeline and seeing those that can generate cash as quickly as possible because at the same time, you do not wish to be strained or find yourself in distress in terms of having to honor commitments and you don't have enough cash. So as Jacques was saying that you really do need to look at it from a portfolio perspective. Yes, you're sitting on cash currently, but there is a pipeline. But there are also other moving parts where we're looking at the cash coming in from Assmang in the form of management fees as well as dividends and all the other commitments. And then it's really just quite a tight balancing act that we're going to have to make. So that -- also the balance sheet will also be informing the decisions that we make in terms of which project we're actually going to proceed with, what is palatable for us and what we can comfortably deliver on without straining the balance sheet. But again, if we find ourselves in a place where -- and I'm hoping we are there, where we decide not to go with any projects, then instead of sitting then on the cash, we will definitely look at returning that cash to the shareholders. Because remember, we look at the cash and we say, okay, how can we generate a return more than that cash just sitting in the bank, and that's where then we will deploy that cash towards to say we believe we can get you as a shareholder, a better return than our weighted average cost of capital. But if not, then the default then say, okay, then let's rather then return to shareholders. I hope that helps a little bit. Operator: Our next question comes from Andrew Snowdowne of Ninety One. Andrew Snowdowne: I am seeing you next week, but I thought I'd ask this question now anyway. And it's just really following on the previous question. The capital allocation slide that you showed, was that the order of priority in which you're looking at things? Or are you just saying these are all the things that are considered because it is quite an interesting order in which is displayed. I guess that's the first question. And then the second one, maybe you can talk me through why you put the collar in place in the first place if you're not actually using it. Again, to the previous point, you're sitting on -- I'm in the same camp. It's a lazy balance sheet. 18% of your market cap is now sitting in cash. You're also seeing a significant value for your Harmony stake. And yet there doesn't seem to be any real initiative by management to try and unlock any of that value. So maybe you can just talk me through some of that. And again, in line with that, just looking at where you're ranking things like share buybacks and maybe you can just remind us where -- just how much you're allowed to buy back at this point. Tsundzukani T. Mhlanga: Thanks. So maybe just the first question around the capital allocation guidelines. So the way they are documented that it's not an order of priority. I think we do have a footnote at the bottom of the slide where we do say that. And then secondly, the question around... Unknown Executive: Collar, if we're not going to use that... Unknown Executive: I can speak to that. I think when that collar was put in place, it was to reflect the time and the strategic intent behind it, which I'll share now. But at that point in time, specifically on our PGM basket prices were a lot more depressed. We're talking about March, April last year, even though it was our view that the metals were in deficit, however, due to the destocking of the substantial inventory above surface, we haven't seen the metal prices were not reflective of the fundamentals, the supply of the 3 metals, specifically platinum, palladium and rhodium. So the whole strategic intent behind the collars there was at that time, even the strong rally up in the gold price, Harmony share price responded quite positively. And we said, given those growth ambitions that we do have, the uncertainty around the PGM prices, how long it will take before it starts to recover, it may be good to just try and strengthen the balance sheet by having some fixed security in place that if we want to, for instance, in future, deploy some of our cash on some of these growth projects that we are -- that could be value accretive and generate cash above our weighted average cost of capital. We don't want to get into a position where you draw down your available cash on the balance sheet and then the commodity price weakness continues and you start to come under balance sheet stress. So in that case, it's good if there's a facility available, maybe linked to a revolving credit facility that you do have access to. So it's really just capitalizing at the time on the good Harmony prices that we saw. And with the benefit of hindsight, it sort of rallied even further beyond that. But in the context of where we were with the commodity prices and not knowing exactly how long it will take, specifically for the PGM prices to respond. Where we are now, we still think it's a good facility because that strategic intent behind it hasn't fallen away. So the -- if we do proceed with some of these projects, it may still be good to put a revolving credit facility in place. We will obviously use the cash first because that's a lower cost of interest compared to paying interest on the RCF. But at least you've got access to that liquidity on a very short period of time if you need it. Because as a holding company and a commodity producer, especially in today's world, commodity prices are very volatile up and down, and you need a bit of headroom to make sure that you've got -- you can cover yourself in any eventuality that may happen. I hope that sort of provides a bit of clarity. And the only reason why we have used the collar is use of proceeds. We haven't finished the studies yet, and we will do that over the next couple of months. And as soon as we make a decision, then we will look at what is the most appropriate way to utilize that strategically to protect the balance sheet. Andrew Snowdowne: Maybe just a very quick follow-up on that. Because your actions and the outlook comments don't seem to be marrying up at the moment. You're talking about a much stronger second half versus the one you've just reported. And if we look at what the basket price, and particularly for PGMs has done since then, iron ore, I think there's a consensus a little bit lower, but it's still holding up. The rand, yes, was stronger, but it's now been weakening a little bit with the events in the Middle East. The sense is you should be generating very significant free cash flow over the next 6 months, which puts you in an even stronger position. So maybe you could -- do you agree with that view, first off, what are your concerns at this point because the actions by the company don't seem to be marrying with the outlook. Just how good an outlook do you need before you start utilizing that significant cash balance? I guess that's the question. Jacques van der Bijl: If I can answer that, you're quite right. I think our outlook is also very much in line with some of our peers and the commentary that Mats made that we do think in the context at least of the PGM prices, the prices will remain stronger for a longer period of time, which is positive. And that we will specifically from our 2 operations, Two Rivers as well as Modikwa should be at least current basket prices quite strongly cash generative. However, we've seen also how quickly things can change in today's world with the volatility. And we have been wrong in the past what we've guided on the outlook and it doesn't transpire. So that's why we do think that it is prudent to keep a certain amount of cash or access to cash in the form of RCF available that you don't overextend yourself. But the intent is once these projects are -- studies have been completed and we have properly evaluated to make a decision on going forward with them or not. And at that point in time, we'll be in a much better position to see what resources do we need from the balance sheet to be able to support those projects. Unknown Executive: Sorry, I just wanted to add something to what Jacques, yes -- just to add to what Jacques said, I think someone said it on the podium earlier. Yes, the platinum operations will be generating cash, but that won't necessarily come through the center. That cash will be used to fund the requirements of those businesses on Two Rivers, specifically on Merensky. So depending on what that built in, I'm not sure what it is, we'll go towards that. And then we do what as well is some increased CapEx requirements that, that cash -- the mine as it is, is generating that cash will go towards funding that. I just wanted to add that. Unknown Executive: Andrew, the last question was on the issue of the share buybacks. You did ask a question as to whether we consider doing another share buyback. I mean, as Tsu mentioned, it's part of the thing that we consider whenever we have a capital allocation review decisions to say which ones come first. Where we are now, as Jacques mentioned, in the next 2 months, there's some serious decisions that we have to be made in terms of those 3 project studies. And this thing as well is weighed against all the other points that we have to consider. And we do take note of what you raised with... Andrew Snowdowne: Super. Maybe one last one. And as you can tell, we're going to have an interesting meeting next week. The -- just can you maybe give me a sense because I'm sure you've done the calculations to at current spot the sort of free cash flow that you'd expect to generate? Or is that a number you're willing to share? Unknown Executive: No, is that free cash flow in CVM or at group level? Andrew Snowdowne: Either way, just an indication because, again, from what we've seen so far and what things have done, if anything, the one number that surprised everybody is just how strong cash generation is. My worry is that management is coming across a little bit too conservative given the current market conditions, hence the question. Unknown Executive: We have to get that information, sorry. Can we give it to you when we see you next week. Or we can drop you an e-mail once we have found the number. Operator: We have a follow-up question from Ntebogang of Investec. Ntebogang Segone: Sorry, guys. Just a quick one, right? So if the PGM -- if the cash flow from the PGM business will be funding these projects. Now my question is around dividends going forward. I mean dividends, your dividend policy is based on dividend received. Ferrous outlook seems muted. So you're not expecting as much dividend received from Ferrous as historic levels. And then now the cash from the PGM business, all of all, essentially, I'm assuming that now because we will be funding these projects, it will then not be going to dividends to the African Rainbow Minerals. So how should we then look at dividends going forward for ARI? Unknown Executive: We are committed to basically giving cash back to our shareholders so -- and it's a capital allocation decision, but it's a commitment that we have made in the bigger scheme of things. As we weigh this project that we need to advance, we also basically take into consideration the dividend payment as well. Unknown Executive: Yes. Maybe I can add, Ntebo. So our dividend policy remains that 40% to 70% of the dividends that we receive from the underlying operations. So yes, as you point out, we might not be expecting -- and I mean we were not expecting actually before this rally in the PGM basket price. We were not expecting dividends coming through from those operations for the next 3 years. So thankfully, we're in a better place. But if those operations are able to fund their requirements and there's anything that's left over that will obviously be given up through to ARM and to our partners. But I think what you can model if you need to model is work with that 40% to 70%. In last couple of years, we have gone above that range, and that is when we -- looking at the cash that we're actually sitting on, we say, okay, actually, we can afford to go beyond that range and we make that decision. We've made it a few times quite often. So -- but just to be on the conservative side, still use that 40% to 70% as a guideline for the dividends that ARM would then be paying. Unknown Executive: I think also maybe just to add on, I think it just sort of links to the question that Andrew asked before, at current spot prices, and we'll run the numbers. But sort of my assessment is that if the current spot price prevail in the -- the cash generative -- cash that will be generated above as well as is quite substantial. And I think that most likely will be more than what the -- so there will be surplus cash available even after servicing requirements to complete the Merensky study as well as the development at the Da. So there is a good chance that if the current prices prevail, that there will be cash passed up through the form of dividends to our book. Unknown Executive: And equally, as ferrous is facing challenges due to pricing and cost and while we try to turn around that business, you can expect more on that front. Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question-and-answer session. I will now hand back for closing remarks. Unknown Executive: Thank you, everyone, for dialing in. We appreciate your participation. We will be on the road next week -- investors. If you've got any more questions or you feel like we may be didn't answer some of your questions to your satisfaction, please feel free to call me or send an e-mail and we'll endeavor to give you accurate answers as soon as possible. But thank you very much, everyone. Operator: Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.
Operator: Good afternoon, ladies and gentlemen, and welcome to the African Rainbow Minerals Interim Results for the 6 months ended 31 December 2025. [Operator Instructions] Please note that this event is being recorded. I will now hand the conference over to Thabang Thlaku. Please go ahead. Thabang Thlaku: Thank you very much. Good afternoon, everyone. So we're all together in the room here. We've got the entire management team. We've got Phillip Tobias, Tsung Shang, Mike Schmidt, Jacques van der Bijl, Thando Mkatshana, La Berger and Johan Jansen. So the entire management team is here to answer all your calls. We're not going to do an introduction. We're going to go straight into Q&A. So we'll just give them some time to take Q&A. Operator: [Operator Instructions] Our first question comes from Ntebogang Segone of Investec. Ntebogang Segone: Perfect. I think my question is quickly on Thando or to Thando in relation to the ARM Coal. I mean I see domestic sales were down 15% year-on-year at GGV and then PCB also was down 3%. And then I also see also on the revised guidance, particularly around those local sales volumes going forward, they've been revised downwards. Could you please just provide some guidance on the contracts and downward revision of that coal business and how we should then be looking at it, particularly on the local sales side? And then in relation to Modikwa, I just wanted to understand, so I saw that like -- so tonnes more were up 5% year-on-year, but the PGM concentrate did go down by 3% due to that plant recovery. How does the recoveries outlook profile with open pit combined look like for Modikwa? And if you could maybe speak more around that 4% unit cost reduction at Modikwa and how we should also look at it going forward? I'll leave it there for now. Thando Mkatshana: With regard to the domestic sales, the main supplies to Eskom. As you probably know, the burn rate in terms of Eskom and power generated from their side has been reducing. So we are having that impacting our domestic sales. The positive thing out of that, obviously and tying it up with an improved performance from TFR is that some of the coal we do divert into the export market prices. So in terms of our contract with Eskom, we have contracted for GGB, it's about 2.5 million tonnes at 100% for the full year of sales. But yes, it all depend on whether they are responsible for the entire logistics as well in terms of getting transport and picking it up. But from time to time, when they don't use or take that coal and derivatives into the export market. I hope that kind of answers your question. Ntebogang Segone: Yes. And the water accumulation there in the coal business there with Mundra, how will that impact production going forward? Thando Mkatshana: Yes, that's a simple -- maybe a bit of quick background is that, that used to be an old underground mine where we're mining now. So we are mining those eras through an open cast method, and we had better accumulation of coal. We have -- that has been, I would say, in the once-off matter. We have since revised the pit layout and we've added additional pumping capacity. Having said so though, across all our business, I think the range that we have been experiencing in the last 2 years has been somehow more than the normal range. So those have impact from time to time. But in the main challenge of the water accumulation has been addressed for now. Unknown Executive: Will you take the Modikwa question. Unknown Executive: Certainly. I must state that the open cost is not the preferred source of ore for Modikwa. We're putting that through the concentrator while we are building up the reserves underground in the UG2. The 6E grades for the underground UG2 is 4.76 grams per tonne. While for the open cast, it's higher, it's anything between 5.2 grams a tonne and 6.5 grams a tonne. The challenge, however, sits with the recovery. Typical recovery for normal underground UG2 is sitting at about 84.5%, 85% while the open cast closer to surface, highly oxidized can be sitting between 50%, 54%. The benefit of the open cast is that it's a much lower cost operation. UG2 cost per 6E ounce comes in underground ZAR 20,200 per 6E ounce, while the open cast comes in at ZAR 16,000. So although you lose some ounces, you're seeing the benefit in terms of the cost. We're going deeper with the open cast. So as you are proceeding deeper, the ore becomes less oxidized and your recovery goes up. So we are confident in the outlook for the open cast as a temporary gap filler Modikwa. Thank you. Operator: [Operator Instructions] And we do have the next person in the queue, which is Tim Clark of SBG Securities. J. Clark: All right. I've got a few questions. I'll sort of roll through them slowly. Let's start with -- the finished stock that you've agreed to sell the 1.2 million tonnes. Can you give us an idea, please, of just the sort of time frame over which you'll sell that, what the offtake is, what the contract is? Unknown Executive: Yes. So the contract has been concluded for 1.2 million tonnes over a 12-month period, which started in February. So the intention is to offtake 100,000 tonnes per month for 12 months. J. Clark: That's very helpful. Let's talk about just how we should think about Nkomati going forward just in terms of spend. You've got this chrome plant, which is going to give some kind of revenue credit. How should we think about it? Just -- I mean, you've got the liability outstanding. Can you give us like some kind of sense or guidance just for our models for the next, I don't know, 2, 3 years of what we should model in terms of -- how we should think about Nkomati in terms of the plant and then offsetting and the spend on rehab, please? Unknown Executive: Thank you for that. I will also ask Tsu to help in terms of the rest of the rehab. But to an extent, this, as you pointed out, this revenue subsidizes the cost of care and maintenance, which as we have indicated in the past, I think we're going to be generating between ZAR 20 million and ZAR 25 million of revenue that will come and subsidize that cost. And yes, so I'm not sure if I've answered. On the rehab side, did you ask on the rehab in terms of margin, we are currently not really undertaking major rehab because we are completing this feasibility study in terms of looking at optionality going forward. As we have indicated, we have quite advanced on that. And I think it is very encouraging and we're confident that when we take it to the Board, it will get approval and we'll make an announcement in due course. So there's no really major rehab that's happened. Same for the water treatment plant, which we have indicated in the past. J. Clark: Okay. So that feasibility study, is that another version of a nickel -- is the feasibility study just to open up another nickel mine effectively a new Nkomati in some different form? Sorry, I don't know much about it. Unknown Executive: Yes. That's what it will entail really recommissioning the mine and bring it back to life. But obviously, in a much more, let me say, a remodel maybe a smaller scale than previously. That's what we are looking at. But yes, we'll be able to share the details in terms of the actual volumes and so on after we've finalized that study and taken further report. But I think that gives a good indication. And in line with that, obviously, also with the very encouraging chrome prices, we are looking at a potential a bigger chrome production than what we are currently doing. Unknown Executive: And on the rehab liability, Tim. So that rehab liability. Unknown Executive: Sorry, just giving more color on the rehab liability. Tsundzukani T. Mhlanga: Yes. Thanks, Tim. Just to let you know, so that we have as at 31 December from Nkomati just over ZAR 2 billion, so it's ZAR 2,011 million or ZAR 2.0 billion. But then just remember that we did receive the ZAR 325 million from Norilsk, which was their contribution as part of the transaction towards the rehab water -- water rehab. Thabang Thlaku: Sorry, it's Thabang. I just -- I want to ask additional questions on your behalf, so we can just clarify some things. So current monthly production of chrome, where are they now and what are we planning to... Unknown Executive: Around 8,500 tonnes per month that we are achieving. But we will peak at about 11,000 tonnes per month of chrome concentrate. Thabang Thlaku: At steady state? Unknown Executive: With the current project. The bigger at the stage we're still finalizing a few items related to the vent recovery process, and that will complicate those volumes, but they are much higher than the current project. Thabang Thlaku: When do you expect to get to 11,000 tonnes per month? Unknown Executive: 11,000 tonnes per month in the month of April. Thabang Thlaku: In April? Unknown Executive: Yes. Thabang Thlaku: And what kind of profit margins are we seeing with the chrome production at Nkomati more or less? Unknown Executive: That plant, it cost us about ZAR 10 million, so I just want to check. It cost us just under ZAR 10 million per month to produce that -- ZAR 20 million to ZAR 25 million. So it's between ZAR 15 million and ZAR 10 million dependent obviously on the chrome price. Unknown Executive: Yes. I think maybe just to come in, overall, just correct me if I understood well. I think in the next 12 months, we should be able to make at least a profit of ZAR 100 million with this 500,000 tonnes as the EBITDA would be positive? Thabang Thlaku: It's revenue or profit? Unknown Executive: Yes. It varies between as I said. Thabang Thlaku: And then just to add -- with regards to the broader Nkomati question, I think it's too early for us to give too much information. As you can imagine, with the geopolitical changes that have been happening, there are some offtakers who've been looking for nickel supply out of Indonesia because of their relationship with China. As a result, Nkomati has become a little bit more attractive to other nickel producers. But it's still early stages. We're doing the study, and we're only sort of going to go for board approval later in the year. And once we do have the details, we'll come back and guide the market accordingly. J. Clark: I'll ask one last question, please. Just on Two Rivers, I was just reading your commentary about being impacted by sympathetic geological structures. I never heard of those before. Can you just chat to how long it's going to take before your productivity improves as the geology improves? Just how long -- you sort of spoke about it improving over time now that you're getting past the docs, maybe you can just give us some timing. Johan Jansen: This is Johan Jansen. What we encountered was a fault parallel to the advancing phases. So about 18 months ago, we started intersecting the fault. We've done redevelopment, went through the fault. We've established the faces on the other side of the fault, which was quite an effort. And at this stage, we are busy bringing the supporting infrastructure up to date the conveyor belts, moving them back to within 60, 80 meters from the face. We've already seen an improvement in the productivity, and we will continue to see that over the next quarter. And by the start of the next financial year, we will be back on 320,000 tonnes per month. Unknown Executive: I think, Tim, that's what I said that -- Tim, that's what I said, our forecast for F '27 will be an improved output because we'll be moving towards strength out of these geological features. Operator: [Operator Instructions] Our next question comes from Thobela of Nedbank. Thobela Bixa: I did get cut off a few times here. Please forgive me if I do ask questions that have been asked already. Earlier on during the webcast, you talked about the value in use model when I asked a question about the realized pricing on the manganese. Could you just expand some more what is meant by value in use model for ARM? And how does that potentially improve your realized pricing? And it did seem as though -- and it did seem as though she wasn't just talking about just sort of the manganese operation, but this perhaps could be applied in other divisions. Can I just get clarity on that as well? So that's my first question. And then I'll ask my second question later. Unknown Executive: Thobela, I would like to expand on that. So what is value in use, you take your specific and you are correct, we need -- for manganese at Black Rock as well as iron ore at Khumani and it is tested in various applications. So where it would be used in different smelters and for what purpose in the smelters. And you develop a model to determine the intrinsic value of your ore type to the customer buying it. And through having that value, you can maximize the economic value you get back in your pricing. And to just further explain it, obviously, in a smelter, they don't only use your specific type of ore. They would use different suppliers type of ore, which has got different grades and contaminants. And we know Black Rock as well as Khumani has got a very high-grade reserves. And we are doing this work in specific to ensure that we get the netback per product on maximizing economic value. So it would mean that we would receive above an index price realization for premiums for our specific product based on our product's value. Thobela Bixa: Okay. No, that's clear. Go ahead, Thabang. Thabang Thlaku: Your answer also applies to iron ore question. Okay, Thobela, go to your next question. Thobela Bixa: Yes. Maybe just a follow-up on that is, would that then maybe mean that your sales volumes perhaps because you may -- I mean, would your sales volume remain the same in terms of how you are forecasting currently? Or would this value in use kind of affect your sales potentially given perhaps you may have to change your products back there? Unknown Executive: No, it would not have any impact on your volumes. The only impact that it would have is on your revenue line. Intent is to see if we can get better prices due to the specific ore type, and we can engage on that. So no, volumes will remain the same, both for Black Rock and Khumani, which is currently in the 5-year plan. Thobela Bixa: Okay. And then my second question is around the domestic sales in the iron ore division. I think my question, I guess, is you've talked about having signed a new contract to sell for domestic sales. Where would those -- given that Beeshoek was the one that you used to supply to your domestic markets. So I'm guessing Khumani will be now the one supplying into that. And is that -- I mean my understanding was that your export sales, you derived better revenue there versus perhaps on the domestic side. Could you just clarify as to why perhaps go via this route. Unknown Executive: So for clarity, the contract on Beeshoek was signed with AMSA, and it was for 1.2 million tonnes. We're sitting with a stockpile of 1.48 million tonnes. The only reason why we signed a contract with AMSA and it is not at a brilliant rate, it's ZAR 800 per tonne, where our previous rand per tonne on Beeshoek was ZAR 1,221. So you can imagine it's 25% lower than our previous base price. That's the best option we could get to get some value for the stocks currently lying at Beeshoek. The intent is never to supply the domestic market from Khumani, no. Khumani is an export mine. And our revenue receiving from exports is much better. So yes, the domestic market will definitely not be supplied by Khumani. This is an isolated matter in specific pertaining to Beeshoek being on planned maintenance, and we're having that 1.48 million tonnes of stockpile. Unknown Executive: And maybe just to comment to, I mean, just a bit of background. You remember that at some stage, we said we don't have a long-term contract with our sole customer, but we were still busy in negotiation with them. And then the last basically delivery of all was done in July, during which period we were still negotiating. And that was at the back of the November '24 when they announced the potential shutdown of the long steel business. So that being announced in November, they were still taking some products for us. And with us being in the mining, obviously, you have to be producing, delivering stockpile so that we can really deliver whatever quantities that are required. So we -- at the back of hope that we're going to enter into an agreement, we still carried on mining and we only need to do the line on the sand out end of October, we said we cannot carry on. At that time, we've already accumulated 1.486 million tonnes. So we just have to basically sell this and clean up everything at... Thobela Bixa: Okay. No, that's helpful. I have my one last question on Two Rivers. I think if I recall well, in terms of your ramp-up profile of prior to the Merensky project being put on care and maintenance. It was quite significant just in terms of what was anticipated then? And then if I look at the current ramp-up profile with the Merensky project being sort of pulled back again into production, this one, this ramp-up profile seems a bit softer. Could you just explain what's the thinking now versus before you put that particular project on care and maintenance. Unknown Executive: Thobela, on the Merensky project, like we communicated earlier today, we started the decline development in October last year, a limited development whilst we're just finishing the feasibility study to recommence with the project. And we plan to complete all of that work as well as the review work and third-party work by May this year, and then we'll take it to the partners for approval with the planned restart date of the 1st of July. The current -- we have redone the whole life of mine model and optimize the mining cuts, et cetera, we get the best value out of the project. And extracting the resource at the maximum grade. And with this latest ramp-up schedule, the schedule that we've done, we ramp up to 200,000 tonnes per month over a 3-year period. So from July 3 years we have steady state production. We are benefiting now obviously from the fact that we've already got 3 levels developed and we are proceeding down towards Level 4, of which 2 are already equipped. So we do have quite a big head start compared to the original feasibility study. Unknown Executive: Thobela, Tsu just actually made me aware. When you're looking at our PGM forecast, the Merensky numbers are not there. So you can't compare this to the numbers that we gave you in 2024 because we're still to include that once we go through the government -- yes. Once the governance process is done, then we'll update the Merensky guidelines. Thobela Bixa: I'm actually looking at the year before that, 2023, where at the time, the Merensky project was due to come in online. And then if I look at your ramp-up profile then, I have it right in front of me. I think from '23 to -- let's say, well, from '24 to '25, you're going to move from 313 cores to 485 cores or kilo ounces. So that's that big jump versus perhaps, I guess, the current softer profile. Thabang Thlaku: Yes. But that's because those numbers did include the Merensky estimate and these don't... Unknown Executive: I can add I think we haven't disclosed in the we haven't disclosed in the current numbers the Merensky ramp-up, like Thabang and Tsu rightly say that we still believe that governance process. However, I can share that the work that we've done with the mining schedule, that ramp-up is over a 3-year period. So I think it's substantially still in line with what we've guided before. Thobela Bixa: Okay. So -- Go ahead. Unknown Executive: Just to help you -- just to clarify, I mean, remember what Doug said, where we stopped in August '24 we were already at Level 3, and this is going to be a 5-level operation, delivering 25,000 tonnes per half level. So we need to develop to Level 4 and to Level 5. And that is basically going to take us about 2 years to do that. Then the third year that Jacques is referring to is when we ramp up to steady state, so which is basically from the beginning, it will be a total of 3 years to get to steady state. Thobela Bixa: Okay. Because my -- I guess my understanding was that the bringing back of the Merensky project would take a lot less time than what I'm hearing now. I guess that's where the misunderstanding would have been. Unknown Executive: I can maybe also just add too that obviously, with the concentrated plant finished, we could sequence now and see exactly when is the optimal that with a combination of building stockpile upfront maybe for the first 6 months or a year and then only starting that. So it doesn't mean that it's a 3-year ramp-up, you're only going to start seeing ounces -- do incremental additional ounces from Merensky in 3 years' time. You could, as quick as within about 12 months, you start to see additional ounces coming from Merensky. Operator: We have a follow-up question from Ntebogang of Investec. Ntebogang Segone: Just a quick one on the Two Rivers production currently, yes, there were like some geological challenges faced in 1H. I just want to quickly confirm as to going forward, is the 3.09 head grades that was reported for 1H sustainable going forward? Or if you could maybe guide us more on how you see that head grade improving as then the geological issues improve? And then in relation to the Two Rivers Merensky project, I mean my understanding is that there's around ZAR 2.6 billion of working capital that needs to be put for it to then be able to get back online. With the current planning, I don't know if it's fair for me to ask if you could maybe provide just some form of color in terms of how you're going to be spending that ZAR 2.6 billion over the next 2 years, if it is then what is approved. And then I think my second last question or my last question is mainly around project priority. I just want to have some like a greater clarity around your growth projects. I mean you've got Nkomati, you've got Bokoni, you've got Two Rivers Merensky project. Are you able to -- or even other M&A and then there's also Surge also as well as part of your growth projects, right? Are you able to explicitly rank those growth projects in order of capital priority for us? Yes, I'll leave it there. Unknown Executive: Yes. Do you want to comment on the grade? Unknown Executive: Yes. If I can go first on the grade, please. Thank you for the question. The grade of 3 mining is a fair outlook of what we could expect going forward. We've moved into an area with split reef. So the grades will no longer be as high as it has been in the initial phases of the project. But the monitoring of the quality of the mining is excellent, and I expect to see the grade remaining where it is. Unknown Executive: Thank you very much. And then in terms of the project, yes, you are correct. I mean we've got the trade-off studies that is currently underway in Nkomati. We are now recovering chrome from the 500,000 tonnes stockpile that you mentioned, and there's another study as well on the chrome side that is taking place, a study basically to restart nickel. So that is basically Nkomati complex. And you come to Two Rivers, obviously, the project there that still needs to be concluded is the Merensky. And as Jacques says, also, we're basically at the tail end of completing that study. The numbers will be put on the table to see what are the returns, confirm the capital that is required, confirm everything and basically the contributions that, that project is going to bring to the Two Rivers mine. And then we also mentioned that we already completed the DFS at Bokoni. We're doing the independent review, third-party review. We do the value engineering, firm up the numbers. And these 3 will have to be ranked in the order of priority and an investment decision will be made at the right time in terms of how we stagger them. The Surge where we are, we will most probably say one can say maybe the best guess is come end of June, we should really have the outcome of the pre-feasibility study, whereafter that will really transition to a definitive feasibility study with some regulatory approval process. We see that process being concluded most probably the best case towards 2029. And then if everything else work well, that mine should really go into execution around 2030. So if you look at the project staggering, the Surge is still about -- last year, we used to say 5 years. It's about 4 years now from execution unless things are really expedited in terms of the approval in cost. We've also seen the response from the Canadian government as far as expediting some of these critical mineral projects. Unknown Executive: If I may also just add with regards to the capital. Maybe just in reference with Khumani, alluded to the volumes that we are looking at the potential open pit mining is less than what we did before. And also the fact that the mine was a producing mine was placed on care and maintenance, the ramp-up capital that we would require to put that mine back into operation is not as substantial as completely building greenfields mine. So it's certainly, I think, a lot more affordable. And depending on how the economics stack up because it's an open pit, it ramps up production very quickly. It should become potentially cash positive generator in a much shorter period of time compared to Bokoni project, where there's a new concentrator plant that needs to be built and substantial underground development. And with regards to Merensky, I think the biggest amount of money that would have to be spent is on the mining, specifically building working capital and stockpile to consistently be able to feed the mill. And both Two Rivers substantially stronger balance sheet, the forecast is that Two Rivers would be able to fund the full capital required to complete and ramp up Merensky from the strength of its own balance sheet and from its cash flow generation without requiring additional funds from the 2 partners. And that then really just leads to current that we would have to see and we're busy with finalizing that work. What we've also said is we are looking at a much smaller study and 120,000 tonnes and we believe this is the right size, which strikes the right balance between capital required as well as sufficient volumes to ensure sustainability and cash competitiveness from a unit cash cost point of view. And we would be able to provide further guidance on that cash flow required to support that project during the next results issue. Thabang Thlaku: Ntebogang, is your question answered? Ntebogang Segone: The ranking part is the one that's not answered. Thabang Thlaku: Yes. Yes, that's the sense that I got, Ntebogang. We're sort of giving you detail on what we're doing at the projects, but we're not ranking them. But if I had to summarize what I think Phillip and Jacques are trying to say is that if you look at the current project pipeline, quite a few of these projects are actually still in steady state. And until they're completed and we've got Board approval, it's very difficult for us to say we're going to prioritize project A over project B, right? So that's number one. And I think Jacques was also just trying to illustrate to you that some of the projects are actually going to be able to self-fund because they'll be generating some cash themselves. And some bigger projects like Bokoni and Surge, only once we've got the information in front of us, will we be able to make a decision going forward. Because remember, your capital allocation model is continuously evolving. And it would be very premature for us to say we're prioritizing this now in 2, 3 years' time once the studies are done and we've got board approvals, the world has changed. So yes, so we can't give you an explicit project ranking right now, specifically because a lot of these are still in study phase and don't have work. Unknown Executive: And as just said earlier on, most probably when we come to the next reporting cycle, we will be having detailed outcome and the decision would have been made. We'll be able to update the market in terms of where we are. Unknown Executive: If I may also just add, as part of this analysis, we're obviously doing very detailed cash flow schedules for all of these projects. And then we also look at it on a portfolio view, where we look at from an ARM's point of view, what is the forecast cash flow coming in from the operations, what would be the cash required to finance each one of these projects as well as our other commitments with regards to returning money back to the shareholders in the form of dividends that we are committed to. So we're making a very prudent decision in terms of which project will start first. And also maybe we don't do all of them at the same time just because from an affordability point of view that we do stagger in. And then maybe just one last point. There's absolutely no decision made at this time. We are still busy with the study book, and we will review the results as well as the cash flow requirements on a portfolio view very carefully before a recommendation or decision is made. Ntebogang Segone: Maybe to finish off, which is -- my question is mainly around balance sheet, right? So your balance sheet has strengthened to now currently with net cash of around ZAR 8.4 billion. And then I'm also then taking into account of the Harmony hedge collar. So one can possibly consider that I'm not an accountant, but like a lazy balance sheet. So I'm trying to understand with the excess cash that you guys have on my view, what is management thinking around using that cash for future growth? So that's what I'm trying to understand in your projects, the ranking and also the prioritization in terms of capital allocation. I don't know if I'm making sense. Unknown Executive: Thanks for that question. No. So I might have a different view from yourself in terms of it being a lazy balance sheet, but be that as it may, that's okay. So I think -- so I mean, you're quite right. Our balance sheet has strengthened from June where we are now, sitting still in a relatively strong net cash position. But the question you're asking, that was actually quite valid and quite -- one that we actually deliberate amongst ourselves with and specifically knowing that we've got these projects, we've got this project pipeline. We have ammunition in terms of raising additional funds through using Harmony collar and end -- but at the same time, still looking at the projects that are in the pipeline and seeing those that can generate cash as quickly as possible because at the same time, you do not wish to be strained or find yourself in distress in terms of having to honor commitments and you don't have enough cash. So as Jacques was saying that you really do need to look at it from a portfolio perspective. Yes, you're sitting on cash currently, but there is a pipeline. But there are also other moving parts where we're looking at the cash coming in from Assmang in the form of management fees as well as dividends and all the other commitments. And then it's really just quite a tight balancing act that we're going to have to make. So that -- also the balance sheet will also be informing the decisions that we make in terms of which project we're actually going to proceed with, what is palatable for us and what we can comfortably deliver on without straining the balance sheet. But again, if we find ourselves in a place where -- and I'm hoping we are there, where we decide not to go with any projects, then instead of sitting then on the cash, we will definitely look at returning that cash to the shareholders. Because remember, we look at the cash and we say, okay, how can we generate a return more than that cash just sitting in the bank, and that's where then we will deploy that cash towards to say we believe we can get you as a shareholder, a better return than our weighted average cost of capital. But if not, then the default then say, okay, then let's rather then return to shareholders. I hope that helps a little bit. Operator: Our next question comes from Andrew Snowdowne of Ninety One. Andrew Snowdowne: I am seeing you next week, but I thought I'd ask this question now anyway. And it's just really following on the previous question. The capital allocation slide that you showed, was that the order of priority in which you're looking at things? Or are you just saying these are all the things that are considered because it is quite an interesting order in which is displayed. I guess that's the first question. And then the second one, maybe you can talk me through why you put the collar in place in the first place if you're not actually using it. Again, to the previous point, you're sitting on -- I'm in the same camp. It's a lazy balance sheet. 18% of your market cap is now sitting in cash. You're also seeing a significant value for your Harmony stake. And yet there doesn't seem to be any real initiative by management to try and unlock any of that value. So maybe you can just talk me through some of that. And again, in line with that, just looking at where you're ranking things like share buybacks and maybe you can just remind us where -- just how much you're allowed to buy back at this point. Tsundzukani T. Mhlanga: Thanks. So maybe just the first question around the capital allocation guidelines. So the way they are documented that it's not an order of priority. I think we do have a footnote at the bottom of the slide where we do say that. And then secondly, the question around... Unknown Executive: Collar, if we're not going to use that... Unknown Executive: I can speak to that. I think when that collar was put in place, it was to reflect the time and the strategic intent behind it, which I'll share now. But at that point in time, specifically on our PGM basket prices were a lot more depressed. We're talking about March, April last year, even though it was our view that the metals were in deficit, however, due to the destocking of the substantial inventory above surface, we haven't seen the metal prices were not reflective of the fundamentals, the supply of the 3 metals, specifically platinum, palladium and rhodium. So the whole strategic intent behind the collars there was at that time, even the strong rally up in the gold price, Harmony share price responded quite positively. And we said, given those growth ambitions that we do have, the uncertainty around the PGM prices, how long it will take before it starts to recover, it may be good to just try and strengthen the balance sheet by having some fixed security in place that if we want to, for instance, in future, deploy some of our cash on some of these growth projects that we are -- that could be value accretive and generate cash above our weighted average cost of capital. We don't want to get into a position where you draw down your available cash on the balance sheet and then the commodity price weakness continues and you start to come under balance sheet stress. So in that case, it's good if there's a facility available, maybe linked to a revolving credit facility that you do have access to. So it's really just capitalizing at the time on the good Harmony prices that we saw. And with the benefit of hindsight, it sort of rallied even further beyond that. But in the context of where we were with the commodity prices and not knowing exactly how long it will take, specifically for the PGM prices to respond. Where we are now, we still think it's a good facility because that strategic intent behind it hasn't fallen away. So the -- if we do proceed with some of these projects, it may still be good to put a revolving credit facility in place. We will obviously use the cash first because that's a lower cost of interest compared to paying interest on the RCF. But at least you've got access to that liquidity on a very short period of time if you need it. Because as a holding company and a commodity producer, especially in today's world, commodity prices are very volatile up and down, and you need a bit of headroom to make sure that you've got -- you can cover yourself in any eventuality that may happen. I hope that sort of provides a bit of clarity. And the only reason why we have used the collar is use of proceeds. We haven't finished the studies yet, and we will do that over the next couple of months. And as soon as we make a decision, then we will look at what is the most appropriate way to utilize that strategically to protect the balance sheet. Andrew Snowdowne: Maybe just a very quick follow-up on that. Because your actions and the outlook comments don't seem to be marrying up at the moment. You're talking about a much stronger second half versus the one you've just reported. And if we look at what the basket price, and particularly for PGMs has done since then, iron ore, I think there's a consensus a little bit lower, but it's still holding up. The rand, yes, was stronger, but it's now been weakening a little bit with the events in the Middle East. The sense is you should be generating very significant free cash flow over the next 6 months, which puts you in an even stronger position. So maybe you could -- do you agree with that view, first off, what are your concerns at this point because the actions by the company don't seem to be marrying with the outlook. Just how good an outlook do you need before you start utilizing that significant cash balance? I guess that's the question. Jacques van der Bijl: If I can answer that, you're quite right. I think our outlook is also very much in line with some of our peers and the commentary that Mats made that we do think in the context at least of the PGM prices, the prices will remain stronger for a longer period of time, which is positive. And that we will specifically from our 2 operations, Two Rivers as well as Modikwa should be at least current basket prices quite strongly cash generative. However, we've seen also how quickly things can change in today's world with the volatility. And we have been wrong in the past what we've guided on the outlook and it doesn't transpire. So that's why we do think that it is prudent to keep a certain amount of cash or access to cash in the form of RCF available that you don't overextend yourself. But the intent is once these projects are -- studies have been completed and we have properly evaluated to make a decision on going forward with them or not. And at that point in time, we'll be in a much better position to see what resources do we need from the balance sheet to be able to support those projects. Unknown Executive: Sorry, I just wanted to add something to what Jacques, yes -- just to add to what Jacques said, I think someone said it on the podium earlier. Yes, the platinum operations will be generating cash, but that won't necessarily come through the center. That cash will be used to fund the requirements of those businesses on Two Rivers, specifically on Merensky. So depending on what that built in, I'm not sure what it is, we'll go towards that. And then we do what as well is some increased CapEx requirements that, that cash -- the mine as it is, is generating that cash will go towards funding that. I just wanted to add that. Unknown Executive: Andrew, the last question was on the issue of the share buybacks. You did ask a question as to whether we consider doing another share buyback. I mean, as Tsu mentioned, it's part of the thing that we consider whenever we have a capital allocation review decisions to say which ones come first. Where we are now, as Jacques mentioned, in the next 2 months, there's some serious decisions that we have to be made in terms of those 3 project studies. And this thing as well is weighed against all the other points that we have to consider. And we do take note of what you raised with... Andrew Snowdowne: Super. Maybe one last one. And as you can tell, we're going to have an interesting meeting next week. The -- just can you maybe give me a sense because I'm sure you've done the calculations to at current spot the sort of free cash flow that you'd expect to generate? Or is that a number you're willing to share? Unknown Executive: No, is that free cash flow in CVM or at group level? Andrew Snowdowne: Either way, just an indication because, again, from what we've seen so far and what things have done, if anything, the one number that surprised everybody is just how strong cash generation is. My worry is that management is coming across a little bit too conservative given the current market conditions, hence the question. Unknown Executive: We have to get that information, sorry. Can we give it to you when we see you next week. Or we can drop you an e-mail once we have found the number. Operator: We have a follow-up question from Ntebogang of Investec. Ntebogang Segone: Sorry, guys. Just a quick one, right? So if the PGM -- if the cash flow from the PGM business will be funding these projects. Now my question is around dividends going forward. I mean dividends, your dividend policy is based on dividend received. Ferrous outlook seems muted. So you're not expecting as much dividend received from Ferrous as historic levels. And then now the cash from the PGM business, all of all, essentially, I'm assuming that now because we will be funding these projects, it will then not be going to dividends to the African Rainbow Minerals. So how should we then look at dividends going forward for ARI? Unknown Executive: We are committed to basically giving cash back to our shareholders so -- and it's a capital allocation decision, but it's a commitment that we have made in the bigger scheme of things. As we weigh this project that we need to advance, we also basically take into consideration the dividend payment as well. Unknown Executive: Yes. Maybe I can add, Ntebo. So our dividend policy remains that 40% to 70% of the dividends that we receive from the underlying operations. So yes, as you point out, we might not be expecting -- and I mean we were not expecting actually before this rally in the PGM basket price. We were not expecting dividends coming through from those operations for the next 3 years. So thankfully, we're in a better place. But if those operations are able to fund their requirements and there's anything that's left over that will obviously be given up through to ARM and to our partners. But I think what you can model if you need to model is work with that 40% to 70%. In last couple of years, we have gone above that range, and that is when we -- looking at the cash that we're actually sitting on, we say, okay, actually, we can afford to go beyond that range and we make that decision. We've made it a few times quite often. So -- but just to be on the conservative side, still use that 40% to 70% as a guideline for the dividends that ARM would then be paying. Unknown Executive: I think also maybe just to add on, I think it just sort of links to the question that Andrew asked before, at current spot prices, and we'll run the numbers. But sort of my assessment is that if the current spot price prevail in the -- the cash generative -- cash that will be generated above as well as is quite substantial. And I think that most likely will be more than what the -- so there will be surplus cash available even after servicing requirements to complete the Merensky study as well as the development at the Da. So there is a good chance that if the current prices prevail, that there will be cash passed up through the form of dividends to our book. Unknown Executive: And equally, as ferrous is facing challenges due to pricing and cost and while we try to turn around that business, you can expect more on that front. Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question-and-answer session. I will now hand back for closing remarks. Unknown Executive: Thank you, everyone, for dialing in. We appreciate your participation. We will be on the road next week -- investors. If you've got any more questions or you feel like we may be didn't answer some of your questions to your satisfaction, please feel free to call me or send an e-mail and we'll endeavor to give you accurate answers as soon as possible. But thank you very much, everyone. Operator: Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.
Operator: Good afternoon. Thank you for joining Tetragon's 2025 Annual Report Investor Call. [Operator Instructions]. The call will be accompanied by a live presentation, which can be viewed online by registering at the link provided in the company's conference call press release. This press release can be found on the shareholder page of the company's website, www.tetragoninv.com/shareholders. [Operator Instructions]. As a reminder, this call is being recorded. I will now turn you over to Paddy Dear to commence the presentation. Patrick Giles Dear: As one of the principals and founders of the Investment Manager of Tetragon Financial Group Limited, I'd like to welcome you to our investor call, which we will focus on the company's 2025 annual results. Paul Gannon, our CFO and COO, will review the company's financial performance for the period. Steve Prince and I will talk through some of the detail of the portfolio and performance. And as usual, we will conclude with questions, those taken electronically via our web-based system at the end of the presentation as well as those received since the last update. The PDF of the slides are now available to download on our website. And if you are on the webcast, directly from the webcast portal. Before I go into the presentation, some reminders. First, Tetragon's shares are subject to restrictions on ownership by U.S. persons and are not intended for European retail investors. These are described in detail on our website. Tetragon anticipates that its typical investors will be institutional and professional investors who wish to invest for the long term and who have experience in investing in financial markets and collective investment undertakings who are capable themselves of evaluating the merits and risks of Tetragon shares and who have sufficient resources both to invest in potentially illiquid securities and to be able to bear any losses that may result from the investment, which may equal the whole amount invested. I would like to remind everyone that the following may contain forward-looking comments, including statements regarding the intentions, beliefs or current expectations concerning performance and financial condition on the products and markets in which Tetragon invests. Our performance may change materially as a result of various possible events or factors. So with that introduction, let me hand over to Paul. Thank you, Paddy. Paul Gannon: Tetragon continues to focus on 3 key metrics when assessing how value is being created for and delivered to Tetragon shareholders. Firstly, how value is being created by an NAV per share total return. Secondly, how investment returns are contributing to value creation measured as a return on equity or ROE. And finally, how value is being returned to shareholders through distributions, mainly in the form of dividends. The fully diluted NAV per share was $41.88 at the 31st of December '25. NAV per share total return was 19.6% for the year. And since the IPO in 2007, Tetragon has now achieved an annualized NAV per share total return of 11.2%. For monitoring investment returns, we use an ROE calculation. This was 23.4% for 2025 full year, net of all fees and expenses. The average annual ROE achieved since IPO is now standing at 12.1%, which is within the target range of 10% to 15%. On to the final key metric, Tetragon declared a dividend of $0.12 for the fourth quarter 2025. That's an increase from $0.11 in Q3 and represents a dividend of $0.45 for the full year. Based on the year-end share price of $17.35, the last 4 quarters dividend represents a yield of approximately 2.6%. This next slide shows a NAV bridge breaking down into its component parts, the change in Tetragon's fully diluted NAV per share, starting at $35.43 at the end of 2024 to $41.88 per share at the end of 2025. Investment income increased NAV per share by $11.24 per share. Operating expenses, management and incentive fees reduced NAV per share by $2.78 with a further $0.29 per share reduction due to interest expense incurred on the revolving credit facility. On the capital side, gross dividends reduced NAV per share by $0.44. There was a net dilution of $1.28 per share, which is labeled as other share dilution in the bridge. This bucket primarily reflects the impact of dilution from stock dividends plus the additional recognition of equity-based compensation shares. I will now hand it back over to Paddy. Patrick Giles Dear: Thanks, Paul. As on previous calls, before we delve into the details of our performance for the year, I'd like to put the company's performance in the context of the long term. Tetragon began trading in 2005 and became a public company in April 2007. So the fund has almost 21 years of trading history. What this chart does is show the NAV per share total return, which is that thick green line and the share price total return, which is the dash green line and shows them since IPO. The chart also includes equity indices, the MSCI, ACWI and the [ FTSE ] all share and also includes the Tetragon hurdle rate, which is SOFR plus 2.75% approximately. As you can see in the graph, over the time that Tetragon has been trading as a publicly listed company, our NAV per share total return is 631%. We believe that our somewhat idiosyncratic structure of a listed fund owning alternative assets and a diversified alternative asset management platform has enabled us to create an alpha-driven ecosystem of ideas, expertise, insights and connections that helps us to generate investment returns. Continuing the theme of looking at the long term, here are some more performance metrics. Our ROE or investment return for the year, as Paul said, is plus 23.4%. Our target is 10% to 15% per year over the cycles, and our average since IPO is 12.1% per annum. So to date, we are achieving that target. Thus, this year's performance is an outlier, but on the positive side. The table also shows that over 39% of the public shares are owned by principals of the investment manager and employees of Tetragon Partners. We believe this is very important as it demonstrates a strong belief in what we do as well as a strong alignment of interest between the manager, our employees and Tetragon's shareholders. This next slide shows the breakdown of the $3.9 billion of net asset value by asset class. Now over the year, we've reorganized the asset classes from prior reporting periods, and it reflects the current mix of our portfolio based on the underlying assets and fund structures. So to give you some color on that, Westbourne River Event fund and other funds have been reclassified to equity funds from event-driven equities. Acasta funds have been reclassified to credit funds previously under the event-driven equities, convertible bonds and other hedge funds. U.S. CLOs and Tetragon Credit Partners funds have been reclassified to credit funds, and that's from previously bank loans. Contingency capital funds have been reclassified to credit funds from legal assets. Hawke's Point funds have been reclassified to equity funds from private equity and venture capital. And lastly, the new Tetragon Life Sciences Fund has been classified to equity funds from other equities. So these colored disks show the percentage breakdown of the asset classes and strategies as at year-end 2025, and that is on the left and compares them with where they were the previous year at the end of 2024 on the right. So a couple of points to highlight. Tetragon's investment in private equity stakes in asset management companies, so this is collectively known as Tetragon Partners, is now 45% -- sorry, 42%, down from 45%, and that is mainly driven by the partial sale of Equitix during the year. Private equity and venture capital grew to 21% from 17%, and that is mainly driven by the gains in Ripple. Equity funds, which comprise investments managed by Hawke's Point, Westbourne River, Tetragon Life Sciences, et cetera, are at 22% from 20%, and that's driven by gains primarily in Hawke's Point. And the credit funds, which now comprise investments managed by contingency and Acasta as well as CLOs are 5% of NAV versus 9% in the previous year, and that is driven predominantly by declines in CLOs, but also a redemption in Acasta. It's worth a slight pause to reiterate that last point. Many people have thought of Tetragon as a CLO business, but to reiterate, bank loans in total as an asset class are now down to less than 5% of the portfolio. And so I think those of you who have long memories will remember the IPO nearly 20 years ago, and we were probably about 96% in CLOs. So a dramatic change over the years in terms of our portfolio allocation. Now let's move on to discuss the performance in more detail. The NAV bridge that Paul showed was a high-level overview of NAV per share. And this table shows a breakdown of the composition of Tetragon's NAV at the end of 2024 versus the end of 2025 by asset classes and the factors contributing to the changes in NAV. Thus this table shows the investment performance plus capital flows and so tying back to that change in NAV. As you can see from the bottom row of the table, the aggregate investment performance during 2025 was mainly driven by the same 3 investments, which were the strongest performance in 2024. First, Tetragon Partners ownership or GP stake in Equitix. Equitix is a leading international investor, developer and fund manager in infrastructure, and it was the strongest positive contributor in 2025 with a gain of $432 million. During the year, Hunter Point Capital, HPC, acquired a 16.1% stake in Equitix at an enterprise value of GBP 1.3 billion, excluding net debt. Post transaction, Equitix remains Tetragon's largest position. Equitix is a leader in a sector where we continue to see significant runway for innovation and growth. Second, Tetragon's investment in Ripple Labs contributed $333 million of gains in 2025. Ripple Labs is a top U.S. enterprise blockchain company, underpinned by the XRP token and XRPL cryptocurrency ledger. In 2025, the company benefited from various tailwinds, including the final resolution of the SEC's lawsuit, significant platform expansion, U.S. cryptocurrency policy developments. And the shares also benefited from multiple share tender offers. In the fourth quarter, Ripple followed a tender offer, valuing the company at $40 billion with a strategic investment round at the same valuation backed by Citadel, Fortress, Brevan Howard and Galaxy. And the third big mover, investments in funds managed by Hawke's Point which is Tetragon Partners resource finance business. These generated gains of $260 million, led by their largest strategic investment, Ora Banda Mining Limited, an Australian gold mining exploration and development company. On the negative side, investments with exposure to bank loans via collateralized loan obligations or CLOs, led losses in 2025. This includes $117 million decline in LCM, our CLO manager, owned within Tetragon Partners, where AUM continued to fall through the year. Indeed, separate equity investments in older vintage CLOs contributed an additional $32 million to losses, including vehicles managed by Tetragon Credit Partners. As I've said before, but I'm very happy to reiterate, it's hard to imagine 3 less intrinsically correlated investments. These 3 investments exemplify our diversified approach, our focus on identifying attractive alternative investment strategies that may be hopefully more likely to have low correlation to markets and indeed to each other. Now to take you through the asset classes in more detail. Firstly, our private equity holdings and asset management companies had gains of $355 million. And these asset management businesses continue to grow and perform well, and this was the best performing segment and obviously includes Equitix that I've mentioned. Secondly, equity funds gained $296 million on the year. And again, as I've mentioned, that includes the Hawke's Point funds. Thirdly, the credit funds had losses of $19 million, the losses mainly generated through CLOs -- and through CLOs. Real estate had a loss of $10 million. And lastly -- sorry, and private equity and venture capital had a gain of $342 million, and this includes Ripple as a direct private equity investment. Lastly, other equities and credit had a gain of $63 million. So now what we're going to do is go through more detail on each category. And to do that, we'll start at the top with Tetragon Partners, our private equity investments business in asset management companies, and I'll pass over to Steve. Stephen Prince: Thanks, Paddy. Before I review the performance of the constituent businesses of Tetragon Partners, I wanted to discuss the renaming of the business from TFG Asset Management that occurred at year-end. Over the last several months, we have been taking steps to simplify the way we present Tetragon Financial Group, both on our website and in our annual report, refining the description of the company's investment strategy and the ways that we invest. Initially, as Paddy mentioned earlier, Tetragon focused on CLO equity and invested exclusively with external managers. However, even during its initial public offering in 2007, Tetragon was built with the capability to invest in alternative assets and strategies, both partnering with asset managers who offer differentiated expertise and by making direct idiosyncratic investments. Beginning in 2010, when we acquired Loan Manager LTM, Tetragon began that journey of building asset management businesses. This first transaction was followed by our real estate joint venture, GreenOak, which eventually became BentallGreenOak or BGO. That was followed by the acquisitions of hedge fund specialist Polygon and our infrastructure manager, Equitix. More recently, we launched Hawke's Point and Banyan Square and Contingency Capital. Our asset management businesses give Tetragon the capability to invest as an LP in the underlying strategies and to benefit from the growth in the value of our GP stakes. In renaming our asset management platform, Tetragon Partners, we have sought to emphasize that an important part of Tetragon's growth has been our success in Tetragon Financial Group and TFG Asset Management, now Tetragon Partners, partnering with asset managers who offer us this differentiated expertise. Through the combination of these partnerships and Tetragon's direct idiosyncratic investing, the diversification of our exposure now ranges from event-driven arbitrage to legal assets from life sciences to AI and machine learning from GP stakes in asset management businesses to digital assets and from mining and resource finance to infrastructure, venture capital co-investments and beyond. I would now like to move on to the performance of the Tetragon Partners segment during 2025. Our private equity investments in asset management companies through this group, Tetragon Partners, recorded an investment gain of $355 million during 2025 driven by our investment in Equitix. Equitix is a leading international investor, developer and fund manager in infrastructure. Tetragon's investment in Equitix was the strongest positive contributor in the portfolio for the year. Tetragon's investment made a gain of $432.2 million in 2025, driven by a combination of: a, a higher valuation as the valuation approaches were calibrated towards the transaction that I will talk about in a moment, where we sold a minority stake, foreign exchange gains as the pound gained 8% against the U.S. dollar, approximately 50% of the value of Equitix is hedged; and lastly, dividend income of $9.4 million received from Equitix during the year. So let me spend a moment on the minority stake transaction we consummated with Hunter Point. In October 2025, Tetragon completed a sale of a minority stake in Equitix to Hunter Point or HPC, an independent investment firm providing capital solutions and strategic support to alternative asset managers. HPC acquired a 16.1% stake in the business at an implied enterprise value of GBP 1.3 billion before accounting for net debt. HPC's stake was acquired from existing investors, approximately 14.6% from us, Tetragon Partners and 1.5% from Equitix Management. Today, Tetragon holds 66.4% of Equitix. Our investment in BGO, a real estate-focused principal investing lending and advisory firm generated an investment gain in 2025 of GBP 54.8 million. Distributions to Tetragon from BGO totaled $19.9 million during the year, reflecting a combination of fixed quarterly contractual payments and variable payments. The valuation of BGO, I should point out, is on a discounted cash flow basis with an assumed exit upon the exercise of the call option in 2026, which I'll talk about in a moment. The exercise price is determined based on the average EBITDA of BGO during the 2 years prior to the exercise of that option. So the main driver of the gain in BGO during the year was an increase in the value of the put/call option due to a higher EBITDA achieved than was previously forecast and an unwinding of the discount at which we hold that -- the value of that option as we got closer to the exercise date. As discussed previously, as I have been discussing, the put call is exercisable in 2026, 2027. And that was put in place in 2018 when Sun Life Financial acquired GreenOak and formed BGL. So I now want to talk about a subsequent events after the year-end. In February '27, Sun Life Financial exercised its option to call our position in BGO, and that transaction is settling in this month in March. Tetragon Partners also agreed as part of that transaction to relinquish certain ongoing rights it has held in the business. We will be retaining -- Tetragon Partners will be retaining its ownership of carried interest in all existing GreenOak and BGO real estate funds as well as its LP interest in a number of those funds. However, going forward, given that Tetragon Partners has monetized its 13% stake in BGO, we will no longer be including BGO as one of our partners on the platform. Moving on to LCM. LCM is a bank loan asset management company that manages loans through collateralized loan obligations, or CLOs. That business generated a loss of $116.5 million during the year as the valuation of LCM decreased for the following reasons: First of all, LCM's AUM fell to $6.6 billion at the end of 2025, which was 25% lower than the prior year's AUM of $8.8 billion. That was due both to the amortization of LCM's existing deals and the fact that LCM did not issue any new deals during 2025. Due to the current issuance volumes that we're seeing from LCM, the future capital raising assumptions in the model were reduced by the valuation agent, which lowered the value of the business. These factors also led to lower EBITDA and the market multiple approach, lower cash flows used in the DCF valuation and a lower discount rate by about 150 points and a lower EBITDA multiple in valuing the business. The EBITDA multiple was reduced from 12.5x to 10.9x. Tetragon Partners' other asset managers consist of 8 diversified alternative asset managers, Westbourne River Partners, Acasta Partners, Tetragon Global Equities, Tetragon Credit Partners, Hawke's Point, Banyan Square, Contingency Capital and Tetragon Life Sciences. Details of each of those businesses can be found in Tetragon's annual report and most of them on Tetragon's website. The collective loss on Tetragon's investments in these managers and the platform was $15.3 million during the year. That's primarily owed to the working capital support that we're providing to these relatively nascent businesses. Paddy is now going to go over our fund investments. Patrick Giles Dear: Thanks, Steve. Tetragon invests in equities, primarily through funds managed by Hawke's Point, Westbourne River Partners, Tetragon Life Sciences and Tetragon Global Equities, so all part of Tetragon Partners. These investments generated a gain of approximately $300 million for the year of 2025, and that was driven by gains in Hawke's Point funds and co-investments that we've discussed. But a little bit more color. Tetragon's resource finance investments managed by Hawke's Point generated a gain of $260 million during '25, primarily driven by the investment in Ora Banda Mining Limited, an Australian gold mining project. This company had a strong 2025 with positive developments in a number of its mines, leading to its stock performing well. In addition, its shares were added to the ASX 300, the ASX 200 and the MVIS Global Junior Miners Index. Tetragon invested an additional $15.1 million into Hawke's Point as it added an investment in an Australian copper producer and increased its investments in another Australian gold mining project. A partial liquidation of investments in Ora Banda produced distributions of $108.4 million during the year. And additionally, Tetragon committed $9.9 million to Hawke's Point Critical Metals Fund. Our investments in Westbourne River European event-driven strategies were flat in 2025. For context, the net performance for the fund was plus 10.3% for its [indiscernible] share class and down 1.6% in its low net share class. Gains in M&A and corporate restructuring trades were offset by weakness in dislocation names and in the no net class, the portfolio hedge. The new Tetragon Life Sciences Fund invests in both public and private equities, targeting opportunities throughout the drug development cycle. The investment strategy is focused on high-impact therapeutic areas such as immune-mediated diseases, cardiometabolic and renal conditions, neurological disorders, rare diseases and precision oncology. In 2025, Tetragon invested just over $100 million of capital and received $62.6 million from sales and had a gain to the NAV of $30.5 million. Other equity funds, investments in other equity funds had a gain of $6.1 million during 2025. Now moving on to credit funds. Tetragon invests in credit primarily through contingency capital funds, Acasta Partner funds, Tetragon Credit Partners funds and LCM managed CLOs. This segment in aggregate had a loss of $18.5 million. First, contingency capital. These funds combine credit structuring and legal underwriting to create pools of legal assets and lend against them in a manner consistent with how a traditional asset-based lender would lend against receivables or inventory. Tetragon has committed capital of $74.5 million to contingency capital vehicles, [ 55.2 ] million of which has been called to date, and a gain of $5.5 million was generated from this investment during the year. Second, Acasta Partner Funds. The Acasta Global Fund invests opportunistically across the credit universe with a particular emphasis on convertible securities, distressed instruments, metals and mining and volatility-driven strategies. Acasta Partners also manages the Acasta Energy Evolution Fund for portfolio targeted opportunities driven by the transition of energy to renewable resources. Tetragon's investment in Acasta funds generated a gain of $8.3 million during the year, and Tetragon reduced its holding in Acasta Global Fund by $50 million during the year. Thirdly, Tetragon Credit Partners Funds. Tetragon invests in bank loans indirectly through Tetragon Credit Partners Funds, TCI II, TCI II, TCI IV and TCI V, a CLO investment vehicles established by Tetragon Credit Partners. During 2025, Tetragon's investment in funds generated $26.3 million in cash distributions and had a P&L loss of $8.7 million. Performance was negatively impacted by both realized and unrealized losses on older vintage loan exposures. And finally, U.S. CLOs. Tetragon invests in bank loans through CLOs managed by LCM, primarily by taking the majority positions in the equity tranches. Directly owned U.S. CLOs generated a loss of $23.6 million in 2025, and this performance was driven by realized and unrealized losses. During the year, investments in this segment generated $24.7 million in cash proceeds. Next is real estate. Tetragon's real estate investments are primarily through principal investment vehicles managed by BGO. And these investments are geographically focused and include investments in the U.S., Canada, Europe and Asia and generally take an opportunistic private equity style investment. BGO funds and co-investments had a net loss of $13.6 million in 2025 and due to losses mainly in the U.S. investments. And as Steve mentioned earlier, we will continue to hold these investments to fruition. Other real estate, Tetragon holds investments in commercial farmland in Paraguay, managed by a specialist third-party manager in South American farmland. And this investment generated an unrealized gain of $3.4 million after third-party revaluation in 2025. And with that, let me hand back to Steve. Stephen Prince: Thanks, Paddy. Tetragon's private equity and venture capital investments were a significant driver of performance during the year, generating gains of over $340 million. Investments in this category are split into the following subcategories: the largest contributor to investment gains was in the direct private equity bucket, which produced a gain of $326 million during the year. This related to Tetragon's investment in the Series A and Series B preferred stock of Ripple Labs. Paddy touched on this investment earlier, but as a reminder, Ripple is a U.S. enterprise blockchain company underpinned by the XRP token and the XRPL cryptocurrency ledger. The gain in this investment was driven by an increase in the price of Ripple shares observed in the private market from $64.50 at the end of 2024 to $150 per share by the end of 2025. During the year, Ripple conducted 3 tender offers, one at a price of $125 a share, one at $175 a share; and lastly, one at $250 per share. Tetragon participated in these tender offers and received $65.7 million in cash receipts during the year. Secondly, I'll cover PE investments in externally managed private equity funds and co-investment vehicles. Those investments are in Europe and North America. They're spread across 41 different positions, and they generated gains of $11 million during the year. Lastly, investments in Banyan Square's portfolio companies generated a gain of $5 million. Banyan Square has 17 positions across its 2 funds, and those investments are across application software, infrastructure software and cybersecurity. Now I'm going to cover our other equity and credit segments. We make direct investments from our balance sheet, and they target idiosyncratic opportunities. And they're typically single strategy ideas, they're opportunistic and they're catalyst-driven. These investments range from listed instruments to private investments, and they cover a broad range of assets. The breadth and diversity of our LP investments in managed funds, including through Tetragon Partners managers and our relationships with the managers on and off the Tetragon Partners platform create co-investment opportunities and ideas, which we may develop in as direct investments. This segment generated a gain of $63 million during the year and at the end of the year, comprised 15 positions. Over half the value of these positions is in shares of UiPath, which is an equity position and is our seventh largest holding at the end of the year. UiPath is a global leader in Agentic automation, which -- and they focus on helping enterprises harness the full potential of AI agents to autonomously execute and optimize complex business processes. I want to lastly cover Tetragon's cash. At the end of the year, cash at the bank was $27.1 million. The net cash balance, let me go through, however, $27 million cash at the bank, $350 million drawn on our credit facility, $0.6 million net due to brokers, $7.1 million positive in receivables and payables gives us a net cash position of $316.4 million negative -- negative $316.4 million. During the year, Tetragon increased the size of its credit facility from $500 million -- or to $500 million, I'm sorry, from $400 million, and we extended the maturity date out to 2034. At the end of the year, as I just mentioned, going through the net cash position, $350 million of our facility was drawn. And of course, this liability is incorporated into the net cash balance calculation. We actively manage our cash to cover future commitments and enable us to capitalize on opportunistic investments and new business opportunities. During the year, Tetragon used $380.8 million of cash to make investments $23.7 million to pay dividends. We received $711.6 million of cash from distributions and proceeds from the sale of investments. And finally, our future cash commitments are just under $100 million, $99.9 million. Those include investment commitments to private equity funds of $35 million, a commitment to contingency capital of $19.3 million, BGO funds of $20.7 million, a commitment to Tetragon Partners, their latest fund of $15 million and a commitment to Hawke's Point of $9.9 million. I now want to hand the call back to Paddy. Patrick Giles Dear: Most of the questions actually fit into 3 very specific areas. So rather than read each question, which might get a little dull, I've decided to amalgamate them. Apologies if I don't read out your questions word for word, therefore. But the 3 areas are, first, lots of questions about the discount to NAV and what management are doing about it. Second theme is several questions about buybacks and what we're doing and what we might be likely to do. And the third on a thematic basis is questions surrounding the sale of BGO and just asking for more clarity in various different ways. So what I'd like to do is start by answering the third question first because it does have impact on the others. And that is BentallGreenOak. So the relevance of this is it's an update post year-end. So the annual report stands for the year-end, but the very detailed minded amongst you will have seen on Page 87 of the annual report, and there is a line item for subsequent events. It's a small item, so easily missed, but an important one to refer to. And so although Steve and Paul have given you some detail, I'd like to give you a little bit more detail on that. So on the 27th of February this year, the call to buy Tetragon's stake in BGO was exercised by Sun Life of Canada. And that call will settle in March, so this month. And what it means, just to reiterate what Steve was saying, is that Tetragon has sold its total ownership in the BGO management entities and any associated ongoing rights that Tetragon had. Tetragon remains an investor in several BGO funds as an LP, and Tetragon still retains its existing participation and carried interest in the [indiscernible], GreenOak and BGO funds. So that is no change. But Tetragon no longer has any financial interest in the equity of the management companies. And thus, BGO will no longer be referred or referenced as a line item within Tetragon Partners. So I think the important point or mediacy is what does that mean for the effect on the NAV for Tetragon and Tetragon's cash. So let's start with the first of those. In addition to the call exercise, Tetragon agreed to relinquish all its ongoing rights for a payment of $155 million. This $155 million is accretive to the year-end NAV, and we expect that to be reflected in the February NAV when that is released. Separately, the call proceeds net of tax are expected to be in line to a little bit above what was in the December NAV. So just to reiterate, the $155 million, we believe will be accretive to the year-end NAV and the call proceeds will be in line with our December NAV or possibly a little bit above. Second theme here is cash. So when these transactions settle in March, we will receive approximately $475 million gross in proceeds in cash, but we will need to pay tax on some of this. So really, that brings me to the second question, which is about the cash position and how that leads into dividends and buybacks. So to update on cash, which is a little bit of an update from year-end, I'm going to start with the January fact sheet that everyone has hopefully seen. The cash position for the company at the end of January was minus $413 million. As Steve says, we have a capacity on a revolver of $500 million. And we also have capacity from lending from our prime brokers on liquid securities. So that is how the $413 million is funded is a combination of those 2. So when we receive $475 million from the sale, we will put that cash first to pay taxes. We're unsure the exact amount right at the moment. The second thing, as we've announced this morning, is we plan to spend $50 million on buying back Tetragon shares in the market. And then the immediate use for the others will be to pay down the existing debt. So that's the immediate use. It's worth just reiterating that longer-term cash usage remains a continued balance between investments, buybacks and dividends. And I would say that if we're looking at the balance between just buybacks and dividends, we currently have a preference for buybacks rather than dividends. The reason for that is partly the noncash flowing nature of the portfolio. And therefore, it's easier to spend lump sums of cash rather than dividends, which are an ongoing source of cash. And secondly, we have a preference for buybacks when there's a large discount to NAV because obviously, a large discount to NAV means that buybacks are accretive to NAV per share. And indeed, at the current share price, we believe this buyback that we are talking about today will be accretive to the NAV per share. So the third theme here is a very important one. It's a common theme, and that is what our management doing about the discount to NAV. And I'm afraid there is no simple answer to the solution. And everyone within the industry is aware of that fact. There's certainly no silver bullet. And I think followers of the U.K. closed-end market will know that this, in particular, is a market-wide issue currently. That's not a reason not to address it, but it's an important one to take into account. And forgive me if some of you or many of you have heard me on this topic before, but I don't think the answers are different. In fact, they remain the same and probably will broadly remain the same for anyone in the closed-end fund industry. And that is if one starts at the most sort of simplistic approach to address the issue, you need to find more buyers and sellers of the shares. And we believe the single most important objective to achieve that is performance. And over the years, it's compounding that performance. So driving value through increase in the NAV per share. But also, I think we have to come to a point where shareholders believe in the future performance because obviously, that is what drives the NAV going forward. So to that end, and we alluded to this in the presentation, it's not only the performance that we try and focus on, but what we think of as, call it, the engine that drives that performance. And what do I mean by that, but really is the -- our ability to generate future performance. So it's improving idea sourcing, idea generation, how we underwrite those ideas, how we risk manage those ideas, et cetera. Now if we're good at that, we then need to get people to understand what we do. We need to explain why. We need to give people confidence in the process. And sometimes that's difficult given the complex nature of some of our investments, whether it be crypto or technology or legal assets, structured credit. A lot of these are not mainstream investment assets or strategies. So we look to educate the market, and we look to our joint brokers or JPMorgan and Jefferies to help in that process, but -- and others. We're always looking to improve the quality and transparency of our reporting. I think you'll see a lot of changes in the annual report, hopefully, for the better. And indeed, that goes to monthly and websites, et cetera. We've talked a bit about dividends and buybacks, but I think they are the most tangible results of performance. If we are generating good returns and cash, that gives us the ability not only to pay ongoing dividends, but also to do one-off buybacks that can help returning capital to shareholders. But I would stress on this last point, our belief is that whilst buybacks can be very accretive to NAV per share, they don't solve the issue of a persistent discount. Indeed, there's evidence not only from the 20 years of observing the performance of our shares, there are plenty of other closed-end funds that have wide discounts that have not been affected by buybacks either. So it's not just our own information on that point. And to put some numbers to that, Tetragon's buybacks to date, not including today's announcement, we've spent $860 million on buybacks, and that's in addition to just under $1 billion in dividends. And as we're all painfully aware, that has had minimal impact on the discount. So to sum up there, we believe those buybacks are accretive. We like doing them, but we don't think they solve the problem of the discount. So those are the sort of 3 large thematic questions we received. There is one rather more specific question, and that is on Ripple. And the question is, can you tell us a bit more about how you value your investment in Ripple Labs. And for that, I'm just going to hand over to Paul, as CFO. Paul Gannon: Thanks, Paddy. So as a reminder, Tetragon holds approximately 3.4 million of the Series A and B preferred stock. This is unlisted, but does trade on private platforms, and we have access to more than one of these. In addition, we also have direct relationships with some brokers who trade the stock. And so in arriving at a valuation, we're looking to both of these sources. At the 31st of December, the position was valued at $150 per share. And we also utilized the services of an independent valuation agent who determined a fair value range for the stock and $150 per share was within that range. Back over to you, Paddy. Patrick Giles Dear: Great. Thanks, Paul. That completes the Q&A session. So just leaves me to thank you once again for participating and wishing you all a very good weekend. Thank you. Operator: This now concludes your presentation. Thank you all for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the South Bow Corporation fourth quarter and year-end 2025 earnings call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, we will open up for questions. To ask a question during the session, you will need to press 1-1 on your telephone, then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today’s call is being recorded. I would now like to hand it over to your speaker, Martha Wilmot, Director, Investor Relations. Please go ahead. Martha Wilmot: Thank you, Victor, and welcome, everyone, to South Bow Corporation’s fourth quarter and year-end 2025 earnings call. With me today are Bevin Mark Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer; and Richard J. Prior, Senior Vice President and Chief Operating Officer. Before I turn it over to Bevin, I would like to remind listeners that today’s remarks will include forward-looking information and statements, which are subject to the risks and uncertainties addressed in our public disclosure documents, available under South Bow Corporation’s SEDAR+ profile and in South Bow Corporation’s filings with the SEC. Today’s discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities. With that, I will turn it over to Bevin. Bevin Mark Wirzba: Thanks, Martha, and good morning, everyone. We appreciate you joining us today. 2025 was an important year for South Bow Corporation. It was a year that tested our organization, but ultimately a year that demonstrated the resilience of our business and the discipline of our decision making. We delivered financial results that were slightly ahead of expectations, advanced our first growth initiative to completion, and, most importantly, continued to operate safely. Safety remains the foundation of everything we do. In a year of significant activity, we delivered a strong occupational safety record, reflecting the commitment of our employees and contractors even under challenging conditions. We also made meaningful progress on our Milepost 171 remedial actions, continuing to prioritize system integrity and working toward returning Keystone to baseline operations. Richard will speak to Milepost 171 shortly. Our focus on safety and operations goes hand in hand with South Bow Corporation’s financial discipline. Strong financial performance in 2025, supported by our highly contracted and predictable cash flows, enabled us to deliver on our capital allocation priorities. Now turning to growth. At our Investor Day last November, we outlined our ambitions to grow our business. Today, we see multiple potential paths to achieving those growth objectives. This will include a combination of organic opportunities that leverage our existing infrastructure to support anticipated crude oil production growth in the Western Canadian Sedimentary Basin, as well as inorganic opportunities that diversify and enhance the competitiveness of our base business. The policy environment in North America is becoming more constructive, and we believe Canada has a tremendous opportunity to grow production and add incremental egress in the coming years. Canadian producers aspire to materially grow their asset bases, and with our customer-led strategy, we are looking to put forward the most competitive solutions to meet their needs, while aligning with our capital allocation principles and risk preferences. All growth at South Bow Corporation will be balanced with financial discipline. This is non-negotiable for our team and board of directors. We remain committed to maintaining a strong balance sheet and returning a meaningful and sustainable dividend to our shareholders, all while investing in growth. That balance is central to our strategy. The Blackrod Connection project is a good example of how we think about organic growth at South Bow Corporation. It builds on existing infrastructure and enables us to safely and reliably move Canadian crude to a desirable market at a competitive toll. A recent endeavor of ours, the Prairie Connector project, has garnered some attention. While currently in early stages, the project would provide firm transportation service from Hardisty, Alberta, leveraging and optimizing South Bow Corporation’s pre-invested infrastructure and connecting to other systems downstream to deliver Canadian crude to U.S. refining and demand markets, including Cushing and destinations on the Gulf Coast. An open season to determine commercial interest is currently underway, and we look forward to discussing this potential solution further in the future. With that, I will now ask Richard and Van to provide an update on the operational, commercial, and financial aspects of the business. Go ahead, Richard. Richard J. Prior: Thanks, Bevin. I will start by talking about our safety performance. We had significant construction activity levels across our business last year, from the Blackrod project, to the Milepost 171 response and restoration, to executing a significant maintenance and integrity program. The scope amounted to more than 2.5 million work hours, where we achieved zero recordable safety incidents. Our strong focus on safety supports the well-being of our workforce and the communities where we operate. Earlier this week, we placed the Blackrod Connection project into commercial service less than 24 months from the time of sanctioning. The project was on time and on budget, with exceptional safety performance. As our first growth initiative, this is a significant accomplishment for the organization and demonstrates that we have a highly capable team that can develop and execute organic projects and deliver competitive solutions to our customers. Turning to Milepost 171, last month, PHMSA posted the results of the independent third-party root cause analysis, which confirmed that the characteristics of the incidents were unique and that the pipe and welds met industry standards for design, materials, and mechanical properties. We began proactively addressing many of the recommendations after the incident occurred last April and have made significant progress on our remedial actions and integrity work, with 11 in-line inspection runs and 51 integrity digs to investigate 68 pipe joints completed across the system so far. In parallel, we continue to work closely with our in-line inspection technology providers to enhance tool performance and detection capabilities. We are operating the Keystone pipeline at a high system operating factor, which has enabled us to continue meeting our contracted commitments while under pressure restrictions. As we progress our remedial and integrity work and share our findings with the regulators, we expect pressure restrictions to be lifted in a phased manner. The lifting of pressure restrictions would present an opportunity for a modest increase in spot movements later in 2026. With that, I will turn it over to Van to walk through our financial performance and outlook. Van Dafoe: Thanks, Richard, and good morning. First, I will speak to our financial performance in 2025. South Bow Corporation delivered solid results despite a challenging backdrop that included geopolitical and market uncertainty, tight pricing differentials, and pressure restrictions following Milepost 171. South Bow Corporation delivered normalized EBITDA of $1,020 million in 2025, slightly above our expectations of $1,010 million, with a modest outperformance driven by our marketing segment. While 90% of our business is underpinned by high-quality cash flows generated from long-term contracts, our marketing affiliate does make small contributions to our bottom line. Early last year, we took steps to reduce our risk exposure in the face of market volatility, and the team did a great job throughout the year to partially offset some of those losses. Our tax team also did an exceptional job optimizing our tax position throughout the year. Reflecting these efforts, South Bow Corporation reported distributable cash flow of $709 million, in line with revised guidance and more than 30% above our original guidance. This outperformance expanded our free cash flow position, enabling us to accelerate our deleveraging priority. We exited 2025 with a net debt to normalized EBITDA ratio of 4.7x, slightly better than the expected 4.8x. All other items were in line with our 2025 guidance. After a solid year, South Bow Corporation is starting 2026 in a position of strength, and we are reaffirming our financial outlook for the year. As Blackrod cash flows ramp in the second half of the year, we will continue to direct our free cash flow to strengthening our balance sheet, remaining on track to meet our leverage target of 4.0x in the medium term. As we deleverage, we also intend to allocate capital towards growth, and we will share our growth capital plans once we have sanctioned our next initiative. Finally, the stability of our financial results enables us to deliver a meaningful return to our shareholders. In 2025, we returned $416 million, or $2.00 per share, through our sustainable dividend. With that brief financial overview, I will hand it back to Bevin for closing remarks. Bevin Mark Wirzba: Thanks, Van. Thanks, Richard. To close, I will come back to what defines South Bow Corporation. We operate critical and enduring energy infrastructure in a corridor that connects one of the strongest and most secure supply basins in North America to some of the most attractive refining and demand markets, and we have a growing set of customer-led opportunities that leverage our pre-invested infrastructure. We plan to do that with a focus on safety, integrity, and discipline, and you can trust that our growth will be paired with balance sheet strength and sustainable shareholder returns. That is fundamental to how we run this company. 2025 showed what South Bow Corporation can deliver. We are confident in the foundation we have built, and the path ahead offers even greater opportunity. You can expect us to execute it the right way. With that, I will now ask the operator to open the line for questions. Operator: Thank you. And as a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Theresa Chen from Barclays. Your line is open. Theresa Chen: Good morning. With respect to the open season for the Prairie Connector project, can you discuss any early indications of commercial interest at this point, understanding that you are still very early on? And then, in general, how are you thinking about competition for U.S.-bound WCS egress from Enbridge and Energy Transfer, as well as the impact of incremental Venezuelan barrels flowing to the U.S. Gulf Coast, potentially displacing WCS in PADD 3? What do you see as Prairie Connector’s key competitive advantages? Bevin Mark Wirzba: Thank you, Theresa. Thanks for joining the coverage group. To your question on the Prairie Connector, we are in early stages as I mentioned. I did say in our remarks that we are a customer-led strategy, meaning that we had good alignment with our customers heading into the open season. That is as much as I can share with respect to the outcome of the open season at this time. Obviously, in addressing your second question, the impacts of the other open seasons and Venezuela, my earlier remarks also focused on providing the most competitive solution for our customers, and we believe what we have put forward is a very competitive offering that should attract the attention that we are looking for. With respect to the other opportunities, owning and controlling the most competitive and direct path to the Gulf Coast has always been an advantage that South Bow Corporation has leveraged, and we will continue to do so. Theresa Chen: Thank you. And in relation to the existing Keystone system, after sharing the root cause analysis related to Milepost 171, can you talk about the timeline of lifting the pressure restrictions in a phased manner? Can you give some details around this? What are your expectations for how much the pressure and hydraulic capacity could step up beginning in 2026? And then, within your annual guidance, how much of an impact is this given expected capacity for higher spot movements, but also the expectations for tight differentials nonetheless? Can you help us reconcile this? Bevin Mark Wirzba: Thank you, Theresa. Even initially after the incident, as Richard pointed out, we have been working very closely with our regulator on all the remedial efforts, and we have made tremendous progress on the digs and in-line inspections to date. Early on, we were able to have some de-rates lifted already on the system as we progressed. What we described in our release is that we intend to continue those remedial efforts at pace this year so that we could see a lifting of the corrective action order by the end of this year. We are in active dialogue with the regulator to ensure that what we are doing and what we are finding informs the plans as we go forward. In terms of the capacity that would be realized, it would be returning to the kind of operational capacity that we delivered in previous years, which was, I believe in 2024 and early 2025, just north of 600,000 barrels per day of delivered capacity. With respect to your last part of the question, our outlook in terms of our earnings and our guidance, the timing of this incident occurred when ARBs were quite tight with TMX coming on in 2024. The basin was long-piped by approximately 250,000 barrels per day. In 2025, we saw the basin grow north of 100,000 barrels per day and continuing to grow here in 2026. We believe that our guidance, while it includes the impact of not being able to move as many spot volumes as we had hoped, reflects that the market really does not open for us until early 2027, and then, at that point, we are planning and targeting to have the de-rates lifted so we can take advantage of those ARBs as the basin grows and overtakes the egress out of the basin. Theresa Chen: Thank you very much. Operator: One moment for our next question. Our next question will come from the line of Robert Hope from Scotiabank. Your line is open. Robert Hope: Morning, everyone. Two questions on the Prairie Connector. Maybe first, just in terms of a follow-up on when you think incremental capacity will be needed out of the basin? And then how would that mesh with what you would think would be a reasonable regulatory time frame and construction time frame if this project does proceed. Bevin Mark Wirzba: Thanks, Rob. One of the benefits of having a strategy that focuses on our pre-invested corridors is that we are in a position where our permits are in place in Canada for the Prairie Connector, and we are working closely with the Canada Energy Regulator to manage through that. Obviously, it is early stages, so we are not going to share our timelines for a potential development, but I would suggest, much like the Blackrod project where we were working within an existing corridor, our ability to advance construction quickly in a regulated environment is consistent with the Prairie Connector project objectives. With respect to the timeline of the need for the project, you can see from our customer base that most are announcing or suggesting they have growth ambitions over the next three to five years of quite materiality. Being able to develop the project over the mid-term would be consistent with providing a competitive solution for our customers at the time frame of when they are intending to have their production growth. Robert Hope: Alright. Appreciate that color. And then maybe as a follow-up, as we take a look at what the Prairie Connector would connect into in the U.S. and the path down to the Gulf Coast, we have seen Bridger file already for some regulatory approvals there. But how do you envision working with partners to help get barrels down to the Gulf Coast? Bevin Mark Wirzba: Great question, Rob. We will not speak on behalf of other developers. What I can say is our team has learned through many previous projects that allocating risk appropriately amongst all stakeholders—our customers, ourselves as developers, and partners—is really critical. The team has been working diligently on that front to ensure that we have the right alignment amongst all stakeholders to ensure that we have a project that could be advanced within our risk preferences, which, as I have stated, is critical. We will not sacrifice our capital allocation discipline through advancing any project. Robert Hope: Alright. Appreciate the color. Seems like an interesting project. Thank you. Bevin Mark Wirzba: Thanks, Rob. Operator: Thank you. One moment for our next question. Our next question will come from the line of Robert Kwan from RBC Capital Markets. Your line is open. Robert Kwan: Great. Thank you. Good morning. If I can just ask about how your growth initiatives—do you have a preference, or how do you think about the role of joint ventures and partnerships versus just outright acquisitions, over and above the organic initiatives? Bevin Mark Wirzba: Thank you, Robert. Within our strategy, we have always said that leveraging the pre-invested capital on the ground and organic allows us to develop projects at a 6x to 8x EV-to-EBITDA build multiple, and Blackrod was demonstrated at the low end of that range. Clearly, organic development that fits the needs of our customers with the same risk preferences that we have been able to achieve with even our base operations is far more accretive for shareholders over the long term. But as I pointed out in my remarks, to complement that organic strategy, there are opportunities that we believe we could leverage inorganically that provide diversity and provide some additional synergies to the business. Obviously, those will not advance at that same EV-to-EBITDA build multiple, but the combination of an organic and inorganic strategy, we believe, can deliver the shareholder returns we are targeting. Robert Kwan: Great. Thanks. And if I could just finish by asking about the open season, there is some language there about asking potential shippers to demonstrate market demand for incremental egress opportunities. What should we take away from that specific wording? And then how should we think about this with respect to the existing Keystone capacity and your contract rollovers or expirations that would occur in roughly the same proximity as this initiative? Bevin Mark Wirzba: Two great points, Robert. First, the language is actually pretty benign in that, from a regulatory standard, we have to prove need and necessity for any development that happens. That need and necessity on our existing permits was demonstrated years ago, and that need and necessity still exists today. The language is really pointing to our customers indicating to us, if they support the open season, that they have need and necessity—they have growth ambitions that require us to develop this capacity. On the second point with respect to base Keystone operations and potential impact of recontracting, the way we think about it is we are really developing a corridor. The Prairie Connector would be in addition to that corridor, and it really serves the same customer base and the same demand markets. We believe that the combination of the two would be an extremely competitive corridor going forward, and we believe that we can provide that competitive solution for customers going forward, making the corridor in and of itself the ideal solution for getting Western Canadian oil sands production down to the Gulf Coast. Robert Kwan: That is great. Thanks, Bevin. Appreciate the thought. Operator: One moment for our next question. Our next question will come from the line of Sam Burwell from Jefferies. Your line is open. Sam Burwell: Hey. Good morning, guys. Another open season question, but maybe from a different angle. Are there any learnings to be had from what happened with the original Keystone XL, especially on the U.S. side? Anything that went wrong on that project that is within your control to perhaps do differently with this one? Obviously, the route will be different, and it is different in many ways. What gives you more confidence in this project’s success where Keystone XL did not? Bevin Mark Wirzba: Sam, great question. I was around, and many of our team were around, during that last attempt. There are a tremendous amount of learnings. Subject to the permit that we have, we are developing it in a very consistent manner to that permit’s requirements, but our conversations with our customers and how we can work with them through a commercial offering—we are leveraging a lot of those learnings in those commercial discussions that are confidential at this time. As I mentioned in my opening remarks, the policy environment in North America has been far more constructive. The unfortunate events that are ongoing in Iran and the tragic events in Ukraine have highlighted that energy security and establishing energy corridors are critical. Those realities are a great backdrop for us to provide a solution that increases energy security in North America between the great resource in Canada and the strong demand markets on the U.S. Gulf Coast. Sam Burwell: Okay. Understood. And then, tying onto that, the Bridger proposal mentioned that a Presidential Permit is required to cross the border. That was obviously an issue with Keystone XL that everyone knows about. Is there a point in time, or a point in construction, or some threshold met whereby the Presidential Permit is ironclad and cannot be revoked? Has anything changed with that dynamic since 2021 when President Biden effectively put the kibosh on Keystone XL? Bevin Mark Wirzba: Per my earlier remarks, Sam, we are only going to talk to our component of a project, which is delivering service from Hardisty to the border. My comments around risk allocation and structuring, and your earlier comment around lessons learned—there are a lot of things going into the commercial dialogue right now amongst ourselves and with our partners. I will leave our partners to speak to their own business. We have really focused on finding a solution that we can deliver for our customers, with an allocation of risk that makes sense for all stakeholders in this approach. If we are not able to achieve that risk allocation that we all believe we need, then the project just will not advance. Sam Burwell: Okay. Understood. Thank you, Bevin. Bevin Mark Wirzba: Thanks, Sam. Operator: Thank you. One moment for our next question. Our next question will come from the line of AJ O’Donnell from TPH. Your line is open. AJ O’Donnell: Hey. Morning, everyone. I am going to sneak in one more about the Prairie Connector, maybe just talking about leveraging your existing corridor. I think we know that you have some pipe already in the ground in Canada. But let us say things go to plan and the project moves forward. Thinking about these barrels getting into Cushing and ultimately getting down to the Gulf Coast, can you speak to what is needed on your U.S. Gulf Coast infrastructure in order to accommodate potentially 450,000 barrels per day going down to the Coast? Would that be all on the existing Keystone system, or would you be looking to leverage other infrastructure as well? Any details you can provide there would be great. Bevin Mark Wirzba: AJ, the Keystone system in this corridor has been built in phases—Phase 1, Phase 2, Phase 3. Phases 2 and 3 were the extension of the Keystone system to Cushing and then to the Gulf Coast. Phase 3 of the system, the Gulf Coast, was sized and built for the original expansion of that system, which is what we are now building into with our Prairie Connector. It is just a continuation of that sequenced expansion of the broader Keystone system. We did build capacity on that Gulf Coast section for increased volumes. There will be some facility modifications through our base Keystone system, but this is all a continuation of that sequenced expansion of our base corridor. AJ O’Donnell: Okay. Thanks, Bevin. And then maybe just one more, shifting into marketing. I realize it is a smaller portion of your business, but spreads have been on the move, particularly WCS Houston trading pretty far back from Brent and WTI right now. Can you speak to what is going on at Houston and if you are seeing any opportunities either in the short or medium term to potentially capture some upside there, either through marketing or maybe storage opportunities? Bevin Mark Wirzba: AJ, great question. We are always in a dynamic crude oil market. It appears in the last few years, with some macro volatility earlier this year with Venezuela and now with the war that is ongoing in Iran. We have taken a really risk-off strategy with our marketing affiliate. As we pointed out, last year we went through a situation where, early in the year, there were tariffs that caused volatility. That caused us to reevaluate how we leverage our marketing affiliate and get back to a customer-led strategy. The strategy around our marketing affiliate is really to reduce the overall operating costs and variable tolls for our customers. We do not try to take advantage of swings that we see down in Houston on the WCS. We do manage and contract MarketLink, because we still have capacity there, and we have seen some movements, as you say, but it is really a non-material part of our strategy. We are focused on our 90% contracted business and managing that as best we can. Operator: Thank you. One moment for our next question. Our next question will come from the line of Ben Fullerton from TD Cowen. Line is open. Aaron MacNeil: Oh, I guess I had my associate run this one. It is Aaron MacNeil here. Good morning, all. Thanks for taking my questions. You guys highlighted Blackrod as a successful project in the context of the balance sheet and in your prepared remarks. Maybe bigger picture, can you speak to how you may look to finance a potentially larger-capital and longer-duration project given the leverage and payout ratio profile of South Bow Corporation? Bevin Mark Wirzba: Thanks, Aaron. At our Investor Day, we laid out a number of different financing strategies, whether it is financing a project at the asset level or partnering with other capital sources. We will look at the specifics of any capital project to ensure that we manage the cost of capital as well as match it to the execution risk. The point I would like to make is, when you think about us developing projects—going back to my comments around within our risk preferences—means that we are not going to take risks that would not allow us to debt finance something, and that can be a base case for people to look at. You have to have the conditions, the contract terms, the investment-grade counterparties, and the risks mitigated to a level that can attract debt-level financing that aligns with our risk preference. That might not be the best way to finance it, but the principles around managing the risks are consistent with any financing approach. We wanted to make clear to our market in November that there are multiple solutions on that front. I will just remind that we go back to our risk preferences and making sure that anything we develop meets those criteria. Van Dafoe: And, Aaron, it is Van here. We will also keep with our deleveraging journey to get to 4.0x by the mid-term, 2028. We are not deviating from that. Aaron MacNeil: Okay. That is helpful. And then, switching gears a bit, we have been fielding a lot of questions on the Grand Rapids arbitration. I can appreciate that you are not going to speak to the ongoing legal matter, but I was hoping you could help with some clarifying items. First, again, I assume the answer is no here, but is the Blackrod Connection project included in the scope of a potential sale? And then, second, how should we be thinking about sanctioning new projects with connectivity to Grand Rapids while arbitration is ongoing? Bevin Mark Wirzba: Aaron, Blackrod we advanced as South Bow Corporation alone. PetroyChina is not involved in that project. They were offered an opportunity to participate in it, and that is as much as I can say. As part of the partnership agreement, when we do pursue growth—obviously growth within the partnership frame is open to all partners—and whether or not our partners choose to capitalize into those projects is up to them. Aaron MacNeil: Okay. Alright. That is all for me. Turn it back. Operator: Thank you. One moment for our next question. The next question will come from the line of Robert Catellier from CIBC Capital Markets. Robert Catellier: Hey. Good morning. Most of my questions have been exhausted here, but I will take a shot in the dark to see if you are interested in putting out a potential capital number for the Prairie Connector project should it make it through the open season and have enough commercial interest? Bevin Mark Wirzba: Robert, unfortunately, you are not going to bait me with that. I will take a pass. We are obviously in early stages. Our team has done a good amount of work, given it is an existing corridor, but we are not establishing any cost at this point in time. Robert Catellier: Understood. And related to that, is there any ability or understanding that you can invest in some of the downstream pieces, whether it is project or otherwise, should the project move forward? Bevin Mark Wirzba: We are really speaking to the Prairie Connector component as how we are looking to participate going forward, and we are still in commercial discussions ongoing. As you can appreciate, the scale of what would be contemplated in Canada is a very meaningful development for South Bow Corporation. Robert Catellier: Okay. Thanks very much. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from JPMorgan Securities. Your line is open. Jeremy Tonet: Hi. Good morning. Bevin Mark Wirzba: Morning, Jeremy. Jeremy Tonet: Just wanted to turn to slide 19, if we could, with the Blackrod and project ramp there. If you could remind us what gives you confidence to the ramp as you laid out in the slide—it looks like the 2027 contribution could be three to four times the size of 2026. With the project just online now, can you walk us through that a little bit more? Bevin Mark Wirzba: Great question, Jeremy. We did the final tie-in weld earlier this year, so our systems are fully prepared for our customer to begin the ramp-up. The sequence of events that we are not in control over on their end—whereby they have already been steaming their asset. Once the wells start producing, they will fill their tankage and infrastructure, fill the pipeline, and then fill our tankage. That is when the production will actually start hitting the Grand Rapids corridor. There is a build-up that takes time to effectively get through commissioning and filling the existing infrastructure, and that happens through the balance of the last half of this year. We have made comments in the market previously—I will remind folks that the commercial agreements agreed to between ourselves and our customer were to acknowledge that ramp in terms of their production growth. In 2027, our outlook is that we will have a full-year contribution of that EBITDA, given the commercial agreements. Jeremy Tonet: Got it. Understood. Thank you for that. And if we think about 2027 in totality, are there any other major moving pieces as we think about growth at that point in time? Bevin Mark Wirzba: I will refer to my previous remarks, Jeremy. We are working hard this year to move through the corrective action order and complete the remedial efforts, which would then allow us, if the order is lifted, to return to full capacity on our base systems, which would give an opportunity for us to achieve that spot capacity out of the basin at a more material level than what we are experiencing. Just to remind you, 94% of our base system is take-or-pay, and we reserve 6% for spot capacity. That is the capacity we are targeting to leverage in 2027. Jeremy Tonet: Understood. I will leave it there. Thank you. Bevin Mark Wirzba: Thanks, Jeremy. Operator: Thank you. One moment for our next question. Next question will come from the line of Patrick Kenny from NBC. Your line is open. Patrick Kenny: Thank you. Good morning, everyone. Just maybe back on the funding plan for Prairie Connector, assuming a successful open season here. Can you confirm your desire for Alberta government involvement, if any, either as an equity partner or perhaps providing loan guarantees through construction, just to help protect your financial guardrails along the way? Bevin Mark Wirzba: Thanks, Patrick. You are referring to the model that was pursued historically, and I believe the Premier has been clear that she wants private developers to develop projects. We are pursuing Prairie Connector as South Bow Corporation today. With respect to your question around loan guarantees and other commercial matters, I will refer back to my comments that we are looking at the risk framework and allocating risk appropriately amongst the customers and us as a developer and, broadly, other stakeholders. We feel that we are in a different environment today where we are able to have those discussions and ensure good alignment of where those risks should be allocated. Patrick Kenny: Got it. Thanks for that. And then maybe on the 60-day review period following the March 30 deadline. How should we think about this period in terms of the binding commitments? Can they be nullified by any material change in policy such as the emissions cap, industrial carbon tax, or any other developments that might come out of the MOU between Alberta and Ottawa? Would these binding commitments basically be taking on the full stroke of pain risk, so to speak, beyond March 30? Bevin Mark Wirzba: As you point out, Patrick, there is a lot going on. When I refer to a constructive policy environment, constructive also means a very active policy environment where our customers are working closely with not only us on this open season, but considering the broader framework that the federal and Alberta governments are putting together. That is consistent with the timeline of what we are pursuing. I will not speak to those conditions or those discussions because I am not a part of them. Our timeline with having a binding open season and the time from there is just the regulated approach of how you develop a project. That is why we have been thoughtful about making a competitive solution for our customers, acknowledging the significant commitment that they have to make over the time frame of the development to commit to a project like this. These are not small decisions by anyone. I think the basin customers have relayed that, under the right policy environment, there is an ability for them to grow. We will have to defer to them on whether they feel they have the confidence to grow into the capacity that we are offering. Patrick Kenny: Okay. That is great, Bevin. I appreciate the comments. Operator: Thanks, Patrick. Thank you. One moment for our next question. Our next question comes from the line of Benjamin Pham from BMO. Line is open. Benjamin Pham: Hi. Thanks. Good morning. Maybe to start off on potential acquisitions. Can South Bow Corporation provide an update on your appetite and observations on acquisitions since your Investor Day? I am also particularly interested in valuation levels on M&A versus organic growth. Bevin Mark Wirzba: Ben, as articulated in the Investor Day and in my earlier remarks, we are pushing all the boats down the field—both organic and inorganic. Certainly, organic, leveraging our pre-invested corridors, has better valuations. To complement and diversify our business, we have been in active dialogues to try to move down the path on inorganic opportunities. In both cases, as per my last response to a previous question, we can put forward the most competitive organic opportunities for our customers, but it still takes our customers to decide if they can commit. On the inorganic side, we can provide a compelling potential solution for an acquisition, but it takes the counterparty to similarly view it as a good outcome. We are managing a multi-pronged approach where we are advancing conversations on organic and inorganic in parallel. Benjamin Pham: And then maybe just a quick follow-up on that. It sounds like you have not seen, with the market valuations expanding meaningfully since your Investor Day, that the spread between the two has widened since that time? Bevin Mark Wirzba: I think we have seen a flight to the energy sector and, in particular, to hard assets like infrastructure. Many have moved. I think that has raised the confidence in shareholders in the space and the investment proposition that infrastructure has. It gives us more confidence in the equity capital markets, if something did work on the inorganic side, that it could be supported in a transaction. Yes, valuations have improved, but I think the strength and thesis around infrastructure investment has strengthened as well. If anything, it is a slight tailwind for us. Benjamin Pham: Got it. And maybe on the Prairie Connector—you had the Big Sky proposal about a year ago. Are you able to compare and contrast the two? Is it just something more to downstream is changing, Canada is unchanged? And then, secondarily, on the Canadian permits, is that just a permit reaffirming with the CER, as you mentioned earlier in your commentary? I just want to clarify that portion of it. Bevin Mark Wirzba: In contrast to 2025, we had a Canadian government that was going through a significant transition. We had a potential tariff environment that was very uncertain, and we had a policy and regulatory framework that was not clear and did not provide the signposts for our customers to legitimately view any kind of meaningful growth as an alternative. Fast forward a year later, all those three things have materially moved in favor of a more constructive environment to consider a development. We did find that the Prairie Connector project—getting barrels to the U.S. Gulf Coast—is a very strategic advantage, and leveraging that pre-invested corridor more broadly also provides advantage. With respect to the permitting situation, these are very complex developments. The largest of the permit requirements, as you say, are held with the Canada Energy Regulator. We have to work within those permits that have been awarded, and there are expectations and things that we have to do to maintain them if we begin developing the project. There are no other material permits required at this point in time. Benjamin Pham: Okay. Understood. Thank you. Operator: Thanks, Ben. One moment for our next question. Our next question comes from the line of Sumantra Banerjee from UBS. Your line is open. Sumantra Banerjee: Hi. Good morning. Thanks for taking the question. I was curious—how you mentioned that you materially exited the TSA with TC and were able to see some workflow optimization. Are there any specific examples of the optimization you could talk to? Bevin Mark Wirzba: Thanks, Sumantra. Our team had three objectives last year, in addition to table stakes of safe operations, and one of those objectives was exiting the TSAs as soon as we could. That ties to one of our key objectives this year, in terms of now optimizing our business workflows and processes. We have already begun seeing some optimizations occur since October when we were effectively off of the TSAs, and we have a number of work streams along that front in each of the areas. An easy example would be supply chain and procurement—utilizing the historical ERP system that we had until we stood up our own system, all those business processes around invoicing and procurement were done in the old way, and now we are able to establish new processes. We have workstreams on financial planning and analysis and on our systems. We are building a new process around budgeting and real-time analysis of our financials and costs, giving the tools to our teams so they can run the business as efficiently as possible. We see 2026 as a big year of standing up all those optimizations. We are leveraging the latest technology in AI where it is appropriate and where it can help make those processes more efficient. Sumantra Banerjee: Got it. That is really helpful. Just wanted to shift towards capital allocation quickly. I know you outlined your priorities in the release, but how are you looking at balancing dividend growth versus reducing the leverage? Bevin Mark Wirzba: I will turn it over to Van on our dividend policy. I want to remind folks that we are going to stick to our capital allocation philosophy with respect to building out this business. When we spun, we were allocated a significant amount of debt and a very meaningful and sustainable dividend, but at a very high level and at payout ratios maybe a bit higher than we like. Van, you can talk through our journey on deleveraging and dividend growth. Van Dafoe: Sure. Thanks, Bevin. Our payout ratios on a DCF basis and on an earnings basis were higher than what we would like. We would like them to be, on a DCF basis, in the low 60s on a consistent basis, and, obviously, under 100% on an earnings basis. Until that time, we would not contemplate a dividend increase. On top of that, our journey to get to 4.0x leverage—again, we would not contemplate a dividend increase until we get to that point. Once we do, our plan would never be to forecast future dividend growth. If we decide we are going to increase our dividend, we would state that, and that would be our new dividend level. Sumantra Banerjee: Got it. That is really helpful. Thank you so much. Bevin Mark Wirzba: Thank you. Operator: This concludes the question-and-answer session. I would now like to turn it back over to Bevin for closing remarks. Bevin Mark Wirzba: Thank you for joining us today and for your continued interest in South Bow Corporation. We look forward to connecting with you in a couple of months’ time. Have a great day. Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Hello and welcome to BCP Investment Corporation's Fourth Quarter and Full Year Ended December 31, 2025 Earnings Conference Call. An earnings press release was distributed yesterday, March 5, after market close. A copy of the release, along with an earnings presentation, is available on the company's website at www.bpinvestmentcorporation.com in the investor relations section and should be reviewed in conjunction with the company's Form 10-K filed yesterday with the SEC. As a reminder, this conference call is being recorded for replay purposes. Please note that today's conference call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described in the company's filings with the SEC. BCP Investment Corporation assumes no obligation to update any such forward-looking statements unless required by law. Speaking on today's call will be Ted Goldthorpe, Chief Executive Officer, President, and Director of BCP Investment Corporation; Brandon Satoren, Chief Financial Officer; and Patrick Schafer, Chief Investment Officer. With that, I would now like to turn the call over to Ted Goldthorpe, Chief Executive Officer of BCP Investment Corporation. Please go ahead, Ted. Good morning. Ted Goldthorpe: Welcome to our fourth quarter and full year 2025 earnings call. I am joined today by our Chief Financial Officer, Brandon Satoren; our Chief Investment Officer, Patrick Schafer; and the rest of the team. Following my opening remarks on the company's performance and activities during the fourth quarter and full year, Patrick will provide commentary on our investment portfolio and our markets, and Brandon will discuss our operating results and financial condition in greater detail. I would like to start by discussing some highlights. 2025 was a transformational year for the company. In July, we completed our merger with Logan Ridge, and in August, we successfully completed a rebranding and name change. The merger meaningfully strengthened our platform, expanded our scale, and broadened our portfolio diversification. At the same time, our rebranding better reflects our affiliation with the broader BC Partners Credit platform and is a representation of our long-term vision as we position the company for its next phase of growth. In December, we completed our tender offer by purchasing roughly 558,000 shares at an aggregate cost of approximately $7,600,000, which was accretive to NAV by $0.18 per share. Consistent with our diligent capital markets management strategy, during the year, we also proactively extended and laddered our unsecured debt maturities, issuing $75,000,000 of 7.75% notes due October 2030 and $35,000,000 of 7.50% notes due October 2028, while also redeeming our 4.875% notes due 2026. These actions further diversified our funding base and provide us with enhanced financial flexibility. As a result of this year's performance and the successful execution of multiple strategic initiatives, the Board of Directors approved a quarterly base distribution of $0.32 per share for the quarter ended 03/31/2026. Additionally, the Board also approved the transition of the company's base dividend payment schedule from quarterly to monthly beginning in April 2026 while retaining the potential for quarterly supplemental distributions. We believe this change better aligns our distribution schedule with shareholder interests. The Board approved a regular monthly base distribution of $0.09 per share for each of the months of April, May, and June 2026. Also consistent with previous years, on 03/04/2026, the Board authorized a renewed stock purchase program of up to $10,000,000 for approximately a one-year period. All these initiatives I have discussed are designed to enhance shareholder value and reaffirm our commitment to shareholders. During the quarter, we generated net investment income of $7,400,000, or $0.57 per share, compared to $8,800,000, or $0.71 per share, in the prior quarter. For the year, we generated $25,100,000, or $2.28 per share, compared to $24,000,000, or $2.59 per share, for 2024. We remain focused on executing our strategic initiatives, managing expenses, optimizing portfolio positioning, and earnings and distribution coverage over time. Before handing the call over, I would like to take a moment to address recent developments in the broader credit markets, specifically regarding the software segment. Over the last several weeks, we have seen a notable risk-off move in public software valuations, driven largely by uncertainty and speculation around how quickly AI adoption might change competitive dynamics, rather than broad-based fundamental deterioration across the sector. As a reminder, BCP Investment Corporation remains broadly diversified, with investments across 34 industries, with software representing approximately 12.5% of the portfolio's fair market value. We have been proactive in evaluating our software-related exposure through an AI disruption lens. Based on our internal review, the overwhelming majority of software exposure we track is assessed as low to medium AI impact; only a small portion is viewed as high impact. We also believe the market will increasingly differentiate between companies that are mission-critical and embedded in customer workflows, often supported by proprietary data, higher switching costs, and customers operating in regulated industries, versus simpler point solutions that may be more vulnerable if they fail to incorporate AI into their products and operations. As a result, our focus remains on scale, activity, and credit quality, structure, underwriting, and monitoring that emphasizes revenue durability, retention, pricing power, and downside protection. Looking ahead, while macroeconomic headwinds persist, we believe current market dynamics continue to create compelling opportunities for our disciplined strategy. We anticipate that 2026 will bring increased activity in the M&A market and expect to capitalize on opportunities in our portfolio. With a larger, more diversified platform and a stronger balance sheet headed into the year, we believe we are well positioned to drive continued earnings growth and long-term value creation. With that, I will turn the call over to Patrick Schafer, our Chief Investment Officer, for a review of our investment activities. Patrick Schafer: Thanks, Ted. During the fourth quarter, we were intentionally prudent in new investment deployment as we executed on several key capital initiatives, including our debt refinancing and tender offer. We view this as disciplined capital management, and we are looking to deploy into attractive opportunities as conditions warrant. Competition remains elevated across sponsor-backed direct lending, particularly for higher-quality assets, and we continue to see lenders competing not only on spreads but also on terms and certainty of execution. In environments like these, we continue to stay disciplined, prioritizing transactions where we can achieve appropriate economics alongside strong documentation and downside protections. When pricing and returns are not compelling, we are comfortable stepping back and continuing to be selective from a credit quality perspective to focus on maximizing risk-adjusted returns for our shareholders. Turning to slide 10, originations for the fourth quarter were $9,600,000 and repayments and sales were $40,400,000, resulting in net repayments and sales of approximately $30,800,000. Overall yield on par value of new debt investments during the quarter was 11.8%. This compares to a 12.9% weighted average annualized yield excluding income from nonaccruals and collateralized loan obligations. As of 12/31/2025, our investment portfolio at year-end remained highly diversified. We ended the year with a debt investment portfolio, when excluding our investments in CLO funds, equities, and joint ventures, spread across 74 different portfolio companies and 34 different industries, with an average par balance of $3,500,000 per investment. Turning to slide 11, at the end of 2025, we had 13 investments on nonaccrual status, attributable to 10 portfolio companies, representing 47.1% of the portfolio at fair value and cost, respectively. This compares to 10 investments attributable to 8 portfolio companies on nonaccrual status as of 09/30/2025, representing 3.8% and 6.3% of the portfolio at fair value and cost, respectively. On slide 12, excluding our nonaccrual investments, we have an aggregate debt investment portfolio of $391,700,000 at fair value, which represents a blended price of 92.7% of par value and is 81.5% comprised of first lien loans at par value. Assuming a par recovery, our 12/31/2025 fair values reflect a potential of $30,900,000 of incremental net value, or a 14.8% increase to NAV. When applying an illustrative 10% default rate and 70% recovery rate, our debt portfolio would generate an incremental $1.46 per share of NAV, or an 8.7% increase as it rotates. I will now turn the call over to Brandon to further discuss our financial results for the period. Brandon Satoren: Thanks, Patrick. For the quarter ended 12/31/2025, the company generated $17,500,000 in investment income, a decrease of $1,400,000 as compared to $18,900,000 reported for the quarter ended 09/30/2025. The decrease in investment income was primarily driven by the distribution from our Great Lakes joint venture coming in $1,300,000 lower than the prior quarter and historical levels as a result of a nonrecurring item, as well as the impact of two additional investments on nonaccrual and decreases in base rates. For the year, total investment income was $61,200,000 compared to $62,400,000 in 2024. For the quarter ended 12/31/2025, total expenses were $10,100,000, which represents a $200,000 decrease as compared to $10,300,000 reported for the prior quarter. The decrease in expenses was primarily driven by lower incentive fees and general and administrative expenses, partially offset by higher financing costs associated with 30 days of duplicative interest expense associated with calling the company's April 2026 notes, which amounted to $500,000. For the year, total expenses were $36,200,000, or a $2,200,000 decrease as compared to $38,400,000 in 2024. The decrease in expenses compared to the prior year was primarily driven by lower incentive fees. Accordingly, our net investment income for the fourth quarter of 2025 was $7,400,000, or $0.57 per share, which constitutes a $1,000,000 decrease, or $0.14 per share, from $8,400,000, or $0.71 per share, reported for the prior quarter. Core net investment income for the fourth quarter was $4,100,000, or $0.32 per share, compared to $5,200,000, or $0.42 per share, in the third quarter of 2025. For the year, net investment income was $25,100,000, or $2.28 per share, compared to $24,000,000, or $2.59 per share, in 2024. As of 12/31/2025, our net asset value totaled $209,200,000, a decrease of $22,100,000, or 9.6%, from the prior quarter's NAV of $231,300,000. On a per share basis, NAV was $16.68 per share as of 12/31/2025, representing an $0.87 decrease, or 5%, as compared to the company's prior quarter NAV per share of $17.55. Notably, the difference between the 9.6% decrease and 5% is the accretive impact of the tender offer and our buyback program. Broadly speaking, the decline in NAV was due to $14,500,000 in net realized and change in unrealized losses on the portfolio, as well as core net NII not covering the dividend paid during the quarter by approximately $2,000,000. As it relates to the right side of our balance sheet, we ended the year with gross and net leverage ratios of 1.5x and 1.4x, respectively, which compares to gross and net leverage ratios of 1.4x and 1.3x, respectively, for the prior quarter. Specifically, as of 12/31/2025, we had a total of $312,300,000 of borrowings outstanding with a current weighted average contractual interest rate of 6.9%. This compares to $324,600,000 in borrowings outstanding as of the prior quarter with a weighted average contractual interest rate of 6.1%. The company finished the year with $124,700,000 of available borrowing capacity under the senior secured revolving credit facilities, which are subject to borrowing base restrictions. Finally, I am pleased to share that during the quarter, the company refinanced its $108,000,000 of unsecured notes maturing in April 2026 by issuing $75,000,000 of 7.75% notes due October 2030 and $35,000,000 of 7.50% notes due October 2028. These actions reduced near-term refinancing risk and better laddered the company's debt capital structure by staggering the company's maturities, which improves the company's balance sheet. With that, I will turn the call back over to Ted. Ted Goldthorpe: Thank you, Brandon. Ahead of questions, I would like to reemphasize our commitment to our shareholders. Our focus remains on disciplined capital allocation, maintaining a high-quality portfolio, and delivering attractive risk-adjusted returns. With a larger, more diversified platform and a strengthened balance sheet, we believe we are well positioned to drive continued earnings growth and value creation in the quarters ahead. Thank you once again to all our shareholders, employees, and partners for your ongoing support. This concludes our prepared remarks, and I will turn the call over for questions. Thank you. Operator: Quick reminder before we start the Q&A. If you would like to withdraw a question or your question has been answered, please press 1 again. Thank you. We will take our first question from Erik Zwick from Lucid Capital Markets. Please go ahead. Erik Zwick: Thanks. Good morning, everyone. You know, Ted, in your prepared comments, you mentioned the actions that you took in 2025 reflect the long-term vision as you position the company for its next phase of growth. I am curious, from your perspective, if you think about the next year or two, what do you think the mix of growth looks like from organic and acquisition mix? And I guess I am kind of curious on that latter potential source of growth, the acquisitions. What the pipeline looks like in terms of opportunities. And I guess if I add another piece in there, are there any other initiatives for growth that you are considering at this point as well? Ted Goldthorpe: Yes. It is a great question. I do not see us pursuing organic growth. I mean, anything, given where our stock trades, makes sense for us to continue to buy back stock. So the tender plus share buybacks obviously were a pretty nice tailwind to NAV for us. In terms of all this recent choppiness in the market, all the recent headlines, our M&A pipeline is probably bigger than it has ever been. So that includes both public entities and unlisted entities. So we expect to be able to grow our platform. We had to get Logan Ridge done, and that sets us up to do continued M&A. As you know, we have kind of rolled up a number of BDCs over the last couple of years, and it is a key part to our strategy to basically continue to do that, optimize the portfolios, and continue to buy back stock. Erik Zwick: That is helpful. And then, thinking about the pipeline, organic growth, and maybe the size of the portfolio, it sounds like you still consider the buyback a pretty attractive use of capital at this point. Is that the right read on your comments there? Ted Goldthorpe: Yes. I mean, you can see our originations. Our repayments and sales are way higher than originations. The reason for that is it is more accretive for us to basically take the liquidation and buy back stock. That is what we will be doing. On a go-forward basis, we are very, very, very cautious in terms of new deployment. We are really looking for areas where we can deploy capital at very wide spreads, and again, those opportunities are just few and far between. We think there is a little bit of a disconnect between actual risk and the way risk is being priced, and so we are being pretty judicious on deploying new capital. Erik Zwick: That is great color. Thanks. And last one, maybe for Brandon. Just looking at the dividend income that you recognized in the quarter, I think it was around $200,000 or something, $197,000, and that was quite a bit below the prior kind of four-quarter average, closer to, like, $1.9 million. So just curious if there is something noteworthy that changed in the fourth quarter and what the run rate of dividend income might look like going forward? Brandon Satoren: Yes, that is right, Erik. The decrease was driven by the much lower Great Lakes—our Great Lakes joint venture’s—distribution this quarter. There was a nonrecurring item associated with it. It is an evergreen product, and every three years it rolls into a new series. That occurred in the prior quarter, and that impacted the Great Lakes distribution this quarter. It is very much a nonrecurring item. The product is sensitive to rates, so where it was previously earning and distributing is probably higher than what we are modeling going forward, but it still should generate, call it, low-teens return on a near-term basis going forward. I would also make the distinction that the nonrecurring item was just the difference between ROC versus income, so it was not necessarily a cash distribution question; it was how we are supposed to recognize the cash in terms of ROC versus income. That is right. Erik Zwick: Great. Thank you for taking my questions this morning, guys. Operator: Thank you. Our next question comes from the line of Christopher Nolan from Ladenburg Thalmann. Please go ahead. Christopher Nolan: Hey, guys. Ted Goldthorpe: Hey, Chris. Christopher Nolan: The declining dividend, should we use that as a proxy for the earnings run rate going forward in the second half of the year? Brandon Satoren: No. That was the nonrecurring item that Erik had just asked about, Chris. So next quarter, we would expect that to return to more normalized historical levels. Christopher Nolan: Okay. And then the driver in the realized loss? Ted Goldthorpe: The largest driver on the realized was a portfolio company called CPFLEX. Patrick, do you want to give some color on that? Patrick Schafer: Yes. I mean, to be honest, Chris, it was a company that was going through a sale process. The sale process had been going on some time. We had a bid that was fully covering par plus accrued interest, and we were working towards the end. To be entirely honest, in the last couple of weeks of the transaction, there were some junior lenders in the capital structure that basically created a massive amount of hold-up value, and the lenders were forced into this discussion of whether we should file the company for a prepack and then get these guys out and move on. Again, we were a small part of the syndication, but there was just an overall view that, between the costs associated with the prepack and the risk that the buyer would move away from us, lenders were willing to accept what amounted to a good amount of hold-up value at the end of the day. The difference effectively between what we had it on the books at and what we ended up realizing was that last little bit of a couple folks holding us hostage. Christopher Nolan: Got it. And then, for unrealized depreciation, were there any particularly big drivers there? Patrick Schafer: Unrealized depreciation? Yes. Please. The biggest one is called HTC Hostway. Again, kind of a similar-ish story, but they were working through LOIs, and they have two different business units and were selling two different business units. They ultimately completed the sale of one of the business units, but the other one—effectively the buyer came back and retraded, like, a $0.50 discount or something like that, which obviously did not make any sense and we were not going to take. We said no. They came back at a higher valuation, but still not something that the company was comfortable with. There is a large lender that is leading the process there. Ultimately, the conclusion was to sell the first business where we got a reasonable cash offer and paid down some debt, and then we will take the second business back to market at some point this year would be my guess. But for valuation purposes, we are using that lower retraded valuation for purposes of that. So that is the driver of the unrealized depreciation. That is the biggest and the big needle-mover there. Christopher Nolan: Got it. And then I guess strategically, on your comments in terms of the growth drivers—acquisitions—are there a lot of potential BDC sellers out there, and is the pricing for these things going down? What sort of color can you provide? Ted Goldthorpe: I would say that there are a lot of permanent capital vehicles for sale. I think the choppiness is going to just exacerbate it. Scale matters. I think there are a lot of subscale vehicles that are going to have a hard time with originations, costs, and growth and fundraising. As I said, our pipeline is really robust, and it is a mix of both private and public entities. Actually, we are pretty excited about the M&A market. We think it is a really good way to create value for our shareholders. Christopher Nolan: Interesting. Okay. Great. Thanks, guys. Ted Goldthorpe: Thank you. Operator: Our next question comes from the line of Angelo Guarino, a Private Investor. Please go ahead. Angelo Guarino: Good morning. Thanks for taking my call. This is going to be a little bit of a tough talk—big picture tough talk. I am really trying to understand where you guys are focused on. So here are a couple data points. June 30, 2019, a couple quarters after you took KCAP, NAV per share, split-adjusted, $37 a share. Over that time, you have distributed $16 per share, split-adjusted, to shareholders, and now we are sitting $20 a share NAV below that. I have been a big supporter of you. I have been a big supporter of management, been a big supporter of the strategy, and have been growing. But you keep on using terms like risk-adjusted returns, shareholder value, continued growth, and shareholder value. I am trying to understand why it seems to me that quarter after quarter your hair is not on fire about the drip, drip, drip of the base value of our investment, which is NAV. You have to agree that BDCs are rarely going to trade at huge multiples of NAV, and why am I not seeing or hearing you talk about being—your hair on fire—about what has been happening to NAV ever since you took KCAP. Ted Goldthorpe: Okay. I will answer that question. I do not necessarily subscribe to everything you said, but the reality is we have probably bought back more stock than any BDC as a percentage of our business. When we say things like that, we are trying to be judicious about how we allocate capital. We have obviously inherited a series of portfolios that were at the relative tail end and are winding those down. If you look at a lot of the headwinds toward NAV, a lot of it has come from inherited positions. When we took those on, we have been working those out over the last—I cannot remember the start date you used—but it is still over the last seven years. In the meantime, we bought back stock, we refinanced the capital structure, and we have done a number of actions that we think are shareholder-friendly. I totally hear what you are saying, and the math is the math. But when you say our hair is on fire, I would not necessarily say that. I would say we have a good command for— Angelo Guarino: I guess what I am saying is I want your hair to be on fire. Ted Goldthorpe: I do not know if you will love to hear— Angelo Guarino: A lot of discussion about—I do not know what increasing shareholder value means if, quarter after quarter or year after year, NAV is just going down, down, down. I do not hear you addressing it in a way that is clear of where that turning point is going to be, where we are going to be seeing at least stable NAV. At the same time, sure, you did the stock buybacks. It was a good deal. But even in the face of stock buybacks, we had a decrease of NAV of $0.80 in just one quarter. That is not just a one-off. This has been going quarter after quarter after quarter. I am asking you as someone who is a supporter and has been very supportive of all—since you bought KCAP—because I was a KCAP holder. I have been here for this whole ride. Why am I not hearing what I think I need to hear that tells me when this is going to—when this drip is going to stop and this thing is going to turn? Just saying that I have bought back stock at a good deal—fine—but over six and a half years, I have lost $20 in NAV, and I have got $16 in distributions. I had to pay taxes on that distribution. It would have been better off to just liquidate KCAP and give it to me six and a half years ago and let me put them in Treasuries. I am trying to understand where this is going and when, and why I am not hearing you address in these conference calls where this turn is going to occur. Is that a better way of putting it? Ted Goldthorpe: Yes. I mean, listen, we are very open-minded to having a broad discussion. Maybe we should just take this offline, and we are happy to sit down with you and take you through it, and maybe optimize our communication next quarter. So why do we not take it offline? We are happy to listen to you, of course, and listen to all of our shareholders, and happy to have that conversation. Angelo Guarino: Okay. Ted Goldthorpe: Thank you. Operator: Our next question comes from the line of Paul Johnson from KBW. Please go ahead. Paul Johnson: Yes. Thanks for taking my questions. I just wanted to echo that a little bit. I just want to understand as well where you really can provide value for shareholders, just given where we are at. In my opinion, at least at this point, I do not think that you have necessarily demonstrated that the mergers have been positive for shareholders, that this has been—that any of these have worked out, and it is clear that buying some of these assets at NAV has not necessarily been a good deal. It sounds like that is still the consideration and the plan going forward, but to me, it has not been a great way to increase shareholder NAV for you guys. So what other ways can we stabilize what is in the portfolio today and you can provide shareholders, aside from trying to scale up through mergers going forward? Ted Goldthorpe: I mean, we used to provide a lot of disclosure about where we bought the assets versus where we monetized them, and we should put that back in the presentation and walk people through why we think a number of the actions we have taken were the right and prudent actions. We will provide additional—We have historically disclosed that in a lot of detail, and obviously, we should just continue to do that, and then lay out the roadmap for why we think that makes sense. Paul Johnson: Thank you. That is all for me. Operator: There are no further questions in the queue. I will now turn the call back over to our CEO, Ted Goldthorpe, for closing remarks. Ted Goldthorpe: Great. Well, thank you all for attending our call. As always, please feel free to reach out to us with any questions, which we are happy to discuss. We look forward to speaking with you again in May when we announce our first quarter 2026 results. Thank you. Operator: The meeting has now concluded. Thank you all for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Cohen & Company Inc.'s fourth quarter 2025 earnings conference call. My name is Robert, and I will be your operator today. Before we begin, Cohen & Company Inc. would like to remind everyone that some of the statements the company makes during this call may contain forward-looking statements under applicable securities laws. These statements may involve risks and uncertainties that could cause the company's actual results to differ materially from the results discussed in such forward-looking statements. The forward-looking statements made during this call are made only as of the date of this call; the company undertakes no obligation to update such statements to reflect subsequent events or circumstances. Cohen & Company Inc. advises you to read the cautionary note regarding forward-looking statements in its earnings release and its most recent annual report on Form 10-K filed with the SEC. Earlier today, Cohen & Company Inc. issued a press release announcing fourth quarter and full-year 2025 financial results. Today's discussion is complementary to that press release, which is available on the company's website at cohenandcompany.com. This conference call is being recorded, and a replay of it will be available for three days beginning shortly after the conclusion of this call. The company's remarks also include certain non-GAAP financial measures that management believes are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measures is provided in the company's earnings release. After the prepared remarks, the call will be opened up for questions. I would now like to turn the call over to your host, Mr. Lester Brafman, Chief Executive Officer at Cohen & Company Inc. Thank you. You may begin. Thank you, Robert, and thank you, everybody, for joining us for our fourth quarter 2025 earnings call. Lester Brafman: With me on the call is Joe Pooler, our CFO. We are pleased with our strong fourth quarter and full-year 2025 results, which were driven by the continued expansion of our client franchise and particularly our full-service boutique investment bank, Cohen & Company Capital Markets, which continues to focus on frontier technologies including digital assets, energy transition, and natural resources. In 2025, we strengthened our leadership team with the appointment of additional managing directors to expand our presence in the energy and energy transition sectors as well as across space technology, aerospace, and communications infrastructure. During the year, CCM closed $43,000,000,000 in transactions and, according to SPAC Research, ranked number one in SPAC IPO underwritings by left book-run deals and in the de-SPAC advisory with leading share in de-SPAC PIPE transactions, reflecting the strength of our client franchise and execution capabilities. Supported by its growing team and strong pipeline of transactions, we believe that CCM is well positioned for continued success over the long term. CCM's pipeline is more robust than it was a year ago, reflecting our strong IPO presence and significant de-SPAC opportunities. Going forward, we will continue to focus on being the advisor of choice to growth in frontier technology sectors of the economy. For the full year of 2025, basic and fully diluted net income attributable to Cohen & Company Inc. per share was $8.33 and $4.35, respectively. Total revenue was $275,600,000, an increase of 246% from 2024, and adjusted pretax income of $41,400,000, representing 15% of total revenue. We finished 2025 with $2,300,000 of revenue per employee. Additionally, we announced a special dividend of $0.70 per share as well as our recurring quarterly dividend of $0.25 per share. These dividends are in addition to the special dividend of $2 per share that was announced in December 2025 and paid in January 2026. As we look ahead, with first quarter 2026 revenue trending substantially higher than first quarter 2025, we are well positioned to continue building on the significant momentum underway and remain confident in our ability to drive long-term sustainable value for our stockholders. Now, I will turn the call over to Joe to walk through this quarter's financial highlights in more detail. Thank you, Lester. I will begin with a discussion of our operating results for the quarter. Joe Pooler: Our net income attributable to Cohen & Company Inc. shareholders was $8,100,000 for the quarter, or $1.48 per fully diluted share, compared to net income of $4,600,000 for the prior quarter, or $2.58 per fully diluted share, and a net loss of $2,000,000 for the prior-year quarter, or $1.21 per fully diluted share. Our fully diluted earnings per share calculation reflects all convertible membership units in our primary operating subsidiary, Cohen & Company LLC, as if they are converted to shares, and it also reflects an income tax expense adjustment at an estimated effective tax rate as if our ownership structure was a full C-Corp for the entire period. Our adjusted pretax income was $18,300,000 for the quarter, compared to adjusted pretax income of $16,400,000 for the prior quarter and an adjusted pretax loss of $7,700,000 for the prior-year quarter. As a reminder, adjusted pretax income and loss is a key earnings measurement for us as it incorporates enterprise earnings attributable to our convertible non-controlling interest, which is substantially held by our Founder and Chairman, Daniel Cohen. Daniel holds his interest in the enterprise through the primary operating subsidiary, Cohen & Company LLC, which is a consolidated subsidiary of Cohen & Company Inc. As noted in prior earnings calls, CCM has become an increasingly important component of our company, generating revenue of $50,800,000 in the fourth quarter and $180,184,000,000 in the full year 2025, an increase of 370% from full-year 2024. CCM revenue as a percentage of total company revenue was 67% for the full year 2025. Investment banking and new issue revenue was $55,000,000 in the fourth quarter compared to $69,000,000 for the prior quarter and $8,200,000 for the year-ago quarter. $50,800,000 of our investment banking and new issue revenue came from our CCM business and was primarily driven by SPAC M&A and SPAC IPO transactions. European insurance origination generated an additional $3,600,000, and commercial real estate origination generated $300,000 for the quarter. As a reminder, we received financial instruments as consideration for services provided by CCM instead of cash at times, which are included in other investments at fair value on our consolidated balance sheets. Beginning in the fourth quarter, and reclassified historically, any realized or unrealized gains or losses on these financial instruments after the day of the transaction closing are now being reported in our investment banking and new issue revenue line item. Net trading revenue came in at $13,800,000 in the fourth quarter, up $300,000 from the prior quarter and up $4,900,000 from the prior-year quarter. Asset management revenue totaled $2,700,000 in the quarter, up $700,000 from the prior quarter and up $600,000 from the prior-year quarter. Fourth quarter principal transactions and other revenue was positive $31,500,000, primarily due to the completion of the business combination between our sponsored SPAC, Columbus Circle Capital Corp I, and ProCap Financial. The December 5, 2025 closing of the business combination resulted in $33,000,000 of principal transactions revenue in the fourth quarter from the markup of consolidated founder and placement shares, primarily held by the consolidated sponsor of the SPAC. After the business combination closing, there was an offsetting $16,500,000 of compensation expense related to the founder shares that were allocable to employees upon the closing, and there was an offsetting $8,500,000 of non-convertible non-controlling interest expense related to founder shares allocable to third-party investors in the consolidated sponsor. At the end of the year, Cohen & Company Inc. held 2,543,000 shares of ProCap Financial, which trades on NASDAQ under the symbol BRR. Compensation and benefits expense for the fourth quarter was $57,800,000, which was up from both prior quarters primarily due to fluctuations in revenue and the related incentive compensation, including the $16,500,000 of expense recorded related to the founder shares allocable to Cohen & Company Inc. employees from the sponsor of Columbus Circle Capital Corp I. The number of company employees was 126 at the end of the year, compared to 124 at the end of September and 113 at the end of the prior year. Net interest expense for 2025 was $1,500,000, including $1,200,000 on our trust preferred securities, $200,000 on our senior promissory notes, and $45,000 on our bank credit facility. Loss from equity method affiliates totaled $5,100,000, primarily due to $3,100,000 of mark-to-market losses on one of our SPAC series fund investments, which was partially offset by a $1,500,000 credit recorded in the net income (loss) attributable to non-convertible non-controlling interest line item. In terms of our balance sheet at the end of the year, equity was $103,100,000 compared to $90,300,000 as of the end of the prior year. The non-convertible non-controlling interest component of total equity was $400,000 at the end of the year and $11,500,000 at the end of the prior year. Thus, the total enterprise equity excluding the non-convertible non-controlling interest was $102,600,000 at the end of the year, a $23,800,000 increase from $78,800,000 at the end of the prior year. At quarter end, consolidated corporate indebtedness was carried at $33,000,000. As Lester mentioned, we declared a quarterly dividend of $0.25 per share and a special dividend of $0.70 per share, both payable on April 3, 2026 to stockholders of record as of March 20, 2026. The $0.70 per share special dividend is on top of the $2 per share special dividend that was announced in December 2025 and paid in January 2026. The Board of Directors will continue to evaluate the dividend policy each quarter, and future decisions regarding dividends may be impacted by quarterly operating results and the company's capital needs. With that, I will turn it back over to Lester. Thanks, Joe. We remain confident in our ability to execute on our strategic priorities and continue driving progress as we enhance long-term value for our stockholders. Please direct any offline investor questions to Joe Pooler at (215) 701-8952 or via email to investorrelations@cohenandcompany.com. The contact information can also be found at the bottom of our earnings release. Operator, you can now open the call lines for questions. Thank you for joining us today. Operator: We will now open for questions. At this time, we will be conducting a question-and-answer session. 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 keys. Our first question comes from Mike Grondahl with Northland Securities. Your line is now live. Hey, guys, thank you and congrats on a nice year. Joe, I think in your comments, or Lester, talking about the pipeline, you said it was robust and off to kind of a good start. Could you go into just a little bit more detail there, kind of what you are seeing, and is there any sector sticking out? Lester Brafman: Yeah. I think if we were standing on this call a year ago and looking at where our pipeline is, we are ahead of where we were last year. I think that is as much kind of context as I would like to give. And in terms of sectors, look, we dominate in the SPAC, in the de-SPAC space. That is really our strength. And so from there, as we spoke before, it really leads us into deals across all of the frontier technology space, which you are looking at whether it is digital assets, whether it is energy, energy transition, any real growth companies really fits into the SPAC product. Now, that being said, business begets business, and from what we have printed in the SPAC space, we have got some traditional M&A mandates, some capital raises, capital markets advisory work, and we are starting also to build out more industry verticals in that frontier technology space, hiring a banker focusing on space and aerospace, as well as some of the telecommunications, new telecommunications areas, and energy in the energy space as well. So when we think about industries, we think about what fits into that SPAC product. Mike Grondahl: Got it. Mike Grondahl: And then what would you say your top two priorities for 2026 are? Lester Brafman: Our top two priorities in 2026 are expanding our investment bank, expanding our footprint, getting more verticals, and not being as dependent on the SPAC product. So that is one priority. And on the fixed income trading side is, again, continue to do the same thing, continue to grow our footprint there. We are looking to add probably eight people or so in that area, all synergistic with leading with the mortgage space and trading with other products around there. So when I think about how our investment bank has grown dramatically, obviously year over year, we are in the right spaces and we have spent a lot of time making sure we have really good market share, but I do not want to forget about the fixed income trading business, which revenue-wise was close to $50,000,000 this year, and we would like to get that up to $60,000,000–$65,000,000 or so. That is where we have been, and I think if we get a couple of rate cuts, we should be able to get a little wind at our back in that area as well, but again, a little bit more stable on the fixed income side and looking at more growth in the capital markets side of investment banking. Mike Grondahl: Got it. Then maybe just lastly, I do not know if you have it handy or not, but the investment banking MD headcount at the end of 2024 and then what it was at the end of 2025? And just with your expansion plans, a rough estimate of where it could be at the end of 2026? Lester Brafman: I do not have those numbers in front of me. I think we have promoted two MDs, and again, I do not have the exact number, but my sense is we promoted a couple of MDs last year and we have hired a couple of MDs into new areas this year so far. My guess is we probably add another two to three through promotions and hiring over the year, maybe as many as four or five. So I guess two to five would be how you bound the range, or three to five is how you bound the range there. Joe Pooler: Yeah, and that is right. At the end of the year, the investment bank had 28 total employees, and we anticipate growth of about five, excluding interns, in 2026. But that can move around to the extent that we see an opportunity to hire an MD that makes sense. Mike Grondahl: Perfect. Thanks, guys, and good luck in 2026. Lester Brafman: Okay. Thanks, thanks. Operator: There are no further questions at this point. I would like to turn the call back over to Lester Brafman for closing comments. Lester Brafman: Thank you, Robert, and thanks, everyone, for listening today. We look forward to reconvening next quarter. You may now close the call. Operator: This concludes today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and welcome to the Allient Inc. Fourth Quarter Fiscal Year 2025 Financial Results. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Craig Mychajluk, Investor Relations. Please go ahead. Craig Mychajluk: Yes, thank you, and good morning, everyone. We certainly appreciate your time today as well as your interest in Allient Inc. On the call today are Richard S. Warzala, our Chairman, President and CEO, and James A. Michaud, our Chief Financial Officer. Rick and Jim will review our fourth quarter and full year 2025 results, provide a strategic and operational update, and share our outlook. We will then open the line for questions. As a reminder, our earnings release and the company's slide presentation are available on our website at allient.com. If you are following along, please turn to Slide 2 for our safe harbor statement. During today's call, we will make forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated. These risks and factors are outlined in our SEC filings and in the earnings release. We will also discuss certain non-GAAP measures we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release as well as the slides. With that, please turn to Slide 3, and I will turn it over to Rick to begin. Richard S. Warzala: Thank you, Craig. Welcome, everyone. We entered 2025 with clear priorities: expanding structural margins, strengthening the balance sheet, and positioning the portfolio around durable secular growth drivers. As we close the year, I am pleased to say we made measurable progress on all three. We delivered a strong fourth quarter and, importantly, exited 2025 with improving momentum across the business. The fourth quarter reflected several highlights, but it can be summarized by a few themes: improving industrial demand, disciplined execution across the organization, and structural margin expansion driven by our Simplify to Accelerate Now program. This performance was not only a function of higher volumes; it was operating leverage. It was improved mix. And it was sustained cost discipline translating directly into stronger profitability. We saw improving conditions at our largest vertical, industrial. A significant automation destocking we have discussed throughout the year appears largely behind us, and ordering patterns are returning to more normalized levels. At the same time, demand for our power quality solutions supporting data center infrastructure remains strong. Vehicle performance was stronger than expected in the quarter, primarily tied to commercial automotive production timing. While we do not view that as a structural shift, it contributed to the top line in the period. Medical remained steady and consistent, and aerospace and defense reflected normal program timing dynamics. So what we experienced in Q4 was broad participation across the portfolio. That balance across verticals matters. It reinforces diversification of the model and supports the durability of our results. Equally important, the margin expansion we delivered was not simply volume-driven. It reflected better mix when compared with last year's results, improved cost structure, and continued execution under our Simplify to Accelerate Now initiative. The operational work we have been doing over the past few years is now clearly embedded in the model. Turning to Slide 4, and looking at the full year, 2025 was about strengthening the foundation of the company. We set out a clear objective under our Simplify to Accelerate Now program: reduce complexity, improve throughput, and strengthen margins in a way that is sustainable. We targeted a set of structural savings in the range of $6 million to $7 million for 2025, and while not yet complete, we delivered meaningful progress on that target. These savings are being realized through footprint optimization, where we are consolidating overlapping operations and focusing our resources where we have scale and competitive advantage; accelerated product development, where we streamlined our process and reduced time to market for our offerings; and lean manufacturing disciplines, where we improved standard work and reduced non-value-added time on our shop floors, consistent with best practices that help cut cost while improving quality and reliability. This is a journey and it never ends. One example that speaks to all three is the transition of our Dothan facility. We announced this last year as part of our realignment strategy, with the plan to focus Dothan on advanced fabrication capabilities, including machining. As a result, we transferred assembly work to facilities where we have complementary capabilities. That effort, while still a work in progress, is expected to drive down costs and reduce complexity across our North American footprint. Overall, we delivered record gross margins for the year. We expanded operating income at a rate well ahead of revenue growth. We generated record operating cash flow. And we reduced net debt significantly, bringing leverage down to levels that give us real financial flexibility. The balance sheet today looks very different than it did a year ago. And that matters because it allows us to invest in organic growth, support new program launches, and pursue disciplined capital allocation opportunities from a position of strength. With that, let me turn it over to Jim for a more in-depth review of the results. James A. Michaud: Thank you, Rick, and good morning, everyone. Turning to Slide 5, fourth quarter revenue increased 17% year over year to $143.4 million, including 15% organic growth on a constant currency basis. The growth was driven primarily by strengthening industrial demand, particularly automation and power quality applications, as well as increased commercial automotive shipments within the vehicle market. From a geographic perspective, 50% of revenue was generated in the U.S., with the balance coming primarily from Europe, Canada, and Asia Pacific, consistent with our diversified footprint. Let me walk you through performance by major vertical because that is where the real story sits. Industrial revenue increased 24% in the quarter. The primary driver was strengthening automation demand as ordering patterns from our largest automation customer returned to more normalized levels following the extended destocking cycle. In addition, demand for power quality solutions supporting data center infrastructure remained very strong. Those applications continue to benefit from electrification and digital infrastructure investment. Vehicle revenue increased 35%. This was primarily due to increased commercial automotive shipments tied to a transitioning model program. As Rick mentioned, we view this as production schedule timing rather than a new long-term run rate. Construction markets also improved, and power sports conditions appear to have stabilized relative to earlier softness. Medical revenue increased 9%, supported by steady demand for surgical instruments and continued traction in precise motion applications. Aerospace and defense declined 5%, reflecting the lumpy nature of defense and space program shipments along with the previously announced M10 Booker Tank program cancellation. Importantly, underlying defense program activity remains solid. Distribution channel sales increased 11%, although that remains a smaller component of total revenue. Turning to Slide 6, here we show the composition of our revenue over the trailing twelve months, along with the year-over-year change in each market and the key drivers of that change. This slide really highlights something important about how the business has evolved, and what you are seeing in the mix is intentional. Industrial remains our largest vertical, and it is increasingly anchored by higher-value applications: power quality for data center infrastructure, motion solutions tied to automation, and applications aligned with electrification. That is where we have been directing engineering focus and capital. Aerospace and defense continues to represent a meaningful and growing contributor. While quarterly shipments can be lumpy, the underlying program activity and pipeline remains solid, and that vertical provides longer-cycle visibility. Medical remains steady and consistent. Surgical applications continue to be reliable contributors, and our precision motion capabilities position us well in that space. Vehicle, while still important, is a smaller percentage of the mix than it was previously. That is partly market-driven, but it is also strategic. We have intentionally shifted away from lower-margin programs and toward higher-value applications across the portfolio. So when you step back, the mix today is more margin-accretive and better aligned with durable secular growth drivers than it was just a couple of years ago. That evolution matters because it supports the margin expansion and earnings durability we have delivered. On Slide 7, gross margin expanded 90 basis points year over year to 32.4%. The improvement was driven by higher volumes, favorable mix, and operational efficiencies from our Simplify initiative. Sequentially, gross margin moderated largely due to a higher proportion of vehicle revenue, which carries lower relative margins. For the full year, gross margin expanded 150 basis points to a record 32.8%. Turning to Slide 8 and the drivers behind the margin and operating income expansion, what stands out in 2025 is not just the headline results, but how we have achieved them. As Rick outlined, the Simplify to Accelerate Now program was designed to structurally reduce complexity, improve throughput, and strengthen margins. The operating performance you see here is the financial expression of that work. The structural savings we delivered in 2024 and now 2025 are embedded in the business, and they are showing up directly in leverage and operating income expansion. Realignment costs related to these actions during the year are primarily associated with the Dothan transition. The transition to date has been successful not just from a cost perspective, but operationally. We are realizing enhanced manufacturing focus and early elements of the anticipated savings. When you layer these structural improvements with improved volume and mix, the impact on leverage becomes clear. At the operating level, we drove meaningful improvement in expense discipline. We captured upside from higher volumes while at the same time controlling SG&A, allowing operating income to grow significantly faster than revenue. In the fourth quarter, operating income increased 76% to $11.4 million, or 7.9% of revenue. For the full year, operating income increased 46% to $44 million, or 7.9% of revenue. Turning to Slide 9, you can clearly see how the structural margin expansion and disciplined execution translated into meaningful bottom-line growth. Net income for the quarter more than doubled to $6.4 million, or $0.38 per diluted share. Adjusted net income was $9.3 million, or $0.55 per share. Adjusted EBITDA was $19 million, or 13.3% of revenue, up 170 basis points. For the full year, net income was $22 million, or $1.32 per diluted share. Adjusted EBITDA was $76.9 million, or 13.9% of revenue, representing 210 basis points of expansion year over year. Our full-year effective tax rate was 23.3%. For 2026, we expect our tax rate to be between 21% and 23%. Turning to Slide 10, this slide reflects disciplined execution against the three financial priorities we outlined at the beginning of the year. Those priorities were improving working capital and inventory efficiency, taking out structural costs, and reducing debt and strengthening the balance sheet. Starting with cash generation, we delivered record operating cash flow of $56.7 million for the year, up 35% from the prior year. That level of cash conversion reflects both improved profitability and better working capital management. Inventory discipline was a major focus in 2025. Despite navigating automation normalization and rare earth considerations during the year, we improved inventory turns to 3.2 times compared to 2.7 at the end of 2024. That is a meaningful step forward. We tightened planning processes, aligned production more closely with demand signals, and reduced excess inventory that had built up during the prior cycle. Importantly, we did that while maintaining strong customer service levels. On receivables, days sales outstanding improved to 57 days for the year versus 60 last year. That reflects better collections, stronger billing discipline, and improved customer mix. When you combine inventory turns improvement with DSO reduction, you see a structurally better working capital profile. Capital expenditures for 2025 were $7 million, with disciplined, focused investments tied to customer programs and productivity initiatives. For 2026, we expect capital expenditures in the range of $10 million to $12 million, primarily supporting customer programs and growth initiatives. So Slide 10 is really about execution. We said we would improve working capital. We did. We said we would drive structural cost improvements. We did. And we said we would reduce debt. That shows up clearly on the next slide as the balance sheet story is directly connected to the execution we just discussed. Total debt declined to $180.4 million. Net debt declined to $139.7 million, a $48.4 million reduction year over year. Our leverage ratio improved significantly to 1.82 times from 3.01 at the end of 2024. Our bank-defined leverage ratio ended the year at 2.34, comfortably within covenant levels and providing meaningful headroom. The combination of stronger earnings, improved cash conversion, and disciplined CapEx allowed us to materially deleverage in a single year. That is important for two reasons. First, it lowers financial risk and reduces interest burden over time. Second, it creates flexibility to invest in organic growth, support new program launches, and evaluate disciplined capital deployment opportunities from a position of strength. So when you look at Slides 10 and 11 together, they tell a clear story. Operational improvements translated into cash. Cash translated into deleveraging, and deleveraging translated into flexibility. That is the financial flywheel we have been working toward. And with that, if you advance to Slide 12, I will now turn the call back over to Rick. Richard S. Warzala: Thank you, Jim. As we move through the fourth quarter, order trends improved. Automation demand is stabilizing, power quality tied to data center infrastructure remains strong, and our aerospace and defense pipeline continues to provide long-term, long-cycle visibility. Orders were up sequentially and year over year; we exited with a book-to-bill ratio slightly above one. That is important as it reflects positive momentum as we enter 2026. Backlog ended the year at approximately $233 million, with the majority expected to convert within three to nine months, consistent with our historical patterns. The visibility we have today supports a constructive start to the year. As we look into 2026, we believe we are positioned to build on that momentum. At the same time, we remain realistic. The macro environment is still uneven across certain end markets. Customer capital spending can move in phases, and policy and tariff considerations remain part of the broader landscape. We continue to monitor developments closely, and we will adjust as needed. With respect to the recent Supreme Court ruling and broader trade policy discussions, we are continuing to evaluate any potential implications. As we have discussed previously, we have taken proactive steps over the past several years to diversify our supply base, localize certain sourcing where appropriate, and manage tariff exposure through pricing and operational adjustments. We remain disciplined in how we evaluate these developments, and we will adjust as needed. What gives us confidence is what we control. We control our cost structure, and it is structurally better than it was a few years ago. We control working capital discipline, and we demonstrated that in 2025. We control capital allocation, and we strengthened the balance sheet meaningfully over the past year. And we continue to align the portfolio around higher-value motion controls and power solutions serving durable secular drivers of electrification, automation, energy efficiency, increased defense spending, and digital infrastructure. These drivers are not short-cycle themes. They represent long-term shifts in how energy is generated and used, how systems are automated, and how infrastructure is built. Allient technologies are directly aligned with those transitions. We exit 2025 with improved margins, stronger cash flow, and a materially stronger balance sheet. That combination provides flexibility and resilience, and it positions us to execute through varying market conditions. We believe we are entering 2026 from a position of strength. We have an excellent opportunity to leverage the foundation we have been building through our Simplify to Accelerate Now initiatives, simplify our organization, drive out cost, and accelerate growth rates well into the future. With that, operator, please open the line for questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Our first question comes from Tomohiko Sano with JPMorgan. Please go ahead. Tomohiko Sano: Good morning. Thank you for taking my questions. So while the cyclical macro recovery, such as improving ISM, is expected, Allient has clearly been driving structural growth and margin improvement through initiatives like Simplify to Accelerate Now. Looking ahead to 2026, which do you see as the bigger contributor to growth and margin expansion, external tailwinds or your own self-help measures? Any more color on 2026, please? Thank you. Richard S. Warzala: Okay. If I understand your first question, you are looking for what are the seculars that we expect to be generating the largest growth opportunities for us in 2026. Is that correct? Tomohiko Sano: Mhmm. I want to get a better sense about cyclical characteristics of the recovery you have seen versus the structural themes you see in 2026. Richard S. Warzala: I am sorry. I do not know whether it is our line or your line, but you are breaking up on us, and I am having a hard time picking up some of the comments or questions. Tomohiko Sano: I am sorry. Could you talk about 2026 growth of sales driven by cyclical recovery versus structural items? For the revenue side, I wanted to get some color on the margin side as well. Thank you. Richard S. Warzala: Okay, I think I have it here now. First off, as we talked about here, as we have been repositioning our business and looking at where we see some of the longer-term drivers, we mentioned data center infrastructure. We do see that continuing. We see, I believe, one of the issues that has been addressed quite a bit over the last few days here has been about the energy side of it and how they are going to generate power, and it seems like some of the companies are stepping up to do that on their own, which I think was a major concern. That does not affect us. We obviously need the power, and as the data center expansion continues, we play a significant role in making sure that power is being delivered efficiently and effectively, and eliminating distortion within the grid and so forth. So I think we do see that opportunity continuing now into 2026 and into the future. Again, it is based upon infrastructure; it is based upon capital projects, and of course those are subject to the developments as the prime contractors and developers determine the right timing for those. As far as aerospace and defense, we have heard, let us call it, defense more than aerospace. That is impacted by many factors, and now, given the war that is going on in Iran right now, I think it is going to take a little bit of time to settle down for us to figure out how that will have an impact on our business, whether it is immediate or long term. That is too soon to call. As far as the other programs go, which we have been very actively involved in, we see some of the key drivers in terms of defense applications, whether it is drones, whether it is missile defense, and so forth. We have been a player in those markets for some time now, and we do see that continuing. One thing that is occurring there is, of course, the requirement for defense products and suppliers to be based in North America or the U.S., and that definitely plays to an advantage for us as we do have a significant manufacturing base and design engineering team in North America. The other areas that we see opportunities, of course, is we do not see medical slowing down. The advent of AI in medical and the use of sophisticated diagnostic tools, and again, some of the key areas that we have been involved in for many years, we continue to participate, and we are excited about that. Automation will come, and automation comes in the form of our normal industrial automation and even in the robotic side of it, sometimes referred to as humanizing and so forth. Again, it is another area we participated in, and we continue to participate in. We see growth and stabilization there. European markets, especially Germany, seem to be remaining a little bit soft, and they are not predicting any growth for 2026. We will see how that shakes out as the year goes along, but the forecast we are getting right now is that the industrial markets in Germany, in fact, may decline this year, which we saw some signs that it was going to improve; the latest information we are getting is that may not be the case. And I think our diversification in many different markets plays well for us, and there is a good balance. We do believe that the industrial sector will continue to grow because we do have automation in that sector, as we call it, and also the data center infrastructure is in there as well. So we do see that continue to grow, and we see defense growing, whether it is timing—as Jim had mentioned, the government canceled the M10 Booker program—and that is a realignment of how they see the priorities on the battlefield going forward and the challenges that are being faced. As far as margins, margins are a big factor based upon mix for us. I can tell you that our focus and emphasis on new applications has been in the markets where the margins are above our average. That has been our focus, will continue to be our focus, and capital spending will align with that. So I think that we are in pretty good shape. Our book-to-bill ratio was improving, and that is one of the things that we pay close attention to to determine whether we have converted some of the opportunities we are working on, and it is showing up in bookings that will later show up in shipments. That is a long-winded answer; I hope I have covered them all. If not, you can ask me to add to that if necessary. Tomohiko Sano: Thank you. Very helpful, Rick. Thank you. And just a follow-up on capital allocation. Congrats on leverage improved and strong cash flow generation. How would you prioritize capital allocation for 2026 among organic growth investment, M&A, and shareholder returns, please? Richard S. Warzala: Sure. I would say to you that, again, going into 2026, we feel that our pipeline of opportunities is quite strong, and our investments that we make will be to support what we have control over and in hand right now, which is some significant opportunities, and we will need to invest to realize some of those opportunities. So that is going to be the majority of the investment that we see going forward. I would also say to you that we are paying very close attention in terms of the pipeline of acquisitions. We have had certain areas that we will not discuss on the call here that we are paying close attention to, and if the opportunity does arise, we think we are well positioned to take advantage of that and to move forward with it. I think the Simplify to Accelerate Now initiative—I just want to make it clear—we are not done. We had several initiatives that were well underway and executed quite successfully, but certain things were not completed in 2025 that are carrying into 2026, and we will have the discipline to get them done and drive cost out. We also see other opportunities when we look at our infrastructure and our footprint to continue to drive cost out, to become more efficient in the way we do things. So that is not ending; that will continue. It is not like we did a mad push for a couple years and it is all completed. It is not. There is more opportunity ahead of us. And 2026 will not be one where we just sit back and say, okay, let us take a deep breath and look at what we did and move on from here. We are going to be aggressively going after additional opportunities to improve our cost base, and they are there. Tomohiko Sano: That is very helpful as well. Thank you very much. That is all from me. Richard S. Warzala: Thank you, Tomo. Operator: The next question comes from Gregory William Palm with Craig-Hallum. Please go ahead. Gregory William Palm: Thanks. Good morning, everybody. Congrats on a good way to finish 2025. I do not remember the last time you actually grew revenues sequentially from Q3 to Q4. Maybe it has happened once or twice, but I understand a little bit was due to some outsized growth in commercial vehicle, which you talked about. But broadly speaking, what else drove the better-than-expected seasonality that you would normally see? And just to be clear, what kind of trends have you seen so far in Q1? Richard S. Warzala: Yeah, great question, Greg, because it was abnormal. You are absolutely correct. You have followed us a long time, and as we say, going into Q4, there are always some unknowns. We have seen years where demand was pent up—supply chain crisis, things like that—which caused irregularities in the normal cyclical patterns that we would see during the year. We did in fact have a few pull-ins that we had not anticipated, so it did elevate Q4 sales to a certain extent, one that we mentioned in the commercial vehicle side of it. We do not see that having—that was a one-time surge based upon some demand that had been sitting out there, and we see returning to normal. A couple other areas were a few surprises, and I will not mention in detail what they were. They were pulling in product, and then as we turned the year, we saw that reflected in a little bit lower demand in the first quarter. So there were some offsets there that we are going to have to address and see—it is still early, of course—how that lands. But that is a little bit unusual, and thank you for pointing it out, because there were, I will say, three different drivers of that. One was a one-time, which will reduce to normal, and the other two, we did see a little bit of reduction after they were pulled ahead as we started the year. But nothing that we see that will change normal run rates on an annual basis. It was just unusual. Gregory William Palm: Leaving this aside, what type of demand are you seeing right now across your markets? Any change? I know things strengthened as we went through 2025, but any strength? I am just curious as you look at what has occurred over the last week, what kind of risks or even opportunities could that bring about this year? Richard S. Warzala: Our order input seems to be coming in quite well, and we saw improvement through the year, and as you mentioned, we watch that very closely because that is obviously an indicator of what we are going to see in terms of converting it into shipments. That is encouraging. We see that continuing to flow in nicely. As far as what has happened in the last week, of course, there is no surprise in saying that on the defense side of the business, we certainly do supply products that are being utilized right now. How that converts into orders—you know, we were also surprised when they were heavily consumed, and we did not see production orders happening as fast as we would have expected, which indicated there was a big stockpile. We think the stockpile had been chewed up. We saw some return to starting to ship again for some defense-related products. So if you just ask for what our gut feel is, there will need to be an increase in certainly some of the products that we deliver to do some replenishment. What the total amount is—the impact—is hard for me to say. But I am sure we will start seeing some of that fairly soon. Gregory William Palm: I know you mentioned drones, and that is an opportunity that you have called out a little more recently. Are you able to share with us any traction that you are seeing, just in terms of what the opportunity set might be emerging there? Richard S. Warzala: Our company is well regarded and well respected for high-performance solutions, custom engineering, and so forth. I would say our activity in that market had been primarily in that space, and it accelerated. It certainly accelerated as far as the pipeline of opportunities, the prototyping that we are doing, the quoting that we are doing. It also seems to be expanding into the class one or group one, whichever way you want to describe it, devices, and has caught our attention. One of the areas of opportunity for us that we see is that we know how to produce product and buy in. We have one of the benefits that we enjoy based upon having a certain percentage of our business—as we have stated in the past, we try to keep it in the single digits—automotive, is we know how to produce higher-volume solutions cost-competitively with the use of automation. So I see it as very encouraging, and I see it as a real opportunity for us to take our know-how that we have gained and developed over the years and to redeploy it into some of these other areas. While the pricing and the margins may not necessarily be the same as the higher-performance custom engineered products, certainly the volumes do give you the opportunity from a volume standpoint and from an operating margin standpoint to be incremental to our business. So that is an area that we see. The shift to North America has created an increase in inquiries. As I said, we have been in the business in different applications. We see our technology base in electronics and controls and motors and lightweighting and composites definitely gives us an opportunity to expand that. So we are pretty excited about it. Gregory William Palm: And I guess just last one. I recall last year you announced the facility expansion where you are doing a bulk of the data center work, and I am curious what the status is of that. Do you feel like you have adequate capacity once it is done to capitalize? What are you seeing in terms of the opportunity set there? Richard S. Warzala: Yes. To answer your question, it is coming along extremely well. It will be late second quarter, early third quarter when it is fully operational. Timing could not have been better. That is all I can say. Timing could not have been better. The opportunities we are seeing, and the fact that we had addressed it in advance to expand our capabilities and our footprint, were definitely fortuitous as the demands of the market continue to go up. I think they will start to unfold later in the year. You will start to see some significant increases in volume in that area. And our timing was good. Gregory William Palm: Okay. Perfect. Appreciate all the color. Thanks. Richard S. Warzala: Thank you, Greg. Operator: The next question comes from Matt McAllister with Lake Street Capital Markets. Please go ahead. Matt McAllister: Hey, guys. Thanks for taking my questions. I want to go back to the data center opportunity. From your comments here in the Q&A and then prepared remarks, it sounds like it would be safe to say you expect the data center opportunity to accelerate in 2026 over 2025 in terms of growth rate. Is that correct? James A. Michaud: Yes, we do. Richard S. Warzala: And what I would say to you is that definitely the opportunities are there. As Greg asked in the previous question about the expansion to our facility, our main facility was underway, and last year was approved and is reaching the point of completion. That is critical for us to be able to handle the increased demand that we expect to see. I will say to you that there was an acceleration into last year of some of the products that we produce and accelerated deliveries, and you are going to have to pay close attention to the order input rates and what we see there, because it is not a smooth, incrementally improving business. You can see fairly substantial jumps in opportunities and timing of orders and when the demand and shipments are going to occur. It is not just going to be a straight line. We will see that perhaps in the third and fourth quarters of this year where you will see some ramping. Matt McAllister: Is this growth primarily driven by new contract wins with new customers, or is it a mix between expanding wallet share with existing customers? Richard S. Warzala: The market itself is expanding, and we have talked in the past about some of our capabilities that put us in a very nice competitive position in the market, and I think that is what is driving it. So it is market expansion, and the technology we have to support and service that is also being recognized and accelerating some of those opportunities for us as well. I do not want to—you are fairly new, and I appreciate you joining us as an analyst. In the past, we talked about an acquisition that we did in Wisconsin that gave us capability and a manufacturing capability and footprint in Mexico. We have been leveraging that to a great extent and helping us accelerate our ability to meet those demands. It has proven to be very helpful for us as we have been addressing some of those. So it has been our capability, our production capability, the expansion that we are doing to continue to improve upon that, as well as our technology, which gives us a nice competitive edge in the marketplace. I am not saying we are alone, but we clearly have product that is recognized as high-performing and very cost effective. Matt McAllister: Okay. And then last one for me. With the M10 Booker program coming to an end, is there any other program you can share with us to give us an idea where you expect to head next, or is it something you cannot share? Richard S. Warzala: No. I would rather not share. Sure, we could share what defense programs, but as we found out with M10 Booker, that was not a one-year program. That was a six- or seven-year program. If you look at it, there is logic behind what is happening. As the battlefield is transitioning, the utilization of drones, the utilization of missiles, less boots on the ground—Booker was a larger vehicle. It is not going to go away in itself for the need for those larger vehicles and boots on the ground in some applications or some arenas. But we will see a shift towards smaller, more agile, more autonomous vehicles, and we are positioned as well on those. One of the things for us to get the message out—as we have acquired companies in the past, and we looked at more of a fully integrated solution—we provide significant advantages in that we can handle the electrification; we can handle actuation. So we have got motors, we have got controls, we have got drives, we have got I/O, and we have lightweighting composites. Those composites are used quite extensively, and composites are not just for lightweighting. There are other reasons you use lightweighting: structural integrity or improved strength, EMI protection, as well as lightweighting to make them more efficient as you move towards whether it is electric or hybrid vehicles to improve battery life and so forth. I would say that we are in a unique position to be able to offer all of that to some of the prime contractors in addition to one of the things where the Department of War is pushing really hard now—accelerated development. These long design-in cycle times like a six- or seven-year Booker program and then canceling at the end, the speed of play is going to be absolutely critical. If you have products that are already being utilized in other markets that you can leverage, that gives you a competitive advantage. In many cases they are vehicles, and since we have been very strong in the vehicle market with some of our products, we are able to leverage those. So COTS—commercial off-the-shelf—products are critical. We can leverage those, and we can apply engineering and modifications to fit them for purpose, whether it is more ruggedized, more environmental, lighter, higher performance, and so forth. We are very excited about it, and we have made an investment. You have not seen the returns on those investments yet, but we are highly confident that we are positioning ourselves well for the future. Matt McAllister: Awesome. Thanks. Operator: Again, if you have any questions, please press star then 1. Our next question comes from Ted Jackson with Northland Securities. Please go ahead. Ted Jackson: Thanks very much. You guys sound so optimistic; it is infectious. A couple of questions. Dick, on the domestication of work and its drive for you, you have been dancing around that, and this whole thing with DAA—there are two buckets to bringing stuff back into the country. One is the actual manufacturing, and the other is the supply chain. For Allient, the manufacturing bucket is pretty straightforward. Is there work that you need to do on the supply chain to bring anything into compliance within DAA by the time it becomes fully into effect in January? Richard S. Warzala: It is a very good question. The answer is there is always going to be work to be done there. There are no quick answers to some of the rare earth minerals and materials that are being utilized in some of the higher-performing products here. You are 100% correct. We have the capacity and the capability to produce in North America. We have got ample capacity, and some of the work that we have been doing over the past few years that we have talked about—facility rationalization—and it is there, and it is to our advantage. We have about 1,200,000 square feet of manufacturing space within the company, and in North America a substantial portion of that. We freed up a significant amount of space that we can redeploy if there is a quick demand and a ramp-up for certain initiatives that may be undertaken. Supply chain is another challenge, and we have been hot and heavy on it and working on it. We have a team that is on it, but I will not tell you that it is completely solved. We are subject to other governments and other policies they may impose. We have been working hard to minimize the impact, to solidify supply chain sources, but some of that ramp-up has not been as quick as we would have liked to have seen it or the government would have liked to have seen it. So there is clearly going to have to be—government is going to have to look at that and really decide—there is a desire and there is a reality, and whether the two meet. I think we will be working through some of that this year. It is an excellent question. It is something that we are on top of. We are doing everything we can possibly do to resource. We already started before some of this had happened. Regionalization of supply chain had nothing to do with tariffs and duties and restrictions. It was more of a logical business decision. So we were pretty well prepared. On the other hand, we cannot control when some of the other factors that come into play could impact us. Jim, do you have anything you want to add to that? James A. Michaud: What I would tell you, Ted, and this is just really dovetailing what Rick just mentioned, the Feds are investing billions of dollars in a number of companies here in the U.S., and obviously we have been in contact with all of them. But as Rick just mentioned, it is going to take time for all of the supply chain in and around the rare earths and the processing of materials and so forth to evolve. I do not think it is going to all happen when we hit January 1. But I can tell you we have teams here that are working diligently with a variety of different suppliers, and we are setting the foundation for us to partner with these companies that the government is investing in. Ted Jackson: I did want to get into magnets, but let us keep on, and so I am going to jump over here. On the main issue for you on the supply chain side is rare earth around magnets. Everyone has that problem. I have to believe that your government is well aware of that. Do you have any dialogue with the government? Do they understand that at some level you have to be practical, or are you just saying that yourself? Richard S. Warzala: As Jim mentioned, we have been in close contact with the government and the key in the government, working hand-in-hand to—and that is why I said to you, at some point in time, there is a desire and there is a push, but there is also reality of the timing when all of this could occur. I can just tell you this: we are hand-in-hand. We are in there. We are working with the identified sources that are being supported and invested in. And we are not letting up on it. We are not stopping there. It is a continuous effort to make sure that we are working all the angles as well as staying very close to the key government officials and activities that are being undertaken right now. Ted Jackson: Beyond magnets, is there any other critical components or parts that you have had to go out and resource or need to resource to move into compliance? Richard S. Warzala: Yes, to answer your question, there are other components, but they are not as complicated or as difficult to resource. It may be a cost factor more than anything. Something else that does impact that as well. Without getting into all the details of the different components that we are seeing, you are seeing certain supply shortages in pockets of areas, even electronic components. You see some things popping up based upon demand in other areas that are occurring that are stressing the supply chain. But to answer your question, yes, there are other components that are key. If you are talking about motors, for a motor to function—whether it is laminated steel, whether it is bearings—there are alternatives. The alternatives may be more costly, but there are alternatives. Magnets are a little bit unique in themselves, so highlighting the magnet side of it is important. The others are there, but they get impacted based on other factors. Ted Jackson: So it sounds like it will just be a topic for discussion every quarter as you progress through it, and you are not the only one. There are so many different companies. I am shifting over to the commercial vehicle market and the fourth quarter. You had like a pig in the python with regards to the fourth quarter. I would ask, one, if you could quantify it a bit to help us realign how our first quarter will look, because you typically have some seasonality from fourth to first, just to make sure that it is helpful for analysts in terms of getting their 2026 numbers done. And then on a more macro level, the commercial vehicle market seems very much on a rebound. You have seen a pickup in freight rates. If you listen to PACCAR and Volvo and all the Class 8 guys, starting in November they saw order activity bookings pick up substantially. It continued through January. I have talked to some of their suppliers. It continued through February. You are going to see a lot of that translate into an improved demand environment probably when we get to the back half of 2026, assuming this continues, and it sets up well for 2027. Can you talk about what things you are supplying into that market and how you see that market playing out as we roll through the year and into 2027? Richard S. Warzala: Is your question about what we supply into the commercial automotive, or what do we supply into the truck and construction, or all of them? Ted Jackson: All of them. I was trying not to get too granular, but I am always interested in more than this. I am American. Richard S. Warzala: What I will say is this. Yes, we did see, and we can echo, that we saw some improvements. When we talk about vehicle—and thanks for bringing it up because many times people have their own definition—our definition of vehicle is commercial automotive, bus, construction, marine, agricultural, truck, and rail. That is what we consider vehicles. We have to continually remind people when we talk about vehicle, and also we do have powersports in there. When we talk about vehicle, do not get too wrapped up in thinking of us as an automotive company. We have mentioned we have a target to keep that in single digits. The major reason for that is it is a long lead-time design-in cycle time, it is very cost competitive, and it is heavily capital intensive. We have chosen to invest our money in other areas. But we did see increases across the board. The impact of the one-time effect of the fourth quarter that you could see going forward, I would tell you about $2.5 million in fourth quarter. As far as the applications go, when you get into agricultural, construction, and so forth, we are in several applications, different types of actuators and so forth. One of the key elements that we are in across the board in vehicles is steering applications. It is agnostic to whether it is gas or electrification, so we can be utilized in each. We are also involved in electrohydraulics for some of the larger vehicles, again primarily in the steering area. We have great expertise in steering, and that is where we focus our efforts not just in vehicle but also in some of the industrial applications as well. Does that help you? Ted Jackson: That does. I know we are at the timeline, so I will stop. Richard S. Warzala: Okay. Thank you, Ted. Thank you, everyone. I think if there are no more questions, which I believe there are not, operator, can you confirm that? Operator: Yes. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Richard S. Warzala: Thank you, everyone, for joining us on today's call and for your interest in Allient. We will be participating in the JPMorgan Industrials Conference in Washington, D.C. on March 17. As always, please feel free to reach out to us at any time, and we look forward to talking to you all again after our first quarter 2026 results. Have a great day, and that will conclude the call, operator. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to Orion Properties Inc. Year End 2025 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Emma Little, Investor Relations. Thank you. You may begin. Emma Little: Thank you, and good morning, everyone. Yesterday, Orion Properties Inc. released its results for the quarter and year ended 12/31/2025, filed its 2025 Form 10-Ks with the Securities and Exchange Commission, and posted its earnings supplement to its website at onlreit.com. During the call today, we will be discussing Orion Properties Inc.’s guidance estimates for calendar year 2026 and other forward-looking statements, which are based on management's current expectations and are subject to certain risks that could cause actual results to differ materially from our estimates. The risks are discussed in our earnings release as well as in our Form 10-Ks and other SEC filings, and Orion Properties Inc. undertakes no duty to update any forward-looking statements made during this call. We will also be discussing non-GAAP financial measures, such as funds from operations, or FFO, and core funds from operations, or core FFO. These non-GAAP financial measures are not a substitute for financial information presented in accordance with GAAP, and Orion Properties Inc.’s earnings release and supplement include a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure. Hosting the call today are Orion Properties Inc.’s Chief Executive Officer, Paul McDowell, and Chief Financial Officer, Gavin Brandon. And joining us for the Q&A session will be Chris Day, our Chief Operating Officer. With that, I am now going to turn the call over to Paul McDowell. Paul McDowell: Good morning, everyone, and thank you for joining us on Orion Properties Inc.’s 2025 Year End Earnings Call. As recently announced, Orion Properties Inc. has begun a strategic options review process as management and the board of directors continue to explore pathways to unlock value for our shareholders. Since this process is in the early stages, we will focus today's call on our operating performance and the tremendous progress we made further stabilizing the portfolio and executing our business plan during 2025, which has now positioned us for core FFO earnings growth in 2026 and beyond. We completed over 900,000 square feet of leasing in 2025, on top of the 1,100,000 square feet we leased in 2024, reflecting an improving market backdrop. We also signed an additional 183,000 square feet after year end. These are meaningful volumes, particularly given the reduced size of our portfolio and have really moved the needle to enhance the quality and stability of our lease roll. One critical metric to measure our success is weighted average lease term, or WALT, which averaged nearly 10 years on new leases signed in 2025. This is nearly double our portfolio average WALT. Overall, the average WALT for all leasing activity in 2025 was 7.5 years, which continues to move in the right direction and is approaching six years for the total portfolio. Cash rent spreads on fourth quarter renewals were up for the third straight quarter at 12.8%, though overall, 2025 rent spreads remained volatile and were down 7.1% for the year, but were up an average of 3.7% when comparing ending rents in the current term versus ending rents in the renewal term. Importantly, our 2025 leasing momentum and noncore dispositions translated into a 600 basis point improvement in our leased rate year-over-year to over 80% at year end and a 500 basis point improvement in our occupancy rate to 78.7% at year end. Equally significant, our lease rollover profile has improved and we entered 2026 with scheduled lease expirations totaling just $11.4 million of annualized base rent in 2026. This is relative to the nearly $16.2 million of annualized base rent that was scheduled to expire in 2025 and $39.4 million in 2024. This positions us to drive further occupancy gains and stabilize revenues as we continue to lease, sell vacant properties, and selectively recycle capital into new cash-flowing assets throughout this year and into next. Leasing momentum remains constructive so far in 2026. Our pipeline is robust, and we have over 1,000,000 square feet in either discussion or documentation stages, which includes several full building leases as well as longer duration renewals and new leases with terms materially greater than the average of our portfolio. Our accelerating portfolio improvement through increased disposition activity was another key story for the year. During 2025, we sold 10 properties totaling more than 960,000 square feet for approximately $81 million of gross proceeds, which included two vacant traditional office properties and one stabilized traditional office property sold in the fourth quarter for $32 million. Subsequent to year end, we sold two more vacant properties in Bedford, Massachusetts, and Malvern, Pennsylvania, totaling an additional 516,000 square feet for over $13 million, and are under contract to sell additional noncore properties for gross proceeds of roughly $36 million in the near term, including the 37.4-acre Deerfield, Illinois property where we completed the demolition of the six buildings formerly leased to Walgreens during the fourth quarter. While the per square foot price of these sales varied from $17 per square foot to $216 per square foot, our focus was on selling properties where we felt the releasing prospects did not outweigh the burden of continuing to carry them. These sale transactions will substantially reduce the estimated carry costs associated with these vacant properties by a combined $10.3 million annually. Our 2025 and near-term dispositions will generate a total of roughly $130 million, and this has allowed us to maintain reasonable debt levels while still funding vital tenant improvement allowances, leasing commissions, and other capital expenditures to support our strong leasing activity. We are also actively evaluating opportunities to recycle a modest percentage of these proceeds into acquisitions as we continue to shift our portfolio concentration away from traditional suburban office properties and toward dedicated use assets, or DUAs, where our tenants perform work that cannot be replicated from home or relocated to a generic office setting. These property types include medical, lab, R&D, flex, and government properties, all of which we already own. Our experience is that these assets tend to exhibit stronger renewal trends, higher tenant investment, and more durable cash flows. A terrific example of this strategy is the Barilla Americas headquarters building we just purchased at the end of last week in Northbrook, Illinois. In addition to serving as Barilla's headquarters, the building also houses their sole test kitchen and R&D facility in the U.S. Worldwide, the Barilla Group is the world's largest maker of pasta and their pasta and sauces are a familiar sight on U.S. grocery shelves. The 75,000 square foot building is subject to a 10.8-year lease with current net rents at approximately $15.30 per square foot and growing 2.5% annually. We bought the property for $15 million, equating to a going-in cash capitalization rate of 8.1% and an average capitalization rate over the approximately 11-year lease term of 9%. At year end, approximately 35.8% of our portfolio by annualized base rent consisted of dedicated use assets, versus 31.8% at the end of 2024, and we expect this percentage will continue to increase over time through disposition activity and targeted acquisitions. We recognize, as a small cap REIT, that G&A expense is a very important consideration and we remain disciplined on expenses at the corporate level. In 2025 and early 2026, we reduced headcount by more than 10%, including at the executive and senior vice president levels, and managed controllable G&A. We estimate these initiatives will generate about $1.8 million of annualized savings. These efforts are, however, offset by inevitable inflation, expected increased accounting fees associated with SOX 404 internal control audit requirements beginning in 2026 for us, and legal and other expenses associated with managing an activist investor. Turning very briefly to the balance sheet, as Gavin will give more detail in his remarks. In February, we were able to deal with both our major debt maturities that had been scheduled to come due within the next year. First, with the support of our existing lenders, we entered into a new $215 million secured revolving facility which will mature in February 2029, inclusive of two six-month extension options. Second, we extended our existing $355 million CMBS loan by three and a half years to August 2030, inclusive of two extension options totaling 18 months. These very significant achievements give us the financial flexibility and term to continue to execute on our business plan. A final note on our strategic options process. While we have increasing confidence in our stand-alone prospects, over the past three years, as we have consistently disclosed, management and the board have devoted time to considering avenues for Orion Properties Inc. to potentially pursue in addition to our business plan. Our ongoing public strategic options review process will provide further opportunity to consider with our board and our financial advisers what could be a range of potential strategic alternatives to maximize stockholder value. And as we have said before, we remain very open to pursuing any actionable proposals. To sum up, the progress we have made over the past four years, and which progress accelerated in 2025, has materially de-risked and stabilized our portfolio and we are finally set for meaningful growth from a core FFO standpoint over the next several years. Our priorities in 2026 remain: improve portfolio quality, lengthen WALT, renew tenants and fill vacant space, reduce risk, lower expenses, prudently manage leverage, and position Orion Properties Inc. with a more stable and durable earnings profile. We believe these are the right steps to unlock long-term value which will make Orion Properties Inc. attractive to investors and potential strategic partners alike. I will now turn the call over to Gavin Brandon for the financial results. Gavin Brandon: Thanks, Paul. For the fourth quarter of 2025 compared to 2024, Orion Properties Inc. had total revenues of $35.2 million as compared to $38.4 million, and core FFO of $0.19 per share as compared to $0.18 per share. As expected, we recognized $0.03 per share of lease termination income in 2025 associated with the Fresno, California asset sale. Adjusted EBITDA of $16.1 million versus $16.6 million. The year-over-year changes in operating income are primarily related to current year vacancies and costs incurred for the Deerfield demolition, offset by income from our San Ramon property acquired in 2024 and carry cost savings from dispositions of vacant assets. G&A came in as expected at $6 million compared to $6.1 million. CapEx and leasing costs were $17.8 million compared to $8.2 million, which primarily relates to work performed at our Buffalo, New York property for our new 160,000 square foot lease with Ingram Micro, which is expected to commence in April 2026, and at our Lincoln, Nebraska property where our new 886,000 square foot lease with the United States government commenced in February 2026. For the full year 2025 compared to 2024, Orion Properties Inc. had total revenues of $147.6 million as compared to $164.9 million, and core FFO of $0.78 per share, which included approximately $0.09 per share of income from lease terminations and end-of-lease obligations. This compares to core FFO of $1.01 in 2024, which included $0.04 per share of lease termination income. Adjusted EBITDA was $69 million versus $82.8 million. The year-over-year decreases in operating income are primarily related to current year vacancies and costs incurred for the demolition discussed earlier, offset by income from our 2024 acquisition and carry cost savings from dispositions of vacant assets, as well as successful property tax appeals. G&A came in as expected at $20.3 million as compared to $20.1 million in 2024. 2025 G&A includes $423,000 in legal and other expenses related to managing an activist investor. CapEx and leasing costs were $60 million compared to $24.1 million in the prior year. The increase in CapEx in 2025 was driven by completion of landlord and tenant improvement work related to the acceleration in our leasing activity. As we have previously discussed, CapEx timing is dependent on when leases are signed and work is completed on leased properties. We expect to allocate more capital to CapEx over time as leases roll and new and existing tenants draw upon their tenant improvement allowances. Our net debt to full-year adjusted EBITDA was a relatively conservative 6.8x at year end, and on a modified basis, net of restricted cash, was approximately 6.2x. As of 12/31/2025, and as adjusted for our new secured $215 million revolver, we had total liquidity of $145.9 million, including $22.9 million of cash and cash equivalents and $123 million of available revolver capacity. We also had $39.9 million of restricted cash, including our pro rata share of the joint venture's restricted cash. Orion Properties Inc. continues to manage leverage while maintaining significant liquidity to support our ongoing leasing efforts and provide the financial flexibility needed to execute on our business plan for the next several years. Since our spin, we have repaid a net $173 million of outstanding debt as of year end while supporting our current business plan. As Paul mentioned, on February 18, we entered into a credit agreement for a new senior secured credit facility revolver, which refinances our original credit facility revolver. The new credit facility revolver extends the maturity date until February 2029, including two six-month borrower extension options. It reduces the lender's commitment to $215 million to more closely align with our business plan, reduces the interest rate margin on our borrowings by 50 basis points to SOFR plus 2.75%, and eliminates the 10 basis point SOFR adjustment, which will help to lower future interest expense. As of 03/05/2026, we had $127 million outstanding and $88 million of borrowing capacity under our new credit facility revolver. We appreciate the continued support from our lending group and the timeliness of executing the credit agreement prior to our 10-K filing, which alleviated any accounting disclosures with respect to near-term debt maturities. On February 17, we amended our CMBS loan. The loan modification agreement extends the maturity date by two years to February 2029, subject to two borrower extension options for a total of 18 months until August 2030. During this time, the fixed interest rate on the CMBS loan of 4.971% will remain unchanged, and excess cash flows after payment of interest and property operating expenses will be swept by the lender to be applied to a combination of prepaying the outstanding principal balance of the CMBS loan and funding reserves which we can access principally for capital expenditures. As part of the loan modification, we negotiated partial release provisions for certain assets in the pool that we may dispose of and repay principal. Additionally, yield maintenance premiums will no longer apply to principal payments made during the term. Potential property dispositions, as well as the amortizing nature of the CMBS loan, will repay principal and reduce interest expense during the term, further lowering leverage over the next several years. As of 03/05/2026, we had $353 million outstanding under the CMBS loan and $37.7 million in an all-purpose reserve. Turning to the York Street joint venture. The nonrecourse mortgage debt was $128.8 million as of year end, and our 20% share of that was $25.8 million. Due to the capital constraints of our joint venture partner, the joint venture was unable to make an approximately $16 million loan principal prepayment to satisfy the 60% loan-to-value condition to extend this debt obligation until 11/27/2026. The lenders have been providing short-term extensions while the joint venture remains in active, cooperative discussions with the lenders with respect to the plans of the portfolio and an additional extension. Further, the joint venture has entered into a contract to sell one of the assets out of the portfolio and is in active discussions with the lenders on additional asset sales to repay debt. Due to the uncertainties regarding the Arch Street joint venture investments, as of 12/31/2025, we reduced the carrying value of our investment to zero and recorded a loan loss reserve against our member loan to the Arch Street joint venture. The impairments are driven by accounting rules, which are focused on the probable recoverability of our investment in and collection of the member loan based on facts and circumstances as of 12/31/2025. The Arch Street joint venture contributed approximately $0.05 of core FFO in 2025, which primarily related to interest income from our member loan and management fees. We have not included income from the JV in our outlook for this year past February 2026. While we have written our investment in the JV down due to the uncertainty around the debt finance and our partner's ability to meet capital calls, we continue to believe that the portfolio, which is performing with an occupancy rate of 100% and a weighted average lease term of 6.3 years, has positive equity. We expect to continue to work with the JV's lenders and our JV partner to find a way to collect our member loan in full and unlock our equity. As for the dividend, on 03/04/2026, Orion Properties Inc.’s board of directors declared a quarterly cash dividend of $0.02 per share for 2026. Turning to our 2026 outlook. As previewed last quarter, 2025 represented a trough for our core FFO, excluding lease-related termination income, as our recent leasing and capital initiatives begin to translate into improved recurring earnings power over 2026 and beyond. Core FFO for the year is expected to range from $0.69 to $0.76 per diluted share. As a reminder, core FFO for 2025 would have been $0.69, excluding $0.09 of lease termination income. G&A is expected to range from $19.8 million to $20.8 million. Excluding noncash compensation, we expect 2026 G&A will be in line or slightly better than 2025. We also do not expect G&A to rise significantly in the outer years, including noncash compensation. As a percentage of revenue and total assets, our G&A remains in line with other similarly sized public REITs. Net debt to adjusted EBITDA is expected to range from 6.5x to 7.3x. With that, we will open the line for questions. Operator: Thank you. If you would like to ask a question, you may press star followed by one. You may press two if you would like to remove your question from the queue, before pressing the star keys. Our first question is from Mitch Germain with Citizens JMP. Please proceed. Mitch Germain: Thank you. It seems like your leasing pipeline is almost two times higher relative to last quarter. Is that just an overall conviction that you are seeing in office leasing? Is the tide really turning a bit more positively here? Paul McDowell: Good morning, Mitch. I think it is probably a little bit of both, frankly. You know, our portfolio is not very big, so the numbers can move pretty dramatically if we start to get some leasing momentum on one or two properties, which is exactly the case that has occurred from last quarter to this quarter. And I would characterize that leasing momentum that we have gotten as a result of the market improving somewhat. So I think it is a bit of both. But I would reemphasize that the number may be volatile quarter over quarter. Mitch Germain: And from a historical context, and I know that the track record is three, four years for you guys, when you look at your leasing pipeline and compare that to the success rate that you have had, maybe if you have thought about what the percentage is that you have seen historically in your ability to take the pipeline into a lease? Paul McDowell: We have not calculated that specifically. But I will tell you, Mitch, that our success rate has improved very significantly over the past two years. I think, in 2023, you might remember, we only leased 230,000 square feet of space and we did not have any new leases. And in 2024, we did 1,100,000 square feet, and in 2025, we did 900,000 square feet, and 183,000 square feet so far this year, with a pretty strong pipeline. So I would say that our ability to turn inquiry into signed leases has really improved a lot. And I would say that the decision-making process at tenants has also shortened up quite significantly, where they are now looking at space, deciding it meets their needs, and then entering into lease negotiations with us. Mitch Germain: That is helpful. Last one for me. The Barilla transaction, was that a broker that brought it to you, was it a relationship, and I do understand some of the criteria as to why you consider it a stronghold or an investment, and maybe what percentage of the asset is office versus nontraditional or more like industrial space? If you could provide some context there. Paul McDowell: Well, the transaction came to us through the broker. You know, it was brokered. It was a marketed transaction, so we saw it as well as other market participants. Stephanie Peacher works for us, she is the one who does acquisitions, and so she keeps a close eye on the market, and she brought that in from the brokerage community. The property itself contains the test kitchens and R&D facilities for the Barilla operations here in North America and South America as well, so very important. From a percentage perspective, about half, roughly, is their test and R&D, and half is office. Mitch Germain: Thank you. Operator: Our next question is from Matthew Gardner with JonesTrading. Please proceed. Matthew Gardner: Hey, good morning, guys, and thanks for taking the question. It is good to see you back in the market acquiring properties. How should we think about the pace of the remaining, I guess, vacant properties being disposed of throughout the year, and then what should we look for from you to go out and acquire more properties? Paul McDowell: Yes, that is a great question. On the vacant property side, it is important to note that we had a huge amount of activity in 2025—obviously, 10 properties in 2025 and then two additional vacant properties in 2026—and then we have pending a couple of additional sales, our vacant land in Deerfield, Illinois. With respect to the pace of vacant sales in the future, we do not have that much vacancy left, but as we generate—as vacancy comes online, we are going to take a hard look, and we will make a judgment about whether or not we sell those properties or whether we hold them for lease-up. Some of the vacancy that we have now, we feel pretty confident about our ability to lease it up, so that is the primary focus. With respect to acquisitions, we have been very judicious. This is only our second acquisition since the spin. But we do want to recycle capital, and so when we have capital recycled from sale of either vacant properties or stabilized properties, both of which we did last year, we look at that capital, and we can allocate it towards debt repayment, we can allocate it towards our existing asset base for tenant improvements and leasing commissions and building improvements and the like, or we can allocate it towards acquisitions, all of which we expect to do during the course of this year. Matthew Gardner: I guess just looking at the upcoming lease maturities, it looks like through 2028, there is a little under 46% that is scheduled to roll over. What kind of opportunity does this present to you in terms of being able to go out there and grow these cash spreads and generate that FFO growth? Paul McDowell: Well, I think we do expect core FFO to grow meaningfully in the coming years as the portfolio stabilizes and as we rent stuff up. We have had, I would characterize it, which is I think reflective of the broader market, mixed renewal rent increases or decreases. Sometimes the market requires us to lower rents for renewal because that is just what the market will bear. But as we have seen at the end of last year, where we had three quarters in a row of increases in renewal rents, we hope that continues into 2026 and 2027 as the market gradually recovers. But I think it is going to be volatile quarter over quarter. Matthew Gardner: Got it. That is helpful. Thank you, guys. Operator: There are no further questions at this time. I would like to turn the conference back over to Paul for closing remarks. Paul McDowell: Okay. Thank you, everyone, for joining us today on the call. We had a terrific year in 2025, and we are hoping to have just as good a year in 2026. We look forward to updating you on our first quarter later in the year. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
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.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the Fourth Quarter 2025 financial results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Mr. Nikolas Tsakos, Founder and CEO; Mr. George Saroglou, President and Chief Operating Officer; and Mr. Harrys Kosmatos, Co-CFO of the company. [Operator Instructions]. I must advise that this conference is being recorded today. And now I'll pass the floor to Mr. Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation Limited. Please go ahead, sir. Nicolas Bornozis: Thank you very much, and good morning to all of our participants. I am Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the 12 months and fourth quarter ended December 31, 2025. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail at ten@capitallink.com, and we will have a copy for you e-mailed right away. . Now please note that parallel to today's conference call, there is also a live audio and slide webcast, which can be accessed on the company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation slides on the company's website. Now please note that the slides of the webcast presentation will be available and archived on the website of the company after the conference call. Also, please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slide on your own. Now at this time, I would like to read the safe harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. And at this moment, I would like to pass the floor to Mr. Arapoglou, the Chairman of Tsakos Energy Navigation. Mr. Arapoglou, please go ahead, sir. Efstratios-Georgios Arapoglou: Thank you, Nicolas. Good morning, good afternoon to everyone. Thanks for joining our call today. I have really nothing to add on the brilliant financial performance and the usual quality operating performance for TEN. Just 4 points from me worth noting. All of our 19 new buildings under construction, including the 2 recent VLCCs and the LNG are already in the money. The second point is that we sold the 10-year-old VLCC generating $82 million of free cash to be added to the $300 million already existing cash cushion that we traditionally keep. The third point is that the locked-in contracted future revenue has now gone over the $4 billion mark, excluding profit shares. And lastly, which is very important, 22 of our vessels are taking full advantage of the high rates in the spot markets through profit share as we speak. So all the above, I believe, guarantee a continued strong performance going forward. And with this, I give the floor to Nikolas Tsakos. Nikolas Tsakos: Thank you, Chairman. Good morning, good afternoon to everybody here from Athens -- from peaceful Athens, Greece. We just reported a very strong year, a year that has been a milestone period for TEN, a year in which we concluded significant strategic transactions for the future growth of the company and in very specific segments as the shuttle tanker and the dual fleet segment. The last quarter of 2025 has been a very strong quarter, and that was before the geopolitical events that started early in January, with the changes and the opening up of Venezuela, one of the largest traditional exporters of sweet crude to the west that has been lagging behind due to political reasons. The opening of Venezuela to the mainstream fleet like ours, we were the first vessel under a several charter to transport the first, let's call it, legal export to the United States after the change of the political environment there. And soon after that, of course, we have the issues in the Red Sea and the Gulf of Aden that have made it even further -- have even further strengthened spot rates to levels that at least our generation has never seen before. And I think these are the highest levels ever recorded in recent times. In this environment, TEN has been able to conclude very successfully 2025 and is taking advantage of the very strong rates that we are facing since the beginning of the year. In the meantime, we were able to disinvest some of our older tankers, putting aside in excess of $100 million to our cash reserves and reducing significantly our debt. And we were, I would say, lucky enough with a very good timely orders of our VLCCs at what today look -- our 3 VLCCs at what look today to be at very, very significant discount to today's market and also recently to our LNG orders. We maintain our moat of modernizing our fleet according to our clients' requests. We are looking to -- we have already a significant dividend policy. Our last dividend was in the later part of February and we're looking forward as we're following day-to-day, and I think we have -- we are following the developments, the geopolitical developments in the Middle East in order to, first of all, to secure the safety of our seafarers, the crew and the cargoes on board and take advantage of this very strong market environment. So all in all, I would say, as far as the market is concerned, good news. Good news, perhaps not for the right reasons because none of us -- I think nobody in the world is happy to have good news under war circumstances, but we have to run a tight and safe ship and this is what we have been doing. And with that, I will ask George, if you -- Mr. Saroglou, our President, to give us a more detailed analysis of what happened in 2025 and we'll be happy to answer your questions later. George Saroglou: Thank you, Nikolas. We are pleased to report today on another profitable quarter and year. Before reflecting on the company's performance of last year, a few words for the current events unfolding in the Middle East and the Arabian Gulf. Shipping faces another geopolitical event in the Arabian Gulf and the Strait of Hormuz. The Strait of Hormuz sits on one of the world's busiest shipping routes, acting as a gateway to the oil and gas fields, refineries and terminals of the Arabian Gulf. 1/5 of the world's oil and liquefied natural gas passes through this narrow strait. It's a vital shipping lane for dry bulk commodities as well. Spot rates across all tanker vessel classes have spiked at levels far above the already strong rates in existence prior to the start of operation, Epic Fury. Substitute barrels from the U.S.A., Venezuela, Brazil, Guyana and West Africa are expected to benefit tanker rates and ton-mile demand. When the conflict started last Saturday, we had 3 vessels under time charter approaching the Arabian Gulf. We monitor 24/7 and follow the advice and updates of maritime security centers, flag, state, P&I and insurance underwriters. In coordination with our charterers, we assess the risk associated with any potential assets through this high-risk area. None of our vessels have entered for now this area, and they are kept outside the Strait of Hormuz. Charterers consider diverting some or all of them to other loading areas outside of the Arabian Gulf. Our foremost concern remains the safety and well-being of our seafarers on board these vessels and all those vessels that are in proximity and the structural integrity of our assets. Even without the latest geopolitical events, tanker markets have remained healthy during the course of last year. Energy majors continue to approach our company for time charter business. Since the start of the fourth quarter of 2025, we concluded 20 new time charter fixtures and extensions of existing time charters. Today, we have a backlog of approximately over $4 billion as minimum fleet contracted revenue. We have 33 years history as a public company. We have started with 4 vessels in 1993, and we have turned every crisis the world and shipping have faced through the years into a growth opportunity. If we move to Slide #4, we see that today, we have managed to have TEN as one of the largest energy transported in the world with a very young, diversified, versatile pro forma fleet of 83 vessels. In Slide 4, we list the pro forma fleet of all conventional tankers, both crude and product carriers. The red color shows the vessels that trade in the spot market, and we have 9 as we speak, 2 more from our last call and our new buildings under construction. With light blue, we have the vessels that are on time charter with profit sharing, 13 vessels, and with dark blue, the vessels that are on fixed rate time charters, 42 vessels. In the next slide, we leased the pro forma diversified fleet, which consists of our 3 LNG vessels, including the new order we announced today and our 16 vessel shuttle tanker fleet. We are one of the largest shuttle tanker operators in the world with a very young and technologically advanced fleet after the tender we won last year in Brazil to build 9 shuttle tankers in South Korea. We have 6 shuttle tankers in full operations after taking delivery of both Athens 04 and Paris 24 last year, which commenced long time charters to an energy major. If we combine the 2 slides and account only for the current operating fleet of 64 vessels, 22 vessels or 34% of the operating fleet has market exposure spot and time charter with profit sharing, while 55 vessels or 86% of the fleet is in secured revenue contracts, time charters and time charters with profit sharing. The next slide lists our clients with whom we do repeat business through the years, thanks to our industrial model. ExxonMobil is the largest revenue client. Equinor, Shell, Chevron, TotalEnergies and BP follow. We believe that over the years, we have become the carrier of choice to energy majors, thanks to the fleet that we have built, the operational and safety record, the disciplined financial approach, the strong balance sheet and good financial performance. The left side of Slide 7 presents the all-in breakeven costs for the various vessel types we operate in the company. Our operating model is simple. We try to have our time charter vessels generate revenue to cover the company's cash expenses that is paying for vessel operating and finance expenses for overheads, chartering costs and commissions and we let the revenue from the spot and profit-sharing trading vessels to make contributions to the profitability of the company. Thanks to the profit-sharing elements, for every $1,000 per day increase in spot rates, we have a positive $0.11 impact on the annual earnings per share based on the number of TEN vessels that currently have exposure to spot rates, 22 vessels. We have a solid balance sheet with strong cash reserves. The fair market value of the operating fleet exceeds today $4 billion against $1.9 billion debt and net debt to cap of around 47%. Fleet renewal and investing in eco-friendly greener vessel has been key to our operating model. Since January 1, 2023, we have further upgraded the quality of the fleet by divesting from our first-generation conventional tankers, replacing them with more energy-efficient new buildings and modern secondhand tankers, including dual fuel vessels. In summary, we sold 18 vessels with an average age of 17 years and capacity of 1.7 million deadweight ton and replaced them with 34 contracted and modern acquired vessels with an average age of 0.5 years and 4.7 million deadweight capacity. We continue to transition our fleet to greener and dual fuel vessels. We are currently one of the largest owners of dual-fuel, LNG-powered Aframax tankers with 6 vessels in the water. Global oil demand continues to grow year after year. OPEC+ accelerated their voluntary production cuts, wars, economic sanctions, sanctions lifted tankers and geopolitical events positively affect the tanker market and freight rates while the tanker order book remains at healthy levels as a big part of the global tanker fleet is over 20 years and will need to be replaced gradually. And with that, I will pass the floor to Harrys Kosmatos, who will walk us through the financial performance for the fourth quarter and last year. Efstratios-Georgios Arapoglou: Thank you, George. Harrys? Harrys Kosmatos: Thank you, George. So let's start with a review of the year 2025. So with 2025 starting on the whim with an avalanche of global tariffs and tit-for-tat actions by China on U.S. proposed port fees, measures that were subsequently revised or suspended, all in the backdrop of ever-growing geopolitical turmoil, the tanker markets remained elevated and oil majors increased their long-term cargo requirements. To this effect, TEN through to its tried and tested operating model of seeking long-term cover provided the vessels required for its blue-chip clientele to meet its needs. This operational tweak, however, did not hinder the fleet from taking advantage of the equally strong but more erratic spot market as it had a good complement of vessels benefiting from trading spot. In particular, with the fleet in the water averaging 62 vessels identical to 2024, days under secure revenue employment, that is vessels on time charters and time charters with profit sharing provisions increased by 12.6%, while days on spot declined by 33%. Of interest, during 2025, days on profit sharing contracts alone increased by 12.4% from 2024, highlighting TEN's commitment to adding another layer of employment to benefit from the very lucrative spot market. Today, 1/3 of our fleet, that is 22 vessels, 9 on pure spot and 13 on profit sharing contracts are directly impacted by the historical strong spot market. As a result of this employment shift, during 2025, TEN generated close to $800 million in gross revenues and $252 million in operating income, which incorporated $12.5 million of capital gains from the sale of 4 older vessels. Capital gains during the equivalent 2024 12 months were up $49 million from the sale of 5 vessels. In line with the above employment pattern and fewer vessels on dry dock compared to 2024, 10 in '25 from 15 last year in '24, fleet utilization increased to 96.6% from 92.5% in 2024. The time charter equivalent rate the fleet attained during 2025 was a healthy $32,130, similar to 2024 levels. Reflecting the reduction of the fleet's spot exposure mentioned above, voyage expenses declined from $153 million in 2024 to $122 million in 2025, a saving of $30 million. A saving of $4.4 million was also incurred by a reduction in charter hire expenses whilst vessel operating expenses increased by just under $13 million from the year prior to settle at $211 million. The introduction of larger and more specialized vessels in the fleet like Suezmax and shuttle tankers in place of Handysize and Aframax vessels that were sold contributed to that increase. As a result, operating expenses ship seat per day for 2025 average a competitive $9,990, about 1/3 of the time charter equivalent rate mentioned above. Depreciation and amortization came in at $170 million for 2025 from $160 million reflecting the introduction of 4 newbuilding vessels. General and administrative expenses in 2025 were at $42 million from $45 million in 2024, to a large extent, the result of the amortization of stock compensation awarded in July 2024 and scheduled to fully vest by July 2026. A decline was also experienced in our cost of interest as a result of lower interest rates, which despite $174 million increase in the company's debt obligations from 2024 due to new loans for TEN's newbuilding program came in at $98 million compared to $112 million in 2024, another saving of $14 million. Interest income came in at $10.5 million which was another meaningful contribution. At the end of 2025 with just 62 vessels on average in the water and 20 vessels -- and a 20-vessel newbuilding program, TEN's total debt obligations were at $1.9 billion with net debt to cap -- while net debt-to-cap stood at a comfortable 46.7%. TEN's loan-to-value at the end of 2025 was a conservative 48%. As a result of all the above, the company during 2025 generated a healthy net income of $161 million or $4.45 in earnings per share. Adjusted EBITDA for the year came in at $416 million, while cash at hand as at the end of December 2025 stood at $298 million. After having paid $148 million in scheduled principal payments, $190 million in yard predelivery installments and capitalized costs and $27 million in preferred share coupons. And now let's go over the quarter 4 summary results. The fourth quarter of 2025 experienced similar fleet employment patterns, which had fleet utilization reaching 97.7% from 93.3% during the 2024 fourth quarter. During the 2025 fourth quarter, 2 vessels underwent scheduled dry dockings compared to 4 in the 2024 fourth quarter, which naturally contributed to this improvement. With an identical number of vessels in the water with the 2024 fourth quarter, albeit of greater deadweight, the fleet generated $222 million of gross revenues and $81 million in operating income which similarly to the 2024 fourth quarter did not have any gains or losses from vessel sales. The result in time charter equivalent per ship per day, reflecting the ever-increasing strength in rates was at $36,300, 21% higher than the 2024 fourth quarter level. Voyage expenses during this year's fourth quarter were lower compared to last year's fourth quarter, experiencing a $7.6 million drop to settle at $26.8 million. Operating expenses, on the other hand, increased to $56 million from $51 million in the fourth quarter of '24 due to some extent by operating larger vessels. The result in operating expenses per ship per day for the fourth quarter of 2025 came in at $10,558. Again, 1/3 of the fleet average TCE and still competitive, thanks to the efficient and proactive management performed by TEN's technical managers. Depreciation and amortization were a little higher from the 2024 fourth quarter at $44.4 million. General and administrative expenses were at $6.2 million lower from last year's third quarter at $9.2 million. Interest came in at -- interest costs came in at $25 million, similar to the 2024 fourth quarter, while interest income contributed about $3 million to the bottom line. As a result of all the above, TEN during the fourth quarter of 2025 reported $58 million of net income or $1.70 in earnings per share, a 200% increase from the 2024 fourth quarter. The adjusted EBITDA during the fourth quarter of 2025 settled at $128 million, $42 million here from the 2024 fourth quarter number. And with that, I'll pass it back to Nikolas. Thank you. Nikolas Tsakos: Thank you, Harrys, for having so many positive numbers. I will allow you to make long presentations as long as the numbers are positive because -- well, as we said, the fourth quarter was only the beginning of the end, I would say, of a very fruitful year for 2025, a year that we have been able to establish a renewal -- a significant renewal of the fleet. We have been able to take and absorb the new acquisitions of the Viken fleet, which we did earlier fully in the company. And we were able to have an increase of our utilization to close to 98%, which I think this is really something that we want to congratulate also the operation department of Tsakos Shipping and Trading for keeping the ships -- the propellers earning almost 100% of the day. And this figure includes dry dockings and special surveys. So it's really, I think, the highest utilization in the company's history. And the beginning of '26, we had, I would say, surprises mainly on the geopolitical front. We have the change and the lifting of sanctions from Venezuela, which has allowed companies like ourselves to be able to participate even more in that -- in those trades. And of course, recently, the events in the Persian Gulf which have created spot rates or have led to spot rates and prices of oil that we have not seen for a generation. The company is very well prepared to navigate such a tremulous environment. And as Mr. Saroglou showed us in our earlier slide, I think the company comes stronger out of every crisis. I think most of you listening are too young to remember most of the crisis that we have been -- that we have gone through in the last -- 7 crisis in the last 30-odd years, but the company has been able to build and build further. And I think this graph is very evident that the Harrys, next time don't forget you have 12.5% growth that we usually have to show that the company has been growing year after year regardless of difficult markets. Another important factor we have increased the dividend. We paid the last part of our dividend in February and we're looking to reward shareholders accordingly as we move forward. A lot of question marks. We're actually focusing on the safety of our seafarers, as Mr. Saroglou said and also protecting our assets and the cargoes in our assets. We are going through situations that we have not seen in a generation. But we are well prepared to be able to take advantage of that. And with that, I would like to open the floor and also to thank the Chairman for his good words earlier to any questions. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Climent Molins with Value Investor's Edge. Climent Molins: I wanted to start by asking about the 2 LNG carrier orders you announced today. Could you talk a bit about whether you're already in discussions for long-term charter employment. And if so, what duration are you targeting? Nikolas Tsakos: Yes. I mean, there is -- as I said, the LNG segment is a segment that we have been participating from a very early stage back in 2007. However, I think for good reasons, we have never overextended ourselves in investing in that segment. We always want to participate in new ships and new technologies, and that's what we have done. And with these ships, it's too early to charter long term, but there is a lot of appetite going forward. So I think this is more as a long-term investment for this growing segment of the business rather than something that we have done with a charter in mind. Climent Molins: All right. Makes sense. I also wanted to ask about the [indiscernible]. Could you talk about how the index-linked portion is calculated? Is it benefiting from the surge in spot rates we've seen in recent days? Nikolas Tsakos: The [indiscernible] on a profit sharing arrangement based on trading routes of the Far East, end of Transatlantic. So of course, it's participating in this situation and the current employment ends in about 8 months. And of course, there is a significant appetite for such a [ prong ] ship going forward. Climent Molins: That's helpful. As I understand it, you very recently fixed 2 MR2 new builds that were delivered earlier this year. Are they employed at fixed rates or at variable hire? And if it's the former, at what rate are they employed? Nikolas Tsakos: We cannot tell you all the secrets. You have to call Mr. Kosmatos. When you see him in New York, you can ask Mr. Kosmatos. He's only allowed to write this in a piece of paper and secretly hand it to you under the table. But they are -- I would say, they are fixed rates, and they're very, very accretive in the mid- to high 20s. That's all I can say. And I think these are the highest that those ships have been fixed -- these type of ships have been fixed in the recent months or at least this is what our chartering department tells us. Climent Molins: Makes sense. Harrys, we definitely need to catch up soon. Harrys Kosmatos: Looking forward to it, gentleman. Climent Molins: Yes. I also have a question on the shuttle tanker newbuilds. We've seen some of your peers getting very good financing terms and support from the Korean export agency. Is this something we should kind of expect on your shuttle tanker orders as well? Nikolas Tsakos: Of course. Of course, I mean, we are one of the biggest supporters of South Korean yards and all the -- we try to keep all -- we are currently to the Herculean task of our newbuilding department. We had site offices in all the major South Korean yards. So we have a very big site office in Samsung as big in Hanwha, the ex Daewoo, and of course, a big one in Hyundai, which we never stopped having versus perhaps if you recall, we just took delivery of our last vessel there in October. So we keep on maintaining very hands-on site offices in this -- in all of them. And of course, we get the appreciation from the Korean banking system. And I think our team has concluded one of the largest syndications for the finance of those vessels at very, very competitive terms. Climent Molins: That's good to hear. And final question from me. Big picture, 2026 has started very strongly for you and both earnings and free cash flow are set to rise very significantly. Could you talk a bit about how you think about your capital allocation priorities? How do you plan to balance deleveraging fleet renewal and increase shareholder returns going forward? Nikolas Tsakos: Well, I think, as we said, our -- we make sure that we are securing the well-being of the company long term. And as we speak, I think as we see today, [indiscernible] accounted, I think that by the end of the first and second quarter, we might be in excess of $0.5 billion in liquidity, which means that our priority is the reward of our shareholders, which we are the largest ones as the management. And then, of course, we would be allocating our newbuilding program is almost fully financed, as I said, with the recent syndication. So rewarding our shareholders, reducing debt significantly. And we might be looking at next year, April next year to actually repurchasing some of our very, very usual preferreds. Operator: Our next question comes from the line of Poe Fratt with Alliance Global Partners. Charles Fratt: Yes. I was trying to isolate the impact of the profit sharing agreements that you had in the spot market exposure on the increase in voyage revenue in the fourth quarter versus the third quarter. Can you quantify the impact of the increase in the TCE rate. What was the exposure to the spot market versus the contribution from profit sharing? Harrys Kosmatos: Well, we did see a lot of profit sharing coming in later -- well, throughout '25, and we are beginning to see recently. And actually, a number of our vessels have been rechartered on higher elevated floor rates to what they were previously. Just to give you an idea, over and above the fixed rate that I mentioned earlier in the fourth quarter of '25, we got an additional $27 million from the profit sharing income that came in. So obviously, we did have some benefit. It seems that the numbers will -- I mean they look that we are moving in the right direction and perhaps to recall the similar amounts of additional income going forward. So again, $27 million over and above the flow rate on those profit sharing vessels in the fourth quarter. Nikolas Tsakos: Yes. That's a significant amount. I mean, this is almost like 50% of the profitability of the fourth quarter. So it's not -- it's -- the profit arrangements have huge contribution being $27 million on $58 million of profit. Charles Fratt: Yes, that's exactly what I was looking for. And so there were some -- there was a positive increase on some of rechartering or recontracting the time charters that you had. And when you look at the first quarter and looking maybe at the first half of the year, my sense is that rates started to move in the fourth quarter, but the really significant move is more in the February time frame. And obviously, it's a little early just because of what's going on in the Middle East. But is there an additional step-up that we should see in the first quarter in profit sharing? Nikolas Tsakos: Yes. I mean, the way things are today, I think the profit sharing has gone off the chart because of -- and as Harrys said, I mean, for example, we had the categories of ships that we would profit share for anything above $20,000 a day. And the next fixture was anything about $35,000 a day. So you understand that we made sure that we pushed the fixed part of the profit sharing as high as possible for as long as possible and then the profit sharing goes. So yes, I think the first quarter, it's going to be another step up from where we left the fourth quarter. Harrys Kosmatos: And I think of interest, Poe, is that from the 13 vessels that we currently have on profit sharing, 7 are Suezmaxes and 2 are VLs. Nikolas Tsakos: Yes. So they're actually the big boys of profit sharing. Charles Fratt: Yes. I was going to say and that's where you're seeing the meaningful increases. Maybe it will still [ flip ] down to the smaller sizes, but at this point in time, your exposure to the larger segments is -- or larger sectors is really good. When you look at the decision to sell the [ B ], what -- how did you -- was this an inquiry from somebody as far as trying to -- there's been a big acquirer out there, was there an inquiry that came in that led you to hit the bid? Or was this part of your strategic fleet renewal? And then if you could talk about what other potential assets are on the block that we could see sold in 2026, that would be helpful. Nikolas Tsakos: Yes. I mean there's always -- it takes 2 to tango. So it was not that we were out. I mean, our philosophy has always been that we're looking to sell any vessel which is between 10 and 15 years old. As you very well know, there have been people who have been buying these assets at prices that make a huge sense. I think we were, I would call it, lucky enough in November to order 3 VLs of Hanwha at prices of today. And just to put it in perspective, the newbuilding, so we show -- we ordered those ships. I think it has been reported at $128 million. And we sold the 10-year-old ship, which if you equate, it's a newbuilding price, it's in excess of $170 million. So it doesn't -- it's always good to take advantage of these possibilities. And the good thing is that we are going to be using the ship up to almost the middle of the year since we're taking advantage right now in a huge way of the big market -- of the spot market. And we're going to be selling here and delivering here back to the new owners sometime in June, end of May, June. So in a sense, we were able to have our [indiscernible] for the first 6 months. Charles Fratt: Yes, that was a pretty timely rollover as far as just the [ issues ] went open in the, I guess, December time frame. Just go back to, if you wouldn't mind, the chartering strategy, profit sharings kicked in, you see a step-up in the first quarter, probably the second quarter too. Where do you get more aggressive in trying to lock in the higher rates? Nikolas Tsakos: We are always -- I mean, we have set an evident step-up in all categories of the vessels. And as long as we are able to have the profit sharing arrangement, which is something that very few others do, we should keep it that way. You've seen on Slide #7 on Page 7, you see our breakevens, which I think are very, very competitive. I mean, we have an all-in breakeven for VLs up to $28,000. Today, they're averaging above $100,000, including the profit sharing. So there's a little profit to make there. Suezmax is breakeven of everything at $25,000. I think we're closer to $80,000. Aframax is $21,000 -- well, Aframax and LR2s, if you put them together, about $22,500. Again, we're in the $70,000s and $80,000s there. our Panamaxes, which are our oldest segment in the $18,000 and I think that's where we got the $30,000-plus profit share arrangements. So those are in the money. Our Handysizes are down to $10,000, which means there are actually operating expenses and some interest since they're very, very well amortized. The LNGs -- and our shuttle tankers are also very much into the money at $34,000 time charter. So when we can make sure that we get covering our minimum significantly, then we do the profit share. I think Page #7 portrays, Mr. George, what Mr. -- our President has put up on the board. Charles Fratt: Yes, that's helpful. And if I may, one more question. Obviously, the turmoil in the Middle East just had an impact on rates. But the other side of the question is, right now, and I know you don't have any tankers in Hormuz way. But what are you expecting on the insurance expense side? And then also how much exposure do you have to higher fuel costs as we look at the rest of 2026? Nikolas Tsakos: This is actually a very good point. I think we have had in the last week a 500% increase on insurance on war risk insurance. I think from what we used to do it at $0.15 per deadweight ton, we're up to close to $1 now or $0.75 to a $1. So that's a huge increase. It's 500%. Of course, all this is paid directly by the charter. So it does not really influence -- it's not -- it's a pass-through cost for us. But it shows how the market rates this risk. As far as our fuel costs, I mean, we have -- first of all, we have close to 25% of our existing requirements covered, George, for the next couple of years at very competitive rates. But also being mainly on a time charter basis, all the fuel cost surges or not affects our clients. So we do not have that. I mean we have a huge fleet, but being on time charter, the risk of the surge or drop of the bunker costs are taken up by the charters in a very big way. Charles Fratt: Great. And I'm sorry, if I may squeeze one last one in. What's your dry docking schedule for the rest of the year? Harrys Kosmatos: Okay. We are starting quite live for the first quarter. We only have 2 vessels, 2 Suezmaxes for Q1. We have 5 vessels in the second quarter, 7 vessels in the third quarter and 3 vessels in the fourth quarter. Nikolas Tsakos: Hopefully, we will be able to see you in New York next week. Operator: And we have reached the end of the question-and-answer session. Now I'd like to turn the floor back to CEO, Mr. Nikolas Tsakos for closing remarks. Nikolas Tsakos: Well, thank you for participating and listening in to our 2025 end of the year results. It has been a productive year. Your support has been appreciated. We have seen significant, I think, close to 60% increase of share price in the last year, which shows the trust that the public markets are putting on TEN. And hopefully, this is only the beginning. We have seen, again, a very steady trading and a very positive trading of our preferreds. The company would maintain its distribution policy of keeping shareholders -- of rewarding shareholders. We are going through a period of uncertainty in the world. And what we try to do with them is to take as much of this uncertainty possibly out through our chartering policy, which is always to the most blue-chip end users out there. And with that, we want again to thank you. Wish you a good weekend. And hopefully, we'll see you in New York next week. Thank you. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation. Have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Aecon Group, Inc. Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Borgatti, Senior Vice President of Corporate Development and Investor Relations. Please go ahead. Adam Borgatti: Thank you, Deani. Good morning, everyone, and thanks for participating in our year-end 2025 results conference call. Joining me today are Jean-Louis Servranckx, President and CEO; Jerome Julier, Executive Vice President and CFO; and Alistair MacCallum, Senior Vice President, Finance. Our earnings announcement was released yesterday evening, and we posted a slide presentation on our website, which we'll refer to during this call. Following our call, we'll be glad to take questions from the analysts. [Operator Instructions]. As noted on Slide 2 of the presentation, listeners are reminded that the information we're sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes the expectations reflected in these statements are reasonable, we can give no assurance that the expectations will prove to be correct. Before moving to our financial results, I'll first turn the call over to Jean-Louis to highlight a few of Aecon's important accomplishments in 2025. Jean-Louis Servranckx: Thanks, Adam. As noted on Slide 3, 2025 was a transformative year of growth and significant milestones for Aecon with record revenue of $5.4 billion and backlog additions of $9.5 billion, supported by a balanced and derisked backlog profile. Revenue grew 28% over 2024 with 84% of the $1.2 billion increase in revenue through organic growth. Revenue from U.S. and international markets also increased by $386 million or 87% in 2025 over 2024. We delivered our strongest safety performance in over 5 years while maintaining disciplined risk management across major projects and programs. We further advanced our nuclear leadership in North America with our partnership selection to deliver the G7 first grid-scale Small Modular Reactor or SMR at the Darlington Nuclear Generating Station. We also commenced the definition phase of the Pickering Refurbishment Program and an Aecon partnership was awarded a development phase contract at Energy Northwest's Cascade SMR project in the U.S. Backlog growth was also highlighted by Aecon's largest contract award to date, the Scarborough Subway Extension progressive design-build project, adding approximately $2.8 billion under a collaborative target price model. We expanded strategically through the acquisitions of Bodell Construction, Trinity Industrial Services, and KPC Power and Electrical Services. We strengthened our leadership team with the appointment of Thomas Clochard as Chief Operating Officer and received industrial recognition with gold stages on Renew Canada's Top 100 Infrastructure Projects list, reflecting our involvement in 17 ranked projects, including four of the top five. And as noted on slide four, we achieved significant operational milestones, including completing the world's largest nuclear refurbishment program at the Darlington Nuclear Site ahead of schedule and below budget in early 2026, providing a model for major nuclear projects on a global scale. Substantial completion was achieved on the Finch West and Eglinton Crosstown LRTs, which were two of the three remaining legacy projects. And we delivered Canada's largest battery energy storage facility, the Oneida Energy Storage Project. I will now turn the call over to Jerome for our financial results, and we'll return to address our outlook at the end of the call. Jerome Julier: Thanks, Jean-Louis, and good morning, everyone. I'll speak to Aecon's consolidated results, review results by segment, and address Aecon's financial position. Additional information has been provided to help clarify the underlying results, excluding impacts from the legacy projects and divestitures. Detailed reconciliation tables are included on slides 15 through 17 in the conference call presentation. Turning now to slide 5. On a reported basis, record revenue for the year of $5.4 billion was $1.2 billion, or 28% higher compared to 2024. Adjusted EBITDA of $235 million compared to $83 million last year. An operating profit of $87 million compared to an operating loss of $60 million in 2024. Adjusted EBITDA and operating profit in 2025 were negatively impacted by $94 million in legacy project losses, compared to legacy project losses of $273 million in 2024. Adjusted diluted earnings per share for the year was $0.40, compared to adjusted diluted loss per share of $0.99 in 2024. As only noted, reported backlog of $10.7 billion at the end of 2025 was a record year-end level and compared to backlog of $6.7 billion a year ago. New contract awards of $9.5 billion were booked in the year compared to $4.7 billion in the previous year. Now looking at results by segment. Turning to slide 6. Construction revenue of $5.4 billion in 2025 was $1.2 billion or 28% higher than the previous year. Revenue was higher in all sectors, with the largest increase in nuclear operations, driven by a higher volume of refurbishment, new build and engineering services work in Ontario and the United States. Higher revenue in industrial was driven by an increase in field construction work on critical mineral facilities in Western Canada and incremental revenue in the U.S. from the Bodell and Trinity acquisitions completed in the third quarter of 2025. Revenue was also higher in urban transportation solutions, primarily from an increase in subway and commuter rail system projects. In civil operations, higher revenue was mainly due to an increase in power and rail projects and from major project work performed internationally, partially offset by a lower volume of highway, road, and bridge building activity. In utility operations, higher revenue was due to a higher volume of gas distribution work in Canada and electrical work in the U.S., partially offset by a lower volume of telecommunications work and battery energy storage systems work as our team successfully delivered 3 grid-scale projects in the year. On an as adjusted basis, construction revenue was $5.3 billion in 2025 compared to $4.1 billion last year. Turning to slide 7. Adjusted EBITDA of $220 million compared to $34 million last year. The primary driver of the increase was lower losses from fixed-price legacy projects in the year. On an as adjusted basis, the Adjusted EBITDA was $315 million in 2025. Turning to slide 8. Concessions Adjusted EBITDA for the year was $57 million compared to $87 million last year, driven by lower income from O&M activities and a decrease in management and development fees related to concession projects nearing or achieving substantial completion of construction activity in 2025. The book value of equity of our concessions portfolio at year-end was $251 million, up 7% versus the end of 2024. On slide 9, we brought together the as-adjusted information to exclude impacts of the legacy projects and divestitures to provide insight into the underlying performance of the business. For the construction segment, on an as-adjusted basis, Adjusted EBITDA was $315 million in 2025, representing a 6% margin and $8 million increase over 2024. On slide 10, at the end of 2025, Aecon held core cash and cash equivalents of $94 million, which excludes $393 million of cash, representing Aecon's proportionate share held in joint operations. In addition, at December 31, 2025, Aecon had committed revolving credit facilities of $1 billion, of which $257 million was drawn and $4 million was utilized for letters of credit. Aecon has no debt or working capital credit facility maturities until 2029, except equipment loans and leases in the normal course. Aecon's board of directors approved an annualized increase to the dividend of $0.01 per share, resulting in a quarterly dividend of $0.1925 per share. The dividend will be paid on April 2, 2026 to shareholders of record on March 23, 2026. At this point, I'll turn the call back over to Jean-Louis to address our business performance and outlook. Jean-Louis Servranckx: Thank you, Jerome. Turning now to slide 11, Aecon continues to build resiliency through a balanced and diversified work portfolio. In 2025, roughly 55% of Aecon's construction revenue was related to power and utility services across the nuclear, civil, utilities, and industrial sectors, with nuclear representing the largest share. This represents a purposeful transition in our business, with the percentage of power activity increasing significantly over the past five years. Approximately 30% of Aecon's construction revenue was derived from power and utility services in 2020. Through our growth and diversification, Aecon is a profoundly different company now than we were several years ago. Turning to slide 12. Demand for Aecon services continues to be strong. With backlog of $10.7 billion at the end of 2025, recurring revenue programs seeing robust demand and a strong bid pipeline, Aecon believes it's positioned to achieve further revenue growth in 2026 and is focused on achieving improved profitability and margin predictability, all while improving the risk profile of our business. Recurring revenue was $926 million in 2025. The proportion of recurring revenue from utility services increased from $610 million to $728 million, an increase of 19% over 2024. Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog figures. Turning to slide 13, Aecon expects 2026 revenue to exceed 2025 levels based on Aecon strategic positioning in sectors with attractive demand profiles and a healthy pipeline of project opportunities tied to power generation, critical resource development, mass transit infrastructure, water, and defense. In the concessions segment, Aecon continues to focus on opportunities to add to the existing portfolio of Canadian and international concessions to support trends in aging infrastructure, mobility, connectivity, energy, and population growth. Beyond the fixed price legacy projects, we believe that the deliberate shift towards a greater weighting of improved risk-adjusted programs in combination with a strong focus on operational excellence, is anticipated to support a stabilization and gradual improvement of Adjusted EBITDA margins in the construction segment in 2026. Aecon plans to maintain a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, capital investments, and share repurchases on an opportunistic basis. We are focused on making strategic investments to support our strong growth, whether through the concessions portfolio to provide access and entry into new markets or to increase operational effectiveness. Our overall look for 2026 is very positive. We are extremely excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value. I want to express my sincere thanks to our growing team for their resilience, high professionalism, and safety always mindset that has positioned Aecon for what comes next. Thank you. We'll now turn the call over to analysts for questions. Operator: [Operator Instructions]. And our first question comes from Sabahat Khan of RBC Capital Markets. Sabahat Khan: Great. Just you provided a bit of color on the sort of the opportunities ahead. I was hoping you could dig a little bit into some of the announcements we've been seeing from the Canadian government on the infrastructure side. Just hoping you could provide a bit of color on behind all these headlines, where are we in maybe some of these projects hitting the bidding process? Are you bidding on some of these already? Maybe if you could just tie in the announcement from the other day related to NORAD as well. Just curious to get some more color on that project. Jean-Louis Servranckx: Yes. I will take this one. First of all, as an introduction, where we are today is a result of being extremely serious and focused about our strategy. We are extremely disciplined with this. We are now following our plan 2024 to 2027. We had an update mid-2025. Basically, where we are today belongs to 4 vectors. The first one was Aecon has to become a powerhouse. As I've noted during my speech, we are now a little more than 55% related with power. It's an incredibly important shift for our company that was before much more road and bridges. Point number 2, Aecon has to become what we call a sovereignty champion. We are coming to your questions. You probably have noticed that we were among the first five project of nationally important that were defined with the Contrecoeur port in Montreal and the SMR construction, I mean, in Darlington. We also announced a few days ago that we had been awarded this Arctic Over-the-Horizon project. This project was a target for Aecon. I mean, we wanted to come back to Defence Construction Canada. We have not been there for quite a number of years because the jobs were much more refurbishments of buildings, hangars, and not that much infrastructure. We decided that we had to be back. We have been awarded the first two pieces of this job. Ultimately, there will be several others for what has been announced as a total size that could be $3 billion to $5 billion. It's a complex project. We are leader. We want it with an outstanding scoring result. It's a purely collaborative job. It means that we first have a validation phase, then we have a development or a detailed definition phase, then we have construction that should begin in 2027. It was very important for us, and we got it. Third point of our strategy, we'll come back to this. Aecon has to be a national and a local strong player in the US. We'll come back to it. Number four, Aecon has to become more international, what we also have been doing. I hope I've answered your question. Sabahat Khan: Yes. Just, maybe a bit more, if I could follow up there on just behind some of these initial projects, have you seen an uptick in bidding activity, or are these projects still initial phases? Just wondering sort of when some of the other larger projects or some of this investment might hit the ground? Jean-Louis Servranckx: When you discuss with Defence Construction Canada, or you also can go to their website, I mean, obviously, the number of project that are now on the list and that will be put on the market, I mean, during the few years to come has been multiplied by quite an interesting factor. We are tracking this. Of course, you have also, for example, learned about Alto, I mean, the high speed train with the first phase between Montreal and Ottawa. I mean, this is a pure kind of project for which Aecon is excellently positioned now. Sabahat Khan: Great. And then just my last question. Obviously, you're talking a bit about the power opportunity and the business here. Can you maybe just rehash sort of the utility strategy? Is that something that is it more growing it via some of these power project opportunities? How big of a role would M&A play in that? Maybe just a little bit of color there, and I'll pass along. Jean-Louis Servranckx: I mean, obviously, the power part of utilities is growing and is growing well. Our utility sector is also about gas. It's also about telecom. It's also about fiber to the home and those kind of activities. Power is what is growing. At the same time, in United States and in Canada, I mean, basically, the main topic of today is about electricity addition. This is the wave, and we were not wrong 3 years ago when we just called this and decided to focus our efforts on this part of the link. This being said, as I've always told you, Aecon has to stay balanced. It has to stay balanced between the different core competencies that we have. It's about urban transportation, it's about industrial, it's about nuclear, it's about utilities, and it's about civil. We have to keep balanced, but we know that the wave is about power. Jerome, you want to add something? Jerome Julier: Sure. Just to close the loop on it, on the utility services side of the business, the capability that we have both in Canada and the United States centers around grid-scale, battery storage, substations, distribution, transmission. Now increasingly, electrical testing, verification, meter replacement with the new team that's joined us. Our perspective is we want to continue to build capacity to serve these end markets. There's an undeniable growth trend, even in the more bearish case for power demand. We just see an enormous opportunity for us to continue to build out that area. We'll do it organically. We'll do that through M&A to the extent the opportunities fit our buy box, our culture, and our safety record. We continue to view it as an area of opportunity for capital deployment for sure. Operator: And our next question comes from Yuri Lynk of Canaccord Genuity. Yuri Lynk: Just want to dig in a little bit on the outlook for construction segment Adjusted EBITDA margin. Calling for some stabilization here, after a number of quarters of decline, and then maybe some improvement in the back half of the year. Maybe just what are the puts and takes that get us stable here, and then what could possibly drive some upside in the back half of the year on the margin? Jerome Julier: For sure. The message is simply that the direction of travel for like the construction margin, whether you look at it on a reported or Adjusted basis, that the message is very much consistent, is stabilization on the direction of travel with the potential for improvement. That's largely a function of through 2025, the business has moved the type of execution that's flowing through and being recognized into revenue away from some of the progressive elements and fixed price contracts, which generally carry higher margins. You know, in some ways on fixed price, certainly higher risk to a much more stable risk-adjusted return that we view as very attractive from an Aecon perspective. We've now reached that point where we've stabilized that transition. You know, the vast majority of our work is done under more appropriate contract structures. The risk-adjusted margin profile that we're recognizing is strong, given the contract structures that we're in front of. The improvement is going to stem largely from operational efficiency gains, improved cost and schedule performance on our jobs. As well as the drop off of legacy and then the Western Civil area that's added a dilutive impact to the overall margin profile in '25 and late '24. I think from that perspective, it's a mix of factors, but I think all of this is in the context of a business that's continues to grow quite well. We think there's good torque in that message. Yuri Lynk: Are those Western Civil contracts still dragging or they're finished or stable? Jerome Julier: Our view is we have a handle on their completion and finalization, we're going to continue to just to close them out, right? They're effectively I think backlog wise, we're probably talking kind of sub $100 million here. Same thing on the legacy side, sub $100 million in the context of $5.4 billion of overall rev. We're feeling better about it. Yuri Lynk: Last one for me, just on the bookings, I mean, a huge bookings year, 2025. Safe assumption that we're not going to get to that level of bookings in '26. Can you just remind us of any progressive contracts that might be suitable to be booked in '26? Like I'm thinking Pickering is probably one, but any help on just how we think about the new awards outlook this year. Jean-Louis Servranckx: I will take this one. Yes, you're right. I mean, the increase in our backlog, I mean, in 2025 is mainly due to big chunk, I mean, of job. I mean, we told you about Scarborough. What is coming now, I mean, obviously Pickering is an important one. We are also on Winnipeg on a very interesting wastewater treatment plant where we are finishing the development phase. We are also working, you probably remember on a fish passage and a civil job in the United States, I mean, over Hanson Dam, that should most probably come to our construction backlog. We are waiting, I mean, for a few results, or eventual awards on some UDS projects on which we have been bidding during the last months. Operator: Our next question comes from Chris Murray of ATB Cormark Capital Markets. Chris Murray: Maybe kind of following on, kind of what to expect in 2026, especially on the revenue line. Certainly really strong revenue growth through this year. You know, there's a few projects that we've been in. Actually, I was thinking of the Ontario GO Electrification project as well. You gave the indication that you expect revenues to be higher in '26 and '25, which given where the backlog is, that's I guess probably what we should have been expecting. But I'm just trying to gauge how you think the magnitude's going to show up. I can't believe that this 20% clip on year-over-year growth is going to continue, but maybe if you can characterize it a little bit better, that would help us kind of shape our view. Jerome Julier: Sure thing, Chris. The growth in '25, I mean, we'd likely describe as exceptional, rather than just very good. 8-plus percent of that was organic, which is roughly $1 billion. You know, just the growth that Aecon produced in 2025, if that was its own business, would've been a top 20 construction company in Canada, that was formed out of Aecon. We are not anticipating that level next year. Our commentary in the outlook is formed on the basis of, number one, the backlog, number two, really strong recurring revenue programs across the business, but you know, in particular the Utilities group. Number 3, all sectors are really well positioned for where demand trends exist today. If we look, 2025 was effectively a flat or down year in construction in North America, except for a select few sectors, and those sectors were the 5 sectors in which we're involved. 2026, we continue to see good outlook. You know, overall general industry trends, people are calling for something in the order of low mid-single digit growth. Again, we think we can, we can handily beat that, but we're not going to get to the level we got in 2025. I don't anticipate that absent some significant M&A. We're expecting another good year after an excellent year, but not we have to temper expectations, right? We can't expand our human capacity and deliver the amount of skill trades, that we use as the basis for business, at that clip on a continual basis, right? We need to be smart about it. Chris Murray: Okay. Maybe if I ask the question a different way. If I think if I look at your backlog kind of characteristics today, you've got about $3.6 billion that looks like delivered or planned for the next 12 months. $1 billion of probably recurring revenue that's in the pipeline. How should we think about at least even with the project demand in here, is it fair to think, like what would be about the right number to think about stuff that you can actually book and execute in the same year, kind of on a normal run rate? Maybe that's a different way to think about this. Jerome Julier: Yes. If I gave you that, we'd be plugging to the revenue number that we have in our business plan, which we're not going to disclose. The opportunity set is strong at both procurement, go get change orders, ability to expand in existing projects and secure additional work packages. If you go back historically, it's a relatively broad range that we've been able to pull together across the years. You know, 2025, if you look at where we were in 2024, obviously that kind of go get element was quite strong. I don't think it'll be as strong in '26, if you want to try to track back against that. Chris Murray: Okay. Next question really quick. You know, just we're starting to see another one of these, kind of legacy issues, getting solved, I guess, in the quarter. Can you just give us any color around the solution and if it had any material impact on the numbers in the quarter? Jean-Louis Servranckx: Maybe I just begin with where are we physically on those job, and then Jerome will add a few figures that are all in our report. As you have noticed, we are now substantially completed on Finch and Eglinton LRT, following what we call the revenue service demonstration, which is an extremely complex demonstration of the capabilities of all the systems we have been building. This is done on those two LRT. Our maintenance and TTC operation is going quite well. We are very happy about it. Gordie Howe, we are nearing substantial completion. It's about finalizing operational readiness of all our systems and finalizing the onboarding of all border agencies and installation in their office. I've read a few comments. Just to be clear, substantial completion is totally separated from opening of the bridge. It means that we are now in the last centimeters to go to substantial completion. The opening of the bridge is a different topic. We are on those three job finalizing our commercial discussion with all our clients. I mean, we have no disputes. We are under discussion, and we think that within the next few months we will be over with that. A few figures? Jerome Julier: Financially, the legacy projects had a negative impact of $6 million in the quarter, Chris. Total for the year was $94 million. It's obviously substantially less than what we had last year. The big focus in 2026, as Jean mentioned, is the successful delivery of the final project and then the closeout of the commercial terms associated with all three. Given where we stand today, I'm not sure it's actually additive or constructive for the overall Aecon discussion to zoom in too much on these items. Like, we're getting basically narrowing down the level of outcomes, so not immaterial, but like less material levels. What we might likely do in '26 is just report everything all together and then close out this chapter. Like, we're in the twilight phase of the legacy. We're focused on what comes next, around some pretty stellar opportunities that we're in execution and procurement on. I think we're going to want to talk a lot about that in '26 and a lot less about this very difficult phase that I think the team's done an extraordinary job managing through. Chris Murray: Okay. Great. I probably asked the question a little bit wrong. I was actually more curious about the Rio Tinto agreement and just if that had any material impact on the quarter. Jerome Julier: If it was material, we would have disclosed it. No. That's just another successful completion by our operational legal team to settle a dispute or claim situation with a client and it's closed off. I think from a macro level, if you kind of take it out a little bit, the real message here is that Aecon does a really good job at managing risk exposures and reducing the overall enterprise level risk that we're putting forward. In '24 to '25, the business has been in a better position in '25 to '26. Again, we think we're in a better risk-adjusted position. The idea is creating a more boring, more stable, more predictable Aecon from a financial perspective, and then a more exciting, more thrilling Aecon from a perspective of the people who work and you know, a very dependable Aecon from the perspective of our clients. I think we're advancing along all three of those. Operator: And our next question comes from Michael Tupholme of TD Cowen. Michael Tupholme: My first question is just about the nuclear, the nuclear business. Obviously a key growth area for Aecon in 2025, and it was your most important growth area in the year. I guess as we look to 2026, the question is, beyond executing on the substantial volume of nuclear work that you already have in hand, what should we be watching for and expecting as far as nuclear developments and progression in terms of new nuclear opportunities, in 2026? Jean-Louis Servranckx: Okay. As an introduction, I just want to come back to this incredible news about Darlington refurbishment. I mean, in February of 2026, we just finalized the refurbishment of the 4 reactor under budget and 4 months ahead of schedule. I mean, it's extraordinary. You cannot imagine the number of calls and questions that we are receiving. I mean, something like this is the first time we have good news on a big nuclear project for the last 20 years. How did you do it? We are extremely proud because Aecon, during the last 8 years on this project, was on the critical path of its execution. It's a very good news for the nuclear industry to have been able to demonstrate that when it is well organized, it works. Obviously, I mean, on refurbishment, we are still on two major programs. I mean, Bruce, with 4 reactors to complete up to 2032, and Pickering, I mean, 4 reactors, we have just begun the development phase and turbine up to 2035. Regarding new construction in Canada, we are working on the first unit of the small modular reactor, the 300 megawatts from GE Hitachi. A completion forecasted around 2030. It's going well. We have, at this stage, something like 1,100 people, I mean, between staff and workers on site. Nothing has yet been decided regarding new big nuclear in Canada in terms of technology from OPG or from Bruce. We are working with those two utilities on the development phase with various options. In United States, I mean, we are working on three different topics. Major component replacement, mainly with Dominion, but also now with Energy Northwest. Second vector is the Department of Energy on their national lab in Savannah River. The third one you have noticed we have been awarded for Energy Northwest. I mean, the collaborative de-development to complete the planning, the design, and the construction of a 12x 80-megawatt X-energy reactor with Kiewit and Black & Veatch. It's just beginning. We are at planning and then pure definition phase, but it's a new build. What's important with this is to say that Aecon is technology agnostic. I mean, we work for CANDU and we're extremely strong, I mean, with CANDU. We work with GE Hitachi. We are beginning with X-energy. We have been working in the past, and we are working today with Westinghouse. It just means that we are ideally positioned for what is coming. Michael Tupholme: That's helpful. Maybe just one quick follow-up on that response. As far as the Energy Northwest Cascade Advanced Energy Facility opportunity, is that something that as you move through this next phase, you could get to the point you're at where you are booking more meaningful amounts into backlog in 2026, or is that a beyond 2026 opportunity? Jean-Louis Servranckx: So it's going to be beyond. I mean, at the moment, we are at pure definition phase. I mean, it's a new kind of reactor. This will require, I mean, some time just to get it well in the box between the next phases will be launched. Michael Tupholme: Got it. Thank you. Then maybe for Jerome, you have a few questions about 2026 revenue outlook. I think you provided us some good information. The question is really about as we look beyond 2026, obviously, all of the transformation that's occurred at the company and the focus on different vectors has been done with a longer-term view. Can you talk about what sort of visibility you have into revenue growth and beyond 2026 as you look to 2027 and future years? You talked a moment ago about sort of 2026 being able to hopefully do better than industry-level growth. How do we think about sort of that period beyond '26? Jerome Julier: There's a few things. One, we've done a good job building out the stable recurring revenue side of the business on the utilities front. We see opportunities to build out there. The next component is if you look at our backlog, something in the order of $5 billion of the backlog is executable effectively kind of beyond the two-year period. The way we define backlog, Mike, as you know, is it needs to be a project that has been awarded with costs and scope and schedule. It's really kind of a air quotes hard backlog definition. We have visibility for financials that extend beyond based on the projects that we're in procurement on, right? For instance, Arctic Over-the-Horizon, that will not enter backlog until we exit the validation phase. But we have a pretty good handle given the work that's been done by the big construction teams as to what that could look like. Where we sit today, we one, items that have been we've effectively secured but not entered into backlog, recurring revenue, pipeline of work, just overall trends in the sectors where we're present, the inbounds that we're receiving from a demand perspective gives us a strong degree of confidence that the business is positioned where it ought to be positioned. And so you're probably looking for something a little bit more than that other than to say that, like, we feel, we feel pretty good about the trajectory that Aecon's on today, and an ability certainly in the medium term to outpace the overall industry. Operator: And our next question comes from Frederic Bastien of Raymond James. Frederic Bastien: Guys, it's been almost 2.5 years since Oaktree made its strategic investment in Aecon Utilities. How would you grade yourself or Aecon on a report card with respect to that investment, and what can we be looking forward to in the future? Jerome Julier: So the utilities business has been performing well in the context of a very difficult regulatory environment in Canada. When Oaktree entered into the equity of Aecon Utilities, we were facing some pretty good demand tailwinds not shortly thereafter, telecom regulations, OEB regulations. A lot of the core markets where Aecon Utilities has historically been focused, were just faced with customer profile, reducing CapEx to redeploy to other jurisdictions based on regulatory challenges in those markets. The team did a very good job reimagining where they could put their resources. In the context of a business that was very heavily focused on pipeline and telecom, what we saw in 2025 was the addition of the Xtreme group in Michigan provided very strong growth in the United States. Our execution on 3 major grid-scale battery projects, which is an internal partnership between industrial and utilities, all those got done with just extraordinary schedule and cost performance. Then we also had KPC and then Ainsworth added to the mix as well. Overall, though, the performance in a very tough environment where we operate wasn't bad. Wasn't bad at all. Like the team is. We're very proud of what they've been able to produce. Oaktree's a constructive partner. They've got a very good read on aspects of the market in the United States, which when combined with our own intel and perspectives gives us a very good growth algorithm for that market. I mean, we're not going to give ourselves a letter grade, but we're happy with how it's worked out. Frederic Bastien: Great. I think one of the options that you would be contemplating further down the pipe is potentially turning this Aecon Utilities into an IPO. What are your thoughts there? Jerome Julier: Our focus with the business is to continue to grow and build out the recurring revenue programs and expand its diversification from a market client and geographic perspective. First things first. Frederic Bastien: Okay. We saw obviously the recurring revenues types of utilities go up nicely year over year. What's behind the? There was a drop if you look at the other side of the recurring revenue pie. There's been a drop from about 50%. What's in that? What's in there as well? Jerome Julier: So that would capture a variety of items ranging from aggregate sales, but most of the change that we've seen on that level relates primarily to some of the progressive design phases that were more active in 2024 that have effectively flipped into construction now. When we think about some of these collaborative projects that we're on and we're expanding kind of design and pre-construction resources where it's not tied to backlog, but it's kind of like an ongoing recognition of revenue, it falls into this bucket from a kind of disclosure perspective. Then as those projects have flipped into construction, it's now just moved into another part of the business. You know, it's less here, but more elsewhere. Operator: And our next question comes from Krista Friesen of CIBC. Krista Friesen: Congrats on the quarter. Obviously, a number of opportunities in front of you guys, whether it's utilities, nuclear, defense, build Canada. How are you feeling about your capacity? Maybe that's the labor force. To ask it a different way, what do you feel is your limiting factor when you're looking at all of these opportunities? Jean-Louis Servranckx: Obviously, construction, I mean, as I used to say, is about people and processes. Here, we have to be careful about people availability. At this stage, we have no issue. I remind you that we have extremely strong relation with the trades community and the trade unions. We have been able because it was part of our strategy and we had quite a good view about what was coming to discuss with them and to be ready. We do not have at this stage issue. For example, our workforce in the nuclear to finish Bruce and Pickering is extremely strong. I mean, not only in Canada, I mean, in United States we have something like 1,500 workers in our nuclear sector, very much loyal to the company. I would tend to say, so far, so good. The battle on the staff and the executive, I mean, has always existed between company. It's an open market. The fact that Aecon, I mean, has a bright future, is helping us a lot to be able to attract, to train, to retain, a lot of new and former executives. At this stage, I will say I'm not that worried. We are extremely focused on the contract mode of our new project, of our backlog, and I think we have done quite a good exercise to de-risk. You remember that we have inverted, I mean, our proportion of fixed lump sum costs and collaborative progressive variable costs. This is what I can say to you at this stage. Krista Friesen: And maybe just thinking about defense specifically, do you feel that you have all the capabilities that you would like to have to execute on these defense projects? Or are there M&A opportunities to build out your expertise in that space? Jean-Louis Servranckx: I mean, for what we have at the moment, I mean, specifically Arctic Over-the-Horizon Radar Program, I mean, we are ready. We are ready. I mean, It was a target, and we have been preparing this extremely carefully. Obviously, you have heard that there is going to be 4 new bases, I mean, for aircraft in the northern territories. We're not going to take and win those 4 job. We don't want to. I mean, we are extremely careful. We are not looking at M&A to be able to execute those jobs. Operator: And our next question comes from Maxim Sytchev of NBCM. Maxim Sytchev: Jean-Louis, maybe, first question for you. I mean, nuclear right now is 30% of the business, and given the visibility of all the new build stuff that's coming up, and I mean, obviously the construction revenue sort of attached to it, is it conceivable we could be driving like maybe close to half of revenue in 5 to 7 years from nuclear for Aecon? Is that too aggressive of a potential assumption? Jean-Louis Servranckx: I think it's too aggressive, Maxim we just have to realize when we speak about new build and new technology, for example, or upgraded reactors, I mean, it takes quite a lot of time to take them from definition or planning phase toward construction where the bulk of the revenue is. This will take time, and that's good. That's good for us. I think that the 50% is too much aggressive. This being said, I come back to the fact that we want to be balanced. We want to be balanced because, I mean, we don't have in hand the control of all the parameters. We think we have a good mix at the moment. We worked a lot to modify it. It may grow, I mean, on the nuclear side, but not at up to the level you have been citing. Jerome Julier: And then just to layer on top of it, all other sectors are also growing, right? And so if we were in a dynamic where we only had one shining star in the constellation, it probably wouldn't be a crazy assumption. The fact that all five of our sectors in the construction segment are very well-positioned, I think reduces that impact quite materially. Maxim Sytchev: Yes. Okay. That's fair. And then quickly just in terms of potential M&A in the U.S., I mean, I presume anything in the utilities power space still commands pretty lofty multiples. I'm just wondering what are your thoughts there and what are you seeing on the ground while obviously benefiting from your own multiple expansion? Any comments would be great. Jerome Julier: Sure. Multiples are strong and it's a reflection of the dynamic in that market. It's very clear the people who have the ability to service utilities are doing quite well now in the context of the CapEx budgets that the utilities need in order to keep pace with the demand profile. You know, part of that is clearly tied to compute consumption, whether it's for AI or kind of Bitcoin mining or whatever it is that is running through those server farms. Part of it's also reindustrialization, which I think we shouldn't lose track of. You know, the administration's policies are focused on onshoring a lot of that productive capacity, and that just consumes a ton of energy as well. Yes, the multiples are expanding. Yes, it's creating a acquisition. We need to be very specific with what we want to target. We have very particular parameters and ways that we approach it. You know, we generally don't want to find ourselves in a situation where we're bidding for businesses that are mercenary or private equity rollovers. Like, it just. This is a challenging dynamic. We need to have businesses that will be additive to Aecon, from a not just revenue and EBITDA and earnings perspective, but they need to be additive from a capability standpoint, safety standpoint, and team standpoint. Like, our job is to find the way. If you look at the average multiples that we've, we pay for M&A, over the last dozen acquisitions that the company's done, they tend to be appropriate for what we trade at the Aecon level. Our job is to thread the needle and finesse that. Like, that's why, if people want to go pay whatever the multiple that Quant is trading at, they can easily go do that. If they want to find a better way of doing it, that's our job. Operator: I'm showing no further questions at this time. I'd like to turn it back to Adam Borgatti for closing remarks. Adam Borgatti: Thanks very much, and I appreciate everyone's attention and interest. We're available for follow-up calls at any time. I wish you a great rest of you speak with you soon. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to the Kingstone Companies, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Stefan Norbum, Kingstone Companies, Inc. Investor Relations representative. Thank you. You may begin. Stefan Norbum: Thank you and good morning everyone. Joining us on the call today will be President and Chief Executive Officer, Meryl Golden, and Chief Financial Officer, Randy Patten. On behalf of the company, I would like to note this conference may contain forward-looking statements, which involve known and unknown risks and uncertainties, and other factors that may cause actual results to be materially different from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone Companies, Inc. undertakes no obligation to update the information discussed. For more information, please refer to the section entitled “Risk Factors” in Part I, Item 1A of the company's latest Form 10-Ks. Additionally, today's remarks may include references to non-GAAP measures. For a reconciliation of these non-GAAP measures to GAAP figures, please see the tables in the latest earnings release available at the company's website at https://www.kingstonecompanies.com. With that, it is my pleasure to turn the call over to Meryl Golden. Meryl? Meryl Golden: Thanks, Stefan. Good morning, everyone, and thanks for joining our call. I am delighted to share the results of our most profitable quarter and year in Kingstone Companies, Inc.’s history. I want to thank the amazing Kingstone Companies, Inc. team and our select producers for making it possible. Let me start with the headlines. In the fourth quarter, we delivered net income of $14.8 million, diluted earnings per share of $1.30, diluted operating earnings per share of $1.80, a GAAP net combined ratio of 64.2%, and an annualized return on equity of 51%. For the full year, net income more than doubled to $40.8 million, diluted earnings per share increased 95% to $2.88, and our return on equity was 43%. These results exceeded the guidance we provided in November. I am particularly proud that from year-end 2023 to year-end 2025, we grew direct premiums written 39% while improving our combined ratio by 30 points. These results are structural, not simply weather-driven, and they validate the transformation we have executed. What sets Kingstone Companies, Inc. apart and what drove these results is clear. First, our Select product, now 57% of policies in force compared to 45% one year ago, continues to improve risk selection, properly matching rate to risk and driving lower claims frequency. Second, our producer relationships generate strong retention and consistent new business flow. Third, our operating efficiency, with a net expense ratio that improved from 41% in 2021 to 30% in 2025, provides durable margin advantage. And last, our conservative financial position, with no debt and robust reinsurance, means we can grow with confidence. Turning to the quarter, direct premiums written grew 14% to $82.8 million, driven by higher average premiums and strong retention. For the full year, direct premiums written grew 15% to $277.8 million, and our New York personal lines policies in force grew over 7%. The hard market conditions in our Downstate New York footprint have not changed materially. Demand from our producers remains strong, supported by policies from the GARD Renewable Rights Agreement which we began writing in September. New business policy count has increased sequentially from Q2, and in Q4 grew 25% over Q3. In this environment, what separates the winners from the rest is straightforward: highly segmented products to better assess risk, low expenses, claims execution, and deep producer relationships. We have built these advantages; we will not chase volume at the expense of underwriting discipline. Net earned premium growth remains a powerful tailwind. Net premiums earned increased 38% in the fourth quarter and 46% for the full year, primarily due to our reduced quota share, which allows us to retain a greater share of premium and underwriting profits. The decision to reduce our quota share reflects our confidence in the quality of our book and that our underwriting results warrant retaining more premium. As such, we have reduced our quota share even further for 2026, and net earned premium growth will continue to be a tailwind. On underwriting, our fourth quarter net combined ratio of 64.2% reflects exceptional performance across the board. The underlying loss ratio was 34.7%, an improvement of over 14 points from the prior-year quarter, driven by meaningfully lower claim frequency. The improvement in frequency, particularly for non-weather water, our largest peril, is a trend we have shared throughout the year, and we attribute it to the effectiveness of risk selection in our Select product. During the quarter, we also recognized the benefit from continuing improvements in our claims operations, with faster cycle times and providing earlier visibility into ultimate property claims cost. For the full year, our underlying loss ratio improved nearly 4 points to 44.4%, and our catastrophe loss ratio was just 1.2 points. I want to be direct. While we benefited from very low catastrophe activity in 2025, our underlying performance improved materially. Even with a normalized catastrophe load, our full-year combined ratio would have been in the low 80s, reflecting the differentiated platform we have built. As we shared in the second quarter, we have set a five-year goal of $500 million in direct premiums written by year-end 2029, approximately doubling the size of the company through continued growth in New York, measured expansion into new markets, and strategic inorganic opportunities. I am pleased to share that our first new market will be California, which we will be entering in 2026 on an excess and surplus (E&S) lines basis. California is one of the largest homeowners markets with $15 billion in written premium, almost double the size of New York, and the largest E&S homeowners market in the country, where the supply-demand imbalance for homeowners coverage continues to grow. The E&S approach gives us the flexibility to price wildfire risk using forward-looking models to set prices to achieve our margin requirements and to apply strict underwriting standards, including rigorous property-level risk selection and real-time accumulation management. We will start small, consistent with our disciplined approach, and scale as we gain confidence in our pricing and product. The initial contribution from California will be modest, less than 5% of our 2026 premium, with the vast majority of our volume continuing to come from New York. But the opportunity is enormous, and California will become a large contributor to our growth over time. Turning to our outlook for 2026, I want to explain an important change in how we are reframing our outlook for this year because we think it will help investors better understand our business. Starting this year, we are introducing the underlying combined ratio, which excludes catastrophe losses and prior-year reserve development, as our primary operating lens. We define it as the underlying loss ratio plus the net expense ratio. This metric isolates the performance we control, including pricing, risk selection, claims management, and operating efficiency, from the inherent volatility of catastrophe events. In 2025, our underlying combined ratio was 74.4%, an improvement of 5.1 points from 79.5% in 2024. That improvement is structural. It reflects Select product penetration, earned rate adequacy, and operating leverage, and is independent of catastrophic weather events. At the same time, our record combined ratio of 75% benefited from an outlier low catastrophe loss ratio of just 1.2 points. To put that in context, the six-year average cat loss ratio from 2019 through 2024 is 7.1 points. Both 2024 and 2025 were well below the average, including two consecutive mild winters. So when you look at our 2026 guidance, I want to be very clear about the bridge. The headline year-over-year change in earnings per share and return on equity is driven almost entirely by our assumption of a higher-than-normal catastrophe load, not by any deterioration in our underlying business. In fact, our underlying combined ratio guidance of 74% to 76% is comparable to 2025. The headline story is straightforward: the controllable business is healthy and growing; the year-over-year change reflects cat normalization. Here is our updated guidance for fiscal year 2026: direct premiums written growth of 16% to 20%; an underlying combined ratio, excluding catastrophes and prior-year reserve development, of 74% to 76%; a catastrophe loss assumption of 7 to 10 points, which is at or above the six-year historical average and reflects the elevated winter storm activity we experienced in 2026; and a net combined ratio of 81% to 86%. Diluted earnings per share of $2.20 to $2.90, with a midpoint of $2.55, reflects an increase at the midpoint relative to our initial outlook and the benefit of a lower quota share cession for 2026. The 16% to 20% direct premium growth target helps keep us on pace toward our five-year goal of $500 million in direct premiums written by year-end 2029. I want to give investors the tools to model different catastrophe scenarios. On an illustrative basis, and this is not guidance, each one point of catastrophe loss ratio has approximately a $0.13 impact on diluted earnings per share. So if you want to see what our earnings power looks like at fiscal year 2025 cat levels of 1.2 points, the illustrative answer is approximately $3.53 per diluted share, which represents 23% growth year over year. That is the underlying trajectory of this business. I want to emphasize that weather is unpredictable, and our 2026 guidance assumes a higher-than-average catastrophe year given the winter weather in 2026. As a reminder, our catastrophe reinsurance program limits our maximum first event loss to $5 million pretax, or approximately $0.27 per share after tax, whether from a hurricane or a winter storm. We will refine our outlook as the year unfolds. Before I hand it to Randy, I want to briefly address the regulatory proposals in New York regarding homeowner insurer profitability. We share the goal of affordability for consumers, and we are monitoring these proposals closely and engaging constructively through industry bodies. We believe any final legislation will need to account for the inherent volatility of catastrophe-exposed property insurance and the importance of maintaining carrier capacity and availability for New York homeowners. We will continue to execute with discipline, advance our measured expansion roadmap, and allocate capital prudently to drive sustained profitable growth. I remain highly confident in Kingstone Companies, Inc.’s strategic direction and fully committed to creating long-term shareholder value. With that, I will turn the call over to Randy Patten, our Chief Financial Officer, for a more detailed review of our results. Randy? Randy Patten: Thank you, Meryl, good morning again, everyone. The fourth quarter was our most profitable quarter in the company's history and our ninth consecutive quarter of profitability. During the quarter, we reported net income of $14.8 million, diluted earnings per share of $1.03, a 64.2% combined ratio, and an annualized return on equity of 51%. For the full year, net income was $40.8 million, more than doubling the prior year and the most profitable in company history. Performance is driven by strong net earned premium growth as our reduced quota share and our 2024 new business surge continue to earn in. This was combined with very low catastrophe losses, favorable frequency trends, and lower expenses, aided by adjustments to the sliding-scale ceding commissions due to both an improvement in the attritional loss ratio and low catastrophe losses. As a reminder, the quota share reduction from 27% to 16% for the 2025 treaty year reflected the improved quality of our book and increased our projected earnings per share by approximately $0.25 for 2025. For the 2026 treaty year, we have further reduced our quota share cession from 16% to 5%, reflecting continued confidence in the quality of our underwriting portfolio and capital position to support our growth. This reduction is expected to increase projected earnings per share by approximately $0.20 for 2026, as incorporated in our updated guidance ranges. Our net investment income for the quarter increased 55% to $3.0 million, up from $1.9 million last year. For the full year, we achieved a 44% increase, reaching $9.8 million. The momentum is due to robust cash generation from operations, which has enabled us to grow our investment portfolio to $309.7 million and benefit from higher fixed income yields. We also continue to reposition a portion of the portfolio to capitalize on attractive new money yields of 4.7% in the fourth quarter. While we remain conservative in our investment strategy, we are actively seeking opportunities to enhance our portfolio yield and duration. As of 12/31/2025, our fixed income yield is 4.3% with an effective duration of 4.4 years, up from 3.7% and 3.9 years at 12/31/2024, an increase of 60 basis points and a half year, respectively. During the quarter, we recognized an additional $1.0 million in sliding-scale contingent ceding commissions under our quota share treaty, with about half coming from lower attritional losses and half from lower catastrophe losses, which contributed a 1.9 percentage point decrease in the 27.9% expense ratio reported in the fourth quarter. For the full year of 2025, we reported an expense ratio of 30%, an improvement of 1.3 percentage points from the prior year. Reaching 30% for the expense ratio is an important milestone for the company. As a reminder, the company's expense ratio was 41% in 2021, and in four years we have successfully lowered the expense ratio by 11 points through several expense initiatives. I would now like to provide some detail on the guidance framework Meryl introduced. For the full year 2025, our underlying combined ratio was 74.4%, comprised of a 44.4% underlying loss ratio and a 30% expense ratio. This was a 5.1 point improvement from 79.5% in the prior year. For the full year of 2026, we are guiding to an underlying combined ratio of 74% to 76%, reflecting continued benefits from our Select product and operating leverage. Our full-year 2025 catastrophe loss ratio of 1.2 points was well below the six-year historical average of 7.1 points for the 2019 through 2024 period. Our full-year 2026 guidance includes 7 to 10 catastrophe loss points, which is above our historical average and incorporates the elevated winter storm activity experienced during 2026. The difference between our full-year 2025 reported combined ratio of 75% and our full-year 2026 guided range of 81% to 86% is mostly attributable to the inclusion of above-average catastrophe losses and minimal change to our underlying combined ratio. I will conclude my portion of the call today discussing our capital position. We have no debt at the holding company. Shareholder equity ended the year at $122.7 million, an increase of 84% during the year. Book value per diluted share increased 75% to $8.28, and book value excluding accumulated other comprehensive income increased 56% to $8.69. For 2025, return on equity is 43%, an increase of nearly seven percentage points from the prior year. Given this foundation and our outlook, we declared our third consecutive quarterly dividend during 2026 and have ample capital to fund the disciplined growth initiatives that Meryl outlined. With that, I will now turn the call back to Meryl for closing remarks. Meryl Golden: Thanks, Randy. I just want to underscore one thing. The results we are sharing today reflect the durable competitive advantages we have built in underwriting, in our producer relationships, and in our operating model. We are entering 2026 with a strong foundation, a clear roadmap for profitable growth, and the financial flexibility to execute. We look forward to updating you as the year progresses. Operator, we are ready for questions. Operator: Thank you. We will now open for questions. Our first question today is coming from Robert Farnam of Brean Capital. Please go ahead. Robert Farnam: Hey there and good morning. I have a couple of questions. One, let us just talk about California first, because obviously California risks are not quite the same as Downstate New York risks. So I kind of wanted to know, and I think this is going to be your first foray into kind of the excess and surplus lines basis of writing things. So I just want to know, how do you see the differences in the risks? How do you expect performance-wise? I am just trying to get a little bit more color as to how California may be different from New York. Meryl Golden: Sure. So we hired an actuarial consulting firm earlier this year to look at the landscape of all the catastrophe-exposed property markets for Kingstone Companies, Inc. to expand, and California came out on top because it is a very large market, it is dislocated, and it is completely diversifying for Kingstone Companies, Inc. relative to New York. So our plan is to enter with the same differentiators as we have in New York. We are going to be using our Select product, and that same firm that helped us build the Select product is helping us modify it to be appropriate for the California market. We are entering E&S so we can have a highly segmented product and use best-in-class models for underwriting and rating of wildfire risk and for risk aggregation. And we are fortunate that we have some underwriters and some claims employees that have experience in California, so that will be really helpful to us. But mostly, the point I want to make about our entry into California is that we will be disciplined. Our plan is to enter small, less than 5% of our premium for 2026, make sure we understand the market and we are doing everything right before we expand. Robert Farnam: And if I read right in the presentation, you have a 30% quota share on the California business. Is that right? Meryl Golden: That is correct. Out of an abundance of caution, we have a 30% quota share for California initially. Robert Farnam: Okay. And are you looking to write all across California, or are you looking, like, Northern California, Southern California? Or coastal California? You know, where the wildfires could possibly be? I am just kind of curious. Obviously, in New York, you have a specific targeted area, so I did not know if California would be similar. Meryl Golden: Yes. So in California, we are going to write all across the state. It is really important to manage our concentration in any area of California to manage the wildfire exposure, and we will be doing that in real time. And we are focused on low to moderate wildfire risk. Robert Farnam: Okay. Same kind of target size value for homes as in New York? Or something? Meryl Golden: Same as New York. Robert Farnam: Okay. Just to change tack a little bit here. So your expense ratio—obviously, you have had a lot of progress getting it down to 30%. Do you see, like, where do you see a happy run rate as to where that expense ratio can get to? Are you pretty much where you should be, or do you think you could still squeak some improvement out of that? Meryl Golden: Randy, do you want to take that? Randy Patten: Sure. Hey, Bob. Good morning. Robert Farnam: Hey. Randy Patten: Yes. So reaching a 30% expense ratio is a huge milestone for the company. As you know, if you look back to 2021, we were at 41%. I think with some economies of scale, we can get that expense ratio down possibly another half to a full point. But it is kind of where we expect it to be—kind of in the 29% to 30% range is where ultimately we will be comfortable with that expense range. Meryl Golden: Great. I just want to add, Bob, that most of the expense to enter California has already been incurred in terms of developing the product and programming the product, and we will likely need to add some staff, but a modest amount of staff as we continue to grow in California. So I think we are going to get scale economies, as the platform we have built is scalable. Robert Farnam: Yes. Right. Yes. I saw that in the presentation. You are talking about your ability to scale up is not going to have a whole lot of impact on the expenses at this point. So that is great. Last question for me—I probably ask you every quarter—but obviously, with such profitable business, has there been a change in competition at this point in New York? It is just something that baffles me that you do not have a whole bunch of other companies trying to get into the same market to try to capture the same profitability. Meryl Golden: Yes. I mean, we have been hearing lately about different companies planning to enter the state, but let us not forget that competition has come and gone in New York, and Kingstone Companies, Inc. has been able to execute regardless of the competitive environment. We are in a really good place in Downstate New York. We have our Select product that properly matches rate to risk, low expenses, we are providing great service to our producers and our policyholders, and we have very deep and broad producer relations. So I feel confident we can compete successfully with whoever is entering New York State. Robert Farnam: Okay. Good. Good answer. Congrats on a great year. That is it for me. Meryl Golden: Thanks, Bob. Operator: Thank you. Next question is coming from Gabriel McClure, a Private Investor. Please go ahead. Gabriel McClure: Good morning and congrats on an outstanding quarter. Meryl Golden: Thanks, Gabe. Yes. So— Gabriel McClure: I think Bob asked most of the questions that I had for you. Just wanted to circle back on the exposure limits on the policies in California. Can you remind us again what our exposure limits are on our New York policies? Meryl Golden: Sure. We just, in New York, increased the available Coverage A, or value of the home, to $5 million. So we had been operating with a max of $3.5 million for all of last year, and we have just increased to $5 million. And that would be our plan for California as well. We are going to start off with a cap that is a bit lower, and as we gain confidence in our product, we will open up to $5 million as well. Gabriel McClure: Okay. Got it. And then I think in your prepared remarks, you made a little bit of reference to the winter storm that you all had a couple of weeks ago. Did we have some noticeable claim activity from that storm? It looked pretty bad from out here in Arizona. Meryl Golden: Yes, Gabe, it is obvious you are not in the Northeast because it has been a bad winter. We have not just had one winter storm. There have actually been seven catastrophe events that have been declared since January 23. So the one thing I want to say is our claims department has been working so hard. I am so proud of the way they have managed this catastrophe event and the service that they have been able to provide to our policyholders. And our estimates for the winter storm losses have been included in our guidance for 2026. So we have mentioned that we are planning for an at or above average catastrophe loss year of 7 to 10 points, and that includes the catastrophe activity from Q1. Hopefully, the winter is over, and there will not be any more catastrophes declared. Gabriel McClure: Okay. Yes. I hope so. Got it. Okay. And then just last thing, the California opportunity is super exciting and interesting. I know Bob asked most of my questions already, but is there anything interesting or anecdotal that you have about the California market that you might want to share? Meryl Golden: I think what is really important to understand is that the market is in need of capacity, and many people think that is because of wildfire. And certainly, wildfire is a major risk for California, but the primary issue in California is the regulatory environment, which precludes companies from charging adequate prices for the underlying exposure. So as an E&S writer, we are not subject to that same regulation, so it gives us a real advantage, and that is why you are seeing in California the E&S market for homeowners is growing faster than any other place in the United States. So I think it is a terrific opportunity to highlight the differentiators that Kingstone Companies, Inc. brings to the market, particularly relative to pricing sophistication and producer relationships, and I am really excited to start writing business there in Q2. Gabriel McClure: Sounds really good. That is all for me. Thanks, Meryl. Operator: Thanks, Gabe. We are showing no additional questions in queue at this time. I would like to turn the floor back over to Ms. Golden for closing comments. Meryl Golden: Great. Thank you, everyone, for joining us today. It is a really exciting time for Kingstone Companies, Inc., and we appreciate your support. Have a wonderful day. Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Operator: Greetings, and welcome to the Methode Electronics Third Quarter Fiscal 2026 Results Conference Call. And please note, this conference is being recorded. I will now turn the conference over to your host, Joni Konstantelos, Managing Director of Riveron. Ma'am, the floor is yours. Unknown Executive: Good morning, and welcome to Methode Electronics Fiscal 2026 Third Quarter Earnings Conference Call. Our fiscal 2026 third quarter financial results, including a press release and presentation can be found on the Methode Investor Relations website. I'm joined today by John DeGaynor, President and Chief Executive Officer; and Laura Kawaltick, Chief Financial Officer. Please turn to Slide 2 for our safe harbor statements. This conference call contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this conference call involve a number of risks and uncertainties. We will also be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the SEC, such as the 10-K and 10-Q. Please turn to Slide 3, and I will now turn the call over to John DeGayner. Jonathan DeGaynor: Thanks, Jonny, and good morning. Welcome to Methode's Third Quarter 2026 Earnings Call. I want to begin by recognizing our global team for their continued focus on serving our customers in the face of a challenging and rapidly evolving environment while driving forward our multiyear transformation journey. Across our manufacturing sites and corporate functions, our teams have demonstrated resilience as we work through industry headwinds and advance our transformation initiatives. Your discipline, collaboration and commitment to continuous improvement are strengthening our foundation and positioning us for better long-term performance. Thank you. Moving to our third quarter results. We generated $234 million in sales and $7.3 million in adjusted EBITDA. While profitability was pressured year-over-year, we delivered positive free cash flow of $10 million in the quarter and approximately $17 million in year-to-date cash flow as we remain on track to achieve our fiscal '26 free cash flow targets. Importantly, our Industrial segment sales increased 9.5% year-over-year, reflecting continued strength in off-road lighting and power distribution solutions supporting data center applications. That performance demonstrates the benefit of our growing exposure to higher-growth industrial power markets and helps offset some of the headwinds we are seeing in North American automotive and in commercial vehicle lighting. Generating cash while navigating a volatile revenue environment is a clear reflection of the operational discipline we are building into this organization. Please turn to Slide 4. Our transformation journey continues. As I've said before, progress will not be linear and is not something that could be measured in a single quarter or even a few quarters. Our transformation is a multiyear effort focused on strengthening the foundation of the company, utilizing our resources as efficiently as possible and finding new sources of value. Along the way, we must refine our portfolio, align our business structure, optimize our footprint and embed operational discipline into everything we do. At the same time, there are factors outside of our near-term control, commercial vehicle market softness, EV program delays and macro volatility, particularly in North American automotive that will impact our improvement trajectory. We are addressing those realities directly with our teams and with our customers, but we are not allowing them to distract us from executing our priorities. Let me briefly recap these priorities. First, stabilize and improve our operational execution. When we started this journey, we had 2 facilities that were extremely challenged, Egypt and Mexico. We continue to see positive trends in Egypt as a result of the changes we have made there. The transformation of our Mexico facility is not as far along. We're making progress in upgrading the team and improving execution on both existing programs and new programs. However, we have not seen the productivity improvements as quickly as we initially expected, which has been exacerbated by commercial vehicle volume reductions and program delays from multiple North American customers. These external factors were the primary driver of our EBITDA guidance revision that Laura will talk about later in the call. We've built an entirely new leadership team in Mexico, and we are supplementing that team with both corporate and specialist external resources. Our new leadership team is getting fully up to speed and working hard to tackle the challenges in our 2 Mexico facilities, understanding root causes, driving accountability and resetting expectations. Naturally, when you're transforming an operation, there's a cleanup involved. You have to surface issues before you can permanently fix them. This is part of the process. It is not comfortable, but it is necessary. We are taking focused actions to improve execution, efficiency and cost control, and we expect performance to strengthen as those actions take hold. Second, we are refining and simplifying the portfolio. A clear example is the completed sale of the Dataamate business, which I'll talk about more in a minute. Third, align our cost structure and footprint. We completed the move of our headquarters from Chicago and sublease that facility. We've signed a purchase agreement on our Howard Heights facility in Illinois, a facility that formally housed our Dataamate business. So we are making good progress in reducing our overall footprint. And fourth, position the company to capitalize on secular growth opportunities, particularly in Power Solutions. We are actively capitalizing on the data center and vehicle electrification megatrends, reallocating resources toward the areas where the strongest long-term return potential. These are deliberate, measurable actions, and we are doing what we said we would do. These are not concepts, they are actions. Turning to Slide 5. For background, Datamate is a supplier of copper transceivers for enterprise and telecom networks. While it was a solid business, it was not aligned with our long-term power solutions strategy. Divesting it allows us to redeploy capital and management toward higher growth, higher return opportunities, particularly in our Industrial Power Solutions business. We are concentrating our capital management -- capital and management attention and engineering resources on the areas that can generate the greatest long-term returns. The proceeds from this sale and the Harvard Heights facility sale will be used primarily to repay debt and further strengthen our balance sheet, consistent with our disciplined capital allocation approach. Turning to Slide 6. Power Solutions has been part of the Methode DNA for more than 60 years. We are now leveraging that deep expertise to serve today's most demanding applications across EV, industrial and data center markets. We're expanding our customer base. We are adding experienced industry veterans into the industrial power business, and we are rotating engineering and commercial resources toward higher growth opportunities. This is not a short-term pivot. It is a structural reallocation of talent and capital, and we expect this to pay dividends over time, but we are still early in this journey. Let me spend a minute on data centers. Based on Q4 order patterns, we now have line of sight toward $120 million annualized run rate. This represents a significant increase in run rate year-over-year. Importantly, this run rate reflects current end customers through various contract manufacturers. It does not assume incremental wins from new accounts. Our actions regarding additional commercial and engineering resources and our investment in items like vendor-managed inventory are enabling us to react much more quickly to customers. We are seeing increasing momentum as a result of these actions. We are expanding our customer base, but our current run rate is supported solely by existing relationships. As momentum builds, the trajectory suggests a 50% increase in run rate year-over-year in the near term. This is a meaningful growth driver for Methode both for today and the future. Turning to Slide 7. Transformation is not linear. There will be turbulence, particularly in North American automotive, and we are seeing that today. But we are building a stronger operational foundation underneath the business. At the same time, we are executing every day. We're shipping product. We're supporting launches, and we are managing working capital. This dual focus of transformation while operating is critical. -- transformation does not happen in isolation. We remain encouraged by opportunities in our Industrial segment, especially in power distribution solutions supporting data center infrastructure. Those align directly with our core competencies while there is more work ahead, we are making measurable progress, strengthening execution, simplifying the organization, improving the balance sheet and positioning method for performance over time. I'll now turn it over to Laura to go through the financials. Laura Kowalchik: Thanks, John. And turning to Slide 8. Third quarter net sales were $233.7 million compared to $239.9 million in fiscal 2025, a decrease of 3%. The year-over-year decrease in sales reflected lower sales volumes in the automotive segment related to a reduction in North American electric vehicle volumes and the interface segment related to a previously announced appliance program roll off. Results were partially offset by a higher sales volumes in the Industrial segment, particularly for off-road lighting and power products as well as positive foreign currency translation which had a favorable impact of approximately $12 million in the quarter. As a reminder, the third quarter is also historically our weakest quarter for sales as it covers the year-end holidays. Gross profit was $38.8 million, down from $41.3 million in the prior fiscal year quarter, primarily a result of lower sales volume and product mix in the Automotive segment and interface cement. Selling and administrative expenses increased by $1.4 million to $39.1 million in the quarter. Restructuring and asset impairment charges included within selling and administrative expenses were $400,000. Income tax expense for the quarter was $2.8 million, down from $6.2 million in the prior fiscal year quarter. In the quarter, we realized a lower valuation allowance for U.S. deferred tax assets of $2.4 million compared to $6.5 million in the prior fiscal year quarter. Third quarter adjusted EBITDA was $7.3 million, down $5 million from the same period last fiscal year. Third quarter adjusted net loss was $13.1 million a $5.9 million change from the third quarter of fiscal 2025 attributable to the decrease in gross profit and increase in selling and administrative expenses, partially offset by a lower income tax expense. Third quarter adjusted loss per diluted share was $0.37 compared to a loss of $0.21 in the prior fiscal year third quarter. Please turn to Slide 9, where I will discuss the progress made with our disciplined capital allocation strategy. We ended the quarter with $133.7 million in cash, which was up $30.1 million compared to the end of fiscal 2025. Operating cash generation in the third quarter was $15.4 million. Third quarter free cash flow was $10.1 million compared to $19.6 million in the fiscal third quarter 2025. Although down year-over-year, we continue to generate robust free cash flow amidst a challenging operating environment with a free cash flow of $16.5 million year-to-date as we continue to operate with strong capital discipline. Net debt was down $16.9 million compared to the same period last year. Moving forward, we remain committed to driving strong cash flow generation to further pursue our capital allocation priorities of net debt reduction, selective high-growth investments, business improvements, portfolio alignment as well as returning value to our shareholders through dividends. Turning to Slide 10. Again, please note that fiscal 2025 was a 53-week fiscal year in fiscal 2026 is a 52-week fiscal year. Our guidance also does not reflect the sale of Data Mate or our Howard Hites, Illinois facility. For fiscal 2026, we have narrowed our net sales guidance, raising the low end of the range by $50 million to now be $950 million to $1 billion. The increase primarily reflects the benefit of foreign currency translation, which totaled approximately $25 million through the first 9 months of fiscal 2026. For the full year, we anticipate foreign exchange to provide an approximate $30 million benefit relative to our prior assumptions, which is largely driving the increase in our midpoint. In addition, we have lowered our adjusted EBITDA outlook to be in the range of $58 million to $62 million compared to our prior range of $70 million to $80 million. The reduction is primarily concentrated in North American auto and reflects updated cost assumptions related to multiple customer program delays and higher expenses associated with the transformation of our Mexico facility, including wages and professional fees. For fiscal year 2026, we continue to expect positive free cash flow in the fourth quarter and for the full year compared to an outflow of $15 million in the previous fiscal year. With that, I will hand it back to Jon for closing remarks. Jonathan DeGaynor: Thanks, Laura. To close, while the near-term environment remains dynamic and our improvement trajectory is not linear, we are taking deliberate actions to strengthen the company. We are stabilizing operations, refining the portfolio, aligning our footprint and cost structure and reallocating resources towards higher-growth power solutions opportunities. There is more work ahead, particularly in Mexico and within North American automotive. But the foundation we are building is real. At the same time, we are maintaining a sharp focus on cash generation and balance sheet discipline. We believe the actions we are taking today position method for improved performance and more consistent value creation over the long term. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question is coming from John Franzreb with Sidoti & Company. John Franzreb: I would like to start with Mexico. Can you just kind of review what's going on there? And how far along are you on the process and maybe time line when you think it will be completed. . Jonathan DeGaynor: Yes. So John, a couple of things. Thanks for your question, and Laura will chime in here as well. As we said on previous calls, the transformation in Mexico is probably about 6 months behind where we are with Egypt. And we are making progress there. But one of the challenges that we have is in Egypt, we have year-over-year revenue growth on top of performance improvement whereas in Mexico, we have continued -- we have year-over-year revenue shrinkage. Most of the roll off of our past programs is in Mexico and the primary impact of program delays is also in Mexico. So the -- what we're spending to prepare and launch new programs as well as the transformation there isn't getting any benefit from tailwinds of increased revenue. We're seeing -- we're spending the money to get the launches ready and we're seeing the delays. The team has been completely rebuilt over the last 6 months, and I'm really pleased with the progress that we're making on our day-to-day execution. But we're 6 months behind where we were with regard to Egypt. Laura Kowalchik: Yes. And as Jon mentioned, the decrease year-over-year in revenue, which results in the bottom line decreases as well as under absorption. We have some additional S&A expenses related to changing out the management team and wages as well as additional resources that we brought in to help with the operational performance. But despite this, we are seeing improvements in scrap and direct material costs as a percent of sales through our supply chain initiatives. John Franzreb: Now we had 3 great months of commercial truck orders. I'm curious, have you seen that flow through your P&L yet or any purchasing orders or anything? And also, does that impact the Mexico facility at all? Can you just maybe talk to that? Jonathan DeGaynor: So John, it does impact the Mexico facility and it's the impact of -- we're actually still seeing it as a headwind with regard to orders. Both what we've seen from DTA and PACCAR in is more of second half of calendar '26 as to where the volumes start to come back. And what we're seeing the impact, and we talk a little bit about it, is the trade-off between commercial vehicle volumes in our in lighting and some of the North American automotive programs. So we have a mix impact as well as volume impact. We do see some future growth later in this quarter and probably more into early of our fiscal 2027, but we aren't yet seeing it. John Franzreb: And one last question on Data made. How much in revenue or annualized revenue did that business contribute? And was it profitable? Or maybe you can give us maybe the scale profitability? . Jonathan DeGaynor: So it's roughly $18 million worth of revenue. It was profitable. But what I can say is in roughly $3 million worth of profitability. But what we can say, John, is the ability to pay down debt, the ability to exit an underutilized facility and to continue just our overall rationalization of structural cost, we believe we can largely offset that profitability. So we think overall, it's an accretive decision. Operator: Our next question is coming from Luke Junk with Baird. Luke Junk: I'll jump off there. Jon, can you just remind us of some of the key products and applications for that data made business? And I guess 1 of the obvious questions strategically is just why it wasn't too complementary with the core power business in data center? . Jonathan DeGaynor: So this is more of a data over copper. -- system. It's a small electronic data over copper product. It's not complementary with our data center activity whatsoever. And really, the judgment for this look was it's a good business. But as you think about the opportunities that we have, and you and I have talked many times about return on effort, what it would take to make that grow materially because it's been relatively flat in the $15 million to $18 million for revenue for a long period of time. As we looked at it, it was a good business -- it is a good business. But in order for us to make it grow versus putting more effort into our base data center business or some of the other areas where we can drive growth and really return for the shareholders, our decision was that probably is a better open for the business than method. Luke Junk: Sticking with data center, if I look at the chart that you guys provided, which is helpful. Just trying to extrapolate the data center piece in fiscal '26 specifically. It seems like it's trending fairly flat this year. Now I understand some of the reasons for that. I know you were implementing the VMI. There's some other things going on in the hood there. But just trying to understand, certainly, there's been a lot of CapEx growth this year. Should we perceive that there's been effectively like a little bit of a growth bubble because I'm just trying to get comfortable then stepping into, I think you said in the $120 million run rate on a go-forward basis given the clarification. Jonathan DeGaynor: So look, -- what we've said to you is -- and said to the investors is that as we move to an EDI-based sales forecast versus just a, if you will, a contract-by-contract sales forecast that we would give you transparency as soon as we knew it. This run rate that we're talking about is that transparency. This is backed with EDI. So you're right that on a total year basis, it looks like it's relatively flat. Part of that was due to some of the sales gap that we had moving from where we recognize the sale when the parts leave the boat in Shanghai to moving to vendor-managed inventory, which created a 6- to 8-week revenue gap. So -- the most important thing here is a flat -- relatively flat year-over-year, but Q4 run rate of $120 million with EDI that gives us great confidence in what we see on year-over-year growth and what we see into the future. The other aspect is I think you made a comment about CapEx growth. We have not had significant CapEx growth. It's actually down year-over-year. And there's been no material CapEx that's been invested for the data center business whatsoever. As a matter of fact, we're using some core competencies and some capabilities from other investments as we rotate into Mexico. So we have really use our capabilities. We rotated with this VMI and it is creating the momentum that we said it would and the $120 million run rate reinforces that. Laura Kowalchik: Yes. Our CapEx, just to jump in here. Our CapEx was $42 million for FY '25, and we're at 16.5% right under 17% approximately this year. Luke Junk: Yes. That $120 million, you also mentioned, Jon, that you have a line of sight to 50% kind of growth in the medium term. I think if I try to extrapolate what you're implying in the targets maybe about $85 million of data center this year. Is that -- what kind of base numbers should we use for that 50% opportunity? . Jonathan DeGaynor: And that's what we have said pretty consistently is $80 million to $85 million as a basis in our guidance. And as we talked about on the last earnings calls, that considered the impact of VMI. But what we're seeing here is a run rate that's actually higher, much of which will be setting us up into 2027 -- fiscal 2027. Luke Junk: And then last question for me, a Mexico, understand some of the challenges there. I think you had some initial improvements, but obviously, things that are cutting against you as well. It feels like maybe there's been some things that have cropped up that you weren't anticipating? I guess, is this some more contagion across launchings and the fact that just -- I know you had whatever is something in the range of 20 launches this year. Just that as you're spending to those that Silensys was pretty visible, but are there more launches that are becoming problematic at the margin? . Jonathan DeGaynor: Yes. So I think the way to think about this is as you bring new people in with fresh eyes, we do see some things from a performance perspective. But as Laura said, our scrap rates and our premium freight and other items that are really controllable performance-based items are better year-over-year. We -- what we have seen with regard to the new launches is we've spent the money both from a capital standpoint and from an engineering standpoint to prepare for the launches and we've had further delays even from what we said in the last quarter. So because those launches were primarily EV-based power application launches for North America, and many of our customers have further delayed their programs. That's where the challenge is. So we just don't have the revenue that we would expect as these launches -- as these programs start and ramp up, we're not seeing those. So as we've talked about we're dealing with it from a class standpoint. We're also dealing with it with going back to customers for recoveries on where we have those delays. Operator: Our next question is coming from Gary Prestopino with Barrington Research. Gary Prestopino: Jon, Laura. I just want to follow up on this EV issue. These are delayed programs. Is there any programs that have been outright canceled? . Jonathan DeGaynor: Yes, you okay. So as we -- Gary, just to answer that, as we've talked about there, we have talked about some Stellantis program cancellations as well as other programs that are delayed. And we've mentioned what we've done with regard to previously about going back to customers and particularly Stellantis with regard to dealing with cancellation claims. So those are ongoing. None of the customer negotiations are in our -- in this guide. I think it's important to note that neither the data make transaction nor the Hardwood Height transaction nor any customer recoveries are in this guide. Gary Prestopino: Let me ask the question another way just so I can get an idea. In the programs that you have right now that you're actually producing for and you're actually having take rates, was -- were the take rates less than you had anticipated and that has been causing you to channel down your expectations for the EV market this year? I'm just trying to get a handle on it, how this is all shaping out. Jonathan DeGaynor: Yes. So here's -- the answer is yes. And it's primarily in North America. So if you think about it, auto is 45% of method. EVs are 41% of auto. So as a total, EVs as a percentage of method through this year, through this fiscal year is 18%, where now take it to the next level, which is exposure to EVs -- of that 41% of auto that is EVs, only 14% of that is North America. If we were going back, and I don't have the number at my fingertips, if we've gone back when we originally set guidance, that number should have been much, much higher based on the assumption of launches from multiple programs. So the -- what we're seeing is expenses launch expenses, CapEx, building inventory, all those sort of things in Mexico, in a place where you have big programs rolling off that we've talked about across multiple quarters and none of the revenue coming from the EV programs. Gary Prestopino: What about what you're doing outside of North America, how would the take rate spend there? Jonathan DeGaynor: Those take rates are relatively on track. The growth on a year-over-year basis in Egypt, the top line growth we have bottom line that's driven by performance. We have top line growth that's basically driven by ramp-up of programs, particularly the EV programs that we launched there, and China is stable. So this is -- it's why we refer to it specifically as a North American automotive challenge and as an EV program cancellation or delay challenge. Gary Prestopino: Are the products that you guys produce the EVs, are they applicable to plug-in hybrids and hybrids. I mean can you bid on those new models that are coming out because it seems that that's the way the market's really rolling now. Jonathan DeGaynor: Yes. And our pipeline of bids has our quoting and cost estimating team is very busy. Operator: We have another question from John Franzreb with Sidoti. John Franzreb: I stick to the launch topic here. How many programs have you launched on so far in fiscal '26 and how many remain for this year -- and how does that compare to your expectations at the beginning of the year? I'm just trying to contextualize what kind of magnitude we're talking here. Jonathan DeGaynor: John, I don't I don't have the exact split between what we plan to launch and what we have launched versus cancellations. Our number was programs in this fiscal year. It was 56% over fiscal 2025 and fiscal '26. And because of the timing -- because of the timing of some of these delays, we spent the money on the launches before we ended up with either a delay or cancellation. So the number is still the same. It's just a question of whether we got the revenue from it. John Franzreb: And when looking at the product portfolio, where does that stand? I mean, is Data made the first of many? Or are you still like looking at everything you're trying to decide. I'm pretty sure at 1 point, you said there was some unprofitable businesses that you may want to exit. But can you just kind of give us an update on what -- how that process looks at this point? Jonathan DeGaynor: What we would say is that data mate was an important first step. It reinforces what we have said to the shareholders that we will continue to refine our portfolio as well as refine our overhead structure. The portfolio review is ongoing, and you can expect more to come in the future. Operator: Thanks, Jon. Thank you, everybody. Thank you, ladies and gentlemen. As we have reached the end of our Q&A session. This will conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Evaxion Business Update and Full Year 2025 Financial Results Webcast and 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, Helen Tayton-Martin, CEO. Please go ahead. Unknown Executive: Thank you, and good morning, everyone. Thank you for joining us for Evaxion's business update following the reporting of our 2025 full year financial results yesterday. And apologies that this call is 24 hours later than we anticipated for technical reasons, we are delighted to be here today. My name is Helen Tayton-Martin, and I am honored to be leading this call for the first time as Evaxion's CEO. We move to the first slide. Okay. So on today's call, we will review the achievements of 2025 and touch on the milestones we anticipate for 2026. Our Chief Scientific Officer, Birgitte Rono, will then walk through our key R&D updates for the year, including the latest innovations from our AI immunology platform, after which our CFO, Tom Schmidt, will walk through our 2025 financial results before we close with a few concluding remarks and take questions. Right. Moving to the next slide. And of course, our comments and presentation today may contain forward-looking statements and all references on today's call, I'll refer to our filed SEC statements and specifically, our most recent 20th annual report for 2025 -- 2025 filed yesterday. So moving to the next slide. I will start with our 2025 achievements and our 2026 milestones. In 2025, we were very pleased to report tremendous progress across all pillars of the company. First of all, in business development, we were delighted with the progress in our collaboration with MSD and our infectious disease portfolio, with the decision by Merck to exercise its option over our EVX-B3 program candidate. Whilst the target for this program is not disclosed, we are very proud that this represents the first in-licensing to our knowledge of an infectious disease vaccine candidate identified and validated to an AI discovery platform. Whilst MSD chose not to exercise its option over our EVX-B2 candidate in gonorrhea, we remain very excited about the data and the prospects for this program, over which we have retained full rights and have seen significant interest. We were also pleased to enter into a collaboration with the Gates Foundation on the design of a new polio vaccine and are also seeing significant interest in our platform and pipeline programs more broadly from a number of parties. In R&D, we were very pleased to be able to present very positive [ to ] Phase II data at ESMO on our EVX-01 program with a personalized neoantigen-directed cancer vaccine in advanced melanoma patients. We also presented preclinical data at ASH on our first cancer vaccine we shared [ at antigen directed ] to a conserved endogenous retroviral EBR elements that we have identified in AML patients with our EVX-04 program. In our infectious disease portfolio, we were also able to move forward a new program with candidates identified from our AI immunology platform against [ Group A strep Coke ]. On the platform itself, the team has continued to innovate and use platform to not only identify optimal vaccine candidates, but improve their design biology for product delivery for us in our new automated module. And Birgitte will touch on all of these achievements shortly. We were also honored by the recognition of our AI immunology platform by the Galien Foundation for AI advances in human health. And finally, we were very pleased to see the capital influx of the business last year through financing, business development and the use of our ATM, which now gives us action a cash runway to the second half of 2027. And Thomas will talk more to this later. So moving to the next slide. Just as a reminder, our action has built a broad novel product basis pipeline of assets from its unique AI immunology platform. clinically validated with the cancer vaccine space with our EVX-01 [ peptide ] base vaccine in advanced melanoma that's supported by assets and data on DNA and RNA platforms and together with a preclinical pipeline of infectious disease vaccine candidate, focused on challenging targets remaining intractable with conventional approaches and subject to significant medical need. On to the next slide. This unique capability with AI immunology is something that we have also begun to investigate within the autoimmune field, given a wider range of diseases driven by autoimmune attack and the direct applicability of our platform to focus on immune mechanisms in disease. Autoimmune diseases affected over 14 million patients annually in the U.S. and are characterized by chronic debilitating conditions with treatment options focused primarily on the symptoms rather than the underlying cause of disease. Moving on to the next slide. This is why we believe our AI immunology platform is strongly positioned to focus on underlying disease mechanisms with greater specificity to identify autoimmune disease targets, which can be approached in different ways. There will be more to come on this later in the year. So finally, in the next slide, turning to our 2026 milestones. This year, we will be updating on our EVX-01 program with additional biomarkers and immunogenicity data, AACR and then the clinical data, 3-year data towards the [ later ] towards the end of the year. Well, we will be talking more about the autoimmune applications of our AI immunology platform and bringing forward data on our new EVX-B4 candidate in Group B [ rubric ] in the second half of the year. And finally, be ready to submit a regulatory application for our next EVX-04 candidate vaccine candidate for the shared her antigens in AML by the end of the year. And throughout, we remain committed to driving value from both our platform and our pipeline assets to partnership for our shareholders and patients. I'll now hand over to Birgitte to update you further on our R&D achievements. Birgitte Rono: Thank you, Helen. So 2025 marked a turning point with significant advancement across our R&D pipeline and also and our AI platform. And additionally, as Helen alluded to, we also entered into the in-licensing agreement with MSD on the EVX-03 program. So our 2025 focus has been on strengthening our platforms predictive power, maturing key R&D assets and are building the foundation for future partnerships. So the 2025 achievements position us well as we move towards the data with milestones in 2026, that Helen just presented. So with that, I will begin by walking through individual key programs and platform development. So next slide, please. [ EVX-01 ], our personalized peptide-based cancer vaccine in advanced melanoma continues to deliver strong clinical data. So our 2-year Phase II data presented at an oral session at ESMO in October showed strong clinical outcomes, including a high objective response rate of 75% and complete response rate of 25%. Notably, 92% of the responders remained in response at this 2-year mark. Key biomarker data included the very high [ immunogenicities ] rate with 81% of all the individual new antigen administered across patients, giving rise to a specific T-cell response. So this very impressive heat rate outcompete data from similar programs conducted by others. And this truly underlines the precision of our AI immunology platform, to identify better than vaccine targets. Two key milestones are expected for this program, as Helen also alluded to, additional biomarker and [ genicity ] data expected in the first half of '26, and we also plan to communicate the 3-year data from a subset of patients that are currently in expansion part of the Phase II study, and that will be reported in the second half of '26. So importantly, we aim to conduct future trials in partnership ensuring the broadest possible impacts for patients. So moving to the next slide and EVX-04, our after-shelf therapeutic vaccine for acute myeloid leukemia or e-mail, we have generated a compelling preclinical base evidence supporting its development. In this program, we are focusing on a completely novel class of tumor antigens, so-called endogenous retroviruses or ERVs that are selectively and highly expressed in AML blast, making them attractive as therapeutic targets. So with AI immunology, we have identified millions of shortages from patient sequencing tumor data and designed the [ EVX-04 ] vaccines with 16 optimal ERV [ anti fragment ] selected based on craft patients [ pellets ] and also on the immunological potential. So key data include invite vaccination studies, demonstrating that all of these 16 fragments in the vaccine induced a strong specific immune response and further that EVX-04 prevents tumor growth in several of our tumor [ virus ] and induce strong T-cell responses. So again, these findings reinforces the power of our platform. And here, we have expanded it to uncover unique tumor antigens that are not accessible through traditional discovery methods. Next slide, please. As we progress towards clinical business for EVX-04, we have completed key steps, including antigen selection and lead development we have conducted preclinical efficacy studies and are currently conducted further human cell-based translational assays. CMC work and GMP manufacturing are advancing according to plan. And the next major milestone for this program is the submission of the clinical trial application in the second half of '26, which enabled first in human system. So this program is a prime example of how AI immunology accelerates vaccine design from concept to clinic. So next slide, please. Now turning to our key indexes disease programs. So after retaining the full global rights to EVX-B2 late last year, we are now fully in control of the development of this highly differentiated vaccine candidate targeting -- gonorrhea. So our preclinical data package is strong and comprehensive demonstrating significant protection in a mouse infectious model. We have demonstrated broad efficacy against 50 clinically relevant -- dates reflecting coverage across diverse strengths and further induction of significant [ una ] and cellular responses in mice, and we have also demonstrated a well-established mechanism of actions supported by potent antibody-dependent complement-mediated killing. So collectively, these results position EVX-B2 as one of the most advanced and differentiated infectious disease preclinical gonorrhea vaccine candidates in an area of high unmet need where no approved vaccine exists today. So given the strength of our data, we see a clear opportunity to engage with potential partners to progress the program towards clinical development. So next slide, please. So a number of our key infectious disease vaccine program is EVX-B1. In this program, we are developing a margin target vaccine against cytomegalovirus or CMV and instead of relying on a single glycoprotein or limited set of glycoproteins, the program integrates both these well-described glycoprotein and novel antigens to target the prior -- from multiple complementary angles. So this broad multicomponent strategy is designed to enhanced vaccine efficacy and also to reduce the risk of viral escape. So we have applied AI immunology for both antigen optimization of the known glycoproteins and for identification of 2 novel antigens. So first, we improved these established CMV antigens that are essential for virus neutralization. And as part of this, we have engineered the glycoprotein B antigen, by locking in a prefusion state. And this AI analogy designed a construct has demonstrated a superior neutralization capacity compared to the native program. And secondly, we are identifying and validating entirely novel antigens and several of these -- they have already demonstrated the ability to inhibit [ Vinten ] further, we are characterizing them at the moment. So supported by this strong preclinical data, EVX-B1 represents a highly promising program for continued development and for future partnership discussions. Next slide, please. So now turning to the recent development of our AI-Immunology platform. So our AI-Immunology platform continues to expand capability. So the platform integrates [ multiomic ] data sets to generate ranked antigen lifts within 24 hours. So in October last year, we launched a an automated vaccine design module enabling sequence and structural optimization directly from this short-listed engines. At this end-to-end automation significantly reduced cost development time and also this. So next slide, please. So more specifically, the automated module enhances design of [ Sage ] antigen constructs, enabling higher expression, better formulation and improved manufacturability. So this capability directs the design of [ salable ] antigen constructs and also stabilizing antigens using in various posing producing more reliable antigen construct vendor, wire side variance. There is a faster and more cost-effective design cycle fully integrated into our antigen discovery and vaccine optimization workflow. So this strengthened the foundation for all of our programs across oncology and infectious diseases. So in conclusion, we have seen strong progress across our platform and our R&D pipeline, and we are encouraged by the momentum and we look forward to keeping you updated as we advanced to 2026. And with that, I will now hand over to Thomas, who will go us through our financial business. Thomas Schmidt: Yes. Thank you, Birgitte. And also a warm welcome from my side to our call today. And I will now walk you through the financial results for 2025. So turning to the next page. We have, throughout 2025, been really successful in expanding on our cash runway and also strengthening on our equity side. This has happened throughout the year through public offering and the use of ATM we did in January, followed by the MSD exercise fee and the ATM used in September. And furthermore, the exercise of investor warrants from our January offering in October and November, all summing up to a cash inflow of USD 32 million. Furthermore, as also shown on this slide, our EIB debt-to-equity conversion done in July of USD 4.1 [ billion ]. We've reduced certainly our cash -- future cash out and thereby certainly also expanding and extending our cash runway. And finally, with our filing in December of our prospectus supplement regarding our ATM. It has now created us with further flexibility ability and options as we move forward with expanding our pipeline and platform also. So really, really underlines the strong execution throughout the year. And turning to the next slide. that also leads into the highlights of 2025, where we really have delivered on all the targets that we set and we are progressing towards our aim of becoming a sustainable self-funding business. Both revenue and costs have improved while at the same time, we are continuing to invest in our platform and in our pipeline programs. As just mentioned on the previous slide, activities and execution of the MSD deal, the EIB debt conversion, our ATM and capital market activities have not only improved our cash position and runway, but has also significantly strengthened our equity. And with improved cash runway and equity -- equity we have created more stability and certainly have also reduced uncertainty. So I think that is really, really also a highlight for '25. And again, with the update of [ F3 ] and ATM, we have removed the constraints of baby shelf and also provides us far better flexibility and options in support of our long-term strategic initiatives and also the long-term plans we do have. Next slide. is on our profit and loss statement. As I just mentioned, revenue has improved, but also we've improved on our operational costs. So we've actually been successful in long in our operational spend whilst at the same time delivering on the quality that we would want to do from a pipeline and platform perspective. revenue certainly stems from our NST option exercises, but also important to mention, we also had a grant from the Gates Foundation that also has come in 2025 -- apologies. Net financial position of [ $4.6 million ] is driven by a premium that we received from -- our debt conversion -- debt-to-equity conversion from [ EIB ] and against that goes remeasurement of a derivative liability as some of our warrants or our [ launch ] from the public offering in January were in a different exchange setting, so the USD versus our reporting of DKK. Net loss for the year, [ $7.7 million ], certainly a better in compared to last year. And as I said before, also a good step on the way of becoming a sales funding and profitable business. Next slide, on the balance sheet. since we ended the year with a cash position of USD 23 million with a runway that now is extended into half year 2 of 2027 in certainly also a significant improvement compared to last year. And this, of course, will be used for operations expenses and investing into our platform and pipeline. We currently have an outstanding -- we have a total outstanding ADS of $8.3 million when assuming that all shares have been converted into ADSs. We've also, through the investor warrants exercise has been reducing the outstanding warrants in terms of ADSs by $1 million. which leaves another [ 2.8 million warrants ] outstanding. So also an improvement in that and really drives in the right direction. So in summary, from a financial position, we have during 2025, established a far better foundation that really makes us puts us in a good position to continue our execution of strategy and business for '26 and the years beyond. With that, I hand it back to Helen for some final concluding remarks. Unknown Executive: Thanks, Thomas. And just moving to the last slide. In summary, 2025 was a year of strong operational momentum for Evaxion, in which we achieved several key milestones. Overall, we strengthened the business considerably to the validation of our strategy with our AI-Immunology platform, delivering on both data and partnerships. This, in turn, has enabled us to both strengthen our financial position and consolidate our position as a leader in AI-based of discovery, design and early development. With a number of potential partnership discussions ongoing, we are already funded into the second half of 2027 through the financial milestones achieved in 2025. So we're in a good position to move forward through 2026. With that, I'll hand over to the operator for questions. Operator: [Operator Instructions]. Our first question today comes from the line of Thomas Flaten from Lake Street Capital Markets. Thomas Flaten: Maybe to start broadly, Helen, you've been in the seat now for a few months. I'm just curious if you could provide some overarching commentary on what you have implemented or are going to implement -- any changes in strategy? And any bigger picture notes like that, that could help us with the context of your tenure? Unknown Executive: Sure. Thanks. Thanks for the question. Yes, I joined at the end of November last year. So the last 3 months have flown by. But I already have a strong impression from my prior seat on the Evaxion Board. In terms of bigger picture, changes. I think the fundamental action remains really strong. And in fact, I think they have only got stronger through 2025. So the ability to have an AI platform that is built up over many years, many iterations, grounded in data and testing for that data in the lab, and ultimately in the clinic has really strengthened the core offering. So I remain really excited about the power of the platform in the oncology space and also in the infectious disease space. And I think we're sort of seeing a lot more traction around what we can do with the platform now from external engagement. So I think the fundamental strengths and core of what Evaxion has to offer is even stronger now than potentially before. And I think in a world of AI, everything, actually getting to products, actually producing candidates that can generate vaccines that generate a biological response and the clinical response is meaningful and is becoming recognized as meaningful, certainly in our partnering conversations, et cetera. So I think that, that is core. So clear observation I had before coming into the company and certainly strengthened by all my observations within it. and even more impressed by the team that's in place that can deliver on this. I think in terms of the overall strategy, what have Evaxion has done well is that early discovery, the early validation, that deep scientific and informatic embedded expertise, and we can certainly bring things forward into early clinical development, late preclinical, early clinical. And I think what we're going through at the moment is a process of really optimizing where we see the most value in the near term, both in terms of our oncology assets, but also within the infectious disease area. I think we are not positioned to take too much further forward into the clinic. So we've been very cautious about that but we certainly see strength in getting interest from external parties around the assets that we've already got. And actually, the capability of the platform. So there's not a fundamental change to strategy, but I think a sharpening and the deepening of focus around the assets that will have the most value. I hope that's helpful. Thomas Flaten: Yes, that's great. And just keying off of your last comment there about taking products into the clinic. You mentioned with EVX-04 in Birgitte's presentation that you would be looking to submit regulatory paperwork. Is that a product that you think you have to take into Phase I given that herbs are a bit new, a bit different in order to attract a partner interest? Unknown Executive: I think that's a very good question. We are certainly preparing to take it into the clinic, and we believe that we can do that to gain some initial proof of concept. There's a lot of interest around the platform at that particular metacandidate antigens in the vaccine. I think we're doing some further validation, which I think will continue to strengthen it. So the answer in short is not necessarily, but clearly, the more critical validating data that we can add to the package. The stronger the value proposition to an external partner, and that's obviously what we're all about is maintaining the -- building the value for as long as we can to strengthen our position. And I think we're very confident about what we can do with it preclinically and potentially clinically. Operator: Our next question today comes from the line of Michael Okunewitch from Maxim Group. Michael Okunewitch: Congrats on all the great progress you made. I guess to start off, I'd just like to see if you could comment a little bit on the partnering efforts for EVX-01. And in particular, if there's anything that you've heard either in your feedback from partners that you think you're still would be particularly important for us to watch for from the upcoming data releases, whether that's the 3-year data or the biomarker immunogenicity. Is there anything in particular you think is key for driving these partnering discussions? Unknown Executive: So that's a really good question. And I mean, clearly, the cancer vaccine space has had something of a checker passed -- way back, but more renaissance, I think, in the checkpoint era. And I think our data is certainly resonating with companies who are interested in the cancer vaccine area, understand the nuances around getting, I think, strong cancer -- antigens, [ presliced ] cancer antigens for not just immune recognition but for clinical benefit. So the -- it is a complex therapy to administer, but it is also potentially an effective therapy. And I think the sorts of things that gain interest of the -- not just the response rate that we've seen in 2 years, 1 year than 2 years at ESMO, but also the recognition of the antigens, the numbers that the [indiscernible], and I'll ask you to add comment to this as well. So I think the -- we're in a strong position with that updated clinical data package that we have, the translational data, I think it's going to be interesting. It continues to -- so why and how the immune response is happening in parallel to the clinical response. So that is, I think, a differentiator and also in the population, the advanced population rather than adjuvant melanoma population. And clearly, I think we're also seeing interest in this whole approach in other high mutational burden cancers too. So beyond melanoma knows of it. I think those are the differentiators thinking about where else this is applicable accolading the different biological parameters, the translational insights that we're seeing that's somewhat different to how others have reported on this with similar approaches. So quite a bit of interest. I think the number -- to be honest, a number of companies are on the fence, but we're looking with interest and very interested in the shared approach -- the share approach that our EVX-04 program offered. Birgitte, do you want to add some further comments? Birgitte Rono: So there's no doubt that the ability of our AI immunology platform to identify the relevant targets and is getting a lot of interest from potential partners and also from the academic community. And with this 81% hit rate, as we call it, I think this is very impressive. We have, of course, looked at other similar programs and seen that most of them are reporting hit rates way below 60%, meaning that the antigens that they are including in their vaccines are not all able to induce a specific T cell response. And this is, of course, a testament to the position of our platform. So that's one of the key elements. And another point that I would like to make is that we do see EVX-01 as not just a therapy for advanced melanoma. We believe that the same concept can be very useful in other occasions where there are a high mutational burden, meaning that there are several antigens to choose from. That includes many of the high prevalent cancer indications. It could be non-small cell lung cancer and also some of the colorectal cancers. Michael Okunewitch: Thank you. I appreciate that additional color on that. And then as a follow-up, I wanted to ask if you could provide a bit more color on how you're applying the AI immunology platform to autoimmune disease. You identified this as a new area of interest. And do you expect that this would be more focused on allergies? Or would you focus more on the major large autoimmune and inflammatory diseases. Any additional color you could provide on that would be helpful? Unknown Executive: Sure. I think the first thing to say is it's early in terms of our prioritization of the indications, but we've certainly done some work around that based on parameters, which I'll -- Birgitte you're happy to comment on that, I think, high level in terms of what's guiding where we focus will be -- that would be good. Birgitte Rono: Yes. So we have done a lot of analysis on most prevalent autoimmune diseases, and we do see a clear fit for our platform. I mean, we, of course, need to further improve it and build a few additional smaller unit that allows us to apply the immunology. But we do have many things in place that can be directly applied in this area. So we will, of course, share more when we have done both analysis on which key indications we will pursue and also when we have done a little bit more work on adjusting AI-immunology, so it fits these diseases. But we should remember to say that there's a lot of these smaller units we call them building blocks that we can directly apply for these tax of diseases. So not only for autoimmune diseases but also for other diseases where there is a strong immunological component. So of course, we need to build a little bit, but the majority is already in AI-Immunology. Operator: Our next question today will come from the line of RK from H.C. Wainwright. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Just to start off, Helen, a quick question for you. You have basically, we've been an architect and multibillion dollar balances at that [ immune ] especially the large deal that was transacted with GSK. And also, you have heard a lot of experience in transactions. And while Evaxion is technically a very strong company, they have always had a difficulty in translating that language into meaningful transactions. Of course, Merck is a pretty strong partner. Based on your experiences, and how you manage to translate that. What sort of discussions could you have at this point? especially when talking with large-cap pharma, I'm convinced them that an AI tools predictability is as good as a physical assay and get them to start looking into some of the products that Evaxion is generating. Unknown Executive: Thanks for the question. I think there are probably multiple dimensions to answer that question to the extent that it is possible to answer it at this point. One is that A lot of this is to do with timing. It's to do with data that validates that it's more than a sort of an AI platform. And I think actually, the fact that we have the scope to validate and iterate candidates target discovery with candidate development with cancer validation is something really novel that we're generally out there. And when I said timing -- there are obviously many of the large pharma, most of them will all have in-house AI platforms running in one form or another. But I don't think there are many that have got this sort of integrated long sort of longitudinal depth of expertise that actually has. So really, is that this is about crystallizing the offering through the validation of the cannabis we have and sort of being in dialogue with the right people. And you mentioned my background was a long time, 17 years in my precise company, building relationships establishing contact, understanding and listening to strategy, looking at the wider picture. These are all things that are very much part of how deals get done. And ultimately, it's down to relationships and credibility and really having something that fits the need. And all I can say at this point is we're reworking up some of those approaches and some of those themes in terms of how we are approaching potential partnering interaction, I have to say that the action team is well known with quite a few of these groups, but we're building and expanding that profile. And I think that's critical to the future success in partnering conversations. So it's being what you say you are in front of the right... Swayampakula Ramakanth: Perfect. Then going into relationships with Merck, especially regarding EVX-B2, Merck decided to extend the evaluation of the molecule rather than exercise the option at this point. Is this a function of them trying to do additional experiments or functional assets? Or are they requesting from new additional work so that they can come to a conclusion? Unknown Executive: Sorry, are you referring to the extension that they had last year before the opt decision there? Swayampakula Ramakanth: Yes, yes. Unknown Executive: I mean we can't really comment on, obviously, the combination nature of the interactions. All I can say is that sometimes is sort of R&D programs when they are back and forth and shared between organizations don't always run to plan. And so sometimes that requires looking at things again. But ultimately, then there are time frames around things, which have to follow through. So I think there are reasons for not taking sort of obviously, their reasons not multidimensional. All I can say is that we remain really excited about the data. We actually continue to build data on the program internally throughout that period of time as well. So we feel very, very bullish and strong about the data package but how and why I wanted to do that work? Or is it something we probably we can't really add any more commentary on. Swayampakula Ramakanth: Okay. On the EVX-01 durability, Birgitte, so you have shown 92% of the responders showing sustainability, be it 24 months. As we are looking forward to the 3-year durability what sort of exhaustion markers are you going to be tracking so that we understand how well the durability is. Birgitte Rono: Yes. Thank you for that question,. So it's correct that 92% of the responders remained in response with this 2 year mark. And I guess your question was related to the T-cell extortion -- as yes, we do a deep scar profiling, looking at activation marker, extortion markers and also at different phenotypes of the T-cells, so including CD4, CD8, but also looking into whether there are regulatory T-cells coming up. And so far, we have demonstrated that -- the profile of the T-cells are very favorable. So in more of the activation or effective type of sales and not too many that are having exhaustion markers. We also see that there's a like dominance of CD4 T-cells and with some patients are also mounting a CD8 T-cell by time. So we have -- during this extension phase of the study, we have been collecting additional blood samples that are currently being analyzed in our lab. So not to comment on that, but it's very exciting. And since EVX-01 is giving us a immunotherapy in this extension phase, we're also very curious of understanding what EVX-01 can drive on its own without having the background of the checkpoint inhibitors. Swayampakula Ramakanth: Okay. One last question from me. This is on the EVX-04... Operator: In the interest of time, we will move to our next question. And our next question comes from the line of Daniel Ben Hill from Jones. Unknown Analyst: On the autoimmune disease program, can you provide more detail on your strategy for validating early candidates? Unknown Executive: Thanks for the question. I mean it's early, and we probably cannot provide more details. But, Birgitte, do you want to comment on how we think about it. Birgitte Rono: Yes. So the first step is to settle on an indication. So we have done landscaping. We've done dianalysis on looking at the top 10 most prevalent ultimate diseases, and we are now narrowing down which one could be the most, I would say, interesting from a -- from our perspective, where there is a nice fit for AI-Immunology. And so that work is ongoing. We've almost completed it. And next step is to focused on building the additional smaller units that we will be needing in AI immunology to enable us to develop therapies for these diseases. And in parallel, we are also sitting on mouse models in our lab, so ensuring that we can also test the candidates that AI-Immunology is designing. So that is the current plan. So pretty traditional way of analyzing our existing the candidates that AI immunology is designing. Operator: Thank you. This concludes today's question-and-answer session. I will now hand the call back to Helen Tayton-Martin, CEO, for closing remarks. Unknown Executive: Thank you very much for everyone participating on the call today. It's been a great year of 2025 of transforming the company for Evaxion delivering on multiple milestones, leaving us in a stronger financial position than for some time, where we hope we can take the company forward and deliver on our 2026 milestones and continue to strengthen the value that comes from the platform and the asset. So thank you for your questions and your engagement, and we look forward to our next update. Thank you. Bye-bye. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.